Early Morning Call: USD/JPY holds recent losses near support as Tokyo CPI surges

Equity market overview

There was no real direction overnight for indices in the Asia-Pacific region as US equity markets were closed yesterday for Thanksgiving. The Nikkei 225 closed 0.35% lower, while Australia’s ASX 200 gained 0.24%.

In Japan, Tokyo's core CPI rose at its fastest pace in 40 years, up 3.6% in November compared to November last year, higher than the 3.4% recorded in October, and above market estimates of 3.5%.

Tokyo core CPI, which is a leading indicator of nationwide trends, has now exceeded the Bank of Japan's (BoJ) 2% target for six consecutive months, which makes it harder for the bank to argue that price rises are temporary.

European indices are hesitant this morning, after recording small gains yesterday. The German economy expanded 0.4% in the third quarter (Q3), according to a final estimate, one notch higher than previously estimated. Also, Gfk consumer confidence has improved for the second straight month to -40.2 in November, from -41.9 the previous month.

British car production rose 7.4% in October from a year earlier. The Society of Motor Manufacturers and Traders (SMMT) said 69,524 cars were made in Britain in October, an output mainly driven (excuse the pun) by exports of luxury and specialist models primarily to the European Union.

While the SMMT welcomed this return to growth, it noted that UK car manufacturers are still affected by global chip shortages and supply chain issues. Production is still 48.4% lower than 2019 levels.

Elsewhere on the equity market, British power generator and network operator SSE has reached an agreement to sell a 25% stake in its power transmission network business, SSEN Transmission, to Ontario Teachers' Pension Plan Board for £1.47 billion.

Production of Apple iPhones at the Foxconn factory could slump by at least 30%, according to Reuters, citing a person close to the matter. Following a week of intensified unrest at the plant, production won't be able to resume at full capacity by the end of the month, as it was previously announced.

Commodities

Last week, the Baker Hughes total rig count rose by three to 782. The number of oil rigs in operation rose by one to 623, which sees the number of active gas rigs up two to 159.