Daily update
Daily update
- The Japanese equity market is behaving with all the decorum and rationality of someone dancing the Hokey Cokey at a family wedding at two in the morning. Economic fundamentals are not driving equity prices—no economic data justified yesterday’s 12% plunge, nor today’s 10% rally.
- The S&P 500 index is at early May levels. Fears of a negative wealth effect should be kept in perspective. For the overwhelming majority of US households, the family home is the most important asset and equities are something of an afterthought. The second quarter equity rally did not produce a positive wealth effect (savings rates were stable), so fears of the impact of the rally’s unwinding should be contained.
- There are few economic data points today, but markets seem to be independent of real world economics. The Bank of Japan, the Japanese Ministry of Finance, and the Japanese financial regulator are reportedly meeting. It is hard to imagine what this will achieve—the Bank of Japan is very unlikely to take back its rate increase.
- UK July BRC shop sales data rose a little (it is a value measure), suggesting that the UK consumer is not being very interesting at the moment. Eurozone area June retail sales (a volume measure) are not expected to change.
