Danske Daily: Japense Stock Market Surged Almost 3%

The ISM manufacturing index is likely to fall back a bit after last month's surge. We suspect that seasonal adjustments added almost two points to the index in July, and we expect the ISM to give back some of the increase. However, the level should remain high, indicating a continued improvement in the US economy.

For August a flash 53.9 is published an hour before ISM. The two indices differ because of differences in weighing of sub-indices, survey panels, and seasonal adjustment methodology.

In Denmark the central bank will publish foreign exchange reserve figures. With the EUR/DKK holding well below 7.46 for most of August, we do not expect the central bank to have had to intervene.

Selected market news
The US market was closed for Labor Day, and thus seems to have something in store after positive Chinese and European PMI data suggests that the global economy is recovering combined with the fact that a declining likelihood of a US attack on Syria has given a substantial lift to most markets. With US markets closed, trading in other markets was generally thinner than usual. Despite the perceived reduction in geopolitical risk, oil prices have increased slightly on the improved economic outlook, which has also added further downward pressure on US treasuries.

This morning the Japanese stock market has surged almost 3%, and the yen has depreciated slightly against all major peers on global recovery signs and after data showed that Japanese money growth is now at its highest in 40 years. In August the money base was up as much as 42% y/y to JPY177trn. The Bank of Japan’s target is to lift the money base to JPY270trn by the end of 2014.

Japan cash wages increased 0.4% y/y in July down from 0.6% y/y in June. While this is the second month of positive wage growth, it suggests that core inflation remains subdued and it may take some time to bring inflation up to the 2.0% target.

Other Asian markets are generally up as well though not as much as Japan. In China Premier Li Keqiang said that he was confident that China would reach this year’s economic goal, indicating that China is on track for 7.5% growth this year. Indeed, recent more upbeat data suggests that Chinese GDP growth is likely to be in the 7.5-8.0% range.

This morning the Reserve Bank of Australia as widely expected kept the overnight cash rate unchanged at record low 2.5%.

To Read the Entire Report Please Click on the pdf File Below.