Risk assets subdued ahead of this week's FOMC rate decision

Monday, December 14, 2015

Asian equity markets posted a mixed start to the week as Chinese investors reacted positively to the PBOC's decision to weaken the yuan further. The onshore renminbi exchange rate slipped against the dollar for the seventh straight session, trading towards 6.4662 at one point during the Asian session as it hit a fresh four and half year low. Chinese mainland stock indices were up between 2% and 2.9%, however, Japanese equity stocks started the week on the back foot, trading between 1.4% and 1.8% lower as investors approached risk assets with renewed caution despite data hinting at a cautiously optimistic outlook.

Another quiet start to the week with Tankan large manufacturing survey and outlook data hinting towards a cautious outlook for the fourth quarter. Japanese industrial production data for October saw another stable month of growth as output increased 1.4% month-on-month, building on last month’s 1.1% m/m increase. We also saw the release of Rightmove’s house price data which saw house prices in the UK slip 1.1% m/m in December, compounding on last month’s 1.3% m/m decline. While house buying typically slows down towards the end of the year, some market participants are cautioning that the substantial rally we have seen since the financial crisis is coming to an end and with many hoping that the Bank of England will raise interest rates at some point next year we could see further month-on-month price declines.

We expect the week ahead to be dominated by choppy trading as investors gear themselves up for this Wednesday’s FOMC interest rate decision. Commodity prices have started the week under pressure with crude oil and the base metals struggling with direction early on this morning. Expectations for the first interest rate rise in the US for nine years will heavily influence this week’s trading sentiment and we could see investors pare back risk assets further in the run up to the decision.

Onshore yuan weakens for a seventh straight session 

CNY Curncy China Renminbi Spot 2015 12 14 08 18 50

Japanese industrial production improves 

JNIPMOM Index Japan Indices Of 2015 12 14 08 09 57

Events for today




Tankan Large Mfg Survey (13/12/15)




Tankan Large Mfg Outlook (13/12/15)




Rightmove House Prices




Industrial Production

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