Asian markets rebounded from last week's worst performance since August after Japan's GDP showed less contraction than forecast with China overtaking Japan as the second largest economy and Egypt's President Mubarak stepped down with the MSCI Asia Pacific index adding 1.6%, Nikkei gained 1.1%, Hang Seng gained 1.1% and the Shanghai Composite gained the most by 2.3% on expectation tomorrow's Chinese inflation report would show lesser than expected growth in prices and as exports rose 38% YoY and imports rose 51%, more than the estimates.
Japan's economy shrank for the first time in five quarters by 1.1% (exp. -2%), beating forecasts and is expected to be temporary as the global economy is recovering, inflation level in China is expected to be at 4.9% against previous expectation of 5.4% rise which is boosting the Chinese shares. Middle East tensions subsided as Egypt's President resigned paving way for a democratic set-up and ending the 18-day uprising which has added signs of optimism on the global outlook.
EURJPY fell for a second day to a low of 112.50 amid speculations that EU finance ministers meeting today and tomorrow will struggle to agree on debt-reduction targets amid concerns that the EU region's debt issues will persist, USDJPY declined to 83.15 after the Yen strengthened on speculations that Japanese exporters took advantage of a weaker Yen, EURUSD dropped to 1.3502 as the Euro dropped against majority of currencies after EU officials this month failed to agree on expanding aid to debt-ridden nations, NZDUSD dropped to low of 0.7555 after retail sales fell 1.1% (prev. 1.2%) adding to signs of a recession in H2 2010 and AUDUSD gained for the first time in four days to high of 1.0065 after reports showed home loans climbed 2.1% (exp. 1%) with demand for higher-yielding currencies rising on back of Asian market optimism. We remain bullish on the Dollar amid growing outlook for US and the global economy also as EU debt concerns could keep the safe-currency in demand.
Today we are expecting EU industrial production figures while focus would be on the EU finance ministers meet today and tomorrow and Fed's Dudley's speech.