Resurrection day

The revenant

When Leonardo DiCaprio returned from the dead in 1823 he won a BAFTA award. When the Japanese stock market returned from the dead this morning it won the grateful appreciation of investors. But will the Nikkei eventually take its revenge?

Financial markets think not. Since Friday morning Japanese equity prices have risen by 8% and the yen has lost -1.7% of its value. Whatever was troubling investors during the early part of the month (when the Nikkei went down by -15% and the yen strengthened by 6%) is no longer a problem. As if to emphasise this new ebullience the Shanghai stock market moved only fractionally lower this morning when it reopened after the New Year holiday.

The optimism of investors might seem at odds with data released overnight which showed Japan's economy shrinking by -0.4% in the fourth quarter of last year. When the figures came out the yen did strengthen briefly but the change of heart which has taken root over the weekend outweighs niggly little details such as stagnation and deflation. Share prices are going up and nobody needs the protection of safe-haven currencies.

Full steam ahead

The rebound in optimism coincides with renewed appetite for oil and the commodity currencies. Oil is up by 7% from Friday morning and the antipodean dollars are leading the way.

Australia's dollar is a cent higher, a rise of 0.5%, and the NZ dollar is up by four fifths of a cent with the South African rand at its side for gains of 0.4% apiece. At the back of the field the Japanese currency's three-yen loss amounts to -1.7% while the euro and the Swiss franc have paid a one-and-a-half-cent price for their safe-haven status, putting them -1.1% lower. Sterling is up by an average of 0.5% and is firmer by exactly that much, two thirds of a cent, against the US dollar.

Three ecostats attracted attention on Friday. Germany and the euro zone both reported quarterly growth of 0.3% and US retail sales rose by a monthly 0.1% where no increase had been expected. Nobody seemed concerned by the -1.9% quarterly contraction in Greece. 

More stimulus to come

Investors also turned a blind eye to China's trade figures this morning, perhaps because the US$63.3bn monthly surplus in January was the biggest ever. The number did, however, conceal some less reassuring numbers.

Chinese exports were down by an annual -6.6% to their lowest level since last April and imports were down by -14.4% to a ten-month low. All that remains on today's ecostat agenda is Euroland's balance of trade and, tonight, New Zealand retail sales. The European Central Bank president will be speaking at 14:00. North America will be closed to celebrate Presidents' Day in the States and family day in Canada.

Investors will want to hear what Mario Draghi might have to say about further stimulus. They also expect news of a similar move in Japan, though it might not come today.