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Daffa Zaky
Daffa Zaky
Articles (10)  | Author's Website |

Asian Shares Stumble as Japan Records Stagnation in Economic Growth

China's economy hit a seven-month high

As of Monday, Asian shares bounced from a one-year peak after Japanese data revealed China's economy hit a seven-month high. The data also showed oil prices tried to gain momentum, marking a slow start of the week.

The Nikkei (N225) eased 0.3%, as Japan's previously fast economic growth stalled in the second quater, a factor attributed to weak exports and and business investments. The broadest index of Asia-Pacific shares outside Japan( MIAPJ0000PUS) stumbled with a 0.2% drop.

The MSCI's broadest index of the Asia-Pacific has increased to a record of almost 14% since June. This occurred after the British voted to exit the European Union, an event that ignited a new sensation of global policy stimulus. This global policy stimulus was spearheaded by the overzealous Bank of England. The easing has had a big impact on the yields of the rich world bond. The yields have drastically gone down, forcing many investors to look for other alternatives, such as higher returns in longer-term debt and in emerging markets.

Yields on British gilts(GB10YT=PR) have been reduced by over a half of what they used to be. They are now at the lows of 53 basis points, yet some months before the British Exit vote, they were up at 1.39%. These results have also had an impact on the rates across Europe. The rates have gone down in many countries across this region. One example is the Spanish yields(ES10YT=PR), which has experienced a fall of exceeding 60 basis points to break under under 1%. This is the first time yields have been so low.

As the return on bonds continued plumetting, the equities seemed to be the best attractive options. The Dow(DJI), S&P 500 (SPX) and Nasdaq(IXIC) recorded the best closing highs last week. The last time that they recorded such highs was in 1999. The Pan-European STOXX 600 index(STOXX) went down on Friday,coming off from a seven-week high.

Head of Investment Strategy at AMP Capital, Shane Oliver, was quoted saying that after a long period, shares are about to take a breather. However, he expressed optisim that shares are expected to trend higher for the next 12 months . This could be possible with proper valuations, better global monetary conditions and a predicted growth in global econy. Oliver agreed that the latest bond rally has badly affected the yields and taken them to "pathetic levels".

Meanwhile in the United States, July inflation figures and minutes taken during the last Federal Reserve meeting are expected to be released this week. This information may reveal any possibilities of hiked interest rates at the end of the year. In addition to that, the docket will have five separate Fed speakers. The economic data that was released on Friday showed July recorded unexpected flat retail sales growth. This was a result of people cutting down on purchasing neccesities such as clothes and other essential goods. The producer price index dwindled to 0.4% in July, the biggest slump in over a year.

Monday data showed the dollar was at 101.30 yen, while the Euro was steadied at $1.1050. The sterling stands at $1.2905 and has been steadily slipping since Brexit. In terms of commodities, oil prices boasted gains of 6%.

Disclosure: I do not own any shares or any stocks mentioned in this article.

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About the author:

Daffa Zaky
With over seven years’ experience in the heart of the investment industry, Daffa Zaky has become a respected commentator in the financial world. Daffa remains a keen forex and binary options trader. He is a regular featured analyst for a number of online news portals and was responsible for FxDailyReport.com

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