Japan’s economy slides further into recession as election looms

After the markets rode high on the better-than-expected US non-farm figures last Friday, the global indices have come crashing back down to reality this Monday morning, as more disappointing data from Japan, and the continued downward trajectory of Brent crude oil, made their presence felt.

Japan’s final GDP figures fell to -0.5%, much lower than the forecast -0.1%. This prevented the Nikkei from continuing its 6 day growth to a seventh, as the Japan slipped further into recession, causing the index to close over 100 points lower at 17889.5. This drop doesn’t bode well for the week ahead; uncertainty will begin to creep in as the next Sunday’s Japanese election grows ever closer, with the yen already suffering.

As its non-farm figures wowed the world, the USA saw the Dow Jones reach another record high of 17959.5, achingly close to the 18000 mark. With the dollar closing out last week at over 121 against the yen, it will only take one or two pieces of good news for the US markets to see the Dow finally breach that psychologically significant level. On a data-light day, the US will be looking for positivity from elsewhere if it hopes to reach 18000 today.

It continues to be a tumultuous time for Germany, whose industrial production figures fell short of what was hoped. Coming in at 0.2%, lower than the 0.4% forecast, this data caused the DAX to fall slightly to open at 10080.5. The DAX is caught between two opposing forces at the moment; it is simultaneously being dragged down by Germany’s own poor data whilst being boosted by the increase in pressure for QE this data causes. So far the boost from potential quantitative easing has won out; however, without action soon the DAX could begin to slump under the weight of its home nation’s gloomy numbers.

The FTSE took note of the state of the worldwide indices this morning and followed suit, opening lower than last week’s close at 6723.3, seeing it slip below 6700 not long after the bell. This drop comes as the Bank of England looks ahead to 2015 for a potential rise in interest rates. Despite wage growth struck by inertia, signs of this changing, alongside fast economic growth, have caused the BoE to consider raising the rates. It is now for the BoE to weigh up the potential effects on consumer spending compared to the potential benefits of a rate hike.

Finally, the perpetual volatility of Brent Crude oil saw it fall again this morning, with fears that it could reach new 5 years lows as the week goes on. This was the sour cherry on top of the bitter cake for the global markets today, as crude oil spent the morning trading at $68 dollars per barrel.