Investors are looking forward to the Bank of Japan’s interest rate decision on September 22. The consensus estimate is for the benchmark to retain a record low of -0.10%. Meanwhile, the 10-year bond yield is capped at zero percent. Aside from the short-term monetary policy of the Japanese central bank, the market looks forward to the LDP’s presidential race. The Liberal Democratic Party will hold an election on September 29 to determine its next standard-bearer for a premiership. The move is in response to Japanese Prime Minister Yoshihide Suga’s resignation as LDP leader. On October 10, the winner will become the next PM. A general election will also run before the November 28 deadline. The next leader will shape Japan’s fiscal response against the pandemic. Hence, it is important for traders to determine if the next prime minister is hawkish or dovish. Most of the candidates support the country’s ultra-low monetary policy amidst the covid-19 pandemic.
Demand for safe-haven US dollar picks up following Monday’s stock sell-off. S&P 500 was down -75.26 points, the technology-based NASDAQ 1000 with -2.10% fall, and Dow 30’s 614.41 points plunge. The culprit for the decline is the growing risks of Evergrande’s default and the refusal by the FDA for booster’s broader application. In China, the largest property developer runs out of cash. A leaked letter shows Evergrande’s plea for the government’s support for a backdoor listing. The firm plans to spin-off property assets to raise money while retaining business control. The proceeds will be used to pay loans and interest due this week. Failure to do so would result in a collapse. The large exposure by US financial institutions poses a threat of spillover in the economy. In other news, the Food and Drug Administration approves the third shot for individuals aged 65 and above. The market discounts vaccine makers on September 20 following the FDA’s comment.
The end of the snap election clears the gloomy sentiment in Canada. Prime Minister Justin Trudeau kept his post for the third time as Liberals led with 158 parliamentary seats. However, the number is below the 170 seats goal to form a majority government. Meanwhile, the Conservatives stood with 122 seats. The continued leadership of PM Trudeau ensures numerous attempts to pass a new stimulus. The idea will keep CAD in competitive mode against its Australian counterpart. But the minority government would be a blow to any budget proposals. According to reports, the pandemic election cost the Canadian taxpayers around 470 million US dollars. Looking at the economic data, Canada’s New Housing Price Index (NHPI) jumped by 0.7%. The result outpaces the increase in June and July. The August result also ended three consecutive months of declines. Analysts expect a further increase in housing prices as Canada slowly reopens its economy with the United States.