【Fujitomi】Is the Nikkei Average’s 20,000 resistance or support?

The U.S. stock market paused yesterday. The S&P 500 index finished at 2,399.38, up 0.09 from the prior week’s close, and the Dow Jones Industrial Average rose 5.34 to 21,012.28. The favorable reception to Macron’s decisive victory in the French presidential election gave an early buying tone, but momentum faded as near-term catalysts ran out. The S&P 500 sector indices showed energy up about 0.7 percent on the back of higher oil prices, while materials and healthcare fell notably.

NYMEX WTI crude futures for June settled 21 cents higher at $46.43 per barrel from the previous business day. News that OPEC and non-OPEC members would extend current daily cuts for nine months or longer was welcomed, with Saudi Arabia and Russia signaling a possible extension.

Today’s Nikkei is expected to open on a firm note. With the Korean presidential election today, media outlets including Nikkei reported that “the Trump administration would hold a U.S.-North Korea summit if it abandons its nuclear program.” If North Korea does not undertake any military actions around the vote, a sense of buying confidence could spread. Trading volume on the Tokyo Stock Exchange First Section yesterday exceeded 3 trillion yen, with concerns tied to the French election retreating. There is also observation of foreign buying due to Japan’s stock market lag relative to others.

https://www.fujitomi.co.jp/?p=14979

【Reasons to Buy】

・U.S. stock market — S&P 500 hits intraday high, VIX at its lowest since 1993

・Macron’s election win eases concerns about global disorder, U.S. Federal Reserve officials show calm

・Speculation that BoJ ETF purchases will support demand/supply

・NY crude futures — slight rise, some volatility on OPEC remarks

・NY dollar — dollar/yen near its high since mid-March, risk-on again

・CME 225 futures rise versus Osaka Exchange, settled at 19915

・VIX fear gauge at 9.77, down from the previous day

【Reasons to Sell】

・European stock markets — decline, losing upward momentum from the French election

・North Korea geopolitical risk

・Four U.S. citizens detained by North Korea — White House

・Trump administration lacks clarity in policy execution

・Continued U.S. dollar appreciation target

【Other Points to Note】

○ Korean presidential election

・Market closed: Korea

・U.S. bond market — declines, selling toward the weekly auction

・European bonds — mixed, German bonds little changed from the previous day

・NY gold futures — little rebound, buying on price appeal after events

・Coordinated production cuts may extend into next year; measures to resolve oversupply — Saudi

・German chancellor keen to cooperate on Macron’s forthcoming presidency’s unemployment measures

・Trump and Macron to meet on the 25th — White House

・U.S. and Russian foreign ministers to meet in Washington on the 10th — RIA

・U.S. and Canada finance ministers to hold separate talks on trade issues during the G7

・G7 finance ministers meeting will not address trade issues; statement mentions currency — Italian finance ministry official

・No need for U.S. rate hikes; safe-haven buying to restrain rates — St. Louis Fed President

・Prospect of continued U.S. rate hikes; overall goal achieved — Cleveland Fed President

・U.S. rate hike probability rises next month, per Federal Reserve official remarks — rate futures

・U.S. banks tighten standards for commercial real estate lending — Fed survey

《Schedule》

09:00 March Employment Situation (U.S.)

11:00 Vehicle sales by make (April)

11:00 Light vehicle sales by make (April)

08:00 April UK Retail Sales (BRC) Report

10:30 March Australia Retail Sales

14:45 April Switzerland Unemployment Rate

15:00 March Germany Industrial Production

15:00 March Germany Trade Balance

15:00 March Germany Current Account

15:45 March France Public Finance Balance

21:30 March Canada Housing Permits

22:00 Kashkari, President of the Federal Reserve Bank of Minneapolis, speaks

23:00 March U.S. Wholesale Inventories

10th 02:00 U.S. Treasury, 3-year notes auction ($24 billion)

10th 02:00 Rosengren, Boston Fed President, speaks

10th 05:15 Kaplan, Dallas Fed President, speaks

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