By Carlos Guillen
Equity markets are currently giving up the gains made last Friday, more than likely as a result of some profit taking. However, overall markets are still holding around resistance levels as reflected by the infamous 14,000 Dow level. There is little in terms of economic drivers today, but everyone will be focused on the bits of data out later this week. As we all know by now the sequestration dead line is also around the corner at the end of this month, and this will likely move markets very soon.
Over in China, the total of exports and imports generated by the nation last year just topped that of the United States. According to China's customs administration the country's trade of goods in 2012 amounted to $3.87 trillion. Exports and imports of goods last year in the U.S. totaled $3.82 trillion, according to a report by U.S. Commerce Department. The final tally for exports and imports now puts China at the top as the world's biggest trading nation. With such an immense gravitational pull for trading, China is likely to change the normal trading patterns that have existed for some time. For instance, Street analysts now forecast that Germany may export twice as much to China by the end of the decade as it does to France, and this will likely be the trend most of Europe will experience by the end of this decade as well.
Taking a look at some commodity markets, the price of gold fell to a one-month low today, hit by technical selling after prices slid through key support levels, and as investment appetite for the metal was hurt by a sluggish price performance in the year to date. Spot gold fell as much as 1.4 percent to $1,643.24 an ounce, its lowest point since January 7.
China, Japan, Singapore, Hong Kong, and Korea were among the major regional markets that are closed this week as a result of the Asian Lunar Year, and this is also to blame for the drop as liquidity during this holiday is low, exaggerating downward moves.
At the moment the Dow Jones Industrial Average is still down over 30 points, or 0.2 percent from Friday's closing price. The lack of economic news or earnings today is causing volatility on low volumes. The rest of the week should be more eventful with retail sales, initial claims, and Michigan Sentiment data compelling investors in a more solid direction.
Japan Central Bank Going All Out
By David Urani
In Japan's new Prime Minister, Shinzo Abe, they have a man who seemingly won't take no for an answer with respect to Keynesian stimulus. This guy is full speed ahead, having pushed Japan's central bank to start open-ended bond purchases (a.k.a. quantitative easing). Along with that they're rolling out a $117 billion stimulus package.
The printing presses are going pedal to the metal, and with that the government acknowledges that they need to raise their inflation target to 2% from 1% for this year. You can say what you want about this type of brash spending and in the long term it may well blow up in their faces. But for the immediate term, the promise of spending and the flood of new money pouring into the system has had a real impact on the markets. The Nikkei index is already up approximately 7% in the past month.
And on that note, yen futures (weighed against a basket of global currencies) are down 7% since the beginning of the year. And that may not be a coincidence. The idea of all this quantitative easing is literally to inflate asset prices, and of course stocks would fall under that category. The inflated stock prices can be connected to the fact that they're priced in yen.
With that said, over the weekend Japan's Economic Minister went so far as to set a target for the Nikkei of 13,000 by year end (it currently stands at 11,153). Even if he secretly does under the surface, even "Helicopter" Ben Bernanke would never publicly admit to actually setting a target for inflating the stock market.