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Tokyo inflation keeps pressure on markets

Inflation data out of Tokyo remained well above the Bank of Japan’s (BOJ) target in November, reinforcing expectations that the central bank could resume its tightening cycle in the coming months and leaving Japanese equities slightly weaker to end the week. Asian stock markets traded mostly lower on Friday as tech shares lost steam and renewed concerns over China’s property sector weighed on sentiment. European equities finished broadly flat on Thursday amid thin trading due to the US Thanksgiving holiday. Gold prices were trading higher around USD 4180 per ounce on Friday.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

Japan economy
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Core consumer prices in Tokyo rose 2.8% year-on-year in November, unchanged from October and slightly above the market’s expectations, keeping inflation comfortably above the BOJ’s 2% target and strengthening the case for an interest rate increase. A narrower inflation gauge that excludes both fresh food and fuel also climbed 2.8%, while the latest figures showed sharp rises in food prices, including double-digit increases for staples such as rice and coffee, and more moderate gains in services inflation at 1.5%. Additional data for October indicated that retail sales and industrial production both increased and the unemployment rate held at 2.6%, although manufacturers surveyed by the government expect output to contract in November and December as higher US tariffs start to bite. With the yen having weakened to around ten‑month lows and underlying inflation likely to stay elevated, market participants speculate the BOJ could resume its tightening cycle within the next few months, despite opposition from reflationist advisers to Prime Minister Sanae Takaichi who argue that soft consumption and a recent economic contraction warrant caution. Japan’s Nikkei 225 was trading 0.1% lower on Friday.

Asian stocks slip on China concerns

Asian equity markets traded mostly lower on Friday as fading momentum in technology shares combined with renewed worries about China’s property sector and speculation over higher interest rates in Japan. Kong’s Hang Seng Index was 0.3% weaker and mainland China’s CSI 300 was trading 0.2% higher, with developer China Vanke under continued pressure after reports earlier this week that it was exploring a debt restructuring, fuelling fears of a broader real estate crisis. Korea’s Kospi was down 1.5% and Australia’s S&P/ASX 200 was essentially flat.

European equities flat on US holiday

Key European stock indices ended virtually unchanged on Thursday as trading volumes diminished due to the US Thanksgiving holiday, although sentiment remained supported by expectations of further US interest rate cuts. The EuroStoxx 50 slipped 0.1%, while Switzerland’s SMI inched up 0.1%. Technology and commodity shares gave back part of their recent advances, with Dutch chip equipment maker ASML losing 1.3%, whereas euro-area economic sentiment data for November generated little market reaction. Germany’s DAX added 0.2% and France’s CAC 40 ended the session marginally higher.

German consumer climate steadies in November

The GfK Consumer Climate indicator for Germany is forecast to increase slightly by 0.9 points to minus 23.2 points in December, according to data published on Thursday, following moderate changes in November. This stabilisation results from a 3.3-point rise in willingness to buy and a 2.1-point decrease in willingness to save, partly offset by declines in economic and income expectations. Income expectations dropped for a second consecutive month, although the 2.4-point reduction was considerably smaller than in October, while economic expectations fell 1.9 points, but remain 2.5 points above last year's level. Overall, consumer sentiment is now similar to a year ago, indicating stable retail conditions for the Christmas period, though significant short-term improvement is not anticipated.

US equities futures suggest November losses

US stock futures rose modestly on Friday, although the main indices remain on course to end November lower after a sharp pullback in large technology stocks. Futures on the Dow Jones Industrial Average and the S&P 500 both gained around 0.1%, while Nasdaq-100 contracts added 0.2%, leaving the Nasdaq Composite down about 2% so far this month and set to break a seven-month winning streak, with the Dow and S&P 500 also slightly negative and at risk of ending six consecutive months of gains. Trading in several commodities futures, including US crude oil, gasoline and palm oil, was temporarily halted early Friday due to data centre issues at the Chicago Mercantile Exchange, as oil prices head for their largest monthly decline in more than two years and Brent crude trades just above USD 63 per barrel, on track for a fourth consecutive monthly fall. US markets were closed on Thursday for Thanksgiving and due to shut early on Friday.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: German retail sales (08:00), French retail sales (08:45), French Consumer Price Index (08:45), French gross domestic product (08:45), Swiss KOF Economic Barometer (09:00), Swiss gross domestic product (09:00), Spanish Consumer Price Index (09:00), German unemployment rate (09:55), German Consumer Price Index (14:00), Canadian gross domestic product (14:30).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.