What impact could today’s Bank of Japan meeting have on trading?
Anticipation of this week’s big central bank meetings, and Iran’s oil production plans were to of the main drivers behind trading today.
Although Asia Pacific and European exchanges started the week off strong, US traders weren’t as enthusiastic as they were Friday sending US indices to a mixed or essentially flat performance. It seems like US traders backed off not wanting to get too far out on a limb ahead of Wednesday’s FOMC interest rate decision. Other than the correction in oil, there was no reason to go bearish with the other main event a budding bidding war between a Chinese group and Marriott for hotelier Starwood.
A correction in crude oil may have weighed on energy stocks a bit, holding some indices back as well. A 3.1% drop in WTI crude oil was generally blamed on comments out of Iran over the weekend confirming its intent to ramp production up from the current 3 mmbbl/d back up toward the 4 mmbbl/d it was at before sanctions were imposed. This really should not have been a surprise to anyone since Iran has been clear that it thinks other countries should make way for it to restore production levels now that sanctions have been lifted and seems to me more like an excuse for a correction after a big run up. Although it now looks like the big producers meeting may be pushed off to April while Iran and other issues get sorted out, overall it still looks like the IEA’s comment last week that the oil market has likely turned a corner remains viable.
Today, the spotlight is on the Bank of Japan. With the bank having introduced negative interest rates at its last meeting, it’s not expected to do anything this time and because of this JPY has been gaining ground on AUD, EUR, CAD, CNH and other currencies. The Yen has been flat to a bit soft against USD which has been rallying on anticipation that the Fed may send hawkish signals at its meeting later this week.
Japanese stocks have been rallying ahead of the meeting along with stocks in China and in response to a weakening JPY relative to USD. A statement indicating no plans for additional stimulus could boost JPY while providing a headwind to stocks. A statement leaving the door open to additional stimulus in future could knock JPY back and boost stocks.
Tomorrow morning brings a flurry of US data announcements headlined by retail sales and producer process which could spark another round of FOMC speculation trading.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
Eurozone industrial production 2.8% vs street 1.6%
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
TBA Bank of Japan interest rate and QQE no changes expected
3:30 pm AEDT Japan industrial production previous (3.8%)
4:00 pm AEDT Singapore retail sales street 2.7%
7:45 am GMT France consumer prices street (0.2%)
8:30 am GMT Sweden consumer prices street 0.4%
8:30 am EDT US retail sales street (0.2%)
8:30 am EDT US retail ex auto street (0.2%)
8:30 am EDT US producer prices street 0.1%
8:30 am EDT US core PPI street 1.2%
8:30 am EDT US Empire manufacturing street (10.5) vs previous (16.64)
9:00 am EDT Canada existing home sales previous 0.5%
10:00 am EDT US NAHB housing market street 59