Japan: investors shocked - 17.11.2014

The Japanese recession onset pushed the major European, American and Asian indices. The Q3 GDP in Japan, the world’s third largest economy, shrank 1.6% after a reduction of 7.3% in the previous quarter. The official outlook amounted to 2.3% of it’s growth. It was reported that the Bank of Japan was planning to create new incentives for Japanese exports in terms of interest rate reduction and bond issuing. This event leads to the main conclusion: the US economy is no good at coping with the global economic growth function.

Stoxx Europe 600 Index has slipped 0.5% at the London Stock Exchange opening. S&P500 futures dropped 0.4%. Industrial Production data will be released today in the United States. It is estimated to 0.2% in the past month, and that is much lower than in September (1%). MSCI Pacific index and Japan’s Topix have also fallen 1.2% and 2.5%, respectively.

WTI crude oil continued to slide and lost 1.2% after the largest retracement in the previous month: investors don’t believe there will be any decision made regarding the reduction of oil supply at the next OPEC meeting. The targeted dumping is more probable to maintain the market share. Oil prices have fallen about 30% since early June as the US oil production rose till the historical high level. As a result, OPEC failed to achieve a reduction in oil production and was forced to decrease export prices. Among the most affected countries were Venezuela, Libya, and Ecuador. WTI price slipped more than 3.6% over the past week, and 24% compared to the last year.

Gold prices rose $24.10, or 2.07%, to $1185,60 per troy ounce. Gold futures is traded at the level of one-week high: investors are still cautious at closing short positions before the today’s release of important US economic data. Note that today we expect the publication of Empire State manufacturing Index and the US Industrial Production m/m. We don’t expect a long-term price growth of precious metals as positive US economic data makes it possible to expect the monetary policy tightening in the short term.