Japanese Chief Cabinet Secretary Yoshihide Suga, a loyal aide to outgoing Prime Minister Shinzo Abe, won a landslide victory in a ruling party leadership election paving the way for him to replace Abe this week. He will serve out Abe’s term as party leader through September 2021. Suga 71, has said he would continue Abe’s signature “Abenomics” strategy of hyper-easy monetary policy, government spending and reforms while juggling the problems of COVID-19 and a slumping economy. He also needs to tackle longer-term issues such as Japan’s ageing population and low birth rate.
Stocks firmed today on renewed hopes for a coronavirus vaccine after pharmaceutical giant AstraZeneca resumed its phase-3 trial though sentiment was still cautious ahead of a big week of central bank meetings. AstraZeneca said it has resumed British clinical trials of its COVID19 vaccine, one of the most advanced in development, after getting the green light from safety regulators. In a sign the positive mood will spread elsewhere, the pan-European EuroStoxx50 and the German DAX rose 0.5% in early trade. London's FTSE and the S&P 500 e-minis also jumped following a mixed session on Wall Street last week. After the very volatile trading of last week, Australian shares were firm.
Currency markets saw muted moves as trading began with the US dollar weaker against the yen at 106.12 though still a long distance from its low this year of 101.2. The euro was flat at $1.1850 supported after the European Central Bank showed no inclination of slowing down the single currency’s appreciation. The Aussie was slightly weaker at $0.7284 while the British pound flirted with a 1.5-month low against the dollar on fears about no-deal Brexit. It has lost more than 4% so far this month, the worst among G10 currencies. The pound was under pressure from fears that Britain will end its post-Brexit transition period with no trade agreement Gold was firm, with spot prices at $1,946 per ounce. The best performing major currency has by far been the Australian dollar, up 11.9%, thanks to sound risk appetite.
Later this week, the US Federal Reserve will hold its two-day policy meeting where it is expected to hold rates while elaborating on the already-announced shift to inflation targeting. The Fed has announced late last month that it has adjusted its policy strategy, noting that it wants inflation to average 2% over time. The Bank of Japan and the Bank of England will announce their respective policy decisions on Thursday.