A Close Look At Friday’s Key Market Events

A Close Look At Friday’s Key Market Events

$EWJ, $DXJ, $NKY

The world’s leading central banks have the lack of inflation on their front burners.

The Bank of Japan (BOJ) is concerned about the forces of disinflation/deflation. Come Friday morning, the Bank of Japan and global markets will be digesting the latest Consumer Price Index data for Japan and Tokyo.

I. Japan Core CPI Report for January & Tokyo Core CPI Report for February

Note: Japan’s January National CPI 0.0% Y-Y, as expected (previous 0.2%) and National Core CPI 0.0% Y-Y (expected -0.2%; last 0.1%).

February Tokyo CPI 0.1% Y-Y (consensus -0.3%; last -0.3%) and Tokyo Core CPI -0.1% Y-Y (expected -0.2%; previous -0.1%)

Why it is important

  1. It excludes volatile fresh food prices, thereby providing a better look at underlying inflation trends for the nation overall and in the major population center of Tokyo specifically
  2. Japan emerged from a deflationary spiral in May 2013. That comeback ended a year later with National CPI, excluding fresh food, peaking at 3.40% Y-Y. Since then, Japan has seen disinflation take root and lead to the 1st deflationary reading in core CPI in more than 2 years last July.
  3. A deeper dip into deflation will raise concern about currency wars and Asian economies exporting disinflation/deflation
  4. The core CPI reading will be used as a benchmark for assessing the impact of “Abenomics,” which is oriented around the 3-Arrows of monetary easing, fiscal stimulus, and structural reform

A closer look

  1. National Core CPI was up 0.1% Y-Y in December for the 2nd month running
  2. Tokyo Core CPI was down 0.1% Y-Y in January after being + 0.1% Y-Y in December.

What is in play?

  1. Japan ETFs
  2. iShares MSCI Japan ETF (EWJ)
  3. Japan Hedged Equity Fund (DXJ)
  4. Currency Hedged MSCI japan ETF (HEWJ)
  5. MSCI Japan Hedged Equity Fund (DBJP)
  6. MAXIS Nikkei 225 Index Fund (NKY)

Regional ETFs

  1. iShares China Large-Cap ETF (FXI)
  2. ProShares UltraShort FTSE China 50 (FXP)
  3. iShares MSCI South Korea Capped ETF (EWY)
  4. MSCI Australia ETF (EWA)
  5. iShares MSCI Singapore ETF (EWS)
  6. MSCI All Country Asia, ex Japan, Fund (AAXJ)

Currencies

  1. USD/JPY
  2. EUR/JPY
  3. AUD/JPY

Treasuries

Japanese Government Bonds

S&P futures

II. Economic Reports

Friday, these economic reports scheduled to be released to the market:  1. GDP, 2nd estimate (Consensus 0.4%), 2. GDP Deflator, 2nd estimate (Consensus 0.8%), 3. Personal income (Consensus 0.4%), and 4. Personal spending (Consensus 0.3%).

III. Earnings Reports

Friday early these companies report earnings to the market: HLT, AMT, BWEN, SMP, PNM, ACW, GTN, NWN, RDC, RHP, SRE, MGA, BBEP, CNP, DXPE, MEG, NWHM, OGE, OREX, HMSY, PMC, SSP, TPH, TTI, BID, HSC, NRF, PTLA, JCP, FL.

Stay tuned…

Paul Ebeling

HeffX-LTN

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