Abe announcements as expected, Eurozone gets some good news

As has been the case in the past month, Japan is continuing to make big waves on the global markets. Prime Minster Abe finally confirmed a mid-December election, one that he is expected to win despite his declining popularity.

Abe announced he will dissolve the Japanese lower house on November 21st, whilst delaying the October 2015 sales tax increase by at least 18 months. In response to the long-rumoured moves coming true, the Nikkei rallied to an intraday high of 17445.5, compared to yesterday’s low of 16939.5. The Bank of Japan have tentatively pencilled in a monetary policy statement and press conference tomorrow; the last time the BoJ announced anything they sent shockwaves through the markets that are still being felt now, so investors will be looking carefully tomorrow at any reports coming out of Japan.

The US markets, who have been the biggest beneficiary the recent sets of Japanese news, had a fairly flat opening today. This follows significant figures from the US as month by month PPI arrived at 0.2% instead of the predicted -0.1%, core PPI 0.4% instead of the forecast 0.2% and the NAHB housing index coming in 4 points higher than forecast at 58. The Dow fell 4 points to open at 17646, with the S&P opening at 2038.6, and the NASDAQ opening 3 points lower at 4212. Similarly the dollar continues to perform strong but relatively flat against the yen, hitting an intraday high of 117.029. If the USD/JPY does eventually creep towards 120, it will largely depend on the news coming out of Japan in the next month.

Whilst it opened lower today, the Dow has managed to rally every day recently to close at record highs, so traders will not be too concerned at these initial figures. What will peak interest to investors is the macro picture for the Dow. Its charts are gradually looking flatter, especially when compared to the dramatic climb at the start of November, and its margins of improvement are shrinking. Wednesday after sees a new batch of hurdles for the Dow et al. to potentially overcome, as US building permits, housing starts and crude oil inventories are announced.

The FTSE was operating under the influence of important numbers from the UK this morning, as CPI, PPI and RPI figures were announced. With most of these coming in as expected, sentiment around the FTSE remained positive, as it continued to perform at seven week highs of around 6710. Tomorrow sees more important reports for the UK economy as the MPC asset purchase facility votes and the official bank rate votes are announced, both which are forecast to remain the same as last month.

Finally, Europe has received some much needed good news after ZEW figures came in much higher than expected. The Centre for European Economic Research (ZEW) gave Germany an economic sentiment score of 11.5 instead of the forecast 0.9, whilst the Eurozone received a score of 11.0, more than double the predicted 4.3. The DAX then saw 1.7% growth to reach 9458.5, as the pound fell 0.4% against a stronger euro to hit €1.24985 per pound. The combination of the worldwide boost caused by Japan’s announcements, these strong Eurozone figures being significantly better than hoped, and the lingering effects of ECB President Draghi’s assuaging comments yesterday resulted in a (recently) rare good day for Europe.