[Fuji-Tomi] Nikkei average rebounds or not? Caution on geopolitical risks

The previous day’s U.S. stock market saw the Dow Jones Industrial Average rebound, but the intraday gain remained modest at 14 points. The S&P 500 index closed up 0.19% at 2357.49, and the Dow finished at 20,662.95, up 14.80 dollars (0.07%). The market had been steady on the back of strong results from consumer-related stocks and M&A news, but with reports that President Trump was willing to take unilateral action against North Korea and that Syria’s use of chemical weapons was harshly condemned with consideration of military action, the stock prices wavered as the U.S.-China summit slated for the 7th approached. Last week’s initial jobless claims fell short of market expectations, hitting a five-week low. In terms of sectors, energy-related stocks rose on the back of higher oil prices. A focal point for the market was Secretary of State Rex Tillerson’s stance that the summit would prioritize U.S. interests while pursuing economic ties with China. Some in the market read this as a somewhat tougher stance toward China, interpreting it as an increased risk of confrontation rather than cooperation.

NYMEX WTI crude futures for May settled up 55 cents (1.08%) at 51.70 per barrel. Expectations for a reduction in supply-demand imbalances were rising.

The June night session of Osaka Exchange (OSE) Nikkei 225 futures ended at 18,740 yen, up 130 yen from the daytime price. Today’s Nikkei average is likely to rebound autonomously on the back of yesterday’s stock rebound and the late-day decline of more than 300 yen being a backdrop for a reversal. A pause in the yen’s appreciation should also support the share market. Market attention will be on the U.S.-China summit on the 6th–7th and the U.S. employment report due on the 7th. News related to North Korea will also draw focus.

https://www.fujitomi.co.jp/?p=14289

【Buying factors】

・U.S. stock market – rebound; energy and financial stocks rising

・Dow Jones up (20662.95, +14.80)

・Nasdaq up (5878.95, +14.47)

・U.S. initial jobless claims 234,000 (Forecast 250,000) (previous: 258,000)

・European stock markets – broadly firm except for the FTSE 100 in the U.K.

・NY crude oil futures – extending gains; resilient on supply concerns (51.70, +0.55)

・CME 225 futures up relative to Osaka Exchange (18,730, +120)

・VIX fear index at 12.39, down from the previous day

・Supportive expectations from BoJ ETF purchases

・Expectations of capital inflows with the new fiscal year

【Selling factors】

・Trump administration’s policy operations viewed as opaque

・North Korea geopolitical risk

・Greece debt crisis resurging

・Uncertainty ahead of French presidential election

【Other points of interest】

・U.S.-China summit (Florida, final day)

・Eurozone finance ministers meeting (Malta)

・South Korea and China to discuss North Korea’s nuclear issue — statement on the website of the Korean Ministry of Foreign Affairs

・New York FX – awaiting U.S. payroll data; USD/JPY in the upper 110s

・U.S. Treasury market – Treasury yields slightly lower; uncertainty ahead of employment data

・NY gold futures – rebound; supported by safe-haven buying

・EU strengthens sanctions on North Korea

・North Korea issue, possible unilateral U.S. action — “China should step up its response,” says Trump

・U.S. military intervention in Syria also being considered

・Twitter U.S. accounts labeled “anti-Trump” refused to provide information

・Twitter, co-founders sell some shares; stock price falls about 1%

・ECB monetary easing measures; consensus within the Governing Council — VICE President Constancio

・ECB policy guidance changes raise concerns about tighter policy — meeting minutes

・U.S. Vice President to make first trip to the Asia-Pacific region; to visit Japan on the 18th

・Draghi and other ECB officials emphasize sticking to policy guidelines; Germany argues for tightening

《Schedule》

08:50 March foreign exchange reserve assets

09:00 February Labour Force Survey

10:00 Business Outlook Survey (as of March 31, Bank of Japan)

13:30 “Survey on living awareness” (69th, Bank of Japan)

14:00 February Index of Coincidence economic indicators

14:45 March Swiss unemployment rate

15:00 February German mining and mechanical production

15:00 February German trade balance

15:00 February German current account

15:45 February French trade balance

15:45 February French current account

15:45 February French fiscal balance

15:45 February French industrial production index

17:30 February U.K. industrial production index

17:30 February U.K. trade balance

18:00 Governor Mark Carney of the Bank of England to speak

21:30 March U.S. employment statistics

21:30 March Canadian employment statistics

23:00 March Canadian “Ivey Purchasing Managers’ Index”

23:00 February U.S. inventories of wholesalers

23:00 President of the Bank of Canada, Stephen Poloz, speaks

8th 01:15: Dudley, President of the Federal Reserve Bank of New York, speaks

8th 04:00 February U.S. consumer credit

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