Posted Jan 26, 2023 by Martin Armstrong
The Bank of Japan should let government bond yields move more flexibly and be ready to raise short-term interest rates swiftly if “significant” upside risks to inflation materialize, the International Monetary Fund (IMF) said on Thursday. In a proposal after an annual policy consultation with Japan, the IMF said the central bank’s ultra-loose monetary policy remains appropriate as inflation is likely to fall back below its 2% target by the end of 2024 unless wages rise significantly. With Japan’s core consumer inflation at a 41-year high 4%, double the BOJ’s target, markets have been betting the central bank will phase out its aggressive stimulus after dovish Governor Haruhiko Kuroda retires in April.
The major Asian stock markets had a mixed day today:
- NIKKEI 225 decreased 32.26 points or -0.12% to 27,362.75
- Shanghai closed
- Hang Seng increased 522.13 points or 2.37% to 22,566.78
- ASX 200 closed
- Kospi increased 40.08 points or 1.60% to 2,468.65
- SENSEX closed
- Nifty50 closed
The major Asian currency markets had a mixed day today:
- AUDUSD decreased 0.00078 or -0.11% to 0.70942
- NZDUSD decreased 0.00073 or -0.11% to 0.64687
- USDJPY increased 0.712 or 0.55% to 130.302
- USDCNY decreased 0.02469 or -0.36% to 6.74561
- Gold decreased 18.97 USD/t oz. or -0.97% to 1,926.96
- Silver increased 0.012 USD/t. oz or 0.05% to 23.912
Some economic news from last night:
Corporate Services Price Index (CSPI) (YoY) decreased from 1.7% to 1.5%
Foreign Bonds Buying decreased from 1,238.5B to -344.2B
Foreign Investments in Japanese Stocks decreased from 186.4B to -83.0B
Some economic news from today:
Exports (MoM) (Dec) decreased from -24.1% to -28.9%
Imports (MoM) (Dec) decreased from -20.3% to -23.5%
Trade Balance decreased from -27.1B to -51.6B
The Bank of England looks on course to raise its main interest rate by half a percentage point to 4% on Feb. 2, but economists will be looking keenly for signals that this 10th consecutive rate rise will be one of the BoE’s last. Forecasts by economists polled by Reuters and pricing in financial markets point towards the BoE raising rates by another half point to 4% on Feb. 2, the highest since 2008, though there is a risk of a smaller increase to 3.75%. After that, most economists see just one rate rise more – to 4.25% in March – while financial markets price in the tightening cycle ending in the middle of this year at 4.5%.
Turkey’s central bank stuck to its forecasts for a sharp drop in inflation on Thursday, saying the increasing predictability of the lira’s exchange rate plus financing support meant there was no longer the basis for large price rises. Presenting a quarterly economic report, the bank’s Governor Sahap Kavcioglu stood by previous year-end annual inflation forecasts for 2023 and 2024 of 22.3% and 8.8%, respectively. The median estimate for inflation at end-2023 in the latest Reuters poll was 42.5%, for example, and 26.4% for 2024. While most mainstream economists expect Turkey’s inflation, which hit a 24-year high of 85% back in October and was 65% in December, to continue to cool in the coming months, they see it staying well above the central bank’s projections.
The major Europe stock markets had a green day:
- CAC 40 increased 52.11 points or 0.74% to 7,095.99
- FTSE 100 increased 16.24 points or 0.21% to 7,761.11
- DAX 30 increased 51.21 points or 0.34% to 15,132.85
The major Europe currency markets had a mixed day today:
- EURUSD decreased 0.00557 or -0.51% to 1.08593
- GBPUSD decreased 0.00274 or -0.22% to 1.23726
- USDCHF increased 0.00386 or 0.42% to 0.92166
Some economic news from Europe today:
Labour Productivity (Q3) decreased from 1.1% to 0.9%
The Commerce Department released decent data this Thursday that shows US GDP rose during Q4 2021. The October to December period experienced a 2.9% uptick in GDP at an annualized pace, which was mostly in line with analysts’ expectations. Growth, however, was slower in Q4 compared to Q3 when GDP advanced by 3.2%. Consumer spending rose 2.1%, which is a bit beneath Q3’s 2.3% reading. Personal consumption expenditures rose 3.2%, but slowed compared to the prior quarter’s 3.9% advancement. Residential investment experienced a 26.7% decrease, and the overall housing stats shed 1.3 percentage points off headline GDP. Federal spending increased 6.2%, accounting for 0.64 percentage points of total GDP.
Mortgage demand in the U.S. rose 7% last week, marking the third straight week of increased demand. The Mortgage Bankers Association noted that the average 30-year fixed-rate mortgage fell to 6.2% compared to 6.23% the week prior. Refinances saw a sharp uptick of 15% on a weekly basis, but remain 77% lower on the yearly level. New mortgage applications saw a 3% increase last week but remain depleted by 39% YoY. Inventory remains low, and sellers still have the upper hand; however, buyers are beginning to re-enter the market.
US Market Closings:
- Dow advanced 205.31 points or 0.51% to 33,949.15
- S&P 500 advanced 44.18 points or 1.1% to 4,060.4
- Nasdaq advanced 199.06 points or 1.76% to 11,512.41
- Russell 2000 advanced 12.75 points or 0.67% to 1,903.06
Canada Market Closings:
- TSX Composite advanced 100.9 points or 0.49% to 20,700.5
- TSX 60 advanced 6.68 points or 0.54% to 1,247.01
Brazil Market Closing:
- Bovespa declined 92.52 points or -0.08% to 114,177.55
Oil prices increased on Thursday on expectations that global demand will strengthen as top oil importer China reopens its economy and on positive U.S. economic data. Brent futures rose $1.55, or 1.8%, to $87.67 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.09, or 1.4%, to $81.24. Earlier in the session, WTI was on track for its highest close since Nov. 16. Currently, however, both Brent and WTI were on track for their highest closing levels since Jan. 23.
The oil markets had a mixed day today:
- Crude Oil increased 1.453 USD/BBL or 1.81% to 81.603
- Brent increased 1.29 USD/BBL or 1.50% to 87.410
- Natural gas decreased 0.1711 USD/MMBtu or -5.58% to 2.8959
- Gasoline increased 0.0342 USD/GAL or 1.32% to 2.6276
- Heating oil increased 0.0448 USD/GAL or 1.33% to 3.4061
The above data was collected around 13:10 EST on Thursday
- Top commodity gainers: Lumber (5.17%), Sugar (3.13%), Wheat (1.94%) and Coffee (2.89%)
- Top commodity losers: Natural Gas (-5.58%), Palladium (-1.69%), Platinum (-2.18%) and Cheese (-4.24%)
The above data was collected around 13:15 EST Thursday.
Japan 0.465% (+3bp), US 2’s 4.17% (+0.033%), US 10’s 3.4726% (+1.06bps); US 30’s 3.61% (-0.014%), Bunds 2.19% (+3.2bp), France 2.661% (+6bp), Italy 4.145% (+5.8bp), Turkey 10.12% (+20bp), Greece 4.222% (+0.4bp), Portugal 3.08% (+3.8bp); Spain 3.221% (+7.2bp) and UK Gilts 3.295% (+5.2bp).