Japan moves into recession to put pressure back on markets

Japan Moves Into Recession To Put Pressure Back On Markets

Market Outlook By Hantec Markets, Posted on November 17, 2014 facebook-icon google-icon linkedn-icon

Japan has once more fallen back into recession. With an annualised decline of 1.6% (which was forecast to gain by 2.1%) in Q3 this is a second successive quarter of negative growth and will draw serious questions over the policy of Abenomics. This should now ensure that the prospect of the second hike in the sales tax (from 8% to 10%) is now kicked into the long grass, but could also mean an early general election. The Nikkei 225 has dropped sharply by 3% and the yen has strengthened overnight. With Wall Street closing Friday again with miniscule gains (the 41st all-time closing high of 2014) the news out of Japan will dominate sentiment during the European session. European markets are trading lower in early exchanges.

The sell-off on the dollar on Friday has continued today as the major currencies have continued to claw back some of the considerable lost ground of recent weeks. However, in the last few hours the move has just begun to show signs of losing momentum once more. The main move has been seen on the stronger yen in a flight to safety after the disappointing GDP number that calls into question the effectiveness of Abenomics. The gold and silver prices have settled down and are broadly flat after Friday’s strong bounce.

The economic calendar is reasonably light today, with US industrial production this afternoon at 14:15GMT. A reading of +0.2% is expected after +1.0% was seen last month, although is a negative number is seen then it could drive a market correction coming so soon after the Japanese GDP number. Beyond that there are several ECB members speaking today including Mario Draghi, with traders looking out for any signs of further easing measures to be announced.

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