Archives of “May 2020” month

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Nikkei 225 closes higher by 0.28% at 19,674.77

  
Analysis, Global Indices

Japanese stocks trade more tepidly upon returning from the holidays

Nikkei 07-05

The lack of significant direction in the Nikkei exemplifies the mixed market mood in the equities space since the start of the week. Asian stocks gained yesterday, only to give that back today with the Hang Seng down 0.7% and Shanghai Composite down 0.2% currently.

Despite the softer tones in Asia, US futures are keeping higher still to start the session with S&P 500 futures up by 0.6% to start the European morning. That said, early gains may not necessarily hold up if trading sentiment yesterday is anything to go by.
In the currencies space, the aussie and kiwi are mildly boosted while the dollar is trading more mixed across the board to start the session. The yen has given up some early gains though, with USD/JPY rising back to 106.30 after having hit a low of 105.99 earlier in the day.

BOE leaves bank rate unchanged at 0.10%

  
  Analysis

BOE announces its latest monetary policy decision – 7 May 2020

  • Prior 0.10%
  • Votes 0-0-9 vs 0-0-9 expected
  • Asset purchase program total £645 billion (unchanged)
  • Existing stance of monetary policy is appropriate
  • Ready to take further action as necessary to support the economy
  • MPC voted 7-2 to maintain QE target, 2 members preferred to increase QE
  • Dissenters were Saunders, Haskel
  • Balance of risks to economic outlook is to the downside
  • Inflation likely to fall below 1% over the next few months
The BOE set out an illustrative scenario with some assumptions of the virus trajectory, seeing a sharp fall in UK economic output in 2H 2020 before a gradual recovery to follow.

But the key takeaway in my view is that we are seeing dissent, that policymakers want more action to bolster economic/financial conditions by increasing QE.

I reckon that is what the market is reacting to here as the pound jumps higher from 1.2320 levels to 1.2370 levels against the dollar currently.
The full statement by the BOE:

(more…)

Japanese markets return after the long holiday today – where to for yen

  
Analysis, Forex

Japan was out on Monday, Tuesday and Wednesday but reopens for trading today.

Some chatter about on where to for the USD/JPY for the session:
  • risk aversion being stoked by renewed US-China tensions over both the corv coronavirus and trade – risk aversion supportive for yen
  • USD/JPY is just above  its lowest seen since mid-March
  • on the wide, range seen 105.50/106.50
  • bids under 105 building

ECB has given the middle finger to the German constitutional court

  
  Analysis
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You’ll recall from earlier this week that the court ruled the European Central Bank must ensure its QE bond-buying program is proportionate or else Germany’s Bundesbank central bank may no longer participate.

  • And if its not the Germany Bundesbank central bank may no longer participate
The Governing Council of the ECB responded with a “Yeah, right …”:
said it “takes note” of the judgement
  • “The Governing Council remains fully committed to doing everything necessary within its mandate”
One member (at least) said the ECB will not respond directly to the court
  • court’s arguments are ridiculous
  • we could easily answer them
  • we should not do so as this is a risk to central bank independence
—
So, its an ‘as you were’ for the ECB QE program.
You'll recall from earlier this week that the court ruled the European Central Bank must ensure its QE bond-buying program is proportionate or else Germany's Bundesbank central bank may no longer participate.

The US economic recovery – V, W or Nike shaped?

  
  Analysis
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The shape of the US economic recovery ahead is much discussed, will it be L, V, U, or W shaped? Seriously, this is a debate!

Now there is a new contender – the Nike Swoosh shaped recovery. This is probably a read for the weekend with a glass of something (really strong most likely) in hand:
  • the recovery could be shaped more like a Nike swoosh. The bottoming out process may take a little longer to take hold, but once the rebound starts it would be steady and gradual.
Piece is here if you’d like more.
Why not ASICS shaped instead?
The shape of the US economic recovery ahead is much discussed, will it be L, V, U, or W shaped? Seriously, this is a debate!
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