Nikkei Down for 7th Consecutive Day

As of this writing, Asian markets are currently trading in the red, extending the declines seen over the last few days of trading. With last night’s declines, the Japanese Nikkei is down for the seventh day in a row.

The Japanese Nikkei slipped on Wednesday for the seventh consecutive day, even though earlier in the day, the U.S. market managed to close barely above the break-even line. Moreover, the S&P futures formed a bullish pin-bar on the daily chart, a pattern that is usually interpreted as a reversal sign.

Asian markets declined on Wednesday as the Japanese yen reached the lowest value against the dollar since February. An important part of the Japanese economy is driven by exports, approximately 25%, and many of these exports leave for the U.S.

As such, any signs of strength that the yen shows compared to the dollar are interpreted as unhelpful by investors since it will reduce the profit margin of most companies. The pharmaceutical, carmakers and the financial industries were among the worst performers on Wednesday, but, unlike in the previous few days, mining companies managed to stay in the green, after Alcoa (AA) posted a smaller than expected loss throughout the second quarter.

Overnight, the Japanese Nikkei declined 49.6 points (0.53%) to 9,371.08. The Australian S&P/Asx lost 7.50 points (0.20%) to 3,760.40

Crude oil for July delivery was recently trading at $60.70 per barrel, higher by $0.50. Wednesday was the seventh day in row in which crude oil declined.

Gold for July delivery was recently trading higher by $2.90 to $912.20. For now, gold is trading near the lowest value since early May.

Comments

[Mad Hedge F...:]

Don't expect a lot out of Japan. It’s sad to see a once great country fall on hard times. It’s likewatching a formerly leading hedge fund manager apply for food stamps.I’m talking about Japan, which in 1989 boasted the world’s mostvaluable stocks, largest banks, and strongest currency. Oh, how themighty have fallen. This week the Ministry of Finance published thetrade figures for May showing a 42% YOY drop, and that the cataclysmicfall in exports continues unabated, as foreigners keep their money intheir pockets instead of buying high quality cars and electronics. Evenexports to China fell 29.7%. I’m sure the chart below will be found inbusiness school textbooks for decades to come as proof of the risks ofrunning an overly export dependent economy. Although a giant fiscalstimulus package will start to hit in the second half of this year,most economists have GDP forecasts for the year of minus 6.8% or worse.This would take GDP back to the 2004 level, and make our economy lookpositively bubbliscious by comparison. This is all happening when thenumbers of those retiring is going through the roof, causing welfarepayments to skyrocket. Taking a page out of Obama’s playbook, thegovernment is borrowing to meet these costs, so the national debt isexpected to reach the certifiable nosebleed territory of 197% by nextyear! Prime Minister Taro Aso has so far fought off increasedconsumption taxes, but it is just a matter of time before those effortsare tossed out the window. Continued deflation is a no brainer. Realestate prices are still stuck at 30% of their 1990 levels. This is whatan “L” shaped recovery looks like up close and ugly. In the meantime,the yen strengthens, making exports ever more expensive anduncompetitive. Better to stand aside from the Land of the Rising Sunand watch with tears. Is the US next?

Jul 09 10:32 AM