Asian stocks rebound ahead of Chinese Q3 GDP data

Monday, October 20, 2014

Asian stocks started the week on a positive note following the solid recovery in European and US markets on Friday. The Nikkei and TOPIX both led the region’s equity indices higher, gaining 4.0% apiece as risk appetite rebounded in the region. A catalyst for the move higher was the speculation that Japan’s Government Pension Investment Fund (GPIF) would increase holdings in foreign stocks and bonds to about 30% from 23%. Wider regional benchmarks were also buoyed higher in anticipation of China’s 3rd quarter GDP data, due for release tomorrow. Market participants expect GDP growth to slow slightly to 7.2% y/y in the third quarter from 7.5% y/y previously and with Chinese industrial production and retail sales data also expected tomorrow any positive surprises could see a further rally in risk assets as investors look to recover some of the recent losses.

The yen fell for the third straight session against the dollar as further details emerged of Japan’s GPIF intention to boost its foreign asset allocation. The yen found firm support around Friday’s close as it traded towards 107.39 early on before easing back slightly ahead of the Chinese data releases tomorrow. The currency has lost 1.0% against the dollar over the past three sessions and faced further selling pressure against all 16 major peers. Comments from BOJ Governor Kuroda could see further weakness in the yen after he reiterated that policymakers will maintain monetary easing until the inflation rate stabilised at 2.0%

Front month WTI futures struggled to extend gains on Friday after adding 2.0% on Thursday in a session which saw futures move as much as 500 basis points throughout the day. Once again the bulls attempted to support a breakout on the upside towards $84.50, however, early gains were quickly sold off as a considerable supply overhang weighed heavily on investor sentiment. The US benchmark has lost almost 23.0% since its year-to-date peak in mid-June and despite the recent relief rally in global equity markets, the general sentiment for commodities has been largely risk-off. Last week saw EIA crude oil stockpiles increase by 8.9m barrels to 370.6m barrels, the highest level since July, and any further significant build this week could see WTI front month futures struggle to gain traction above $85/bbl.

Nikkei 225 rallies 4.0% overnight 

NKY Index Nikkei 225 Daily 20 2014 10 20 07 45 37

WTI prices struggle to extend gains on Friday

CL1 Comdty Generic 1St CL Fut 2014 10 20 08 20 23

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Topics: Crude oil, WTI, JPY
More from: Kash Kamal