Morning Meeting: The Japanese rocket

Good Morning.

Japan under te spotlight this morning as Japan's Prime Minister Yoshihiko Noda of the Democratic Party pf Japan is expected Friday to call a snap election for Dec.16 according to reports out earlier this week. His rival Abe is seen as a favorite to win the nation's leadership.

Expectations on how the new party will tackle deflation in Japan are offsetting persistent concerns on the US's fiscal cliff , investors are  jumping into the Japanese equity market waiting for a money's flood to invest the country.

Japan's Nikkei Stock Average rose 2% to 9,006.71 adding to a 1.9% surge made Thursday as Shinzo Abe, head of the main opposition Liberal Democratic Party (LDP) and former prime minister, called for unlimited easing to hit a 2%-3% inflation target. The need of further easing was highlighted by the Japanese government downgrading the economy for the fourth month in a row.

On the currency market, the dollar fell slightly versus the Yen to 81.07Y  or 0.14%, down from 81.19Y in late US trading when the cross reached a level not seen since late April (In our Daily Strategy section you can find the setup that led us to play the long side in the cross). The Euro held steady at $1.2780, staying well above Tuesday's two month low of $1.2661.

Away from Japan, investors remained wary of buying riskier assets due to the uncertainty about the US budget tussle, the euro zone's recession and violence in the Middle East. Hong Kong was the other major gainer in Asia with the Hang Seng Index 0.17% higher to 21,143.71, the South Korea's Kospi edged down 0.60% to 1,859.84 as the heavy weight Samsung Electronics fell 2.10%. The Shanghai Composite led losers falling 1.15% to 2,006.91 on prospects China's new leadership will put off policy changes needed to reform the economy.

In commodities markets, US crude lost a few cents to around $85.40 a barrel and gold was virtually unchanged near $1,715 an ounce.

At this point the attention will turn to the US where President Obama and Congressional leaders begin budget talks today to avoid some of the $600 billion in spending cuts and tax hikes due to start tacking effect in January.

It's paramount to understand that “fiscal cliff's” talks have the power to undermine the role of the US dollar as “safe haven”, therefore for today we could assist to the so called “focus shift” from Europe to US, where the menu du jour has the Industrial Production, expected at 0.2% versus 0.4 % in the previous month, on the reading weighted the storm which invested New York earlier in the month.

It's now time to get ready for November's derivatives expiry.

Have a great day.

Originally posted at www.77sigmatrading.com