Market Drivers For August 28, 2020
- Abe resignation sends USD/JPY lowerOther assets unmovedNikkei -1.41% Dax -0.44%United States Treasury 10-Year 0.74Oil $43Gold $1951/ozBTC/USD $1447
North America Open
- CAD GDP 8:30USD PS/PI 8:30USD Chicago PMI 9;45
A surprising announcement from Prime Minister Abe that he is resigning due to health concerns sent Japanese markets into a tailspin with Nikkei down by -1.41% and USD/JPY down by more than 85 pips.
Abe who has been Japan’s longest-serving Prime Minister stated that he will appoint an interim Prime Minister until his successor is chosen. The news sent Japanese markets lower and the yen higher as investors tried to grapple with the uncertainty, but it is unclear just how much of an impact his departure will have on Japanese policy. Abe’s party is a center-right party that has been generally a strong ally of the US and the neo-liberal order.
The impact of Abe’s departure would be far greater if it led to a shift in the Japanese political landscape to the left. For now, continuity will likely reign, and tonight’s reaction to the news is likely to be a one-off event.
Although risk assets elsewhere remained steady in quiet overnight trade there is some evidence that the rally in stocks is getting tired. Specifically, the NASDAQ, which has been the prime leader of the move higher, has been underperforming the other indices all week and the index remains choppy in overnight trade.
With the Republican National Convention over and Hurricane Laura having passed through the Gulf, there is little newsflow to drive trade today. On the economic calendar, the market will only see the personal income and spending numbers and Chicago PMI data. With so much positive news priced into equities, any downside surprise in the data could provide the catalysts for some profit-taking. The Nasdaq appears to have found resistance at the 12,000 level and if it can’t hold that figure as the day proceeds profit-taking could accelerate into the close.