Subdued start to the week for Asian stocks as Chinese New Year gets underway

Monday, February 08, 2016

As expected Asian trading was subdued as the week long New Year celebrations in China kicked off, with very little of note to report overnight. Japanese mainland stocks were offered some support from a marginally weaker yen which traded back above 117.00, at one point briefly touching 117.53. The Nikkei 25 close 1.1% higher while the TOPIX added 0.84% as crude oil futures held firm. Market jitters from the mixed US labour market data released on Friday were largely shrugged off but investors were lifted by stable trading in front month Brent crude futures which held above $34/bbl overnight and remain poised to hold this level as we head into the European session.

Saudi Arabia’s oil minister, Ali al-Naimi announced that talks held with his Venezuelan counterpart, Eulogio Del Pino, were “successful” as OPEC members increasingly step up efforts to bolster the crude market. However, the outspoken official offered little additional insight into just what these steps would include and whether or not a production cut would be on the horizon. Front month Brent futures have rallied almost 25% since registering fresh multi-year lows last month and currently face near term resistance at the 50 day moving average but with the expectation of OPEC keeping its production quota unchanged and non-OPEC supply cuts as of yet unresponsive to the precipitous slide in crude prices we may soon see the rally fade on any tempering of the current fragile risk appetite.

China’s foreign exchange reserves continue to decline as the impact of the considerable efforts the PBOC have had on the world’s largest currency reserve come to light. According to a statement released by the central bank over the weekend total FX reserves fell by $99.5bn in January to $3.23tn and while this was less than the consensus estimate of $120bn according to a Bloomberg poll it shows the considerable lengths policymakers have gone to as they look to shore up capital markets and prevent largescale capital flight. Offshore yuan trades around 6.5720 early on this morning after experiencing some modest strength last week but we expect quiet trading in the currency this week as markets remain shuttered for the week long Chinese New Year celebrations.

JPY weakens slightly against USD 

JPY Curncy Japanese Yen Spot 2016 02 08 08 03 57

Brent futures hold onto near term support around $34/bbl

CO1 Comdty Generic 1St CO Fut 2016 02 08 08 03 47

Events for today

CN Market Holiday 

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JP

Dec

BoP Current Account (07/02/16)

0700

DE

Dec

Industrial Production

Topics: Crude oil, Brent, PBOC, OPEC, CNH
More from: Kash Kamal