Japanese Indices Move Forward
Japan’s stock market recovered from yesterday’s rout – the biggest single-day loss this year – as investors expected heightened stimulus measures.
Wednesday, November 19, 2014 - 00:00
On Monday, Japan announced it had fallen into recession after the gross domestic product shrunk for the second consecutive quarter. But economists are hopeful that new stimulus will assist the nation’s recovery.
The Nikkei Stock Average lost 3.0% on Monday and regained 2.2% this morning.
Prime Minister to fight economic stagnation
Japan’s Prime Minister Shinzo Abe is expected to delay a sale tax increase, according to the news source. Gross domestic product contracted at a 1.6% annual rate in the third quarter after falling 7.3% in the second quarter. Many economists blamed a sales tax increase in April for the economic decline.
Abe will also hold a general election in December as way of reauthorizing his call to stem deflation – another factor that has dragged on Japan’s economy. Declining wages and low demand are other negative trends.
While the market responded favorably to Abe’s stimulus plan, the Japanese yen declined, according to Bloomberg. The currency has fallen 7.3% in the last month – worst among the 10 developed-market peers in the Bloomberg Correlation-Weighted Indexes.
“We have good sentiment in Japan for the stock market because of the tax hike taking place later, and on the other hand you have the political uncertainty that is bad for the yen,” Soeren Hettler, a senior foreign exchange analyst at DZ Bank AG in Frankfurt told Bloomberg.
Recovery doesn’t spread to China
As investors listened to Abe’s plan of action, European Central Bank President Mario Draghi expressed a similar embrace of stimulus, The Wall Street Journal reported. The eurozone has undergone recent economic weakness as well and the ECB established it could begin an asset-purchasing program to boost inflation.
Such easy-money policies from Europe and Japan usually boost liquidity across the region. But in China, the impact was minimal. The Hang Seng Index fell 1.1% and the Shanghai Composite Index declined 0.7%.
Hong Kong and Shanghai opened a stock link on Monday that gave mainland China and foreign investors better access to the each other’s assets. But on the trade avenue’s second day, just 38% of the quota for Shanghai stocks was used and there was almost no buying from China into Hong Kong.
Additionally, new home prices in China dropped in October for the sixth consecutive month. Combined with the disappointing trade link performance, investors were wary of the Chinese market.
Don’t let the market stop you out
Investors trading on the stock exchange run the risk of being stopped out when the market makes a big downward shift. Stop orders can stem losses, but if the market recovers, the position is lost. But Nadex offers unique binary options that allow investors to hedge against big market swings with limited-risk, low-collateral contracts that have short-term expirations and maximum profit and loss built in.
This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.