There has been a great deal of soul-searching about Prime Minister Shinzo Abe’s statement on the anniversary of the end of the Pacific War. On 15 August 1945, Emperor Hirohito made his ‘jewel voice broadcast’ of surrender to the Allied forces, accepting the terms of the Potsdam Declaration and ending World War II in the Pacific. After 70 years, some might wonder what the big deal is over recognising wartime history.
Japan reported a smaller than expected June current account surplus. Seasonally, June tends experience deterioration from May. In fact, only twice in the past ten years has the current account improved in June over May.
On the other hand, investors can look forward to improvement in July. Since 2003 without fail, Japan’s current account position improved in July over June.
EM is starting the week with a mixed tone. EM currencies are on the weaker side but EM equities are generally firmer, especially in China as weaker data spur calls for more stimulus. Stabilizing commodity prices are also helping sentiment, though it is far too early to call a bottom. Firm US jobs data supports our call for September Fed liftoff, and US retail sales data on Thursday should support this notion too. We remain bearish on EM assets for now.
South Korean President Park Geun-Hye said the economy is in need of “major surgery,” according to Reuters. The president’s approval rating dropped below 40 percent, a far cry from a 61-percent rating when she was elected in 2013.
1) Poland’s lower house unexpectedly voted on a new legislation that would increase the burden of FX-linked mortgages losses to banks. 2) The popularity of the Chilean and Brazilian presidents continue to tumble.
With home sales improving and average sales prices skyrocketing, the Chinese property market looks like it is recovering.
The main event of the day is the start of a new era at the Bank of England. Until now, at the conclusion of the MPC meeting, the decision would be announced, but no press conference was typically held. A few weeks later the minutes would be released, and the vote revealed. Starting today, the minutes will be released simultaneously with the decision. Also today, at the same time, the Bank of England will release its inflation report, which contains it economic forecasts Less than an hour later Governor Carney will hold a press conference.
China has accepted that its newfound economic clout as the world’s largest economy (in purchasing price parity terms) comes with responsibilities for economic leadership. Within two years, the Asian Infrastructure Investment Bank grew from a proposal put on the table by China alone to a US$100 billion multilateral agreement supported by 57 countries. This is evidence of China’s willingness and capacity for economic leadership among a swathe of countries from South Korea to Portugal.
The World Bank announced new predictions for gross domestic product (GDP) growth among the world’s nations through the end of 2015. Although it slightly downgraded India’s overall annualized growth rate prediction, it was enough to put India in the number one seat for GDP growth by the end of the year.
The fluctuations of the oil prices, the Fed’s policy rate and the U.S. dollar are intertwined. In fall 2015/spring 2016, the Fed’s impending rate hikes will cause substantial turbulence in emerging markets.
Until recently, oil prices were recovering. However, after rallying earlier in the year, oil plunged nearly 20 percent in July (and briefly fell below $47 per barrel). In the past, that has often heralded the coming of a bear market.
