Article / 11 July 2016 at 7:00 GMT

Morning Markets: Helicopter money prospect fuels Nikkei

Former managing editor, / Saxo Bank



  • US: Labour Market Conditions Index (1400 GMT)

The double whammy of that explosive nonfarm payrolls June number of 287,000 and the prospect of yet more central-bank stimulus sent the Nikkei shooting towards a 5% on-day rise for its best rally in four months and helped pull Asian equities along for the ride.

The Nikkei's rise was embellished by a resounding victory for prime minister Shinzo Abe's ruling coalition in elections that gives the mandate for the Bank of Japan to embark on a helicopter money-style stimulus splurge that could be in the region of $120 billion as a likely joint government/BoJ plan unfolds.

A weakening in the yen in the latter part of the Asian session pushed USDJPY out to towards the 102.0 mark and helped sustain the feel-good factor in the export-led index.

Both the Hang Seng and the Shanghai Composite Index also enjoyed stronger days with the former up 1.57% at 0622 GMT and the mainland barometer once again through the 3,000 mark having hit an intraday high of 3,021. Among currencies, Korea's won rode the NFP wave for a 1.4% rise during the Asian session.

The whirlwind sweeping through the Asian equities space looks certain to give European equities a strong start to the day, with Germany's Dax, France's Cac and the UK's FTSE 100 all expected to open up. But the focus in the latter will be on the more UK-led FTSE 250 which is still some 6% off its June 23 peak, the night of the referendum to leave the UK.

The leadership vacuum in the UK has also left the battered sterling marooned below the 1.30 mark and seemingly unable to latch on to any positive sentiment. With the political classes in complete disarray, it will take a brave man to bet on the pound right now, even if one suspects it might be due for some consolidation eventually as Bank of England governor Mark Carney eyes a rate cut, perhaps to zero. GBPUSD by way of comparison was around the 1.70 mark in July 2014.

Elsewhere, WTI has been bashed down below the $45/barrel mark after a strong rigs report Friday, gold continues to find support and there was a slight easing of money away from bonds — although by no means a stampede — with US Treasuries 10-year yields lifting to 1.37% and Japanese government bonds backing away from Friday's all-time low of 0.3%.

Market signals

Asian session

  • Shares leapt higher in Tokyo, with worries about the high yen sidelined, for now
  • US jobs data and the Japanese election result boosted investor sentiment in Tokyo
  • Japan's Nikkei 225 rebounded strongly, recouping last week's losses
  • The Nikkei 225 was up by a stunning 4.46% to 15,781.04 at 0544 GMT
  • Korea's Kospi Composite was up 1.32% to 1,989.02 at 0516 GMT
  • Hong Kong Hang Seng was up 1.72% to  20,916.93 at 0534 GMT
  • The Shanghai Composite was up 1.15% to 3,022.54 at 0532 GMT
  • India's S&P BSE Sensex was up 1.68% to 27,583.86 at 0605 GMT
  • Australia's S&P/ASX200 surged sharply higher, wiping out this year's falls
  • The S&P/ASX200 closed up 1.87% at 5,328.10

Forex ahead

  • The US dollar failed to rise against the yen; it was was worth just ¥101.4450 at 0536 GMT
  • FX traders see the Aussie and New Zealand dollars as safe havens at present
  • The Australian dollar bounced above 0.75, it was worth 0.7566 at 0536 GMT
  • The NZ dollar was worth 0.7271 at 0517 GMT

From the Floor

Supermajority. "Japan's election signals a raised likelihood of fiscal stimulus", says Hardy

Defensive on stocks. "The strong NFP print doesn't change our approach", says Garnry

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

The sharply rising yen is creating headwinds for Japan's weak economy, leaving the Bank of Japan wondering how to fix its forex headache, says James Picerno

Gloom lifting
The ASX got off to a roaring start, a combination of easing electoral uncertainty and the strong US nonfarm jobs report, according to Saxo Capital Markets

Dollar defies pundits
In a counterintuitive move, the robust nonfarm jobs release failed to give the US dollar the lift that FX watchers would expect, says the team at Saxo APAC sales trading.

Missed goals
Portugal and Spain have both failed to meet their budget deficit targets for eight years and the European Commission must now decide what penalty – if any – should be imposed, writes Stephen Pope.


Yen fears sidelined ... The Nikkei 225 soared on an upbeat reaction to US jobs data and Japan's election result, but the soaring yen is still a big headache for the BoJ. Photo: iStock

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