Japanese stocks reach a 30-year high, while the yuan experiences an upward climb

20 Nov, 2023

Japanese stocks reach a 30-year high, while the yuan experiences an upward climb

Japanese shares surged to levels not seen since 1990 on November 20, riding a three-week winning streak driven by strong earnings and robust offshore demand. The Nikkei, having surpassed its September peak, is up 8.8% for the month, with the Topix closely trailing.

Financial shares led gains as investors anticipate an eventual end to negative rates, while auto makers benefit from a weak yen and high exports. Meanwhile, MSCI's Asia-Pacific index edged up 0.1%, following a 2.8% climb last week.

As Black Friday sales test the US consumer-driven economy, Chinese blue chips dipped 0.2% with the central bank holding rates steady. Eurostoxx 50 and FTSE futures showed modest gains, while S&P 500 and Nasdaq futures experienced slight declines.

Despite the S&P 500's nearly 18% gain for the year, analysts at Goldman Sachs caution about the concentration of returns in mega-cap tech stocks. The focus shifts to Nvidia's quarterly results on November 21, influencing the demand outlook for its AI-related products.

US economic data slows this week, but Federal Reserve meeting minutes provide insights. Markets have largely ruled out further rate hikes, with expectations shifting toward easing in 2024. Bond yields retreated, with the 10-year Treasury at 4.45%.

The US dollar weakened almost 2% on a currency basket last week, while the euro strengthened. Commodity markets saw oil rebounding, Brent at $81.19 a barrel, and gold firming at $1,982 an ounce.

As expectations of a strong wage round and high core inflation surface, the yen gained against the dollar. Speculative accounts hold the highest short yen positions since April 2022, raising the risk of position squeezes.

European manufacturing surveys and the Swedish central bank meeting will be closely monitored, influencing ECB rate cut speculations. Oil prices rebounded amid OPEC+ production cut speculations, with Brent at $81.19 and US crude at $76.38 per barrel. Gold held firm at $1,982 an ounce, reflecting a 2.2% gain last week.