FINANCIAL MARKET REVIEW FOR MAY 18, 2018 It was a relatively quieter day through the Asia session this morning, with economic data limited to April inflation figures out of Japan. April’s annual core rate of inflation stood at 0.7%, falling short of a forecasted 0.8%, whilst easing from March’s 0.9%, with headline consumer inflation falling by 0.4% month-on-month. The monthly decline was attributed to falling food prices (-1.0%), which were partially offset by rising prices for clothes and footwear (+2.0%). The core annual rate of inflation came in softer as a result of a 0.2% fall in prices for housing and a 1.5% fall in prices for furniture and household utensils. Offsetting the softer numbers were rises in prices for medical care (+1.9%), transportation and communication (+1.1%) and fuel, light and water charges (+3.6%). As far as the BoJ and Abenomics is concerned, it’s yet another blow in the wake of the contraction in the Japanese economy in the 1st quarter and the quite dire core machinery order numbers released on Thursday. The Japanese Yen moved from ¥110.809 to ¥110.83 upon release of the figures before easing to ¥110.93 against the Dollar at the time of writing, down 0.14% for the morning, any appetite for the safe haven over concerns of a rise in tension between the U.S and North Korea certainly not reflected in the Yen, which has been one of the worst performers for the current week and for good reason. Elsewhere, the Aussie Dollar was up 0.04% to $0.7514 in what’s been a choppy week, while the Kiwi Dollar was up 0.20% to $0.6892 at the time of writing, playing catch up. The pair have had a tough week and rising U.S Treasury yields have certainly done the job, though the Kiwi has had it worse this month, a particularly dovish RBNZ that was in stark contrast to an RBA wanting to sit back through the year, doing most of the damage. In the equity markets, there was some positive momentum for the Nikkei in the wake of the Thursday losses in the U.S, off the back of a softer Yen, while the Hang Seng and CSI300 are having a choppy session and ASX200 in negative territory at the time of writing, the markets responding to comments over the U.S – China trade negotiations, which dampened any hopes of progress this week. For both the Hang Seng and ASX200, it’s been the energy sector leading the way, as Brent crossed over to $80 on Thursday and was knocking on the door again this morning. The U.S futures were in positive territory through the session providing support. For the EUR, economic data scheduled for release is limited to April producer price figures out of Germany and the Eurozone’s March trade figures that will provide some direction, though unlikely to be enough to reverse the week’s losses, the EUR desperately trying to hold on to $1.18 levels. At the time of writing, the EUR up 0.09% to $1.1806, some profit taking from the upside in the Dollar contributing to the morning’s moves, with things continuing to look precarious for the EUR bulls, the news wires likely to also be busy delving into the new anti-EU Italian government. For the Pound, there are no material stats scheduled for release through the morning to provide direction for the Pound that found some support from Brexit news on Thursday.
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