【Fujitomi】Nikkei average inching higher, while watching the foreign exchange market

The U.S. stock market remained weighed by the decline in crude oil prices but extended its gains for a sixth day. Both the S&P 500 and the Nasdaq Composite (6205.257 +42.233) closed at record highs. The S&P 500 finished up 0.44% at 2415.07, and the Dow Jones Industrial Average rose 70.53 points (0.33%) to 21082.95, approaching the previous closing high set on March 1. Initial jobless claims for last week were roughly in line with market expectations. The consumer sector, led by solid earnings from major electronics retailers such as Best Buy, pushed the overall market higher, while energy stocks fell on concerns about crude oil’s decline, with the S&P Energy Sector down 1.8%.

NYMEX WTI futures for July settled at 48.90 dollars per barrel, down 2.46 dollars (4.8%) from the previous day. A nine-month extension of production cuts through March next year was broadly in line with market expectations, but disappointment arose as some in the market had anticipated OPEC to expand cuts or extend them for 12 months, prompting profit-taking to dominate.

Today’s Nikkei average is expected to advance on the back of higher U.S. shares. However, a rising yen could weigh on the market. Early this morning, NBC News and The Washington Post reported, citing U.S. officials, that Jared Kushner, President Trump’s son-in-law and senior adviser, is being investigated by the FBI in connection with Russia. The Trump administration’s policy management continues to be watched with caution.

https://www.fujitomi.co.jp/?p=15460

【Factors to Watch】

・S&P 500 and Nasdaq hit record highs; strong U.S. retail earnings

・U.S. initial jobless claims 234,000 (expected 238,000) [previous: 232,000]

・Dollar remains firm; commodities weaken as oil declines = NY market

・OPEC and Russia reach agreement to extend cuts for 9 months; market broadly sees progress in adjustment

・Global economy brightening; lower risk to Fed outlook = Brinard (Brainerd)

・CBOE VIX at 9.99, down from the previous day

・CME 225 futures rise versus Osaka Exchange; close at 19810

・Expectations that BOJ ETF purchases will support supply-demand

・Strong earnings and thematic stocks show buying interest

【Reasons to Sell】

・NY crude oil futures retreat; profit-taking after replenishing range ahead of OPEC

・Kushner’s focus in Russia investigation reported by Washington Post

・Caution over potential U.S. presidential impeachment

・Geopolitical risk on the Korean Peninsula

・Uncertainty over Trump administration policy management

・Continued plan to correct the dollar strength

・Cyberattacks on a record scale across the world

【Other Highlights】

・G7 summit in Taormina, Italy, through the 27th

・Japan-U.S. leaders’ meeting (Taormina)

・Japan-France leaders’ meeting (Taormina)

・European stock markets little changed; OPEC extension not a clear tailwind

・U.S. bonds: Treasury yields slightly lower; expectations for two rate hikes this year receded

・European bonds extended gains; buying mood persists

・New York gold futures rebound; expectations that U.S. rate hikes will slow support

・U.S. April durable goods report preliminary -0.3% (previous +0.2%)

・North Korea “most dangerous threat” — U.S. Army General

・New presidential decree on U.S. entry regulations, Supreme Court does not uphold

・Trump: “NATO should share a fair burden,” attends first summit

・Hope for cross-party agreement on tax reform = U.S. Treasury Secretary

・French elections: Macron’s new party likely to win a majority

・Leak of information on suicide bombing investigation; UK Prime Minister May to express dissatisfaction to Trump

・Iran completes third underground ballistic missile facility = Fars News

《Schedule》

08:30　April nationwide Consumer Price Index

08:30　Tokyo’s May CPI (Area)

08:50　April Corporate Service Price Index

10:00　Shipments of refined copper products (April)

11:00　U.S. Federal Reserve Bank of St. Louis President to visit Japan and give a lecture

16:00　Aluminum rolled products shipments (April)

11:00　President of the St. Louis Fed, Bullard, to give a lecture

17:00　Taiwan GDP revision (Q1-Q3)

21:30　U.S. GDP (Q1) revised

21:30　U.S. April durable goods orders

23:00　U.S. Consumer Confidence Index (May)

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