Japanese Yen is Lifted by Risk Aversion

Market Reviews

On currency markets, euro remains steady, despite the ECB delivered a mildly dovish shift yesterday. New Zealand dollar and Australian dollar are trading as the weakest ones for today. British pound follows as the third weakest as Brexit uncertainty is increasing. Japanese yen is lifted by risk aversion and is trading as the strongest one. US dollar follows as second strongest as focus turns to US retail sales.

On stock markets, Asian stocks are under pressure after weaker than expected Chinese data. Nikkei closed down 2.02% at 21374.83. Hong Kong HSI fell 1.56%, China Shanghai SSE dropped 1.23%, Singapore Strait Times lost 1.12%.

China’s retail sales grew 8.1% yoy in November, compared with the forecast of 8.8% gain. The growth was the weakest pace since 2003. Meanwhile, growth in industrial output was 5.4% yoy, lower than the 5.9% projected increase. Factory output growth was the weakest in nearly three years.

After yesterday’s EU summit, EU27 leaders concluded their positions on Brexit in a five point statement. Firstly, it’s “not open for renegotiation”. Secondly EU wishes to “establish as close as possible a partnership” with the UK in the future. Thirdly, the backstop is intended as an “insurance policy” to prevent hard Irish border. And EU has “firm determination to work speedily on a subsequent agreement” so that “the backstop will not need to be triggered”. Fourthly, if the backstop were triggered, “it would apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided.” Fifthly, EU calls for preparedness for all possible Brexit outcome.

Economic data from Japan showed, that PMI manufacturing improved to 52.4, up from 52.2 and beat expectation of 52.3. Large manufacturing index was unchanged at 19 versus expectation of a drop to 17. Large manufacturing outlook dropped notably by -4 to 15, missed expectation of 16. Large non-manufacturing index rose 2pts to 24, above expectation of 21. Large non-manufacturing outlook also rose 2pts to 24, above expectation of 20. Large all industry capex rose 14.3% in Q4, beat expectation of 12.7%.