Japanese markets rally on continued BOJ support

Tuesday, February 18, 2014

Japanese equity markets surged higher after the BOJ announced it would continue its monetary easing programme to boost lending and meet target inflation. Both the Nikkei and TOPIX rallied for the second consecutive session, building on support offered by the 200 day MA as they closed up 3.13% and 2.68% respectively. The yen weakened 0.64% against the dollar, sliding towards 102.70 as BOJ officials pledged further support for bank lending programmes.

Chinese equity markets came under significant selling pressure overnight as the PBOC sold repo contracts for the first time in eight months, withdrawing 48bn yuan from the banking system as money market rates fell to their lowest level in six weeks. The PBOC have had to tread carefully with tightening monetary policy as the world’s second largest economy battles with slowing growth and rising consumer prices, with the recent withdrawal of funds at a time when the US Fed is also cutting back on stimulus a sign that market conditions are slowly improving. Despite the longer term prospects both the CSI 300 and Shanghai Composite erased the previous session’s gains, closing 1.26% and 0.77% lower respectively.

Spot gold prices snapped a three day rally, erasing the previous day’s gains and pulling back from a three and a half month high as market expectations that the Fed will continue down the path of tapering slowed the yellow metals advance. Prices are trading 1% lower this morning after closing just above $1,330 yesterday as investors await the Jan 28-29 FOMC meeting minutes, due tomorrow, which will provide further insight into Fed policy under Janet Yellen.

Alcoa has announced it will shut down its Point Henry aluminium smelter and two rolling mills in Australia as overcapacity continues to put pressure on prices. The closure will reduce smelting capacity by 190,000 tonnes per year and rolling capacity by 200,000 tonnes per year bringing total closures by the third largest aluminium producer to 551,000 tonnes of annual smelting capacity, or approximately 18% of capacity currently in operation.

After a quiet day for economic data yesterday and with the return of the US market after yesterday’s Presidents Day holiday investors will be eagerly awaiting eurozone trade balance data, UK inflation figures, the German ZEW survey and the Empire manufacturing survey, all of which will provide further market colour and coax otherwise side-lined investors back to the market.

A weaker yen and continued BOJ stimulus supports the Nikkei higher

NKY Index Nikkei 225 NKY JPY 2014 02 18 08 18 49 

Gold prices snap a three day rally as risk asset appetite returns

XAU Curncy Gold Spot Oz D 2014 02 18 08 18 15

Three month LME aluminium prices struggle to rebound on overcapacity concerns

LMAHDS03 Comdty LME ALUMINUM 3 2014 02 18 08 17 34


Events for today: Tuesday, 18 February 2014

0900

EZ

Dec

Current Accounts

0930

UK

Jan

CPI &PPI

1000

DE

Feb

ZEW Economic Survey

1330

US

Feb

NY Fed Manufacturing

View Economic Market Calendar

 

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