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Weekly market watch
As at Friday May 12, 2017
Equities
Region / Country
Asia-Pacific
Hong Kong
India
Japan
Singapore
South Korea
Taiwan
Shanghai
Europe
France
Germany
Italy
Russia
UK
Americas
Brazil
Mexico
Nasdaq
US
US
Index
Close
Performance
Year-to-date
52-week
Net Change
HSI
BSE 30
Nikkei
STI
KOSPI
WSE
COMPOSITE
25156.34
30188.15
19883.90
3255.29
2286.02
9986.82
3083.51
679.99
329.35
438.20
25.56
44.78
86.88
(19.53)
14.37%
13.43%
4.03%
12.32%
12.81%
7.92%
(5.08%)
26.32%
17.05%
19.45%
18.57%
15.60%
23.17%
8.73%
CAC
DAX
FTSE MIB
RTSI
FTSE 100
5405.42
12770.41
21575.45
1097.78
7435.39
(26.98)
53.52
91.59
13.23
137.96
11.15%
11.23%
12.17%
(4.51%)
4.10%
25.90%
29.49%
22.23%
19.85%
21.81%
IBOV
IPC
CCMP
S&P 500
DOW
68221.94
49426.08
6121.23
2390.90
20896.61
2512.21
(59.59)
20.47
(8.39)
(110.33)
13.27%
8.29%
13.71%
6.79%
5.74%
28.14%
8.19%
29.21%
15.83%
17.92%
Week ago
1.1170
0.8450
0.4180
0.0160
2.3500
Yield
Month ago
1.0500
0.9300
0.1980
0.0240
2.2400
Year ago
1.4040
0.5090
0.1540
-0.1230
1.7520
Bonds
10 Year Gilt
10 Year OAT
10 Year Bund
10 Year Japan
10 Year Treasuries
Close
1.0860
0.8430
0.3910
0.0390
2.3250
Base lending rates
Prime Rates
Latest
6 months ago
12 months ago
US
4.00
3.50
3.50
Canada
2.70
2.70
2.70
Japan
1.48
1.48
1.48
Britain
0.25
0.25
0.50
ECB
0.00
0.00
0.00
Switzerland
0.50
0.50
0.50
Australia
1.50
1.50
1.75
Hong Kong
5.25
5.25
5.25
% change is for indication only; local currency except where stated.
Weekly market watch
1
Equity Markets
US
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U.S. stocks notched their first weekly fall in a month last week, though tech stocks rose, as investors digested the
implications of President Donald Trump’s decision to fire James Comey, the former Federal Bureau of Investigation
director. The move took Wall Street off guard and came at a time when Comey had just asked for further resources to
deepen the bureau’s ongoing probe into the White House’s relationships with Russia. The controversy undermined
support for Trump amongst Republicans, triggering fears his pro-business agenda could suffer as a result. The Dow
Jones Industrial Average fell 0.53% over the week to close at 20,896.61, the Standard & Poor’s 500 index dropped
0.35% to finish at 2,390.90, while the Nasdaq rose 0.34% to reach 6,121.23.
Wells Fargo unveiled a plan Thursday to extend cost cutting, suggesting it will trim a further $2 billion before the end of
2019, in effect doubling the overhead cuts to which it had already committed. Shares fell as analysts were primed for
cuts of $3 billion. The lender also warned investors it will likely operate at the lower end of forecasts for return on equity
and assets this year, as it embarks on a program to close 450 branches through end-2018 as part of a wider turnaround
plan.
Sinclair Broadcast Group agreed to buy Tribune Media for $3.9 billion Tuesday, putting to the sword a potential bid by
21st Century Fox, in the process strengthening its hand in negotiations with the broadcast network via access to the 16
Fox affiliates that Tribune owns in key urban markets like New York and Miami. The deal ensures the combined
company will control a raft of local TV stations and give it the clout to compete with online competitors for advertising
dollars. Tribune shares rose on the news.
Walt Disney unveiled second-quarter profit at the top end of estimates Tuesday, as net income rose to $2.4 billion from
$2.1 billion in the year-earlier period on strong performance of its live-action version of Beauty and the Beast and other
box office hits, as well as higher spending and attendances at its US theme park attractions. Revenue across the
company was up to $13.3 billion from $13 billion a year earlier, missing estimates. Disney also said that ESPN, which
dominates performance at its cable TV stations, was proving an attractive proposition to online TV players like YouTube
and Hulu, in the process easing analysts’ fears that the sports station was vulnerable to losing eyeballs as customers cut
the cord on their cable subscriptions in favor of new on-line players.
Elliott Advisors stepped up its efforts to force Akzo Nobel to enter takeover talks with US rival PPG Industries Tuesday,
launching legal action in an attempt to remove Antony Burgmans as the Dutch paint maker’s chairman. Burgmans is at
the head of a board that on Monday rejected a renewed PPG offer of EUR26.9 billion including debt, citing concerns over
the value of the deal and the impact on workers, despite significant shareholder support for the move. Elliott responded
by combining with other institutional investors to lodge a suit with Amsterdam’s Enterprise Chamber requesting an
extraordinary shareholders’ meeting to discuss Burgmans’ tenure. Despite the pressure from below, Akzo is unlikely to
budge given a priority-share structure introduced in 1926 that ensures binding nominations to the board are the preserve
of just four directors.
Coach on Monday paid over the odds to secure rival Kate Spade in a bid to broaden its portfolio of brands and mimic the
success of industry leaders LVMH and Kering. Coach handed over $2.8 billion for the handbag maker, representing a
27.5% or $525 million premium on the closing price of Kate Spade’s shares when the possibility of a deal was initially
mooted in December. Investors responded positively to the move as shares rose about 6%, despite assurances that the
deal will result in just $50-million in cost savings and calculations that the deal overvalues Kate Side by about $200
million.
UK
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London stocks closed at an all-time high last week, boosted by weakness in sterling that lifted the outlook for
multinational companies that earn most of their profit overseas. The pound fell versus the dollar after the Bank of
England showed no inclination to raise interest rates in the near-term at its monthly policy meeting. The FTSE 100 rose
1.89% over the week to end at 7,435.39.
Improbable sealed a deal Thursday to receive $502 million financing from SoftBank, taking the virtual simulation startup’s valuation to more than $1 billion in the largest-ever round of venture investment for a private UK company. The
financing is also the largest Series B round in Europe. Improbable’s SpatialOS facilitates the simulation of massively
detailed ecosystems by distributing power across multiple computer servers, and is still in test mode, but SoftBank is
betting the founders can fulfill their ambition to make SpatialOS a platform to rival the importance of Facebook and other
US tech giants.
BT said Thursday that full-year pre-tax profit declined by a fifth to GBP2.3 billion, pushing shares down to a four-year low
as the company announced it will cut its dividend growth rate to below 10%, and shed 4,000 staff positions in a bid to
Weekly market watch
2
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recover. Full-year earnings were projected at GBP7.5 billion, down from GBP7.6 billion last year. The job cuts will be
spread across the Global Services division, which lost its boss, Luis Alvarez, this week due to the fallout from an Italian
accounting scandal. TV operations boss Delia Bushell also resigned, on Sunday, after a three-year stint that saw BT rise
as a serious challenger in the sports programming market. But Bushell’s tenure was blighted by claims of bid-rigging at
its Hong Kong branch, not to mention record fines levied by the telecoms regulator on its attempts to prevent rivals’
access to its broadband network, totaling GBP342 million once settlement payments to players like Sky and TalkTalk are
finalized.
Compass Group said Thursday that it will pay a GBP1 billion special dividend in lieu of being able to locate suitable dealmaking opportunities in the first half. The contract caterer said free cash flow rose 26.8% on year to GBP502 million in
the first half, giving it ample room to seek acquisitions if only it could find value in the market. Revenue was up 20% on
year to GBP11.5 billion, lifted by winning currency moves in the US, as well as a tendency for workers all over the world
seeking to eat better food and improve their diet. Pre-tax profit came in at GBP831 million, up 25% on year.
John Lewis Partnership was forced to set aside GBP36 million Tuesday after its policy of averaging employees’ pay
through the year irrespective of how much they work each month put the company on the wrong side of new minimum
wage rules. The operator of John Lewis department stores, which works hard to maintain an ethical brand, said the
policy was meant to provide a stable income for employees, but in fact ensured those who put in extra shifts one month
did not receive an income commensurate with the UK’s minimum wage, which varies according to age. The provision far
exceeds similar costs incurred by Tesco and Argos, amongst other companies.
BP announced Monday that it had discovered a large gas reserve off the coast of Senegal as part of its exploration
efforts with US partner Kosmos Energy. The find comes five-months after BP entered a $1-billion alliance with Kosmos to
prospect and develop resources in the area, which is fast becoming a key plank of BP’s efforts to replenish reserves
following asset sales required to finance the costs of the Deepwater Horizon oil spill disaster. Kosmos said the Yakaar-1
well contains 15 trillion cubic feet of gas, raising hopes that the area is as plentifully stocked with gas as the largest
global developments of recent years.
Europe (ex. UK)
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European stocks moved higher last week, swelled by an influx of money that saw the region’s equity funds receive more
than $6 billion for the first time on record, according to tracking firm EPFR. Analysts said investors were reacting
positively to the election of Emmanuel Macron as French president, as well as a path ahead that appears clear of
political risk. The Eurofirst 300 added 0.39% over the week to close at 1,555.35.
ArcelorMittal announced Friday that first-quarter sales rose 13.9% compared with the previous three months to $16.1
billion to help lift EBITA earnings to $2.2 billion. The strong results represent the success of a turnaround program
initiated in the wake of a $3-billion rights issue launched last year to help pay down its debt, as well as an improvement in
the steelmaker’s overall trading conditions, though boss Lakshmi Mittal noted performance remains negatively impacted
by “unfair imports” from countries such as China.
Crédit Agricole said Thursday that first-quarter profit jumped fourfold to EUR845 million as the French lender benefited
from an upturn in the European economy and a 17% increase in capital markets revenue. The bank benefitted from
uncertainty surrounding the French presidential election, which allowed lenders across the region, including peers BNP
Paribas and Société Générale, to cash in on fixed-income gains. Crédit Agricole also reported quarterly profit at its
French consumer banking business was up more than 50% to EUR140 million, reflecting ongoing restructuring to
improve its digital offering and reduce costs.
Eon and Uniper, the linked German utilities that were divested last year in a bid to separate their traditional and
renewable power assets, both said Tuesday that first-quarter profit declined sharply. Eon, which handles the renewables
side, said net income came to EUR 525 million, down 20% on year on 7% lower revenue, missing estimates, due to
higher grid fees and rising procurement costs. The company reaffirmed its adjusted earnings for 2017 at between
EUR2.8 billion and EUR3.1 billion. Uniper reported earnings of EUR514 million, down 41% on year, but with revenues up
14%, noting the absence of one-off positive factors that had boosted the year earlier period. It also reaffirmed its
earnings estimate of between EUR900 million and EUR1.2 billion.
Commerzbank said Tuesday that first-quarter net income rose 28% on year to EUR217 million, beating expectations,
largely as a result of a one-off EUR68-million gain on hedging exposure at its wind-down unit. Results in its core
business were less encouraging, with operating profit at its corporate client division, including its Mittelstandbank and
investment banking operations, declined 11% to EUR250 million on persistently low interest rates and anemic trading
activity.
Weekly market watch
3
Japan
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Tokyo stocks rose strongly last week, buoyed by a softening yen and easing tensions around North Korea’s nuclear
ambitions, as well as optimism over the prospect for corporate earnings. The Nikkei 225 Index was up 2.25% for the
week at 19,883.90.
Toyota Motor said Wednesday that it expects operating profit in fiscal 2017 to drop 20% to Y1.6 trillion as a persistently
strong yen eats into its margins and forces higher spending to push sales in overseas markets such as the U.S. The
forecast comes after a 30% fall in profit in the past year, and calls into question the Japanese automaker’s ability to keep
up the sizable investments required to keep pace with developments in autonomous vehicle and artificial intelligence.
Toyota said it expects US sales to ease 0.6% on year to 2.82 million against a backdrop of falling industry sales following
a record 2016 that has sapped demand for new vehicles and an increasing move by US consumers to buy SUVs given
low petrol prices.
Tohuku Electric Power sealed a deal Tuesday to pay $85 per ton on an annual contract for Australian coal supplied by
Glencore – about $10 higher than the market rate. The deal is important as it is used as a benchmark by which to price
similar contracts across Asia. Analysts said the outcome was a bonus for Glencore, which recently stated its production
cost for the coal was $44 a ton, and is also significantly above last year’s price of $61.10 per ton as a result of a squeeze
on supply by China as it seeks to streamline its coal industry. Tohuku is prepared to pay a premium for Australian coal as
the quality matches the configurations of Japanese power companies’ boilers and enables them to meet environmental
standards.
Toshiba shares rose Tuesday after the Japanese conglomerate warned US chipmaker Western Digital to stop attempting
to leverage the terms of the pair’s joint venture to undermine the sale of its memory chip business or face legal
consequences. The potential $20-billion sale of its NAND chipmaking business is essential to Toshiba’s survival as it
attempts to shore up its finances following massive write downs on its nuclear power business. The Western Digital joint
venture accounts for about 17% of the Japanese company’s overall chip sales, and the US company in April demanded
exclusive negotiation rights over the sale of the business – throwing a spanner into Toshiba’s plans and prompting
Tuesday’s rejection.
Asia-Pacific (ex. Japan)
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Mainland Chinese stocks fell last week, plumbing a seven-month low Monday after the China Insurance Regulatory
Commission said it was actively working to close loopholes allowing overly aggressive issuance of insurance products
and stock regulators stepped up oversight ahead of the Belt and Road Forum in Beijing. China’s April trade data also
missed forecasts, though growth remained robust, before the People’s Bank of China moved to inject funds and ease
liquidity fears late in the week. The Shanghai Composite Index dropped 0.63% over the week to close at 3,083.51.
Hong Kong stocks rose strongly last week, lifted by optimism over the health of the Chinese economy and upbeat
performances by energy issues following reports that China is considering a plan to merge eight companies in the sector
into three national champions. The Hang Seng Index climbed 2.78% over the week to end at 25,156.34.
Taiwan stocks rose last week, briefly surpassing the 10,000 level for the first time in the 17 years since the height of the
dotcom bubble, as foreign investors backed a global rally in tech shares amid optimism over demand for the new iPhone
due out later this year. Taiex index put on 0.88% over the week to reach 9,986.82.
Seoul stocks rose last week, lifted by the presidential election of Moon Jae In, which observers saw as positive for ties
with North Korea. The Kospi finished the week up 2% at 2,286.02.
Singapore stocks rose last week as banks put in a series of robust earnings reports. The Straits Times Index gained
0.79% on week to finish at 3,255.29.
Emerging Markets
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Brazil stocks rose sharply last week, underpinned by strong corporate results, including Petrobras turning in its strongestever operating profit. Bovispa was up 3.82% on the week at 68,221.94.
Mexico stocks declined slightly last week after the country’s economics minister said that negotiations on the North
American Free Trade Agreement with the U.S. and Canada would start in August. The IPC fell 0.12% over the week to
close at 49,426.08.
Indian stocks continued to rally last week, lifted by a forecast for a better monsoon season that suggested the Reserve
Bank of India had room to reduce interest rates given eased inflation worries. The BSE 30 rose 1.1% over the week to
finish at 30,188.15.
Russian stocks also moved higher last week as crude prices turned a corner after several weeks of suffering, in the
process brightening the outlook for the country’s energy exporters. RSTI put on 1.22% over the week to settle at
1,097.78.
Weekly market watch
4
Alternative Assets
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Crude oil prices rose last week, securing a first weekly gain in almost a month, driven by expectations that the
Organization of the Petroleum Exporting Countries will agree to extend production cuts at a meeting later in the month.
The Wall Street Journal also reported that the deal may usher in new signees such as Turkmenistan and Egypt, as a
monthly OPEC report indicated that members were abiding by previously agreed cuts. Benchmark U.S. crude oil rose
3.5% over the week to settle at $47.84 a barrel. Brent crude, the international standard, rose 3.6% over the week to
$50.84 a barrel.
Gold prices edged higher last week, as weaker-than-expected April U.S. retail sales data helped push the dollar lower
and hence made the yellow metal relatively cheaper to hold. Gold for June delivery added 0.1% over the week to settle
at $1,227.70 per troy ounce, having put together three winning sessions back-to-back to reach Friday’s closing bell.
Fixed Income
US
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The yield on benchmark 10-year Treasuries fell to 2.325% last week from 2.350% at the previous week’s close, as
investors reacted to middling U.S. economic data that suggested the Federal Reserve will stay on track to raise interest
rates in June.
April retail sales did not quite meet expectations Friday, rising 0.4%, with March revised up to a positive figure, while the
month's consumer inflation reading showed signs of softening inflation pressure. The latest month's increase in retail
sales was two-tenths less than the 0.6% anticipated but March sales were revised up three tenths to a positive 0.1%.
The Consumer Price Index, released at the same time, rose 0.2%, in April as expected. It had declined 0.3% in March.
Bureau of Labor Statistics senior analyst Steve Reed, who assembles the report, told Market News International that
without the outsized increase in tobacco prices caused by the new California cigarette tax, the April CPI would have risen
just 0.1%. The month's only other major upward price driver was shelter, rising 0.3%.
The value of business inventories rose 0.2% in March, stronger than the 0.1% gain expected, while sales were flat. Retail
inventories rose 0.5%, revised up from the advance estimate of a 0.4% increase. Wholesale inventories rose 0.2% in the
month, while factory inventories were flat. Business inventories would have been up only 0.1% in March if a 0.9% jump in
retail motor vehicle inventories was excluded, an MNI calculation showed. Retail inventories, after excluding the motor
vehicle inventory gain, were still up 0.3% in the month, compared with a 0.2% gain in the advance estimate. The
remaining retail components were generally higher, with the exception of a 0.5% decline in furniture inventories and a
0.1% decline in food and beverage store inventories.
The core Producer Price Index without its most volatile elements showed a surge in April, a record 0.7% increase
because of an unusual and possibly short-lived combination of aftereffects from the Federal Reserve rate hike combined
with a late spring-break spike in hotel demand, a massive West Coast increase in cigarette prices and – no longer in a
leading role – more expensive gasoline. That was the assessment Bureau of Labor Statistics' senior analyst for the
Producer Price Index, Scott Sager, gave to Market News International Wednesday, "It was a broad-based increase.
Interest rates had a lot to do with it.” Overall, final demand PPI rose 0.5%, the same as in January and last June, all of
which were the highest since the 0.7% increase in September 2012. That brought the business inflation rate for the 12
months through April to 2.8%, the highest since February 2012.
Boston Federal Reserve Bank President Eric Rosengren suggested Wednesday U.S. monetary policymakers should not
only continue along the path of normalization, but even "explore" its pace – which he sees as three more rate hikes this
year – and begin reducing its balance sheet after one more rate hike. "Looking ahead, the federal funds rate would
obviously exceed 1% after one more 25 basis-point increase," Rosengren said. "In my view, that seems an appropriate
point to consider beginning a very gradual normalization of the Federal Reserve's balance sheet.” This may be sooner
than markets expect as many Fed watchers have been looking for the Fed to announce its plan to end reinvestments no
earlier than December.
UK
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The yield on 10-year Gilts fell to 1.086% last week from 1.117% at the previous week’s settlement, as investors focused
on evidence that the economy is losing momentum given falling industrial output and construction – indicators that
interest rates may remain on hold for longer than expected.
The Bank of England Monetary Policy Committee voted seven to one to keep Bank Rate unchanged at its May meeting
Thursday, with only Kristin Forbes again voting for a 25-basis point hike. The minutes restated, however, that for some
members "it would take relatively little further upside news on the prospects for activity or inflation" for them consider
Weekly market watch
5
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hiking, leaving the door wide open to more votes for hikes in coming months. The accompanying May Inflation Report
showed subdued, steady growth through to the end of the three-year forecast period, with inflation running above the 2%
target throughout. The MPC based its inflation and growth forecasts on a "smooth Brexit," assuming that transitional
arrangements would ensure there was no sudden drop-off in economic activity. This was the first time it made this
assumption public.
UK growth slowed to 0.2% in the three months through April, down from 0.3% in the first quarter, according to the
National Institute of Economic and Social Research on Thursday. Consumer spending bolstered growth but industrial
production has weighed on overall activity.
UK industrial production rose by less than previously estimated in the first quarter, courtesy of a fall in electricity
production in March, while construction output was unchanged from early estimates of first quarter growth, Thursday
data showed. Total production fell by 0.5% between February and March, rising by 1.4% over March of 2016. National
statisticians had estimated a 0.7% monthly decline when deriving the preliminary reading of first quarter gross domestic
product. Electricity and gas production declined by 4.2% between February and March, accounting for 0.4 percentage
points of the total fall.
The UK trade gap widened sharply in the first quarter, the result of a marked deterioration in March, exerting a significant
drag on gross domestic product in the first quarter, according to data released Thursday. The deficit surged to
GBP10.540 billion in the opening three months of the year, more than double the GBP4.845 billion shortfall in the fourth
quarter of 2016. Increased imports of machinery and transport equipment, along with oil and chemicals accounted for
much of the deterioration in the trade position over the first quarter, according to a National Statistics official. That leaves
trade poised to exert a significant drag on first quarter gross domestic product, comparable to the third quarter of 2016,
according to an official, when trade shaved 1.3 percentage points from total growth.
The European Commission on Thursday raised its 2017 and 2018 UK growth forecasts, saying the British economy had
fared better than expected since the Brexit vote. UK growth is now seen at 1.8% in 2017 and 1.3% in 2018. The overall
UK picture was mixed, however, as business investment was expected to increase only slightly in 2017 and 2018 due to
uncertainty about Brexit negotiations, it said.
The National Institute of Economic and Social Research predicted Tuesday that UK inflation will peak higher than the
Bank of England expects, but that the BOE Monetary Policy Committee will still leave Bank Rate on hold at 0.25% until
the middle of 2019 as consumer spending stalls. NIESR's quarterly growth forecasts show unchanged GDP growth of
1.7% in 2017 and 1.9% in 2018, both of which are soft by historic standards, while consumer price inflation is predicted
to peak at 3.4% in the fourth quarter of this year before declining to 2.4% in the final quarter of 2018. This would mean
inflation outstripping the BOE MPC's target and their central forecast. Inflation has been rising sharply in the UK, with CPI
coming in at 2.3% on the year in March, having stood at just 0.9% back in October 2016.
Europe (ex. UK)
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The yield on benchmark 10-year Bunds declined to 0.391% last week from 0.418% at the previous week’s finish, with
investors focusing on weak Eurozone industrial production data and a cautious tone from the European Central Bank,
both of which suggest a slower pace of interest rate rises.
Eurozone industrial production took an unexpected fall in March, with Eurostat saying Friday that output slipped 0.1%
from February, but was up 1.9% year-on-year, due to a sharp fall in energy production. Expectations were for an
increase of 0.3% on month and 2.3% on year. Durable goods production rose for a second consecutive month, up 0.9%,
as capital and intermediate goods also rose slightly compared with the previous month. Non-durables were up 2.1%,
rebounding from a 1.3% fall in February.
The European Commission modestly raised its 2017 forecasts for euro area growth and inflation on Thursday, but
trimmed its outlook for prices in 2018. In its Spring economic forecasts, the Commission said Eurozone growth would
likely be 1.7% this year, above the 1.5% forecast it made in November. For 2018, Eurozone growth should increase to
1.8%, the EC said, up from a 1.7% November forecast. Euro area inflation is expected to average 1.6% this year, above
the November forecast, but to fall back to 1.3% in 2018, lower than estimated in November. The Commission said that
while growth in the global economy was strengthening, with China and other emerging economies likely to show betterthan-expected results, some downside risks remained for the euro area. "Europe is entering its fifth consecutive year of
growth, supported by accommodative monetary policies, robust business and consumer confidence and improving world
trade," EU Economic and Financial Affairs chief Pierre Moscovici said in a statement.
The European Commission confirmed Thursday previous Italy growth forecasts for both 2017 and 2018, acknowledging
progress made in the government's fiscal adjustment path. At the same time, the European Central Bank, in its monthly
Economic Bulletin, reported improvements in the country's labor market but warned that despite the ECB's liquidity
operations, credit lending remained weak. "Italy's economy is set to continue expanding by about 1 percent in 2017 and
2018, driven by stronger exports and the recovery of investment," said the EC in the Italy country section of its Spring
Forecast. Italy's government has predicted a slightly rosier 1.1% growth for this year. The general government deficit is
Weekly market watch
6
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expected to slightly decline in 2017 to 2.2% but Brussels argues that in 2018, under a no-policy-change assumption, the
deficit is forecast to increase slightly to 2.3% of GDP, also due to a lower tax take.
The Eurozone recovery is becoming "increasingly solid" but central bank support is still needed to bring inflation back to
target level, European Central Bank President Mario Draghi said Wednesday. "It is too early to declare success" on
inflation, Draghi told the Dutch parliament in The Hague. "Underlying inflation pressures continue to remain subdued and
have yet to show a convincing upward trend.” Draghi said that keeping a "very substantial" degree of monetary policy
accommodation in place was still necessary to allow underlying inflation pressures to build up and support headline
inflation. Draghi's comments come at a sensitive time for the central bank as an improving Eurozone economy has
increased calls for the ECB to scale back its stimulus. Many analysts believe the ECB Governing Council could change
guidance on rates at its June meeting.
Japan
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The yield on 10-year JGBs rose to 0.039% from 0.016% at the previous week’s finish, amid easing safe haven demand
and a strong appetite for equities.
The Economy Watchers sentiment index for Japan's current economic climate released Thursday posted the first rise in
five months, up 0.7 points to 48.1 in April after falling 1.2 points in March on a seasonally adjusted basis. Both
department store sales and business investment were solid while new car sales were sluggish as tougher standards for
tax exemptions and credits for low-emission vehicles took effect on April 1. “The yen appreciated in the middle of April (to
around Y108 against the dollar) but stabilized at around Y111 at the end of the month during the survey period, which
was little changed from the end of March," Cabinet Office director of regional economies Masahiko Tsutsumi told
reporters. "The small number of Watchers' comments on the appreciation of the yen showed there was no particular
concern." The outlook for the effect of the yen's rise was also neutral, he said.
The Bank of Japan will continue its aggressive monetary easing stance for some time to come as it seeks to allow the
public to experience inflation above the bank's 2% target amid lingering uncertainty over retail price and wage hikes, BOJ
Governor Haruhiko Kuroda said Wednesday at an economic seminar. Kuroda also said that it is a "thorny task" to root
out the stubborn deflationary mindset among households and businesses but stressed that the central bank must
complete its mission to anchor inflation around 2%, even though it is taking time to float prices.
Preliminary average wage data from the Monthly Labour Survey released by the Ministry of Health, Labour and Welfare
on Tuesday showed total monthly average cash earnings per regular employee in Japan unexpectedly fell 0.4% on year
in March to Y277,512, the first drop in 10 months after rising 0.4% in February due to sharp declines in special pay and
working hours, particularly for part-time workers. In the past 12 months, the year-on-year change in average wages has
ranged from a gain of 1.5% to a fall of 0.4%. In real terms, average wages slumped 0.8% on year, the first fall in two
months after being unchanged in February and falling 0.1% in January. The recent flat trend was caused by a rise in the
cost of living, with the total CPI minus imputed rents up 0.3% on year in March.
Source: Market News International
The information is based on management forecasts and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to
change. In preparing this document, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information
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be accepted for errors of fact or opinion.
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Potential investors should be aware that such investments involve market risk and should be regarded as long-term investments.
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indicative of future performance. Investment involves risk and investors may not get back the amount originally invested. Please read the relevant offering
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