Nikkei Soars 5 Percent on Positive Economic Data

When China did what China always does and announced uninspiring economic data over the weekend when much of the world wasn’t watching, this looked like bad news for the Monday trading session in Japan but that wasn’t the case. The Nikkei ended higher by nearly five percent.

Reuters reported early Saturday morning that China’s economy is rapidly losing momentum. Consumer inflation slowed to 2.1 percent—the lowest reading in three months and well below Reuters’ estimate of 2.5 percent.

This, and other headline numbers were looking like they could drag Asian markets down further and put the Nikkei deeper into bear market territory.

But then the markets got a surprise. Revised GDP numbers out of Japan revealed that economy grew 1 percent in the first quarter- an upward revision from preliminary figures. This data confirm that Prime Minister Shinzo Abe’s stimulus measures, now called “Abenomics”, are strengthening the economy.

Additionally, the yen substantially weekend against the dollar. The yen sits at 98.85 against the dollar—lower by 1.35 percent. In the currency market, where gains and losses are normally measured in fractions of a percent, a move of this size is huge.

This, along with the unexpected Japanese economic data, could be the catalyst for a sustained recovery off of recent lows following the Nikkei’s plunge of late.

The Nikkei was up 636.67 points to close at 13,514.20—4.94 percent higher. Investors will closely watch the Bank of Japan’s two-day meeting that began Monday. World markets would like to see the bank take more drastic steps to curb the volatility in the Nikkei of late. Any surprise announcements could derail the Monday rally. Abe announcement of the “third arrow” of his stimulus plan sent markets plunging last week proving that Japanese markets are sensitive to any announcement from their government.

Hong Kong’s Hang Seng Index was up 0.18 percent. The move was uninspiring until investors consider that it was able to finish higher after such dismal data out of China.

The South Korean KOSPI was up 0.46 percent. The index had reached an 11-week low on Friday but managed to add fractional gains Monday. Investors were hoping to see the index track more closely with the Nikkei but talks between North and South Korea scheduled for this week tempered those gains as investor fears set in.

Financial markets in China and Australia were closed for holiday. (Was it a coincidence that China released disappointing data on a holiday weekend? You decide.)