Article / 27 May 2016 at 7:00 GMT

Morning Markets: Mildly positive ahead of Yellen speech




  • US Q1 Gross Domestic Production (1230 GMT)
  • US May Michigan Consumer Survey (1400 GMT)
  • Fed's Janet Yellen speaks (1715 GMT)

US stocks took a pause from their recent upward trajectory on Wednesday, leaving little in the way of direction for Asian sentiment towards equities. So local factors became the chief factors driving Asian markets today. In Japan, speculation that the government would delay a planned sales tax hike gave sentiment a lift. In Australia, the benchmark S&P/ASX200 soared above the 5,400 point level to a nine-month high, thanks mainly to local banking and healthcare stocks. 

Meawhile the G7 summit in Japan finished up today, with the leaders agreeing to avoid a race to the bottom in forex. Japanese PM Shinzo Abe wanted the G7 to warn of the risk of a global crisis, but he was unable to persuade his fellow leaders to include his grim view of the world economy in the summit communique.

But the was agreement on another matter – the G7 leaders joined the chorus of global notables and financial institutions warning that Brexit would have a detrimental effect. A British exit from the European Union would pose a "serious risk" to global growth, they said.

Looking ahead, European indices are expected to open mildly higher though markets will likely be subdued as traders await a key speech by Fed chief Janet Yellen later today.

Market signals

Asian session

  • Brent crude for July settlement fell $0.15 to $49.59/barrel in London
  • WTI crude also slipped, falling to 0.2% to $49.48/b
  • Stocks made gains in Tokyo on talk of delay in a proposed sales tax hike
  • The Nikkei 225 was up 0.26% to 16,816.85 at 0453 GMT
  • G7 leaders meeting in Ise-Shima, Japan, agreed to avoid competitive devaluations
  • Shinzo Abe wanted the G7 to warn of the risk of a global crisis: Bloomberg
  • China's Shanghai Composite was down 0.33% to 2,813.16 at 0512 GMT
  • Hong Kong's Hang Seng index was down 0.18% to 20,359.97 at 0514 GMT
  • A typhoon is currently heading for Hong Kong, and all primary schools are closed
  • India's S&P BSE Sensex was up by a hefty 0.72% to 26,556.280 at 0515 GMT
  • Korea's Kospi Composite made gains; it was up 0.46% to 1,966.01 at 0455 GMT
  • Australia's big banks and healthcare stocks pushed the S&P/ASX200 above 5,400 points
  • The S&P/ASX200  closed up 0.46% at 5,412.90 points
  • The ASX rally came despite falls for miners hurt by iron ore slipping below $50/tonne
  • Markets will be closed in the US on Monday, for the May 30 Memorial Day public holiday

Forex ahead

  • The US dollar edged slightly higher against the yen; it was worth ¥109.6705 at 0605 GMT
  • The Australian dollar lost ground but held above 0.72; it was worth 0.7228 at 0604 GMT

From the Floor

USD consolidates. “The dollar has gone into a bit of a consolidation mode,” Hardy says.

Oil’s damp squib. “The $50 level that we have been talking about all week was reached and breached yesterday [...] – it was almost a damp squib,” Hansen says.

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

In opinion

While the upwardly revised first quarter GDP figures for the US will have some impact on monetary policy deliberations, it's Q2 data that will move the Fed, says Juhani Huopainen

Inflation fixation
Don't believe talk that says quantitative easing is exhausted in Japan; the Bank of Japan is desperate for something to push up inflation, says Max McKegg

Mining optimism
Excess capacity is weighing on iron ore prices, but it's not all doom and gloom for miners, with most base metals making gains says the team at Saxo Capital Markets Australia


 Forex was on the table at the G7 summit in Japan today, and the leaders of the largest industrial democracies agreed to avoid competitive devaluations. Photo: iStock

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