- Market sentiment remains positive driven by strong U.S. data.
- Kuroda approved as Bank of Japan governor. Dovish Iwata approved as deputy governor.
- Focus today will be on the EU summit, Eurogroup finance minister meeting and U.S. data.
Market sentiment remains positive driven mainly by strong U.S. data
that suggest that the U.S. economy so far has weathered the recent tax increases. Yesterday’s positive market sentiment was fuelled by an unexpected drop in initial unemployment claims: the less volatile four-week moving average is now at its lowest level since 2008. In line with last week’s strong labour market report it suggests that employment growth in the U.S. is picking up pace.
Growth strategy was the main topic on the first day of the EU spring summit yesterday. According to Financial Times a draft communiqué from the summit will include the phrase ‘allowing short-term targeted measures to boost growth and support job-creation’. Apparently this phrase was hotly debated at the summit with particularly northern European countries objecting.
The U.S. stock market closed higher supported by better-than-expected data. In late trade it got some support from several banks’ announcements of higher dividends and share buy-backs after their plans were cleared by the Fed in the recently conducted stress test. S&P 500 finished yesterday’s session up 0.4%. Asian stock markets are also higher across the board mainly taking their lead from the positive sentiment on the U.S. stock market yesterday. Japan’s Nikkei and China’s Shanghai stock indices are up 1.3% and 1.2% respectively this morning.
In Japan the parliament has approved Haruhiko Kuroda as governor of the Bank of Japan. The two candidates for the deputy governor positions, Kikuo Iwata and Hiroshi Nakaso, were also approved. Ahead of the approval there was some uncertainty whether the super-dovish Iwata would be approved by the Upper House, where the government currently does not have a majority. The new appointments will decisively shift the balance in favour of the doves on the Bank of Japan board.
In the FX market there has been no impact on JPY from the approval of Kuroda as Bank of Japan governor. USD/JPY is this morning trading largely unchanged at 96.15. EUR/USD moved higher yesterday on the back of the improved risk sentiment in the market and is this morning again trading largely unchanged. EUR/NOK is trading largely unchanged after it weakened yesterday after Norges Bank signalled that interest rates are unlikely to be hiked this year.
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