Is the Middle East risk retreating!? Or is it adjusting!? “Key points and events schedule for January 7”

Yesterday, at the first Tokyo Stock Exchange big issue opening, the Nikkei Stock Average started with a tumultuous plunge of about 500 points at one point.

I think this was due to risk-off on Middle East risk, but in Western markets there was no new information, so risk-off gradually receded? and gradually faded away.

As a result, the Dow finished higher.

Dollar-yen did not fall as much as expected, rising to the mid-108 yen range.

There is also information that real demand has bids below 108 yen, suggesting a solid floor.

◎ Today's Points of Focus

1) Middle East Risk

At the start of the week, perhaps due to the lack of additional information on Middle East risk in the developed markets, stock prices rose and the yen, which had been bought, was sold back.

Whether risk-off will continue to retreat or whether it will simply adjust and resume risk-off remains to be seen.

If no further headlines emerge, risk-off is likely to retreat, I think.

Also, reactions from neighboring countries have come into view.

From NATO member countries, for now there have been no criticisms of the United States, but voices urging Iran to curb uranium enrichment have emerged.

Iraq has requested the withdrawal of U.S. troops.

Today too, attention will be on responses of surrounding countries, uranium enrichment and the nuclear deal, the situation in the Hormuz Strait, and U.S.-Iran military confrontations, and if nothing happens, attention will be on whether Middle East risk will fade away.

2) Resumption of the UK Parliament

From today, the UK Parliament will resume and related legislation on the United Kingdom's withdrawal from the EU will be debated and voted on.

Pounds will move significantly depending on what is debated in Parliament and statements from Prime Minister Boris Johnson, so caution is needed.

3) ISM Non-Manufacturing Services Index

With the ISM Manufacturing PMI recently coming in weaker than since 2009, there is growing attention on the ISM Non-Manufacturing PMI results.

Yesterday, dollar-yen dipped below 108 but quickly returned to the 108 range.

If Middle East risk stabilizes, focus is expected to shift to the U.S. economy and U.S. indicators.

Moreover, the U.S. places importance on consumption, so non-manufacturing data is important.

It is unlikely that the ISM Non-Manufacturing PMI will fall below 50 (the dividing line between expansion and contraction), but if it falls significantly short of expectations, a break below 108 yen could become visible.

Today's ISM Non-Manufacturing PMI is a key watch.

◎ Today's Event Schedule

January 7 (Tuesday)

UK House of Commons begins debate on Brexit-related bills (through the 9th)

16:30 CHF Swiss CPI (Consumer Price Index)

19:00 EUR Italy HICP (Consumer Price Index)

19:00 EUR Euro Area HICP (Consumer Price Index)

22:30 USD U.S. trade balance

22:30 CAD Canada trade balance

January 8 (Wednesday)

00:00 USD ISM Non-Manufacturing PMI00:00 CAD Ivey PMI

09:30 AUD Australia Building Permits