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All eyes on Japanese economic and fund flow data

Four key markets in focus today.

Japan 225 (Nikkei)

The Japanese equity market was buffeted around yesterday on reports the Japanese pension fund chairman was going to deliver a speech, which could have talked about changes to its asset allocation. Today however it’s all eyes on economic and fund flow data, due at 09:50. As we know the BoJ is trying desperately hard to create inflation, and therefore today’s national CPI figures are key. The market expects inflation (ex-food) to increase 0.7% on the year, which is unchanged from the July read. It is positive that inflation forces are being seen, however if you extrapolate out volatile energy costs, we should actually see a deflationary read of -0.1%. A reading above 0.7% on the inflation print and good buying of foreign bonds should see both the Nikkei and USD/JPY rally.

China A50 cash

China releases its August industrial profits at 11:30, and although there is no survey, the market will be keen to see if the 11.1% annual profit growth seen in July is replicated. Traders will also be keen to watch for further details around the free trade zone in Shanghai, and while details on the initiatives are light, traders and economists are keen to find out more given the raft of reforms that could be announced in November.

EUR/CHF

There is a huge raft of data due in Europe tonight including eurozone composite consumer and business confidence, while we also get reads on Italian business confidence and Spanish retail sales. We also get two different $3 billion Italian bond auctions and this will be interesting given the spike higher yesterday in the Italian ten-year bond (up ten basis points), on the back of political concerns. In Switzerland we get the monthly KOF leading index, which is probably the most important economic data point in Switzerland as it tries to predict economic strength (or weakness) about six months ahead. The market is expecting a slight increase here to 1.45.

Facebook (FB)

We highlighted this stock recently and the trend remains extremely strong. FB closed above $50, which puts the rally from July 24 at 93.4%, while at the same time increasing its market cap by $54 billion – the equivalent of around 423 S&P companies. The stock is now trading on 52 times forward earnings.

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