Tuesday, 28 May 2013

Markets mostly stable even as Japanese stocks fall again, Israel cuts rate for 2nd time this month

Japanese stocks fell again on Monday. The Nikkei 225 fell by 3.2 percent while the Topix lost 3.4 percent.

However, the rest of Asia were little affected this time. Hong Kong stocks gained 0.30 percent on Monday while Chinese stocks rose 0.20 percent.

European stocks also rose on Monday. The STOXX Europe 600 gained 0.3 percent.

While the fall in global stocks on Thursday had been accompanied by weak manufacturing data from China, this time, there was more positive news. China reported on Monday that industrial companies' profits rose 9.3 percent in April from a year earlier, accelerating from a 5.3 percent increase in March.

So the turbulence in Japanese markets appears to reflect concerns over Japan itself rather than external economic factors. The yen climbed for a third day on Monday amid concern the Bank of Japan is struggling to control a jump in government bond yields.

Indeed, Raúl Ilargi Meijer at The Automatic Earth says that Japan's effort to induce inflation cannot work. Instead, Abenomics is a gamble that is “guaranteed” to be a “spectacular disaster”.

Meanwhile, though, the global central bank easing campaign continues. On Monday, the Bank of Israel cut interest rates for the second time this month. It reduced its benchmark interest rate by another quarter point to 1.25 percent, its lowest level since March 2010.

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