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"I'm lost ... I don't play when I'm lost," says Stan Druckenmiller, explaining to Bloomberg TV why he doesn't have any big bets going right now. He believes the market is topping right now, but his main focus is on who the new Fed chairman will be, and he's willing to wait a few weeks to find out. The takeaway from that comment looks to mean Druckenmiller will be buying on a Yellen appointment, selling on Summers.
As long as the Fed is printing money, he says, there's no chance of a bear market, but "if you tell me QE will be removed in 6-9 months ... that's a big deal." For those who don' think so, he says, look at June - the mere hint of removal caused havoc. What do you think might happen when tapering actually begins (Has the Ted Williams of global macro forgotten markets anticipate?).
On again, off again short bonds for some time now, Druckenmiller admits to missing the big move down in Treasurys this summer after waiting for it for years.
For now, he's long a few Japanese stocks and short the yen.
Taking a page out of the Fed's book, many BOJ board members "expressed hope that the government [will] steadily promote steps to achieve fiscal consolidation," minutes from the central bank's August 7-8 meeting show.
Members also noted that long-term rates remained "more or less flat throughout the intermeeting period."
Nevertheless, "one member pointed out that, if the government's stance in terms of fiscal consolidation were to weaken ... long-term interest rates could rise", hindering the central bank's efforts.
The Nikkei is ahead 2.2% following Tokyo's winning bid for the 2020 Summer Olympics. The news however, will likely boost PM Shinzo Abe's popularity along with the chance of his sales tax increase being implemented next April.
The government also raised its estimate of Q2 GDP growth to +3.8% from +2.6% previously. Consensus forecasts called for a 3.9% increase.
The yen slips half of a percent, with the dollar now buying ¥99.64.
Japan final Q2 GDP: +3.8% versus +3.7% expected and +2.6% preliminary.
As tipped by JPMorgan and UBS last week, the improved GDP number was fueled by a more upbeat read on capital expenditures, which were revised up to +1.3% for the period from an initial reading of -0.1%.
For the first time since May of 2012, Japan's Cabinet Office says its coincident index is "improving", which indicates the government sees "a high likelihood of an economic expansion" based on the composite of 11 key economic indicators.
"The indicators that most contributed to the rise were manufacturing-related numbers, such as industrial output and industrial electricity usage," WSJ notes.
Japan overnight had its biggest gain in a month, the Nikkei +3% to add to Monday's 1.4% advance. The yen has fallen sharply over the past few sessions, with the dollar buying ¥99.29 this morning vs. just ¥97 towards the end of last week. The weaker yen helped Toyota (TM +2.9% premarket) to be the Nikkei's biggest gainer. Kansai Electric soared 8.1% after an expert panel concluded an earthquake fault under the company's Ohi nuclear plant may not be active.
Corporate current profits +24%, corporate sales -0.5%.
JPMorgan and UBS say Q2 GDP may be revised up from a preliminary reading of +2.6% following the capex data, which could make the government more inclined to go through with proposed increases in sales tax. A decision is expected early next month.
Japan's Ministry of Finance reportedly wants to allocate a record ¥25.3T ($257B) just to service the country's mammoth debt of ¥1,000T ($10T) - which is double the size of its economy - for the next fiscal year.
The expected provision is 13.7% higher than for this FY, indicating how the ministry wants to guard against a possible rise in long-term interest rates.
The speculation comes as Japan debates whether to increase sales tax, a move seen as important for dealing with the country's debt but also as possibly hurting its nascent growth.
The 12.2% rise in exports was the fastest since December 2010, with the weak yen helping to boost sales of cars and electronics. Sales to the U.S. +18.4%, to China +9.5%, to the EU +16.6%.
"The details are encouraging because you can see that exports to Japan's main markets are bouncing back," says economist Hiroaki Muto.
The 19.6% jump in imports was the largest gain in three years, due to the weak yen and increasing oil prices.
The trade deficit of ¥1.02T was the third-largest ever. "This is a pretty big deficit and a negative for Japanese companies that will suffer from rising costs," says Yoshiki Shinke of Dai-ichi Life Research.
Reducing Japan's corporate tax rate wouldn't have an immediate impact on the economy, Finance Minister Taro Aso says, as only around 30% of firms pay such taxes.
Rather, the government should consider tax breaks to promote capex and business investment. Economics Minister Akira Amari echoed those remarks.
In addition, Chief Cabinet Secretary Yoshihide Suga denied that Prime Minister Shinzo Abe has told ministers to consider reducing the corporate tax rate.
There has speculation that the government is considering the cut in order to offset a planned two-step rise in sales tax amid fears that such an increase would harm the economy as it begins to recover from deflation.
The Nikkei falls 2.1% while the dollar drops 0.2% vs the yen following the remarks. A lack of clarity about when the Fed might start tapering is also hurting the dollar.
The idea to cut the corporate tax comes as the government increasingly looks to be moving forward with a big hike in the national sales tax - a momentum-killer for the Japanese economy on more than one occasion throughout these two lost decades. A note from JPMorgan this morning has that desk believing the boost will go through as expected, with a final decision coming in October.
The news also boosted stocks, with the Topix climbing 2%. Even after struggling for the last quarter, the Topix is 35% higher on the year. It trades at 1.2x book value compared to 2.5% for the S&P 500 and 1.7% for the Stoxx Europe 600.