Quiet Start Of Busy Week

With inflation and growth reports due out this week and Federal Reserve Chair Yellen’s testimony before Congress, it promises to be a busy week for investors. However, the week has begun off fairly quietly, while the recent rally in equities continues.  

The US dollar is narrowly mixed. The yen is the weakest of the majors, off about 0.5% against the dollar. The greenback reached almost JPY114.20 in Asia as the Trump-Abe meeting was completed without the US raising the issue of currency manipulation. The dollar slipped back to JPY113.40 before the European session.  

Domestic consumption was flat. Business investment was the main driver of Japanese growth, adding about 0.9% to GDP. Net exports added 0.2%, while inventories were a 0.1% drag. The GDP deflator remained at minus 0.1% for the second quarter.   

Asia equity markets were higher, and the MSCI Asia-Pacific Index rose 0.4% following last week’s nearly 1.3% gain. The index has risen for three consecutive weeks. The strongest performance has again been turned in by Chinese shares that trade in Hong Kong. Today’s 1.3% rise caps a six-session 6.6% gain, led by utilities and financials. Only real estate was shunned.  

MSCI Emerging market equity index is up 0.5% to extend its advance for a fourth session and eight of the past nine sessions. It has risen six of the past seven weeks to reach its best level since July 2015. It is about one percent below a key retracement (61.8%) of its decline from mid-2014 (~945).  

European shares are extending their rally. The Dow Jones Stoxx 600 is up for the fifth consecutive session. Materials are leading today’s advance. Financials and real estate are barely participating, and telecoms are heavy.  

Commodity prices are on a tear. Iron ore prices are surging. Today’s nearly 5% increase brings the five-day advance to nearly 16%. Copper prices have extended the pre-weekend 4.5% gain another percent today. Other industrial metals are also higher. Oil, on the other hand, is trading off around 0.5%, jeopardizing the three-day advance.