Morning Brief – More bad news

The Bank of Japan’s surprise move on Tuesday continued to reverberate and dictate the moves in Asia, with the yield on 10-year JGBs rising, and bigger moves in the yen and stocks.

The yield on 2-year JGBs has also risen above zero for the first time since 2015. This really underscores the aftereffects of the shock move from the Japanese central bank.

Japanese stocks remained under pressure, with the Nikkei 225 coming under pressure and then reversing looks. The USDJPY pair as the yen continued to gain strength.

Moreover, The International Monetary Fund weighed in on the Bank of Japan raising its cap on 10-year Japanese Government Bond (JGB) yields from 0.25% to 0.5%.

The IMF’s mission chief to Japan said, “With uncertainty around the inflation outlook, the Bank of Japan’s adjustment of yield curve control settings is a sensible step including given concerns about bond market functioning.”

He also added that “Providing clearer communications on the conditions for adjusting the monetary policy framework would help anchor market expectations and strengthen the credibility of the Bank of Japan’s commitment to achieving its inflation target”

Financial sector stocks, such as banks and insurance companies, rose on expectations of better profits from rising interest rates during the Asian session. Hong Kong and mainland China stocks also gained. However, Taiwan posted some terrible data.

The media reports from Taiwan say that export orders in November fell 23.4% year-on-year. This was shocking news as the number was expected at -12.8 year-on-year.

This was the steepest fall since March 2009. Export orders to China fell the most, down 37.3% year-on-year. Despite its small size Taiwan is known to be a huge economic and export hub in Asia.

Precious metals also remained in focus. Gold, silver, and copper continued to retain recent gains after all three metals rose due to the Bank of Japan’s policy move.

Copper is a bellwether for economic growth globally, hence why  red metal is lagging gains in gold and silver, due to the fact that both metals are seen as safe havens.