Financial market research and analysis

The BoJ took the lead from the ECB this week with a surprise decision to cut the interest rates to the negative territory. Concerns regarding Japan’s drying-up sovereign market may have pushed the BoJ to act on rates, while keeping the annual asset purchases unchanged at 80 trillion yen. And as it appears, the BoJ will likely intervene via rates in the future. It has said it will cut more if needed.
Japans new Economy Minister Ishihara said the macroeconomic fundamentals were unchanged and that was external factors affecting data.

USDJPY surged to 121.42 in a single move, Nikkei and Topix rallied 2.80% and 2.87%. The size of annual asset purchases was left unchanged at 80 trillion yen. Industrial production in Japan may have contracted by 1.4%m/m in December according to a preliminary data, while the ex-food consumer prices grew at the steady pace of 0.1% as expected.

The FTSE jump-opened in London, yet failed to clear yesterday’s top, 6020. Anglo American (+3.57%) and Glencore (+2.49%) gained their seats among top gainers, Fresnillo (-0.63%) and Randgold (-0.48%) retreated as money left gold to feed into the stock market.

Anglo American (+3.66%) reported increased production and revealed plans to keep lowering costs at its iron ore mines in South Africa and Brazil, which include laying-off about 4,000 employees. The enthusiasm is backed up with stabilisation of copper prices above $2/lb.

Glencore (+3.08%) said to profit from contango in the oil market by storing oil on ships by Singapore and Malaysia.

WTI hit $34.80 yesterday and is fighting the bears at the thee-month downtrend top. Surpassing the $35 hurdle, a recovery toward the $40 handle could well be on the radar. Nevertheless, Iran’s enthusiasm to reconquer the oil market and Saudi’s endeavour to offset its rivals will certainly keep the oil prices capped for the time being.

The pound struggled to extend gains above 1.44 against the US dollar. Negative rates from the BoJ is expected to boost the BoE doves before next week’s MPC meeting, especially with Carney hinting at a possibility of a rate cut earlier this week.
The euro-pound consolidated gains within 0.7560/0.7624. The 1-month risk-reversals still warn that the market remains hedged against risk of a further pound depreciation against the euro.

The euro-franc advanced to 1.1134, its highest level since the Swiss National Bank removed the 1.20 floor. The SNB is not seen behind the move. Amid franc depreciation, the SNB took a deep breather especially given the ECB’s plans to add more stimulus by March. It appears that Mr. Jordan gained a battle as the franc successfully escaped the safe-haven inflows through the anxious month of January.