Asian Markets Mixed On China’s Reforms And Japan’s Elections

Asian markets were rather mixed today as they reacted to Shinzo Abe’s overwhelming victory in the Japanese upper house elections. They also digested some pretty big banking reforms announced by China.

Investors are pleased that Abe now has a green light to enact super loose monetary policy in the future as his ruling Liberal Democratic Party (LDP) had a big win on Sunday. They now control both houses of the parliament. This gives Abe a clear mandate to proceed with his economic reforms.

The People’s Bank of China (PBOC) has announced the biggest reforms, to date, towards overhauling its financial system. They are now scrapping controls on lending rates which means individual banks can set their own rates. However, the PBOC is really not on a path to reform till they remove the deposit ceiling.

STOCKS
The Nikkei was down 0.1 percent in a volatile day as was the Shanghai which fell 0.5 percent. The Kospi in south Korea rose and has now crossed the 1880 level. The Australian benchmark, the S&P/ASX 200 hit a monthly high then retreated a bit. Medusa Mining leaped 12 percent and Perseus Mining climbed 14 percent on the day.

European markets were hurt on Friday as weak earnings weighed on investor sentiment. They also took profits on recent market gains before the weekend. U.S. markets finished higher for the week. The DJIA was a little lower to close at 15,543.74 hurt by weaker than expected earnings my Microsoft (DJIA:MSFT) and Hewlett-Packard (DJIA:HPQ). The S&P was a tad higher to hit a new record at 1,692.09 and the NASDAQ was down by 23.67 points. The Dow was up 0.50 percent for theweek and the S&P finished 0.71 percent higher for the week.

CURRENCIES
The USD/JPY (99.94) is trading lower on as the Dollar is weak all over. The fact that the market could not break 100.90 could make the pair weak for a test at 98.50 sometime this week. Please see the chart below.
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The AUD/USD (0.9216) has strong support at 0.9150 and while above that can move higher to test 0.9270, with a break above that testing a key level at 0.9300.

COMMODITIES
Brent, WTI (108.28) has key support at 108.00. We could see some sideways movement this week, which has been going on for the last week or so. We could still see a test of 109.00 and then 110.00 as we have geo political problems remaining in Egypt. Copper (3.1615) has been moving higher with support at 3.10 holding. We could test 3.20 with a break higher testing 3.25.

TODAY’S OUTLOOK
Investors in Europe will be digesting the banking reforms out of China today as rate limits have been scrapped. As far as the week is concerned, investors will be watching Friday’s G-20 summit with some interest. On Thursday the U.S. will release Durable goods and Jobless Claims numbers.