Japanese Nikkei Gains as the New Government Comes to Power

26 December 2012

After the Japanese Prime Minister was sworn in today, the Yen tumbled to an almost two-year low. On the other hand, the Nikkei propelled to its highest point in three quarters. The new Prime Minister is eagerly pursuing stimulus driven steps aimed at improving Japan’s heavily deflated economy.

Markets open slowly after the holiday

Investors are focussing largely on the U.S fiscal cliff negotiations. These negotiations, if unsuccessful, could drive the U.S. Economy straight into a serious recession. As a result, all the assets and Asian shares were capped during a flimsy holiday trade. Most of the Asian markets including South Korea, Indonesia, Malaysia, Philippines and Singapore resumed business as usual today after a break for Christmas yesterday. The markets in the U.S. are expected to open weak as the day progresses. The European markets will not be trading today along with Australia and Hong Kong.

The Asian markets 

As per MSCI, most of the Asian shares including Shanghai and Korea flattened at the day’s end but managed to hold on to the positive territory. The Shanghai shares that experienced a 2.5% jump earlier this Tuesday could possibly mean that Shanghai gets to end its year on an annual gain after 3 long years.

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Shinzo Abe

In Japan, Shinzo Abe‘s party won the elections by a massive margin earlier in December. Shinzo Abe was also elected as the Japanese Prime Minister today. The Japanese premier is all set to appoint his cabinet and ring in his new and revolutionary economic policies into force. The new plan includes a fiscal spending to defeat the deflation and strengthen the Yen. Abe has maintained constant pressure on the Bank of Japan and its policies. Abe wants the Bank to adopt a more drastic rate of inflation at 2%. This may have resulted in the Yen losing and reaching almost a 2 year low today.

As far as the Asian markets and binary options are considered, the trend is quite visible. It is highly likely that the Yen would drop further in the days to come and Nikkei and other indexes would rise significantly. The fact that Shinzo Abe is the new Japanese première itself is enough to keep Nikkei sky rocketing and the Yen slipping.

The U.S. Markets

The U.S dollar is expected to continue its strong performance at the stock markets as it is highly unlikely that the investors would favour any risky assets in view of the impending fiscal cliff negotiations. The ten-year U.S. Treasury notes too did not waver much since 24th of this month. Investors firmly believe that there might be some kind of agreement reached that will enable the postponement of the fiscal cliff by the end of this year, even if it means obtaining only temporary relief. Also U.S. President Barack Obama is due to return from his Hawaii visit later this evening and will be addressing the fiscal cliff issue. The fiscal cliff negotiations are aimed at averting tax increases and spending cuts that will be implemented starting January 2013.

Investor focus is currently on the U.S. fiscal cliff, which if unattended, could drag down several world economies along with it into a serious recession. The average global growth is also quite low. Even though the data from key Asian economies such as Thailand suggests a rise in exports, it is not an indicator of global growth but a mere result of the floods from a year ago.

As for the U.S. markets, it is safe to stay clear of any volatile assets. For your binary options, it would be good to keep an eye on the fiscal cliff negotiations as hopes are high of a possible conclusion being drawn by the end of the week.

Commodities

The commodities market has once again turned out to be a mixed bag with gold and other precious metals slipping as the uncertainty around the fiscal cliff escalates by the minute. Bullion futures however rallied a bit owing to a weak Yen at the Tokyo Commodity Exchange.

While the precious metals market was a disappointment, crude oil traders were cheering as Brent crude rose well above $109 a barrel today. The trade however was quite thin and most of the investors are sitting cross fingered over a last minute deal that could avert the fiscal cliff. The U.S crude futures rose to about 0.4 percent and reached $88.94.