Following a rollercoaster night for the Japanese Yen, when following several media headlines Abe was said to have announced a stimulus package that would be more than JPY28 trillion, which however upon more careful reflection appeared less then met the eye (more in a subsequent post), Japanese stocks surged 1.7% while the USDJPY spiked but well off overnight highs, pushing risk assets higher.
Offsetting Japan’s exuberance was a sharp drop in Chinese stocks, which tumbled the most in 6 weeks, however closing well off the lows, down -1.9% after the 21st Century Business Herald reported the country’s banking regulator is again considering cracking down on the $3.6 trillion market for wealth management products, however yesterday’s AAPL earnings beat fueled optimism over the outlook for the global economy and served as impetus to push European stocks firmly in the green despite a collapse in Deutsche Bank (DB) profit and a drop in revenues across the board, which also helped push US equity futures higher, with the S&P set to open green for yet another session.
The Fed concludes its two-day meeting later today (no press conference), with Yellen widely expected to announce nothing, although questions remain if the recent onslaught of good economic news will not awaken the “hawkish” FOMC from a deep slumber and prompt the chairwoman to once again flip flop and hint at a September rate hike.
Apple and its suppliers in Europe and Asia rallied after the iPhone maker reported a smaller-than-estimated decline in revenue. Positive earnings by companies from LVMH Moet Hennessy Louis Vuitton SE to PSA Group helped lift the Stoxx Europe 600 Index to a third day of gains. Japan’s currency slid on speculation stimulus will boost demand for higher-yielding assets at home and abroad. The yield on two-year Treasuries approached a one-month high as investors awaited the Federal Reserve’s latest assessment of the economy.
The yen weakened 0.8 percent to 105.49 per dollar, after advancing 1.4 percent in the previous two days. Prime Minister Shinzo Abe said his total program will amount to 28 trillion yen ($265 billion), with some unspecified part coming in a supplementary budget for 2016.
“Central bank move this week will still remain key to market direction,†said Nicholas Teo, a strategist at KGI Fraser Securities Pte. BOJ Governor Haruhiko Kuroda’s “show is especially important. Seeing how much expectations have been building in the markets for a ’generous’ helping of stimulus, Disappointment in the actual announcement may have a pronounced negative effectâ€
Almost 80% of surveyed analysts forecast the BOJ will expand its stimulus program Friday, while the Fed is forecast to keep interest rates unchanged on Wednesday.
“The good earnings are driving us further today,†said Michael Woischneck, who oversees about 300 million euros ($330 million) at Lampe Asset Management in Dusseldorf, Germany. “But we have to be aware what the Fed tells us tonight after their two-day meeting.â€
Despite resilient stocks, oil is unable to stage a rebound and as of this morning was on a 5 day losing streak.
The Stoxx 600 rose 0.5 percent in London at 10:15 a.m. in London. Nasdaq 100 futures expiring in September climbed 0.7 percent, while S&P 500 futures added 0.2 percent, with the gauge near a record. Apple rallied 6.4 percent after saying iPhone demand picked up and forecasting fourth-quarter sales that may exceed analysts’ estimates. European suppliers Dialog Semiconductor Plc (DLGNF) and AMS AG (AUKUF) climbed more than 3 percent.
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Market Snapshot
- S&P 500 futures up 0.2% to 2167
- Stoxx 600 up 0.4% to 343
- FTSE 100 up 0.3% to 6745
- DAX up 0.9% to 10338
- German 10Yr yield down 1bp to -0.04%
- Italian 10Yr yield down 2bps to 1.23%
- Spanish 10Yr yield down less than 1bp to 1.1%
- S&P GSCI Index down 0.4% to 342.9
- MSCI Asia Pacific up 0.2% to 135
- Nikkei 225 up 1.7% to 16665
- Hang Seng up 0.4% to 22219
- Shanghai Composite down 1.9% to 2992
- S&P/ASX 200 up less than 0.1% to 5540
- US 10-yr yield up 1bp to 1.57%
- Dollar Index up 0.13% to 97.28
- WTI Crude futures down 0.5% to $42.70
- Brent Futures down 1% to $44.42
- Gold spot down less than 0.1% to $1,320
- Silver spot down 0.3% to $19.59
Top Global News
- Apple’s Cheaper IPhone Is Catching On, Allaying Growth Concerns: 3Q revenue, profit beat analysts’ predictions
- Abe Plans Stimulus Package of More Than 28 Trillion Yen
- Hillary Clinton wins nomination to be U.S. president: with nomination, Democrats seek to put divisions behind them
- Twitter’s (TWTR) Revenue Boost From Video Advertising Is Still Far Off: social media company doesn’t have video ad techology ready yet
- Elon Musk Sees Tesla (TSLA) Master Plan Costing Tens of Billions: Musk says he doesn’t plan on spending billions more right away; Tesla energy storage growth may exceed that of its cars
- Deutsche Bank Signals Deeper Cuts as Trading Slump Erodes Profit: 2Q profit almost wiped out by slump in trading revenue and costs tied to job reductions
- Boeing (BA) Wins $5.5 Billion Malaysia Air Order for 737 Max Jets: deal has option for 25 more; deliveries to start in 2019
- Nintendo (NTDOY) Posts Wider Quarterly Loss, Delays Pokemon Go Plus: game maker keeps its profit outlook for fiscal year intact
- Bayer (BAYRY) Second-Quarter Profit Gains 5.7% Amid Monsanto Pursuit: Crop sciences sales to be flat in “weak market environmentâ€
- BASF (BASFY) Quarterly Profit Hurt by Weak Demand For Crop Chemicals: reiterates 2016 forecast for profit, sales drop; specialty chemicals gain helps buffer decline at agro- products
- Blackstone (BLK) May Bid EU6B For Italian Food Retailer Esselunga: MF
