Japan shares boosted by GDP rebound

Index at eight-week high

The Japanese economy expanded 1.4% on an annualized basis in the fourth quarter of 2018, matching economists’ estimates. The positive growth snapped two consecutive months of contraction and helped to avoid a technical recession. Domestic demand was a major driver of the rebound, rising 0.6% while business spending beat estimates with 2.4% growth rather than 1.8%.

The JP225 index advanced to its highest since December 18 as it nears the 61.8% Fibonacci retracement of the December drop at 21,346. The 100-day moving average sits at 21,586 and has capped prices since December 4.

 

JP225 Daily Chart

Source: OANDA fxTrade

 

China’s January trade numbers finally released

After waiting for a few days, we finally got to see China’s trade data for January. Conspiracy theorists may note the coincidence of the timing of the release and the start of trade talks. The trade surplus with the US shrank to $27.3 billion in the month from $29.9 billion in December. Overall exports rose 9.1% y/y while imports declined 1.5% y/y, both coming in better than economists’ estimates. In response the Aussie rose, though AUD/USD only managed 8an 8 tick rally as a knee-jerk reaction.

 

Waiting for the next trade talk soundbite

Other markets traded mixed during the Asian session, with traders waiting for any comments or headlines out of Beijing as the US-China trade talks officially kick off today. Having breached the 55-day moving average at 110.70 to the upside yesterday, USD/JPY struggled for momentum to attempt to crack the 200-day moving average at 111.32. Trading was confined to a tight 110.87-111.06 range and is now at 111.01.

USD/JPY Daily Chart

Source: OANDA fxTrade

The Kiwi continues to benefit from the comments yesterday from RBNZ Governor Orr’s comments on monetary policy, but failed to advance beyond yesterday’s peak. The Aussie is still riding the kiwi’s coat tails, with nothing locally to drive the antipodean currency.

 

German growth to slow

Economists are expecting GDP growth in Germany to slow to +0.7% y/y in the fourth quarter, which would be the slowest growth since Q2 2017. Money markets are implying only a 36% chance of an ECB rate hike by the end of this year, and that could drop if the slowdown is deeper. Shortly after we see the first revision of Euro-zone GDP growth for the same period, though no change is expected either on a quarterly or annualized basis from the +0.2% and +1.2% initial prints, respectively.

German GDP Growth Chart

Source: MarketPulse

 

The rest of today’s data slate has US retail sales for December (a delayed release due to the US government shutdown) and producer prices for January.

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