XE Morning Update
The Kiwi opens at 0.6373
The main story overnight has been the move in the Yen, and it’s sharp selloff. It’s preliminary GDP on an annualized basis on Monday came in at -6.3%. This went largely under the radar, but when combined with yesterday’s poor machinery orders, which were off 12.5% for the month, the market started to look at Japan more closely. It has been largely insulated by it’s safe haven status, and generally does well in a crisis, but eventually someone needs to look at how it is actually going to perform economically. China is one of its largest trading partners, covering circa 20% of both Imports and Exports. It is not like Japan has the growth to buffer itself against a shock, and looks like it will get hit hard. Increasingly it is becoming a game not of where do you want to put your money, but of all the bad alternatives, what is the most palatable.
For now, the answer is the USD and equities. For stocks, good news is good, and bad news is good as central banks will cut rates. Fundamentals become less relevant, as we saw with a solid CPI print out of the UK, coming in at 1.8%. A lot of countries would dream of that level of inflation, but the Pound is net down on the day. The market is starting to feel like it is on its last legs, and is close to capitulating. As the certainty of Yen as a safe haven erodes, investors will become scared, and scared investors sell first and ask questions later. This is where you get your large moves in markets.
Global equity markets though are up, - Dow 0.48%, S&P 500 +0.60%, FTSE +1.02%, DAX +0.79%, CAC +0.90%, Nikkei +0.89%, Shanghai -0.32%
Gold prices are higher, trading at $1,606 an ounce. WTI Crude Oil prices are also up strongly, gaining 3.1% to $53.36 a barrel