Investors Find Favour In Abes’ Plans Even As JPY Strengthens

Stocks in Asia were trading lower overnight ahead of Shinzo Abe’s speech on Wednesday. He discussed ways in which to boost income in Japan by approximately 3 per cent, as well as discussing plans for tax cuts to boost economic growth. In order to fulfill his target of 2 per cent inflation, Abe will have to increase yearly incomes by at least 2 per cent. Although the JPY is getting stronger of late, investors are positive towards Abe’s policies.

In Australia, growth concerns were topping the bill with the Q1 GDP lower than expected, as drops in investments weighed heavier than the positive consumer spending and exports data. In the first quarter, growth in Australia grew by 2.5 per cent, coming under the expected 2.7 per cent rate. The economy has seen recent gains, although there was some damage by a pullback in the demand of commodities and resources supplied by the country. Many investors are seeking an interest rate cut from the record low of 2.75 per cent.

In the U.S., data showed that the trade deficit had grown by 8.5 per cent to $40.3 bn, surprising investors. Meanwhile, U.S. imports gained 2.4 percent in April, while exports gained just 1.2 per cent.

Stocks
Asian stocks were down in Wednesday’s overnight session, particularly the Nikkei 225 which shed nearly 2 per cent while investors reacted to Abe’s speech. In Australia the ASX 200 lost 0.94 percent, and the Hong Kong Hang Seng lost 0.92 per cent.

Forex
Not much movement in the overnight forex markets except with the USD/YEN pair, which lost 0.35 per cent after the conclusion of Shinzo Abe’s speech. The USD was slightly down against the EUR (-0.6 per cent) and the GB BP (-0.07 per cent). The AUD was down following the release of Q1 growth data (-0.06 per cent).

Commodities
While demands for resources are down on global economic concerns, the weakened USD pushed investors towards the safety of the commodities. Gold was up 0.7 per cent , Silver rose 0.93 per cent and Crude oil gained 0.31 percent while Natural Gas gained 0.25 per cent following positive supply data.

Today
A string of data this morning: key services and retail sales releases will be followed by employment numbers from the U.S., which will all give further clues on the future of the U.S. stimulus plans.