Yen surges as another week starts with stocks tumbling sharply on Brexit worries. Investors are now viewing Brexit as a genuine risk as the June 23 referendum approaches. At the time of writing, Nikkei is down -494 pts, or -2.98% and hit a five week low. The MSCI Asian Pacific ex-Japan index drops -1.6%. Technically, USD/JPY dips through last week's low of 106.24 and should be heading to 105.54 low. EUR/JPY's fall is accelerating and reaches as low as 109.21. GBP/JPY, the weakest pair so far, drops through 151.64 low to resume the larger down trend from 195.86. In other markets, WTI crude oil extends last week's retreat and breaches 48.50. Gold extends recent rebound but it might start to feel heavy approaching 1300 handle.
In UK, a YouGov research for Sunday Times showed that 43% respondents supported "Leave" while 42% supported "Remain". Another Opinion/Observer poll, on the other hand, showed 44% supported "Remain" and 42% supported "Leave". The poll result released late last Friday was the one the shocked that market. A poll of 2000 people by ORB for the Independent newspaper showed that 55% of respondents supported "Brexit", up 4 points from the prior poll in April. 45% supported "remain", down 4 points from April poll. The 10 point lead was the largest on record by ORB for the newspaper.
Released in Asia, China industrial production rose 6.0% yoy in May, unchanged from April and inline with expectation. Retail sales rose 10.0% yoy, compared to April's 10.1% yoy and expectation of 10.1% yoy. Fixed asset investment, rose 9.6% yoy, below April's 10.5% yoy and expectation of 10.4%. IMF first deputy managing director David Lipton warned in a conference in China that "mounting corporate debt is a key fault line in the Chinese economy." And, "corporate debt remains a serious - and growing - problem that must be addressed immediately and with a commitment to serious reforms." Released in Japan BSI large manufacturing index dropped to -11.1 in Q2.
The week ahead is very busy. Four central banks will meet including Fed, BoJ, SNB and BoE. All are expected to keep interest rates unchanged. Markets would be eager to get some hints from FOMC on whether there would be a rate hike in July. But they will likely be disappointed as based on current risks, Fed will definitely stay non-committal. It's also an important week in UK with inflation, retail sales, and job data featured. Here are some highlights for the week ahead:
- Tuesday: UK CPI, PPI; Eurozone employment chance, industrial production; US retail sales, import price
- Wednesday: UK job data; Eurozone trade balance; Canada manufacturing sales; US PPI, Empire state manufacturing, industrial production, FOMC
- Thursday: New Zealand GDP; Australia employment; BoJ; SNB; BoE, UK retail sales; US CPI, Philly Fed index, jobless claims, NAHB housing market index
- Friday: Eurozone current account; Canada CPI; US housing starts and building permits