[FujiTomi] The Nikkei average remains firm, but geopolitical risk concerns may rise again

The U.S. stock market moved in choppy fashion. The Nasdaq index stayed in positive territory all day, but the S&P 500 index and the Dow retreated as some reports spread that North Korea might conduct the sixth nuclear test. There were no notable economic data releases, and overall the market continued to drift modestly as corporate earnings remained the main driver. The S&P 500 stock index finished down 0.1% at 2396.92, and the Dow fell 36.50 points (0.17%) to 20,975.78. The Nasdaq Composite rose 0.29% to 6,120.59, a fresh high.

NYMEX WTI futures for June settled 55 cents (1.18%) lower at $45.88 per barrel. The rise in Libya’s oil production to its highest level in about two years was a souring factor.

Today, the Nikkei would be expected to open firmly on a continuing trend of a weaker yen. On the other hand, a renewed sense of caution over the Korean Peninsula could weigh on sentiment. According to UK Sky News, North Korea’s Ambassador to the U.K., Ji Il, stated that the country would conduct the sixth nuclear test and said, “The United States cannot strike first against us. If the U.S. moves at all, we are prepared to reduce all of the United States’ available strategic assets to ashes.”

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【Positive factors】

・U.S. stock market — Nasdaq at a new high, Apple market capitalization surpasses $800 billion, first among U.S. companies

・London stock market — continued gains, utilities sold off

・European stock markets — rebound, buying in solid earnings and commodity stocks

・Expectation of demand support from Bank of Japan ETF purchases

・NY dollar/yen — risk-on mood and expectations of U.S. rate hikes curb yen and Swiss franc selling

【Negative factors】

・U.S. stock market — Dow down for the first time in three days amid lower energy shares

・North Korea’s Ji Il, ambassador to the U.K., says the country will conduct the sixth nuclear test — Sky News

・Geopolitical risk in North Korea

・Trump administration, opacity in policy management

・Continued U.S. dollar strength correction plans

・NY crude oil futures — fell on weaker demand due to Libya’s high production

・CME 225 futures rose versus Osaka Exchange, settled at 19,955

・VIX fear gauge at 9.96, up from the previous day

【Other points of note】

○ Bank of England Monetary Policy Committee (MPC) meeting through the 11th

・U.S. bond market — yields rose on a soft three-year note auction

・European bonds — declined; focus on ECB exit amid political risk

・New York gold futures — in risk-on mood, safe-haven gold falls

・U.S. March wholesale trade (monthly, provisional) +0.0% vs +0.2% expected (previous +0.6%)

・U.S. March wholesale inventories (revised) +0.2% vs -0.1% expected (previous -0.1%)

・South Korea’s Moon Jae-in elected president, calls for unity

・Xi Jinping and Macron spoke by phone, reaffirming commitment to Paris Agreement

・Trump to decide on withdrawal from Paris Agreement after G7 summit

・Trump considering sending up to 5,000 more U.S. troops to Afghanistan — officials

・Germany to back Macron as next French president to strengthen EU, says finance minister

・U.S. officials say Moon Jae-in’s election as Korea’s president should not drastically change alliance

・Dallas Fed President says three rate hikes in 2017 remain in play

・Fed may begin balance sheet reduction within year — President of the Federal Reserve Bank of Kansas City

・Greek debt relief advances further — PM Kyriakos Mitsotakis

・Australia to invest A$75 billion in infrastructure over the next decade

《Schedule》

08:50 Main opinions from the Bank of Japan Monetary Policy Meeting (April 26-27)

08:50 April foreign currency reserves

14:00 March economic indicators (flash)

14:00 Government debt balance of bonds, borrowings, and government guarantees (end-March)

10:30 April Chinese consumer price index

10:30 April Chinese PPI

15:45 March French trade balance

15:45 March French current account

15:45 March French industrial production index

20:00 MBA mortgage applications index

20:00 Draghi, ECB President, speech

21:30 April U.S. import price index

23:30 EIA weekly crude stocks

11th 01:00 Rosengren, President of the Boston Fed, speech

11th 02:00 U.S. Treasury, 10-year note auction ($23.0 billion)

11th 02:20 Kashkari, President of the Minneapolis Fed, speech

11th 03:00 U.S. monthly budget statement for April

11th 06:00 Reserve Bank of New Zealand policy rate announcement

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