Japan Falls Back Into Recession
Starting a new week, we have seen Japan enter into a technical recession as GDP figures which were expected to be positive came in at -0.4%. This led the Japanese Yen to a seven year low against the US Dollar and forced the Japanese into thinking why this has happened and what is going to be needed to be done. The simple answer is that the increase in sales tax to 8% has taken more of a toll on the economy than expected. With 60% of the economy being driven by the consumer this has clearly not gone down well! With this in mind, the mooted increase to 10% would appear to be on the backburner. We could also see further QE from Japan in the coming months and a general election.
Our Southern Hemisphere friends appear to be having a better time of it at the moment as retail sales in New Zealand rose more than expected and the 10% weakening of the New Zealand Dollar over the past few months have aided companies who are reliant on exports. The Australian Dollar is now on the front foot ahead of an expected free trade agreement with China which is the nation’s biggest export market.
In the UK, house prices are pausing for breath as the number of new potential London buyers fell for the sixth consecutive month in October and is at its lowest level since April 2008. After last year’s tightening of mortgage regulations, it’s no surprise the mortgage market is more sustainable than before but it is now demand and not supply that is the issue.
Monday morning will be relatively quiet data-wise but will spring into life when Mario Draghi speaks this afternoon and traders will be looking into more hints for QE.