The Day So Far…
The biggest move overnight came in Japanese assets with the Nikkei 225 sharply outperforming its peers following news that PM Shinzo Abe will dissolve parliament on the 25th of September. When it comes to politics often the ability of a party achieving success comes down to timing and the latest move from the LPD leader comes at an opportune time where the recent escalation in in North Korean tensions has seen his popularity recover sharply from the summer lull. Unlike the somewhat complacent strategy adopted by the Tories in the recent UK General Election I do not foresee a similar situation occurring in Japan with the PM’s lead in polling seen at roughly 30 percentage points, a reflection of just how weak his current opposition is.
From a market point of view it is interesting to note that Japanese equities tend to react positively upon the announcement of Diet dissolution as it enables a government to lock in its mandate and reward the voting electorate with its greater powers. However, possibly more important in this instance is the continuity of Abe’s “three arrows” of monetary easing, fiscal stimulus and structural reforms, not forgetting that his own draft pick Haruhiko Kuroda is due to finish his existing term in April 2018.
Looking elsewhere, WTI crude has crept higher and back within sight of yesterday’s top of $50.85. This comes amid comments from Iraq this morning who have stated that there have been formal discussions between OPEC and non-OPEC producers on the extension of the existing deal by a further 3-9 months. Closer to home the latest German ZEW Economic Sentiment Index rose back to 17.0, topping median expectations and reversing the drop seen in August. This will provide some comfort to policy makers given the data had seen three consecutive declines and goes to show the limited risk that economists and analysts foresee from the German Federal elections this weekend.
The Day Ahead…
The main highlight for this afternoon will likely come from US President Donald Trump who will deliver his maiden address to the UN General Assembly. Hot on the agenda are the ‘rocket-man’ and Iran with the prospect of the President signalling out China and Russia who were reluctant to back the more aggressive sanctions initially proposed by the US. Over the weekend US Secretary of State Rex Tillerson continued to proclaim that a diplomatic solution should be followed but given Trump’s inability to ‘stick to the scrip’ I would be watching the address at 3.30pm London time with great interest. To wrap up the day we have the regular API crude oil inventories later this evening which may well continue to reflect the impact of recent weather systems but with OPEC producers continuing to talk up the price the long feels more compelling for the time being.
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