Japan staggers into recession as Europe holds its breath for Draghi announcement

Japan shocked the financial world this morning, as a forecasted 0.5% growth in GDP turned into an actual figure of -0.4%, causing Japan to slip into a technical recession. Unsurprisingly, after its Bank of Japan inspired run, the Nikkei dropped 2% to close at 17152.5. This news has all-but-confirmed reports last week that President Abe will call a snap election, 2 years before he is required to, whilst also postponing a sales tax hike. Despite currently performing 0.2% lower than last week’s close, the USD/JPY still hit another recent high of 116.876, compounding the yen’s dismal display in the past few weeks. If President Abe does call a snap election, as is expected, it remains to be seen whether this hail-Mary will have the effect he wishes, as Japan’s dire economic position can largely be traced back to his ‘Abenomics’ over the past two years.

Looking to Europe, after a G20 summit at the weekend that focused on the Ukraine/Russia situation, as well as disappointing figures from Italy’s trade balance, 2.01 billion instead of the 2.69 billion that was forecast, the markets have opened at lower than last week. After closing at 6645.5, a six week high, last Friday, the FTSE opened today at 6616.2, whilst the DAX, closing last week at 9234.2, it opened at  9175.8, continuing its downward slide that was cemented by the poor German growth figures last week. The pound and the euro have also both suffered this morning, as the GBP/USD fell 0.27% to 1.56655, and the euro fell 0.32% to $1.25211 per euro. This continues the trajectory the pound found itself on recently, whilst the Europe will be disappointed by the euro’s drop after its stable week last week. UK Prime Minster David Cameron today described his fears of the ‘red warning lights’ that are ‘flashing on the dashboard of the global economy.’ In light of this, Europe will be looking for good news later today, as President Draghi holds a conference. Considering the consistently disappointing figures coming from the Eurozone, Draghi may finally announce the stimulus that many have been crying out for in recent months.

The US markets continued to squeak their way to record highs last Friday, as the Dow Jones closed marginally higher at 17641. Yet after the weak figures announced this morning worldwide, the futures are pointing at the Dow dropping 0.4% at its open later in the day. However, despite this, the Dow recently has been ignoring world news to consistently break its own records. The lower margins these records are happening at may be an indicator of the Dow reaching its peak point, so it remains to be seen how impervious the Dow is as reacts to its latest test, the industrial production and capacity utilization rate figures that will be released later today.