Overseas demand cut 0.3 percentage points from the GDP, cutting into growth for only the first time in the past four quarters and adding to the pain that weak global demand has inflicted on an economy that is export reliant.
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“With gains in the yen and declines in stocks, companies are holding off their spending”, said Atsushi Takeda, an economist at Itochu in Tokyo.
China’s blue-chip CSI300 Index .CSI300 rose 1.3 percent to a seven-month high and Shanghai .SSEC added 0.9 percent amid talk more stimulus would be forthcoming from Beijing. In turn, further action by the Bank of Japan is expected in September, following its comprehensive assessment of Abe’s stimulus programmes.
European markets looked set to take their lead from a shaky trading session in Asia on Tuesday despite all three major indexes in the USA closing at record highs on Monday as investors reacted to rising oil prices. The approach to lenders comes after BOJ’s easing drove yields below zero for most of the Japanese government bonds traded in the market. The benchmark 10-year JGB yield was up 2.5 basis points at minus 0.085 percent, while the 20-year yield edged up half a basis point to 0.250 percent. These results have also had an impact on the rates across Europe.
As the return on bonds continued plumetting, the equities seemed to be the best attractive options. But some experts are now questioning whether the central bank is reaching the limits of what monetary policy can do.
In Currency Markets the USA dollar was on the defensive on Monday, pressured by downbeat USA data that tempered expectations of a near-term interest rate hike by the Federal Reserve.
This combination of a very resilient Japanese yen and lagging USA dollar has served to pressure USD/JPY back down towards major psychological support around the 100.00 level. After falling sharply from over 1,600 in 2014, before the price rout started, to a low of just 316 in late May, the USA oil rig count has steadily risen since then as US producers have adjusted to lower prices.
One outlier has been sterling, which has slipped steadily since the BoE’s easing to stand at $1.2927 GBP= and ever closer to the post-Brexit trough at $1.2797.
Brent crude futures LCOc1 were up 31 cents on Monday at $47.28 a barrel, while USA crude CLc1 added 35 cents to $44.84. Coal GCLNWCWIDX has also been on a roll but so too has safe-haven gold XAU=.
“In general the negative rate environment, particularly in the euro zone and Japan, is going to keep gold well bid”, Mitsubishi Corp strategist Jonathan Butler said.
It was up 0.4 percent at $1,341 an ounce on Monday and is now up 25 percent since the start of the year.
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USA retail sales were flat in July, the Commerce Department said, disappointing forecasts for a 0.4% rise and slowing sharply from growth of 0.8% in the preceding month.
