The Nikkei closed the morning session at 9200, which is close to the 50% retracement level of the rally from the March 2009 low to the highs earlier this year. USD/JPY is sitting just above 88.00, which was the low in March and again in May.
TOKYO (MNI) – The Japanese government on Thursday formally
appointed Yoshihisa Morimoto, 65, a former director at Tokyo Electric
Power Co., to the Bank of Japan policy board, effective immediately, the
Parliament has approved his nomination.
Morimoto’s entry returns the BOJ’s policymaking body to its full
complement of nine officials: the governor, two deputy governor and six
Morimoto stepped down from his current position as director at the
utility on Wednesday and assumes the new post at the BOJ today.
The last board position has been left unfilled since Kiyohiko
Nishimura was promoted to be one of the two deputy governors in March
Morimoto will hold a news conference at the BOJ at 1700 JST (0800
GMT) today, the BOJ said.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **
Coming on the back of the earlier official PMI, this is more bearish news for the market to digest.
The Nikkei is almost 2% lower as is the Australian All Ords. Korea is 1.5% lower and HK is -1%. Crude has fallen $1 to $74.50 after the Chinese PMI reinforced worries of a stalling global economic recovery. Gold is steady at $1240/oz.
USD/CHF and USD/JPY are somewhat lower on the day, cable has fallen back towards it’s hourly support around 1.4920 and of course the AUD/USD is falling sharply. The EUR/USD nevertheless remains fairly stable with EUR selling against the CHF and the JPY being almost balanced out by EUR buying against the GBP and the AUD. Dealers say that Sovereign names like the BIS and Asian central banks have buying interest on the 1.2100 handle and that only a break below 1.2100 will reignite the bear trend.
The earlier PMI data highlights a slowing global recovery according to the Chinese Bureau of Statistics. AUD/JPY fell another 50 pips after the ‘grim export outlook’ comment. Not much in the way of technical support in the AUD/JPY until the recent lows around 72.00.
The time to get worried in the market is when you buy a lot and not only does the market soak up your buying but it actually falls when you’re finished. We’ve seen some significant buying out of Japan in the last 24 hours and the AUD market has soaked up the buying and is now putting in fresh lows. The big macro funds have been actively selling overnight and again this morning and it would seem that they have more to do. The option protection in the high 80′s that we had been talking about is also now expired and deemed superfluous so obviously the big players think that we are headed a lot lower. Once this type of selling starts it can go on for days and days so if you’re a base picker on the AUD, I’d say be careful.
The AUD is in a vulnerable state at the moment and therefore the market is looking for and reacting to bad news. Retail sales for May came in as expected at +0.2% MoM but building approvals were down by 6.6% from the previous month and analysts had expected no change. The AUD/USD has posted a new intraday low below .8350.
EUR/CHF has fallen by 100 pips in the last two hours and AUD/JPY is also down close to 1% from its earlier session highs. The market has voted with its wallet and the CHF and JPY are the destinations of choice so fighting this trend seems futile at the moment.
– Deleting 11th Paragraph, Background Left In Story Inadvertently
TOKYO (MNI) – Business confidence among large Japanese
manufacturers improved in June for the fifth consecutive quarter to its
highest level in two years, as Japan’s exports and production continued
to rise on the recovering global economy, according to the Bank of
Japan’s latest quarterly June Tankan corporate survey released on
The Tankan survey headline index — showing current business
sentiment among large manufacturers — improved to +1 in June from -14
in March. The June reading was the highest since June 2008 (+5) —
before the global financial crisis — and also the first positive
reading since then.
The benchmark June figure came in better than the consensus call of
-2, with economist forecasts ranging from +2 to -5.
The pace of improvement in business sentiment generally
accelerated, thanks to the stronger-than-expected economic recovery in
The 15-point gain in the current survey was bigger than the 6-point
rise forecast by respondents in the March survey.
Led by a recovery in the textile, general-purpose machinery,
production machinery and motor vehicle sectors, the latest improvement
in the large manufacturing sector matched the 15-point gains posted in
Going forward, the pace of recovery is expected to be slow amid
concerns about persistent deflation and uncertainty over a recovery in
private demand in Japan.
The headline sentiment index is expected to improve by another 2
points to +3 in the next survey in September, according to respondents’
forecasts in the June survey.
It is the sixth straight quarter that major manufacturers expect
their sentiment to improve three months ahead.
But large carmakers, whose sentiment jumped to +18 in June from -2
in March, foresee their index dropping by 15 points to +3 in September.
The latest Tankan showed that the favorable effects from the
recovering overseas economies are gradually filtering through to major
non-manufacturers and smaller firms.
But the Tankan also continued to show there is a gap in improvement
between export-oriented manufacturers and other sectors dependent on
Business confidence among large non-manufacturers also improved for
the fifth straight quarter, though to a less extent than among
manufacturers, rising to -5 from -14 three months earlier. The index is
expected to improve further to -4 in September.
The June figure for large non-manufacturers was also slightly
better than most analysts expected. The median of forecasts by
economists was -7, with estimates ranging from -4 to -9.
The sentiment index for small manufacturers improved to -18 from
-30 in March, up for the fourth straight quarter.
The index is expected to deteriorate to -19 in September.
Sentiment among smaller manufacturers was led by communications,
wholesaling and services for individuals.
The index for smaller non-manufacturers rose to -26 from -31, up
for the fourth quarter in a row, but the index is expected to slip to
-29 in September in the face of continued sluggish domestic demand and
the risk of deepening deflation.
Major manufacturers plan to increase their capital spending by 3.8%
on average in fiscal 2010 started on April 1, revised up from a 0.9%
fall predicted in the previous Tankan.
This follows an estimated record year-on-year drop of 32.2% for the
sector in fiscal 2009 just ended.
All major firms, including non-manufacturers, expect their capital
spending to rise 4.4% from a year earlier in the current fiscal year,
revised up from a 0.4% fall at the previous survey.
Small- and medium-sized firms forecast their capex will fall 15.5%
from a year earlier, improving from a 19.4% fall in the previous Tankan.
Smaller firms tend to gradually revise up their investment plans as
the fiscal year progresses.
The Tankan showed that sales in all sectors in fiscal 2010 are
estimated to rise 3.3% from a year earlier.
In addition, all sectors expect their current profits to turn
positive in this fiscal year, the first rise in three years for major
firms and the first increase in four years for small businesses.
Large companies are now forecasting a 21.6% rise in fiscal 2010
profits, improving from the 21.1% rise estimated in the March Tankan.
The improvement will largely result from a recovery in overseas
demand for Japanese products.
Meanwhile, small- and medium-sized companies expect their current
profits to rise 17.2% in fiscal 2010, down from a 21.5% rise seen in the
In fiscal 2010 current profits by all companies are expected to
rise by 19.7% from a year earlier, revised down from a 21.5% rise
forecast in the March survey.
The Tankan results showed that Japanese firms were still laden with
excess production capacity and employees, suggesting that corporate
executives will remain cautious about resuming investment in plant and
equipment, hiring new graduates and raising salaries.
But the survey also showed that excess production and sales
capacity among major manufacturers eased for the fifth straight quarter
while that for smaller makers eased for the fourth straight quarter.
Among major manufacturers, the diffusion index for production
capacity — the percentage of firms reporting excess capital minus the
percentage of firms reporting the opposite — fell to 17 from 25 in
March. It was the fifth straight quarter of easing in overcapacity but
was still the ninth consecutive quarter of reported excess capacity.
The production capacity index for small manufacturers also fell 5
points to 20, the fourth consecutive quarter of an improvement, but it
was the ninth straight quarter the index showed overcapacity.
Both indexes showed the best level since December 2008.
Meanwhile, the index for employment conditions — the percentage of
firms saying they have excess labor minus the percentage of firms saying
that labor is in short supply — fell by 7 points to 10 for large
manufacturers. It was the fifth consecutive quarter of easing in excess
workforce but the index still showed excess for the seventh straight
The index showing excess employees among major non-manufacturers
was at 7. The employment indexes for smaller manufacturing improved for
the fourth straight quarter.
While there has emerged some improvement in wages, overall job
creation is still slow.
The June Tankan showed that the number of employees at major firms
at the end of March rose 1.1% from a year earlier, down from a 1.7% rise
at end-December while those employed by small businesses fell 1.2% in
March compared to a 1.8% drop in December.
The payroll number for all industries excluding financial firms
fell 0.1% on the year at end-March, a smaller decline than the fall of
0.5% three months earlier.
On corporate financing, the Tankan showed both financial positions
among borrowers and the lending attitude among financial institutions
improved for the fifth straight quarter.
The Tankan diffusion index represents the difference between the
number of companies reporting favorable business conditions and those
reporting unfavorable ones.
The Tankan survey was conducted from May 26 to June 30.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **
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