Risk Rally Continues In Asia, Dollar Stays Soft

Risk sentiments in Asia remains firm with broad based gain in equities, following the record close in S&P 500 last week. Markets are expecting that Fed will delay tapering the stimulus as uncertainties in US over the debt negotiation were just delayed, not solved. Also, the 16 day government shutdown should have hurt recovery momentum in the US. Treasury Secretary Lew urged over the weekend that "we need to make sure that government does not go through another round of brinkmanship," and emphasized that "this can never happen again". Though, he tried to play down the significance of the shutdown as while it "does do some damage", "we have a resilient economy". Also, he noted that what US just went through was a "political crisis, not an economic crisis". Dollar remains general soft against other major currencies while it's only managed to recover mildly against yen.

In Japan, trade deficit widened to 1.06 trillion yen in September from 0.79 trillion yen a month ago. Export growth eased to 11.5% yoy with shipment to China, Korea and Hong Kong rising 11.4%, 14.6% and 16.8% respectively. Exports to the US climbed 18.8% while that Germany added 19.5%. Imports grew 16.5% yoy in September. The September report might have been affected by seasonal factors with a combination of public holidays and bad weather conditions leading to the moderation in trade. Also released from Japan, all industry index rose 0.3% mom in August. BoJ governor Kuroda said that the "Japan's economy is making steady progress toward achieving the BOJ's 2 percent inflation target." And, he's optimistic that "Japan's economy is likely to continue recovering moderately driven by a positive cycle of output, income and expenditure."

Elsewhere, the Chinese government released a statement during the weekend, urging for reforms to consolidate economic growth. The government described the economic developments as "stable and trending for the better". Despite the rebound of growth to 7.8% in 3Q13, policymakers warned of downside risks which are "relatively big". Yet, they affirmed that they are confidence for the prospect. The statement also urged local authorities to speed up implementation of government policies to "further stabilize hard-earned expectations for improvement and for public confidence".

In UK, BoE policy maker Broadbent said that the central should ensure recovery continues and is "not choked off by a premature rise in interest rates". He believed that the inflation opt-out clause in the BoE's forward guidance is "unlikely" to be triggered". And, "it’s more likely that we would only consider raising interest rates once unemployment falls below 7 percent." Released from UK, Rightmove house prices rose 2.8% mom in October.

Looking ahead, German PPI, Canada wholesale sales and US existing home sales will be released. As the US has now averted the default risk, the focus of the week is returned to economic data and central bank meetings. The non-farm payrolls for September would be out tomorrow. The market expects the number of jobs rose 180K during the month from a 169K addition in August. The unemployment rate should have stayed unchanged at 7.3%. The BOC would meet on Wednesday but nothing is expected on monetary adjustment. The BOE minutes for the October meeting would also be released on Wednesday.