- Slightly negative risk sentiment this morning without major market-moving news.
- Possible rejection of Iwata as Bank of Japan deputy governor strengthens JPY.
- Walmart says it sees no signs that payroll tax has hurt consumer spending.
- Main market driver today is retail sales in the US.
Slightly negative market sentiment
this morning, but no major news. The US stock market yesterday edged lower on the back of the recent strong performance, and S&P 500 finished the session down 0.3%. Retail stocks performed relatively well after Walmart’s chief financial officer said that it had not seen a drop in consumer spending from the recent increase in the payroll tax. In earlier statements, Walmart indicated that the weakness evident in consumer spending in particularly early February appears to have been largely due to delayed disbursement of tax refunds that are now expected to boost retail sales in March.
Asian stock markets are also mostly lower this morning with Japan’s Nikkei and China’s Shanghai stock indices down 0.5% and 0.9% respectively. In Japan it is particularly a stronger JPY that has weighed on the stock market and in China the disappointing data released during the weekend and possible curbs on the property market continue to weigh.
US bond yields yesterday dropped on the back of the recent surge but only about 1bp to 2.01% since the markets closed in Europe yesterday.
In the FX market JPY has strengthened overnight as there remains some doubt whether the very dovish Kikuo Iwata will be appointed Deputy Governor for the Bank of Japan. Iwata will have to be approved in both the Lower and the Upper House and the government does not currently have a majority in the Upper House. The main opposition party, the Democratic Party of Japan, has indicated that it will not support Iwata but the support of a couple of minor opposition parties should be enough to secure the approval. The Lower House will vote tomorrow and the Upper House will vote on Friday. USD/JPY is this morning trading 95.71.
In the FX market GBP has recovered slightly after it was initially hammered yesterday on weak industrial production data. EUR/GBP is this morning trading at 0.873. Both SEK and NOK have strengthened a bit overnight.
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