Asian Markets Gain As Risk Appetite Returns, Will It Hold Up?

Talking Points

• Most Asian markets headed upward as risk appetite came back to the investment world
• Japanese growth data blew forecasts away but neither stocks nor the yen capitalized
• The US Dollar made back some lost ground

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Monday’s big Asian economic news was a blockbuster set of Japanese growth data, but the financial markets were focused elsewhere.

The first official look at Gross Domestic Product in the world’s third-largest economy saw growth power ahead at an annualized 4% rate. This was hugely better than the 2.5% gain markets had been looking for. Indeed it was the best showing by Japan since the start of 2015. It’s quite rare for a developed economy to nearly double growth forecasts, but that’s what happened here.

However, markets remained in thrall to geopolitical risk which was held to have declined since last week as top US officials moved to lower the temperature of the rhetoric passing between their country and North Korea. That saw most stocks gain while the perennial haven Japanese yen lost ground. The Australian Dollar inched up too. With some irony the Nikkei 225 was about the only major Asian bourse to slip on Monday. Tokyo was back in the game after a day’s holiday on Friday and investors clearly felt they had some offloading to do despite those punchy figures.

The New Zealand Dollar got a lift from better-than-forecast retail sales.

China's policymakers may be glad that market focus was on broader themes because two key data points from its economy missed forecasts and, perhaps more tellingly decelerated from the previous month. Both July’s industrial production figures and its retail sales came up short.

Crude oil prices slipped a little, reportedly as a slowdown in Chinese refining cast fresh doubts over demand. Gold slipped too as risk appetite returned and the US Dollar gained.

The rest of the day offers investors very little in the way of scheduled economic news with only Eurozone industrial production likely to whet appetites.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX