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In the Asian session today, investors will focus on Japan’s monthly economic report and Japanese Finance Minister Taro Aso and other officials commenting on the economy and the election. Given the Nikkei and yen’s struggle yesterday, they will be watched closely for any further efforts in Abenomics to boost the economy going forward. Local insurers who were traditionally large purchasers of long-term government debt have been avoiding super long government debt in anticipation of changes; net purchases fell 27% in May.
In Southeast Asia, Indonesia is expected to announce 2Q investment, including foreign and domestic data. The Jakarta Composite has failed to recover as well as other Asian bourses, with a 35% rebound from the low on June 25.
The country is combating inflation and current account and budget deficits. Newly appointed Finance Minister, Chatib Basri, raised fuel prices in June, which was the first fuel hike after subsidies for five years, preceding the 50- basis-point interest rate cut in July 11. Since then, the rupiah has been the worst performing currency, falling 1.7% against the dollar. The slowing commodity demand will continue to hamper Indonesia’s growth. The economy is expected to slow from 6.23% in 2012 to 6.05% this year.
Gold and silver prices are consolidating this morning after a stellar performance over the past few sessions. Gold has broken through our $1320 resistance level after investors put tapering aside and the notion of long period of low interest rates is making gold attractive again. With the G20 comments that central banks should remain accommodative, this sentiment could support gold further; we maintain our next immediate level of $1340.
The copper price is inching higher this morning. The recent price action of copper is convincing enough for us to hold the view that it has found a bottom; government data shows hedge funds cut bets against copper prices by 40% to 15,673 and Comex futures as of July 16.
WTI prices are taking a breather, hovering at the $107 level on weaker US economic data and corporate earnings missing estimates. US crude supplies are holding prices up with traders expecting inventories at a six-month low of 364.5 million barrels last week; the data is released tomorrow.