Japanese equity markets extended their recent gains as expectations of a significant stimulus package lifted investor optimism. The recent resignation of Prime Minister Yoshihide Suga has sparked hopes of fresh government support to alleviate some of the pain caused by the COVID-19 pandemic. One candidate aiming to replace Suga, Former Foreign Minister Kishida has outlined plans for a $270.0bn package should he get elected. Suga, who wasn’t viewed as a particularly market friendly Prime Minister will step down after less than a year at the helm.
The Nikkei 225 was the only one amongst the major indices to post a positive weekly return. The Japanese market jumped by +4.3% despite the Government extending coronavirus state of emergency measures on the back of higher cases. Elsewhere, inflation concerns gathered further momentum as US producer price inflation accelerated once again and the ECB increased its own inflation forecasts for the Eurozone. The S&P500 declined by -1.7% whilst in the UK where last week’s monthly GDP data revealed a slowdown in the pace of economic growth, the FTSE100 fell by -1.5%. Meanwhile on the Continent, the German DAX30 and French CAC40 dropped by -1.1% and -0.4% respectively.
Sovereign bond yields ticked higher on both sides of the Atlantic, reflecting the increase in inflation expectations. The 10-year US treasury yield added 2 basis points (bps) to 1.34% with the equivalent duration UK gilt climbing by 4bps to 0.76%. In the Eurozone, the 10-year benchmark index rose by 3bps to -0.36%. Briefly on currencies, the US Dollar continued to tick higher against the peer group with the greenback rising by +0.1% to $1.386 against Sterling and +0.4% versus the Euro to $1.183.
In the commodity markets, gold posted a weekly decline on the back of the increase in the Dollar. The precious metal fell by -2.2% to close out the week at $1,7944 an ounce. Oil prices saw modest weekly gains with Brent Crude increasing by +0.4% to $73.04 a barrel whilst copper also rose with the metal rising by +2.8% to $9,685 a tonne.
Unemployment, CPI inflation and retail sales are amongst the standout data releases from the UK this week. Headline inflation is expected to have increased once again last month with analysts forecasting a 90bps rise to 2.9%. Unemployment meanwhile is forecast to have reduced once again to 4.6%. Similar datasets are due from the US with inflation and retail sales figures published on Tuesday and Thursday respectively. Industrial production and the monthly consumer sentiment indicator from the University of Michigan are also worth keeping an eye on.
Eurozone figures are in short supply this week with industrial production covering August the only notable figure due. It’s a busy week for Chinese data releases with retail sales, fixed asset investment, industrial production, and unemployment all due before its conclusion. Revised industrial production is the only figure of note due from Japan on this occasion. 
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