With the USDJPY repeatedly touching 116.00 as a result of the same pair of headlines hitting either Reuters, the Nikkei or Sankei every 6 or so hours for the past 3 days, namely that Japan will delay its sales tax hike by almost two years, and that Abe is preparing early elections, perhaps the algos realized they were pricing in the same event about 4 times in one day, and unable to break the 7-year-high resistance level, slid dropping nearly 100 pips to just over 115 at least check, which may well be today’s “tractor” level, which in turn has also dragged down both European stocks and US futures. But the thing that made the vacuum tubes really spark is that at a press conference yesterday in Beijing, Abe was quoted as saying that he “has never made any reference to the dissolution of parliament”, this came after the chief cabinet secretary Suga saying that the decision on whether or not to go to the polls would be Abe’s only.
In other words, all those headlines were merely trial balloons by Japan to gauge market reaction, and Abe is certainly unsure what he will do at this point. In any event prepare for USDJPY algos to be shocked again when the same FX headlines are blasted for the 4th day in a row.
And speaking of FX, 5 banks earlier announced they had settled FX-rigging charges with US, UK and Swiss regulators for a total of about $3.3 billion, although Barclays was excluded from the grand settlement due to what some say are fears it may finally lose its New York banking license. Considering it has proven time and again it is a criminal organization through and through, perhaps as a Plan B Barclays should apply to join NY’s Russian mafia instead. More on that shortly.
Quickly skimming through the markets, European shares fall with the autos and utilities sectors underperforming and basic resources, telco outperforming. The Italian and Spanish markets are the worst- performing larger bourses, the Dutch the best. Regulators in the U.S., Britain and Switzerland ordered five banks to pay ~$3.3b in first FX-rigging settlements. U.K. unemployment stays at 6- year low, Brent crude nears 4-year low. The euro is weaker against the dollar. Japanese 10yr bond yields rise; Greek yields decline. Commodities decline, with natural gas, Brent crude underperforming and soybeans outperforming. U.S. mortgage applications, wholesale inventories due later.
Some further details about Europe where despite opening in relatively neutral territory, European equities have drifted into the red throughout the session, with financial names dragging stocks lower amid an absence of any greater macro trend. The banking sector has come under close scrutiny today after the FCA and CFTC came to an agreement over fines with JP Morgan Citi, RBS, HSBC and UBS. However, talks are still ongoing between regulators and Barclays over a figure for such a fine and thus Barclays (-2%) shares are dragging the financial sector as should talks extend further then they may miss out on a potential discount for an early settlement. Elsewhere, Sainsbury’s (-5.5%) shares are continuing to exert pressure on the UK retail sector after they reduced their dividend and remain cautious on their outlook for H2. Further to the downward momentum seen in stocks, this was also allied with the late performance in Japanese equities after a Japanese government spokesman denied the recent reports of a delay to the sales tax hike and thus erased some of the overnight gains for the Nikkei 225.
