A look at the day ahead in European and global markets from Rae Wee
It’s been a slow start to the week in Asia with Japanese markets closed for a holiday on Monday, but currency traders are watching with bated breath for any signs of official yen buying from Tokyo to stem its slide.
The trading week will be interrupted by the U.S. Thanksgiving holiday on Thursday, followed by Black Friday which will see shortened hours, opening a possible window for authorities to step in.
Past interventions haven taken place during periods of low liquidity, allowing the authorities to move prices more sharply, or, as analysts put it, get the most “bang for their buck”.
In such cases, the Ministry of Finance decides when to step in and the Bank of Japan acts as its agent.
The yen fell slightly on Monday in line with the broader market, and last stood at 156.62 per dollar.
It remained pinned near last week’s 10-month trough of 157.90, though the yen appears to have found a floor after Finance Minister Satsuki Katayama ramped up verbal warnings of official yen buying on Friday.
Japan can actively intervene in the currency market to mitigate the negative economic impact of a weak yen, Takuji Aida, a private-sector member of a key government panel, said in a television programme on public broadcaster NHK on Sunday.
Elsewhere, stocks found much-needed reprieve after last week’s beating, helped by comments from influential Federal Reserve policymaker John Williams who said on Friday that interest rates can fall “in the near term”.
That sent traders ramping up bets of further easing next month, with Fed funds futures now pointing to a 57% chance of a 25-basis-point cut.
Still, with global equity markets in the midst of a grim month, attention will turn in the week ahead to holiday shopping trends and U.S. retail sales for signs of strength in consumer spending, which accounts for more than two-thirds of U.S. economic activity.
Over in Europe, focus will be on Britain’s upcoming budget announcement, with Finance Minister Rachel Reeves seeking to reassure investors that the government can be trusted to be fiscally prudent while appeasing voters by honouring pre-election promises not to raise taxes on working people.
Recent selling in bonds, sterling and bank shares shows markets on edge. The budget wait is almost over but UK market volatility is likely not.
Key developments that could influence markets on Monday:
– German Ifo business sentiment (November)
– France: Reopening of 3-month, 6-month and 11-month government debt auctions
– Germany: Reopening of 7-month government debt auction
(Editing by Jacqueline Wong)
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