【Fujitomi】Nikkei average continues to fall slightly as investors wary of the pause in yen weakness

Last weekend’s U.S. stock market showed solid gains. The S&P 500 index finished up 0.32% at 2372.60 from the previous close, and the Dow Jones Industrial Average rose 44.79 points (0.21%) to close at 20,902.98. The closely watched February U.S. jobs report showed payroll growth well exceeding market expectations, while the unemployment rate came in as expected and declined from the previous month. Average hourly earnings growth, though below market expectations from the previous month, accelerated year over year. With wage growth undershooting expectations, bonds edged higher, while the financial sector faced some selling pressure. Among the S&P 500 sector indices, utilities and telecommunications services remained firm, while the energy sector declined as oil prices fell.

With February’s U.S. employment data showing payroll growth well above expectations, the likelihood of a rate hike by the Fed at the March 14–15 FOMC meeting increased further, but the New York FX market on the 10th saw yen buying and dollar selling as the near-term catalysts appeared to have run out.

NYMEX WTI crude futures for April settled at $48.49 per barrel, down 79 cents (1.60%) from the previous day. Amid renewed concerns about oversupply, selling dominated, marking a fifth straight session of losses.

This week is packed with important events, making participants hesitant to engage actively. Domestically, several initial public offerings are scheduled. On the 15th, Phiz will list on the TSE Mothers market, followed by Ururu on the 16th, and Japan Elevator Service Holdings on the 17th. On the 16th, Mucha Nichiyobi (Mucha Nichiyobi) will list on the JASDAQ market.

Today, the Nikkei Stock Average is expected to slip slightly. With a pause in the yen’s weakness, profit-taking selling is anticipated to dominate.

【Buying factors】

・Expected benefits from the Trump administration’s “strong growth path”

・Expectations for President Trump’s policies

・U.S. stock market – small gains continuing; overall favorable reception to strong February payroll data

・Dow Jones: up (20,902.98, +44.79)

・Nasdaq: up (5,861.73, +22.92)

・U.S. nonfarm payrolls Feb: +235,000 vs. +190,000 expected (previous: +227,000)

・VIX fear index: 11.66, down from prior

・China vehicle sales in February: +22.4% year over year; modest tax cuts on small cars even amid solid performance

・Saudi King’s visit to Japan to strengthen economic cooperation

【Selling factors】

・U.S. Feb average hourly earnings (MoM) +0.2% vs. +0.3% expected (previous: +0.1%)

・NY oil futures – continued decline; weekly drop continues; drilling rigs up for 8th week (48.49, -0.79)

・NY FX – expectations of U.S. rate hikes remain high but dollar faces some resistance

・CME 225 futures down vs Osaka Exchange (19,445, -25)

・U.S. authorities did not approve Bitcoin ETFs; Bitcoin price plunge

・Concerns about European political developments

・Uncertainty ahead of the French presidential election

・Uncertainty about EU national elections

・Geopolitical risk on the Korean peninsula

・Greece’s debt crisis re-emerges

【Other notable points】

・The U.S. has already switched to daylight saving time since the 12th

・European stock markets mixed; gains in banking stocks helped by discussions on U.S. rate hikes

・U.S. bond market rebounds; payrolls solid but modest buying on dips

・NY gold futures – continued decline; expectations of U.S. rate hikes and a stronger dollar weigh on prices

・U.S. February unemployment rate 4.7% [expected 4.7%] (previously 4.8%)

・U.S. Budget (economic) report to be released on March 16 – White House

・U.S. short-term rate futures maintain expectations of three rate hikes this year after the jobs data

・[Reuters survey] Primary dealers expect rate hikes next week

・U.S. government to begin NAFTA renegotiations within the next three months – Cabinet Secretary

・New York federal prosecutor’s resignation refused; Trump administration to remove

・U.S. travel industry faces headwinds from travel ban and strong dollar in 2017

・U.S. oil rig count up for 8th week – Baker Hughes

・Toshiba to sell Toshiba TEC shares

・Casinos opening successively across Asia

・Government approves new law on private lodging

《Schedule》

08:50 February Producer Price Index

08:50 January Machinery Orders

13:30 January Third-Quarter Industrial Activity Index

16:00 Turkey Current Account (January)

17:30 Visco – Italian Central Bank Governor, speech

20:00 Rehnänen – Finnish Central Bank Governor, speech

21:45 Lautenschläger – ECB Executive Board member, speech

22:30 Draghi – ECB President, speech

23:00 February U.S. JOLTS job openings

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