Corporate Japan is on track to log a second year in a row of record net profit, driven by electronics makers, trading houses and other sectors making up for the weakness of automakers.
Aggregate fiscal 2017 net profit at listed companies is expected to grow 4% from the previous year to 21.81 trillion yen ($192 billion), with results improving at more than 60% of companies. Profit rose 21% to 20.9 trillion yen in fiscal 2016.
Electronics manufacturers, trading companies and shippers will enjoy strong profit growth this fiscal year. Sony’s sales of smartphone camera image sensors have improved, and the company projects a profit of more than 100 billion yen in its formerly money-losing semiconductor segment. It sees net profit growing 3.5 times to 255 billion yen in fiscal 2017. “We will deliver results,” Chief Financial Officer Kenichiro Yoshida said.
Fujitsu forecasts its first record profit in three years. “We are heading toward growth as the electronic devices market recovers,” said Hidehiro Tsukano, a senior executive vice president.
- Malaysia’s central bank said it will allow investors to fully hedge their currency exposure.
- Egypt declared a 3-month state of emergency after two deadly church attacks.
- South Africa’s parliamentary no confidence vote has been delayed
- Argentina central bank surprised markets with a 150 bp hike to 26.25%.
- Brazil central bank accelerated the easing cycle with a 100 bp cut in the Selic rate.
The U.S. Treasury Department has decided not to label China a currency manipulator in a report published Friday on the foreign exchange policies of America’s key trading partners, backing away from President Donald Trump’s campaign promise to do so.
The move was apparently taken out of consideration for China, which the U.S. hopes will help rein in North Korea’s nuclear and missile programs.
Although the report did not signal a major shift in Washington’s own currency policy, it is likely Trump will try to use the issue as a bargaining chip in negotiations with other countries. The U.S. may try to limit the dollar’s rise against the yen in its first economic dialogue with Japan, scheduled for Tuesday. Japan’s large trade surplus will probably be high on the agenda.
Trump’s Treasury Department used the same standards for determining currency manipulation as those of the previous administration under President Barack Obama. The report kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a watch list as they met some of the criteria.
- Reserve Bank of India surprised markets with the start of the tightening cycle.
- The Czech National Bank (CNB) ended the EUR/CZK floor.
- Israeli central bank said it won’t hike rates until Q2 2018.
- Both S&P and Fitch cut South Africa’s rating one notch to sub-investment grade BB+.
- Moody’s put South Africa’s Baa2 rating on review for a downgrade
- S&P upgraded Argentina one notch to B with stable outlook.
- Brazil’s government will water down its pension reform plan
- Brazil’s central bank corrected some errors in its inflation report.
In the EM equity space as measured by MSCI, the Philippines (+3.8%), Chile (+3.5%), and Poland (+3.4%) have outperformed this week, while Korea (-0.7%), Turkey (-0.6%), and Peru (-0.5%) have underperformed. To put this in better context, MSCI EM rose 0.3% this week while MSCI DM fell -0.5%.
Reserve Bank of India surprised markets with the start of the tightening cycle. It hiked the reverse repo rate 25 bp to 6.0% but left the repo rate steady at 6.25%. The decision was unanimous, and we expect further tightening as the year progresses.
Two Japanese retailing groups soon will accept bitcoin payments, a move that is likely to promote wider use of the virtual currency among domestic consumers.
Electronics chain Bic Camera is teaming up with Tokyo-based bitFlyer, which runs the largest Japanese bitcoin exchange. This Friday, they will begin a trial run of bitFlyer’s bitcoin payment system at Bic Camera’s flagship shop in Tokyo’s Yurakucho district and at Bicqlo Bic Camera, the hybrid outlet with Uniqlo located in Shinjuku.
Recruit Lifestyle, the retail support arm of human resources conglomerate Recruit Holdings, is partnering with another Tokyo bitcoin exchange operator, Coincheck. The virtual currency will become a payment option at shops that have adopted AirRegi, the point-of-sale app developed by Recruit Lifestyle, by this summer.
By using tablets or other devices provided by the store and one’s own smartphone, the customer can deduct the amount on the bill from the designated bitcoin account. Coincheck will convert the bitcoins into yen and transfer the funds to the store.
Prior to Friday’s report, IMF currency data was limited to the US dollar, euro, Japanese yen, UK pound sterling, Australian dollar, Canadian dollar and Swiss franc, and an indistinguishable category of “other currencies.”
“With the separate identification of reserves in RMB [Renminbi], eight currencies are now distinguished,” the IMF publication stated.
Chinese holdings of US dollars were $5.1 trillion at the end of 2016, compared with $10.8 trillion in total foreign currency reserves, the report explained.
The remainder was divided among other currencies, with euro holdings the largest at $1.6 trillion, according to the IMF.
S&P up +0.73%. Nasdaq up +0.60. Dow up 0.73%
- The S&P rose by +0.73%
- The Nasdaq index increased by +0.60% and the
- Dow industrial average rose by +0.73%.
- Spot gold was down by -$3.00 to $1251.30
- WTI Crude recovered to $48.37 (up $0.64)
- 10 year yield rose to 2.416% up 3. 7 bps
PBOC open market operations today … well, the bank says none today. The Bank says bank liquidity is high.
The euro climbed to its strongest level against the dollar since mid-February as the markets reassessed the odds of a December rate rise by the European Central Bank.
A day after mildly hawkish comments from European Central Bank president Mario Draghi helped send the single currency higher, the euro tacked on another 0.9 per cent to hit a three week high of $1.0673 following a report that the ECB had discussed whether rates could rise before it ends its bond buying programme.
However, two people familiar with the discussions denied there had been any meaningful debate over the issue. One person said some members are keen for the council to consider raising the deposit rate, now at minus 0.4 per cent, before it ends its quantitative easing programme.
Against the pound, the euro was up 1 per cent at €1.1393 – a level last seen in mid-January. The currency also firmed more than 1 per cent against the Japanese yen at 122.83.