Can we reach an agreement on the provisional budget for the 米? ~ Key points and schedule for December 21 ~

Following the FOMC hawkish tone, stock prices fell sharply, continuing a risk-off flow. The USD/JPY also declined, temporarily dropping into the 110s. At the 110s, buying to cover short positions pushed it back up to the 111s. The drop in USD/JPY seems driven not only by the risk-off sentiment but also by President Trump’s veto of the budget plan.

◎ Today’s Points of Interest

1)U.S. Budget and Stock Prices

President Trump did not sign the budget approved by the U.S. Senate because it did not include funding for border security (the wall at the border with Mexico). The U.S. budget deadline is the 21st. If the budget bill is not signed, the government could partially shut down when the deadline passes. All eyes are on whether a stopgap funding measure can be agreed upon.

Moreover, investors are watching whether stock prices can rebound if the FOMC details and the budget fail to pass, leading to a continued sharp drop.

2)Positioning Before the Holidays

The markets in Tokyo will be closed on the 24th for the Emperor’s Birthday. European and American markets will be on Christmas holidays, and overall market participation will decrease. Some view that profit-taking and position adjustments for the holidays and year-end will contribute to further declines in stock prices. Therefore, a continuation of stock price declines today is possible.

3)Oil and Gold Prices

Oil prices have fallen below the psychological level of $50, with no clear resistance level since, so the decline continues. U.S. shale oil is said to become unprofitable if prices drop below $40–$50. Attention is on how far oil prices will fall.

Additionally, gold prices are rising. The VIX index has tops above 30. Long-term yields are falling. All of this indicates a typical risk-off market. I will be watching oil, gold, and long-term yields closely.

December 20th Recording Room — Stocks, Yields, and Key Officials’ Remarks

◎ Today’s Event Schedule

Friday, 12/21

16:00 EUR Gfk Consumer Confidence (Germany)
16:45 EUR France GDP
17:30 SEK Sweden Retail
18:30 GBP GDP
22:30 USD GDP ・ Durable Goods Orders
22:30 CAD GDP ・ Retail Sales

Saturday, 12/22

00:00 USD PCE Deflator
00:00 USD University of Michigan Consumer Sentiment
00:00 EUR Eurozone Consumer Confidence
01:00 CAD Fiscal Balance
03:00 USD Baker Hughes Rig Count