The Japanese economy has sank into contraction; shrinking by an annual rate of 3.5% in Q3 and contracting at its sharpest rate for more than a year with expectations that Japanese GDP in Q4 will also be in negative territory which would be classed as a technical recession.
The Japanese economy has fallen victim to a number of factors, with some being outside its control and others being entirely self inflicted. Firstly their Export based economy has suffered due to the economic slowdown as investment and expenditure take a back seat to deleveraging. Secondly Japanese consumer technology companies have failed to innovate, falling by the wayside as their competitors forge ahead. The purchase of disputed islands in the East China Sea has also dented exports as anti-Japanese sentiment grew in China with consumers refusing to purchase Japanese goods. Lastly the country has also had a persistently strong JPY which has made its exports less attractive.
In the Nikkei 225 we have traded lower by 0.7% with one of the stand out laggards being Sony (-1.7%) after a downgrade from Moody’s to one notch above junk, with James bond failing to save the day despite ‘Skyfall’ posting a franchise-record USD 87.8mln in weekend ticket sales in the US and Canada. Also in the equity space we have had HTC trade higher by 7% as they reached a global settlement with Apple that includes the dismissal of all current lawsuits and a 10yr license agreement Meanwhile in Australia, QBE insurance has taken a blow (-7%) after announcing preliminary losses due to hurricane Sandy.
Elsewhere, in the FX market we have once again seen the CNY hit its 1% limit to the upside, trading at 6.2291, marking a 19 year high and consequently seeing AUD, a proxy for Chinese economic performance benefit from CNY strength, breaking through the 1.0400 level. Also from China we received their export numbers over the weekend which showed the worlds second largest economy had posted a better than expected surplus and much better than expected exports in the month of October.
On a footnote we have had the Greeks pass their 2013 budget vote and heard from Moody’s who said they would not downgrade the US in the event of the fiscal cliff.
Looking forward Indian Industrial Production is due at 0530GMT/2330CST and the reaction of European participants to the passing of Greece’s 2013 budget should become evident in the next few hours.
11 Nov 2012 - 22:26 - - Source: RANsquawk
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