Surprisingly high inflation, Retail Trade and Stocks Markets in Japan. Is Japan again doing the exact opposite of the Western economies?

Overnight News Bullets

• AU Job Vacancies (Feb) out at -2.5%. Prior 5.5%
• JN Small Business Confidence (Mar) out at 46.6. Prior 44.3
• GE Gfk Consumer Confidence Survey (Apr) out at 4.6 vs 4.4 expected. Prior 4.5
• SW Trade Balance (Feb) out at 17.1B vs 8.8B expected. Prior 11.0B
• NO Unemployment Rate (Mar) out at 1.7% vs 1.6% expected. Prior 1.7%
• UK Total Business Investment (4Q) QoQ/YoY out at 1.8%/5.3% vs -0.5%/1.7% expected. Prior -0.5%/1.7%
• US GDP Annualized (4Q) out at 0.6% as expected. Prior 0.6%
• US Personal Consumption (4Q) out at 2.3% vs 1.9% expected. Prior 1.9%
• US GDP Price Index (4Q) out at 2.4% vs 2.7% expected. Prior 2.7%
• US Core PCE QoQ (4Q) out at 2.5% vs 2.7% expected. Prior 2.7%
• US Initial Jobless Claims (Mar 22) out at 366K vs 370K expected. Prior 375K
• US Continuing Claims (Mar 15) out at 2845K vs 2885K expected. Prior 2850K
• NZ GDP QoQ/YoY (4Q) out at 1.0%/3.7% vs 0.8%/3.4% expected. Prior 0.5%/3.3%
• JN Jobless Rate (Feb) out at 3.9% vs 3.8% expected. Prior 3.8%
• JN Tokyo CPI YoY (Feb) out at 0.6% vs 0.5% expected. Prior 0.4%
• JN Natl CPI YoY (Feb) out at 1.0% vs 0.9% expected. Prior 0.7%
• JN Retail Trade YoY (Feb) out at 3.1% vs 2.0% expected. Prior 1.3%

Markets

• FX: EURUSD close the all-time high (1.5904). Overall consolidation mode in FX markets.
• Fixed Income: Consolidating or slightly lower. US Rate outlook deteriorating slightly. Now 42% chance of 50 bps. Rate cut by the 30th of April, according to STIR Futures.
• Equities: European session somewhat higher, but US again sliding and closing at day lows. Nikkei up 1.7%
• Commodities: Precious metals ranging, waiting for USD direction. Crude still higher ($107/bbl).

O/N Data Heat map:

Calendar

Today’s Highlights:

This and Next Week’s Highlights:

What’s going on?

• After having trailed below zero for the better part of early 2000’s, Japanese CPI has now hit a decade high at 1%. Rising unemployment and continuing credit cresis, however, make it unlikely for the BoJ to raise rates anytime this year. Rising oil and food costs account for main reasons behind the latest inflation figures.
• Despite 2-day consecutive losses in the American stocks, Asian stocks registered biggest weekly gain in 2008 on speculation the profit growth will weather the credit crisis and bad news will be confined to the financials. Some of this positive sentiment can be expected to carry over to the European session.
• Despite the larger-than-expected draw in inventories, the gasoline prices, much as the crude prices, seem over-strecthed, leaving ample room for downside moves. We look to sell the May contract between $272 and $277 a gallon with a target of $258.

FX

USDJPY

FX Trading Strategies

Equities

(+)Take Advantage of The Volatility With a Breakout Play

• We expect the European markets to open marginally higher today. The US Stocks lost ground yesterday after the closing in Europe, but this has been overcompensated by the Asia session and that the S&P500 Future is trading higher. The fear, that the jump in the oil price to around us $106,5 is sustainable, will hit airlines and especially the low cost carrier during the next days. This is due to that the segment they are targeting is more price sensitive compared to traditional airliners. In addition comes that the fuel price is a larger part of their cost base. We recommend short in Air Berlin, Easy Jet or our sector “favorite’ Ryanair against the market. Important consumer related US economic data can move the equity markets at 12:30 GMT. For more details please have a look at our new economic colander below.
• Trading Strategy: (Breakout play DAX.I) Play the volatility in DAX. At the moment when Indices start to move they are moving a lot, thus we like a breakout play in the German index DAX. to the upside we buy at 6610 with a stop at 6580 targeting 6700. To the downside we recommend to sell at 6455 with a stop at 6485 targeting 6330.

Equity Index Levels

Futures

Gasoline: We still think it is overpriced.

• Sell Gasoline (rbk8) @ $272-277,
  Targets $258 & $253, stop above $277.50

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