Japanese exports gain on weaker yen

Wednesday, April 22, 2015

Another strong session for Asian markets overnight with Japanese benchmark indices pushing to a fresh fifteen year high. Japanese investors received a shot in the arm from better than expected trade data as the trade balance swung back into surplus, posting its highest level since September 2011 as it rebounded from the previous months deficit of -424.6bn yen to 229.3bn yen in March, its first surplus since 2012. The rapid recovery in trade was largely owed to a weaker JPY which spent much of March trading above 120.00 against the dollar, helping to accelerate export growth to 8.5% y/y in March against 2.5% y/y the previous month. The encouraging data pushed the Nikkei 225 1.13% higher throughout the session, closing above 20,000 for the first time in 15 years.

Chinese investors were seemingly unfazed by the first default of a SOE as mainland Chinese stocks rallied to a new year-to-date high, indicative of the renewed optimism shared by market participants in the wake of fresh central bank stimulus. After Baoding Tianwei Group Co., a unit of government owned China South Industries Group Corporation, failed to pay interest to the tune of 85.5m yuan on bonds issued credit default swaps dropped a mere 1.3 basis points to 91.3 basis points reflecting the confidence held by many investors that the central bank would prevent any significant fallout from contagion. The recent injection of liquidity into the market after the PBOC cut the RRR to 18.5% has helped alleviate some of the pressure, however, the implications of further defaults could push credit risk in China higher. Despite this, some market commentators view the default as a positive step, instilling market discipline and distributing capital more effectively as China transitions towards a long term growth trajectory.

The dollar index gained for a second straight session yesterday as it made steady progress recovering some of the previous week’s steep losses. Intraday moves on the upside attempted to recover territory towards 98.50, however, traction at these higher levels failed to take root and the greenback ended the session marginally higher against a basket of currencies at 98.004. With a slow start to the week for economic data investors are eagerly anticipating today’s release of housing and consumer confidence data which will provide additional market colour. The long term upward trend remains intact but the index seems to have stalled in recent weeks, unable to breach and rally above 100.00 for an extended period of time with the dollar index trading sideways within a wide range since mid-March.

Japan's trade balance swings to surplus

JNTBAL Index Japan Trade Statis 2015 04 22 07 37 21

Nikkei pushes above 20,000 for the first time in 15 years

NKY Index Nikkei 225 2015 04 22 07 53 13

DXY gains for a second day as upward trend resumes

DXY Curncy DOLLAR INDEX SPOT 2015 04 22 08 14 27

Events for today

0930

UK

Mar

BOE minutes

1500

US

Mar

Existing Homes Sales

1500

US

Apr

Consumer Confidence

1530

US

w/e

EIA Energy Stocks

All times UK Local Time

 

Topics: JPY, Trade Balance, DXY, PBOC
More from: Kash Kamal