Asian stocks fell overnight as Japan announced a larger than expected trade deficit and as investors await the results of key talks between Greece and its creditors – the IMF, ECB and EU.
It was reported last night that Japan had seen its exports fall by 8.1% for July with imports rising by 2.1%. This fuelled investor worries that demand for Japanese products from key markets such as China (down 12%in July) and Europe (down 25% in July) are waning whilst the increased cost of oil raised the cost of imports. Analysts had anticipated a 2.9% decline after a revised 60.3 billion yen surplus in June. This was Japan’s 9th deficit in 12 months and highlights the dependency on energy imports following on from when the nuclear plants were closed after last year’s earthquake and tsunami disaster.
The Yen was down against the USD, falling 0.05%, trading at 79.25, which means it has gained more than 5% since mid March against the greenback. A strong Yen makes exports more expensive with Japanese GDP advancing an annualized 1.4% in the three months from June, was down from 5.5% in Q1.
Asian trading saw Hong Kong’s Hang Seng Index fall 0.83%, Australia’s S&P/ASX200 decline 0.11%, whilst Japan’s Nikkei 225 Index fell by 0.43%.
Greek Prime Minister Samaras is under pressure to show Greece can meet its commitments of 11.5 bn euros in public spending cuts within two years in order to receive its next 31.5bn-euro bailout payment in September. After telling German daily Bild that Greece needed “breathing space”, Samaras is expected to ask his European counterparts for a two year extension to the reform targets. Eurozone leaders have so far shown negative responses any move to soften the terms and conditions of the bailout, most notably in Germany, the eurozone’s strongest economy, where the German government is under pressure not to make any further concessions.
North America takes the spotlight today although events in Greece should be monitored closely. Canada produces its retail sales figures but much of the trader focus will be on US Home sales and the publication of FOMC meeting minutes – key indicators of the state of the US economy.