Talking Points:
- Asian markets started the week on an upbeat note
- With Japan out for a holiday, Wall Street’s lead was the path of least resistance
- News of a possible snap Japanese election rattled the Yen a bit
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Asian indexes started a new week in the green, buoyed up by a strong Wall Street finish Friday and a lack of further obvious bad news from North Korea.
Investors are looking forward to monetary policy decisions from the US Federal Reserve and the Bank of Japan this week. The first will obviously have top billing but, with US industrial production numbers disappointing last week, investors are hopeful that interest rate rises will be achingly gradual, if they come at all.
With Japanese markets thinned or absent for a holiday Monday, and little economic data to add local colour to trade, investors had little disincentive to follow the US lead. Sure enough every major index is set for gains. The Hang Seng and the Kospi seem set to be the day’s winners with both up by more than 1%.
The US Dollar index weakened a little but the greenback was firm against a Japanese Yen buffeted by early, unconfirmed reports that Prime Minister Shinze Abe might call a snap election, possibly next month. These have since been clarified somewhat by news that Abe will decide the matter when he returns from a US trip- he’ll be back on September 22. The British Pound is at highs not seen since 2016 as investors look toward the Bank of England’s next monetary policy decision with interest in the light of rising inflation. Even if a rate rise does not come then, the rhetoric around such a move is expected to be ramped up.
The rest of the session will offer Germany’s ZEW business sentiment survey for investors' perusal, along with US housing start and building permit numbers and import and export price data for July.
Gold prices made two week lows as the Fed meeting approached, with crude oil prices firm on news of rising refinery demand and a falling US rig count.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
