Daily summary: Is JPY reversing a long-term trend❓

The main factor driving market volatility: Trading on global markets today is characterised by very limited liquidity due to the Labour Day holiday in the United States and the absence of US investors. With no trading session on Wall Street, the markets are still thoroughly analysing Friday’s US labour market report, which showed unemployment remaining stable at 4.1 per cent. Sentiment has been further fuelled by Donald Trump, who has very firmly demanded a halt to the sale of Canadian Bombardier aircraft in the US and ordered their production to be relocated to America. Investors are now positioning themselves with great caution ahead of the upcoming inflation figures, which will ultimately determine the next steps taken by central banks.

Geopolitics: The world’s attention is focused on the worrying escalation of the conflict in the Middle East following the weekend’s attacks between US and Iranian forces. In Europe, a massive political upheaval has been triggered by the historic victory of the far-right AfD party in the German state election in Saxony-Anhalt, with a result of almost 44 per cent. Against the backdrop of these upheavals, the European Union has pledged support for Greenland to the tune of a massive 200 million euros. This is a direct response to renewed efforts by the US administration to annex this strategic island.

Macroeconomic data: The news from the Japanese Ministry of Finance regarding a massive fall in the country’s reserves has caused the biggest stir on the currency markets. In August, reserves shrank by a record $80 billion as a result of costly government interventions to defend the weakening yen. In Europe, meanwhile, the latest figures from Germany proved disappointing, with local industrial production unexpectedly falling by over one per cent. Swedish inflation, on the other hand, slowed more sharply than forecast, which effectively rules out the possibility of immediate interest rate rises there.

Indices: With the New York stock exchanges closed, global capital’s attention shifted entirely to Europe and Asia today. European stock markets ended the session on a very mixed note, with the French CAC 40 index gaining slightly, whilst the German DAX recorded losses amid local political turmoil. Sentiment on Asian markets was decidedly better and more bullish. The Japanese Nikkei and the South Korean Kospi managed to post exceptionally strong gains there. In Poland, the W20 index hit a new all-time high.

Shares: In the corporate sector, there has been widespread discussion of the problems facing the British firm Jaguar Land Rover, which is having to make 4,000 staff redundant due to growing competition from China. Meanwhile, shares in the German wind turbine manufacturer Nordex performed exceptionally well, soaring by over 11 per cent following a glowing recommendation from analysts. By contrast, shares in the Swiss giant Novartis performed very poorly following the severe failure of key clinical trials for a new cholesterol drug.

Currencies: The Japanese yen is currently on a strong upward trend and has just reached its highest level against the dollar since February. The US dollar’s exchange rate against the yen has broken through the 155 barrier with tremendous momentum, driven by massive hedging orders and strong bets on further interest rate rises in Tokyo. The euro, meanwhile, remains surprisingly resilient in the face of the shocking results of the regional elections in Germany. The Polish zloty is also showing great stability, as higher domestic inflation figures have put an end to market speculation about rapid interest rate cuts.

Commodities: The tense situation in the Middle East has had an immediate impact on energy commodity prices, driving crude oil prices to their highest levels in six weeks. The benchmark Brent crude is fast approaching the $98 mark, whilst market jitters are being fuelled by reports of serious damage to Saudi oil facilities in the province of Jizan. This is having a direct impact on the wallets of American motorists, who are paying the highest ever prices for petrol during this festive period. Meanwhile, on the London Metal Exchange, copper has surged to an all-time high of over $14,530 per tonne due to market panic and a severe shortage of physical metal.

Cryptocurrencies: The virtual assets market is mostly in the red today, which perfectly illustrates the very cautious approach taken by investment capital at the start of this shortened week. The best-known digital currency, Bitcoin, is recording slight declines and is currently trading at around $79,000.