Japanese Equities Push Higher On Fiscal Stimulus Hopes

Newer
14/09/2021
Older

Archived Article

This article was correct at the time of publishing however the information contained within it will no longer be current. It may also no longer reflect our views on this topic.

Share

Japanese Equities Push Higher On Fiscal Stimulus Hopes

Japanese equity markets extended their recent gains as expectations of a significant stimulus package lifted investor optimism. The recent resignation of Prime Minister Yoshihide Suga has sparked hopes of fresh government support to alleviate some of the pain caused by the COVID-19 pandemic. One candidate aiming to replace Suga, Former Foreign Minister Kishida has outlined plans for a $270.0bn package should he get elected[1]. Suga, who wasn’t viewed as a particularly market friendly Prime Minister will step down after less than a year at the helm.

The Nikkei 225 was the only one amongst the major indices to post a positive weekly return. The Japanese market jumped by +4.3% despite the Government extending coronavirus state of emergency measures on the back of higher cases. Elsewhere, inflation concerns gathered further momentum as US producer price inflation accelerated once again[2] and the ECB increased its own inflation forecasts for the Eurozone. The S&P500 declined by -1.7% whilst in the UK where last week’s monthly GDP data revealed a slowdown in the pace of economic growth, the FTSE100 fell by -1.5%. Meanwhile on the Continent, the German DAX30 and French CAC40 dropped by -1.1% and -0.4% respectively.

Sovereign bond yields ticked higher on both sides of the Atlantic, reflecting the increase in inflation expectations. The 10-year US treasury yield added 2 basis points (bps) to 1.34% with the equivalent duration UK gilt climbing by 4bps to 0.76%. In the Eurozone, the 10-year benchmark index rose by 3bps to -0.36%. Briefly on currencies, the US Dollar continued to tick higher against the peer group with the greenback rising by +0.1% to $1.386 against Sterling and +0.4% versus the Euro to $1.183.

In the commodity markets, gold posted a weekly decline on the back of the increase in the Dollar. The precious metal fell by -2.2% to close out the week at $1,7944 an ounce. Oil prices saw modest weekly gains with Brent Crude increasing by +0.4% to $73.04 a barrel whilst copper also rose with the metal rising by +2.8% to $9,685 a tonne.

 

Week Ahead

Unemployment, CPI inflation and retail sales are amongst the standout data releases from the UK this week. Headline inflation is expected to have increased once again last month with analysts forecasting a 90bps rise to 2.9%. Unemployment meanwhile is forecast to have reduced once again to 4.6%. Similar datasets are due from the US with inflation and retail sales figures published on Tuesday and Thursday respectively. Industrial production and the monthly consumer sentiment indicator from the University of Michigan are also worth keeping an eye on.

Eurozone figures are in short supply this week with industrial production covering August the only notable figure due. It’s a busy week for Chinese data releases with retail sales, fixed asset investment, industrial production, and unemployment all due before its conclusion.  Revised industrial production is the only figure of note due from Japan on this occasion. [3]

 

Read last week's market update

Inflation Concerns Rise As US Wage Growth Gathers Momentum

 

[1] T. Rowe Price - 10.09.21

[2] Forex Factory - 05.09.21

[3] Forex Facory - 12.09.21

 

The value of an investment may fall as well as rise. You may get back less than the amount invested.

The value of investments may fall as well as rise purely on account of exchange rate fluctuations.

Past performance is not indicative of future performance.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2021. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

© S&P Dow Jones LLC 2021. All rights reserved.

The information contained does not constitute investment advice. It is not intended to state, indicate or imply that current or past results are indicative of future results or expectations.

Full advice should be taken to evaluate the risks, consequences and suitability of any prospective investment. Opinions provided are subject to change in the future as they may be influenced by changes in regulation or market conditions. Where the opinions of third parties are offered, these may not necessarily reflect those of Rowan Dartington.

Rowan Dartington is part of the St. James’s Place Wealth Management Group. Rowan Dartington & Co. Limited is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. 02752304 at St. James’s Place House, 1 Tetbury Road, Cirencester, England, GL7 1FP, United Kingdom.