Mixed data from Japan, markets calm ahead of NFP

Summary:

• Asian equity markets trade little changed following modest falls on Wall Street

• Data from Japan look to be ambiguous

• US dollar moves subtly higher in anticipation of the jobs report

Up and down and up again

This week has looked like a rollercoaster as sentiment has swung up and down affecting various assets. We began with a rally following the G20 summit where the US and China had decided to hold off on imposing higher tariffs over the next 90 days in order to try to reach a final trade agreement and terminate the trade battle. Nevertheless, these gains evaporated quite quickly and markets came back to falls again (a lack of details regarding the above-mentioned accord as well the arrest of Huawei’s CFO were among reasons behind the deterioration in sentiment). US traders came back after the holiday on Wednesday but the selling pressure turned out to be not enough to push US indices much lower and as a result we ended the Thursday’s session with modest losses ranging from 0.1% to 0.3% whereas the NASDAQ (US100) was the sole index being able to close above the flat line (0.4%). Note that this performance was reached despite a gloomy day in Europe where major equity markets saw profound declines exceeding 3% in many cases. As we are still moving up and down today it is time to see a bounce which could be supported by a limited pullback in the US and Asia. Let’s add that Chinese indices are trading roughly 0.3% lower at the time of writing while the NIKKEI (JAP225) closed with a 0.8% increase.

The Dow Jones (US30) managed to stay above its crucial trend line on Thursday boding well for bulls in the short-term. After the price resist the deeper sell-off yesterday now one can count on a rebound even toward 25800 points. However, it could turn out just like a dead cat bounce rather than a more long-lived reversal so caution is warranted. Source: xStation5

Blurry outlook from Japan

A package of data from Japan turned out to be mixed. Real labour cash earnings fell for the third time in a row. Source: Bloomberg

The Asian session did not abound in many important macroeconomic release except those from the Japanese economy. We got a bag of numbers which more or less did not send a consistent message. First of all, household spending fell 0.3% YoY in October falling short of the median estimate of a 1% increase. At the same time labour cash earnings rose 1.5% YoY beating the estimate of a 1% YoY rise, however, the September’s value was revised down to 0.8% from 1.1%. Furthermore, in real terms labour cash earnings saw a 0.1% decline which was the third consecutive fall of this figure. Nevertheless, the October’s reading was enough to beat the dismal consensus pointing to a 0.3% decrease but it overshadowed by a downward revision to the September’s release (-0.6% vs. -0.4% prior to the revision). Finally, both leading and coincident indicators for October failed to meet expectations. The former came in at 100.5 (down from 104.3) while the latter decreased to 104.5 from 114.4. However, these falls, at least in part, could have been due to natural disasters hitting Japan in September. Overnight Haruhiko Kuroda, the governor of the Bank of Japan, said that the 2% inflation target is likely to be met in the 2021 fiscal year or even later underlining the BoJ could struggle to deliver at least one interest rate hike in this cycle.

The USDJPY has fallen back to its medium-term trend line from where bulls could begin their attack again. However, if the price manages to move below this blue line, it could mean a turning point (we are expecting it to happen before long anyway) for the pair and for the US dollar in general. Source: xStation5

In the other news:

• US dollar trades marginally higher this morning ahead of the jobs report for November

• OPEC failed to reach a deal on oil production cuts on Thursday, a joint press conference will take place this afternoon

• There is a speculation Italian Finance Minister Giovanni Tria could step down under Conte and Five-Star party pressure, Bloomberg reports