By Cory Old and New Drivers in the Week Ahead
I have a doctor’s appointment this morning so I will not be able to get up any interviews until the afternoon. In the meantime here is a post by our friend Marc Chandler outlines his thoughts on what will be the main drivers for the markets.
Click here to visit Marc’s website. He has great content everyday!
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Last week’s developments will continue to shape the investment climate in the week ahead, and at the same time, new inflation readings from the US, EMU, and Japan will add incrementally to investors’ information set.
We do not expect the results of the German election to have much market impact. The most likely result is a strong signal of continuity with a return of the Grand Coalition. At the same time, French President Macron’s speech next week is to herald a new post-Brexit, post-financial crisis, phase of the European Project, which a fourth-term Merkel may warm up to if Macron can truly reinvigorate the French economy and reduce its deficit and debt.
The New Zealand election is a different story. The status quo was challenged more than in Germany, and this political uncertainty may have held back the New Zealand dollar. The Nationals and its current ally looked two seats shy of a majority. This makes the New Zealand First Party a bit an of a kingmaker. It may take a couple of weeks to sort out things. The technical indicators remain constructive, especially against the Australian dollar. Perhaps, the election uncertainty or comments coming from the RBNZ meeting can knock the Kiwi back, offering a new opportunity.
It looks increasingly likely that Japan’s Prime Minister Abe will call for snap elections, probably slated for October 22, which is nearly a year early. It is a politically astute move. Public support had waned over various scandals and allegations, which may have contributed to the LDP’s stunning defeat in Tokyo elections a few months ago. Abe responded by a reshuffling of his cabinet, while the tensions with North Korea gave him an opportunity to lead. Support for Abe and the LDP has risen. Meanwhile, main opposition party, Democrat Party of Japan, is in disarray and divided. The election may be too soon for Tokyo Governor Koike to consolidate the new movement.
The likely re-election of Abe speaks to the continuity of policy, and this means Kuroda or at least Kuroda-esque policies. Kuroda’s term expires next year, and Japan’s tradition is for a governor to have a single term. Many suspect Kuroda could be reappointed, but are not particularly confident.
The broader issue is whether the next Governor is in line with an activist stance associated with Kuroda (whose name means black rice paddy) or a reversion back to the traditional stance represented by Kuroda’s predecessor Shirakawa (whose name means white river). This is also supported by the dissent from the BOJ’s decision not to change policy. It was a call to do more, unlike previous dissents, to do less.
UK optics are poor. The same …read more
Source:: The Korelin Economics Report
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