【FujiTomI】This week's Tokyo Stock Exchange may unfold with some turbulence

On the 21st, North Korea test-fired the ballistic missile "Ursa Major-2." Chairman Kim Jong Un's insistence on the nuclear development program is increasing geopolitical risks. U.S. Secretary of State Rex Tillerson said on "FOX News Sunday" that he was "disappointed" and "concerned" about North Korea's missile tests. He expressed the expectation that North Korea would understand that "the path of continued nuclear weapons development is not a path to security or prosperity." The United Nations Security Council decided to hold an emergency meeting on the 23rd in response to North Korea's ballistic missile launches.

Also, The Washington Post weekend report stated that, in relation to the Russia-gate issue, "U.S. investigators are treating White House officials as important witnesses." In the U.S. market, yields fell as the dollar declined.

This week's Tokyo stock market is expected to be volatile. This week, many economic indicators will be released in the U.S. market, the minutes of the May FOMC meeting will be released, there will be an OPEC meeting, the G7 Sicily Summit, and an emergency meeting of the U.N. Security Council. The OPEC meeting could have a significant impact on crude oil prices. If U.S. economic indicators remain strong and a June rate hike seems likely, and if oil-producing countries continue voluntary cuts and tensions such as Trump scandals and geopolitical risks ease, risk-on mood could strengthen; conversely, if not, risk-off mood could accelerate.

Today the Nikkei stock average is expected to rise strongly, with a cautious stance toward the yen's appreciation, buoyed by high crude oil prices and gains in the U.S. stock market. On the other hand, Russia-gate and North Korea issues remain a burden.

The estimated P/E ratio for Tokyo Stock Exchange first section fell to the low teens last week. U.S. stocks at 19x appear undervalued, potentially attracting foreign buying.

https://www.fujitomi.co.jp/?p=15309

【Positive factors】

・U.S. stock market – continuing gains; all 11 sectors of the S&P 500 rise

・Dow Jones rises (20,804.84, +141.82)

・European stock markets rebound, relief from U.S. administration concerns and higher oil

・NY crude futures – continue to rise, on expectations of extended production cuts and weaker dollar (50.33, +0.98)

・CME 225 futures up relative to Osaka Exchange (19,685, +85)

・VIX fear index at 12.04, down from the previous day

・Supportive expectations from BoJ ETF purchases for supply and demand

・Saudi Arabia and SoftBank Group's 1 trillion-yen fund actively launched

・Strong earnings and interest in thematic stocks

【Negative factors】

・North Korea again fires a ballistic missile; could be the same type as the February medium-range missile

・Geopolitical risk from North Korea

・Uncertainty in Trump administration policy management

・Continued push for correcting dollar strength in the U.S.

・Largest-ever cyberattacks occurring worldwide

【Other focus points】

・Canada (Queen Victoria Day) market closed

・NY forex – dollar/yen around 111, European currencies higher

・U.S. bond market – slight decline, supported by U.S. stock gains

・European bonds – decline as risk-off subsides with rising U.S. and European stocks

・NY gold futures – rose on dollar weakness but may be capped by stock gains

・Eurozone May consumer confidence/flash estimate -3.3 (expected -3.0) (previous -3.6)

・Russia inquiry: investigators show interest in White House officials – U.S. newspapers

・Trump to announce $110 billion weapons sale to Saudi Arabia

・Dismissed former FBI Director Comey to testify before Congress

・Iran's presidential election: Rouhani wins, continuing open policy

・SoftBank Group to establish 1 trillion yen fund to boost IT growth

《Schedule》

08:50 April trade statistics

14:00 March coincident index revised value

16:00 Convenience store sales (April)

08:01 May RICS UK housing price index

23:00 Harker, President of the Federal Reserve Bank of Philadelphia, speaks

23:30 Kashkari, President of the Federal Reserve Bank of Minneapolis, speaks

Eurozone finance ministers meeting (Brussels)

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