The Current Market Sentiment

Nikkei 225 has managed not to follow the US equities indexes rising this time to highlight the worries about the Japanese economy in the new financial year with new rising of sales taxes by 3% which can dampen the consuming spending and also the investment spending while Q1 Tankan large all industry capital spending has shown rising today by 0.1% in the first quarter while the market was waiting for rising by 0.3% after rising by 4.6% in 2013 Q4 showing actual retreat of the tendency for taking risk and spend more money in investment while the first rising of sales taxes since 1997 by 3% may cause shrinking of the Japanese GDP by 3% next quarter as it had caused before depression in 1998 came also with what is like what we see now of rising the pressure of the energy prices while the yen is suffering from the abenomics in the current time of Japanese dependence on oil importing for producing energy.

The outlook of the large non-manufacturing index has shown also declining in the first quarter to 13 while the market was waiting for 16 from 17 in 2013 Q4 but the large non-manufacturing index which expresses about the current market sentiment came as expected at 24 from 20 in Q4.

USDJPY retreated to be traded around 103.2 after failure to break its previous resistance at 103.43 while the data which came out from Japan have shown rising of the current confidence in the manufacturing sector and decline of the expectations as Q1 BOJ Tankan large manufacturing index rose to 17 which is the highest reached figure since the fourth quarter of 2007 from 16 in 2013 Q4 while the median forecast was referring to 18 but its outlook index set back to 8 while the market was waiting for 13 from 14 in the fourth quarter of last month.

While the risk appetite could be supported by the softer talking between US and Russia from a side and also by Yellen’s comments which have highlighted stronger than expected care from the Fed to the labor market as she has mentioned the labor market many times yesterday in her community development conference in Chicago. It looked like a try to take the opposite direction for calming down the markets after her signal of hiking the interest rate within 6 months following the ending of the Fed’s QE and also after omitting from last month Fed’s assessment it’s 6.5% unemployment rate target of keeping the interest rates at the current exceptional low levels in favor of adopting a broader range of indicators to figure out the economic performance and the inflation direction.

She has said that the Fed’s has not done what enough to combat unemployment even after holding the interest rate near zero since 2008 and for more than 5 years widening the Fed’s balance sheet to $4.23tr until now. She said that the drop in the unemployment rate is still gradual but steady and the continuation of Fed's low rate policy is necessary to boost employment while the scars from the recession remain and reaching our goals will take time. She said clearly that the extraordinary commitment is still needed and will be for some time.