The Daily Update - BOJ RBA UK China

Unless you want to focus on Hillary’s Gmail account and Donald’s ‘wall’ most of the headlines came from the Far East this morning, where amongst other news the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ) held meetings. The RBA, as widely expected, left the policy unchanged as did the BoJ but some interesting tinkering from the BoJ as to their inflation thoughts did emerge. They moved down their expectations once again, now looking for CPI to run at 1.5% in 2017 from the previous 1.7% and pushed out their 2% target rate to fiscal 2018, which still appears a little optimistic to us.

While we talk about Japan, and as a small interlude, there was also more about the response of Japan to the Brexit situation. The Japanese ambassador to London demanded more regular meetings to discuss Britain’s strategy at a reception last night. “Of course Japan will not sit at the negotiating table when the U.K. negotiates with the EU,” Koji Tsuruoka told lawmakers, “But we are friends, we are also a very major stakeholder, the Japanese economic presence in the U.K. is quite significant. Therefore this important presence will of course have an impact on how the negotiations should be conducted.” “Japanese companies are not leaving, they like it here and they have been operating profitably in the U.K.” the ambassador said. The two governments “should make certain there will be a business environment that will continue to allow them to make profits and operate in the U.K..” Something for David Davies to take note of then.

Back to the Far East, interlude over, China’s Purchasing Managers release for October was stronger than expected this morning, bouncing 0.8 points to 51.2, the highest level in 26 months, 50.3 was expected. Detail shows that new orders, employment and raw materials were all higher. This was confirmed by the private Caixin PMI survey which also bounced 1.1 points and has some observers in the ‘China weak growth camp’ rethinking their forecasts and strategy. This data also helped metal prices with copper hitting its highest close in three months, aluminium held at the best levels since June 2015 and zinc moved up to a fresh five year high as dealers focussed on the possibility of stronger demand from China.

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