Nikkei Stock Average extends gains; will it stall after the SQ pass?

Nikkei stock average continues to rise; range-bound after SQ

https://www.fujitomi.co.jp/?p=13630

With the U.S. employment data due and a wait-and-see mood, U.S. stock markets closed higher with modest gains. The S&P 500 index finished up 0.07% at 2364.87, and the Dow Jones Industrial Average rose 2.46 points (0.01%) to 20858.19. The U.S. 10-year Treasury yield rose briefly to 2.60%, marking nearly a three-month high. Amid this, buying interest led a rally in some financial stocks, supporting the market. On the other hand, a drop in U.S. crude oil futures to a roughly three-month low prompted selling in the oil sector, weighing on further upside.
NYMEX WTI futures for April settled at $49.28 per barrel, down $1.00 (1.99% from the previous day). Domestic concerns about oversupply and caution regarding shale oil expansion plans contributed to the risk-off mood.
In the New York foreign exchange market, dollar buying and yen selling dominated against a backdrop of rising U.S. interest rates. Toward the close, the yen traded around 115 per dollar, marking a one-and-a-half month low not seen since January 30. Ahead of next week’s FOMC meeting on the 14th–15th, expectations were strong that a rate hike would proceed, and speculation grew that the pace of further rate increases could be sooner than anticipated. The ECB decided to keep monetary policy unchanged at its meeting the previous day. President Draghi’s press conference was viewed as less dovish than market expectations, leading to broad euro buying against major currencies.
With the special settlement index (SQ) for stock index futures and options for March, the Nikkei stock average was expected to extend its gains on a weaker yen basis. As the futures cycle shifts, today the Nikkei index futures will be below the March dividend-adjusted level (about 130 yen). After SQ, trading is likely to be range-bound given currency fluctuations, but with the dollar/yen around the 115 mark, further upside is possible.
In the U.S., February employment data will be released. Next week, the FOMC meeting is scheduled.

[Bullish factors]

・ Benefits expected from the Trump administration’s “high growth path”
・ Policy expectations surrounding President Trump
・ U.S. stock market broadly higher; energy stocks rally
・ Dow Jones up (20858.19, +2.46)
・ Nasdaq up (5838.81, +1.26)
・ CME 225 futures rose versus Osaka Exchange, ending at 19290 (June contract)
・ Fed Chair hints at March rate hike
・ FX: dollar-yen around 115.00–115.05

[Bearish factors]

・ Crude futures fall further; U.S. WTI drops below $50 for first time since December (49.28, -1.00)
・ European stock markets decline on oil price drop
・ Fear gauge VIX at 12.30, up from the previous day
・ Concerns about European political developments
・ Uncertainty ahead of the French presidential election
・ Uncertain outlook for EU-wide parliamentary elections
・ North Korea geopolitical risk
・ Greece debt crisis resurfacing

【Other points to watch】

・ Major SQ calculation date
・ EU summit (Brussels, last day)

・ Dollar falls against the euro; ECB president’s remarks draw comments = New York market
・ U.S. bond market continues to fall; yields rise amid rising rate hike expectations; jobs data in focus
・ New York gold futures continue to fall; expectations of U.S. rate hikes and a stronger dollar push prices down

・ ECB keeps policy rate at 0.00%
・ ECB deposits: -0.40%
・ New presidential order restricting U.S. entry; Washington state to file another injunction
・ U.S. to hold meetings with 68 countries on the 22–23 June to accelerate IS cleanup
・ U.S. Treasury Secretary requests early lifting of the debt ceiling from Congress
・ U.S. Federal Reserve buys $8.7 billion in government agency MBS – New York Fed

・ IMF report: If France leaves the eurozone, serious poverty could occur - IMF managing director, per local paper

《Schedule》

08:50 1-3月期 corporate sector sentiment survey

09:30 January Australia home loans
16:00 February German wholesale prices (WPI)
16:00 January German current account
16:00 January German ordinary income
16:45 January French industrial production index
18:30 January UK industrial production index
Manufacturing production
18:30 January UK trade balance
22:30 February U.S. employment data
22:30 February Canadian employment data
11th 04:00 February U.S. monthly budget statement
　　

We would appreciate you referring to the market conditions on Twitter. https://twitter.com/fujitomi_8740