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The Dow outperformed significantly after Visa smashed estimates and its share price jumped 10%. On the data front unemployment claims were relatively in-line with estimates, but the real focus was on Q3 GDP which came in at an annualised 3.5%. This was well ahead of an estimate of 3.1% and the result was also compositionally impressive. Additionally the strong 4.6% Q2 reading was not revised lower and investors found this quite comforting. Essentially, with the Fed turning hawkish, we need to see data backing up the notion that tightening could be on the way.
BoJ in focus
While US data streamed ahead, the USD mostly consolidated against the majors. USD/JPY was an exception though as the pair extended its gains to a high of ¥109.47 heading into the BoJ meeting. It’s a big day for Japan with household spending, CPI and jobs data due out at 10.30 AEDT. CPI will be the big one as inflation is the BoJ’s key reading at the moment. The core CPI reading (ex-food and energy) is expected to fall to 2.2%. Any further deterioration will put the BoJ on high alert and could lead to further yen weakness heading into the results from the meeting.
Although analysts aren’t expecting any BoJ action today, disappointing CPI would certainly put the second leg of the sales tax hike in doubt and could see further stimulus being deployed as early as January. Momentum in USD/JPY remains strong in the short term and I feel we could see early October highs above ¥110.00 being tested in the near term. Ahead of the open we are calling the Nikkei up 0.8% at 15,787. Traders are likely to be looking to buy the dips heading into the BoJ meeting.
Banks key for the ASX 200
We are currently calling the ASX 200 up 0.3% at 5494. This will see some of the positive momentum from US trade filter through to the local market. Weakness in the commodities space, particularly for gold and oil will be a concern for some of the resource names. It just seems like the lack of confidence we saw in the materials space earlier in the year has returned and the fact investors are showing more interest in the banks and IPOs again hasn’t helped.
On the company news front, it’s all about ANZ and MQG. Both results seem to be relatively in-line (to better) than estimates, but after recent runs in their share prices, it’ll be interesting to see how investors react to the results. There are also a number of AGMs including the likes of Ausdrill, Newcrest and CFS Retail.