Change of leadership in Japan and Chinese stimulus measures send stock markets roaring in opposite directions.

1. There are unusually strong movements today in Japanese and Chinese stock markets. The decline in Japanese stock markets has been triggered by the primary victory of Mr. Ishiba, a known interest rate hawk, boosting prospects of a faster pace of rate hikes by the Bank of Japan. This is also helping to strengthen the Japanese Yen, and we see the USD/JPY currency pair falling further to trade well below ¥142. In China, further stimulus measures taken in the property sector have goosed the stock market, which is racing ahead.
2. In the Forex market, the Australian Dollar has been the strongest major currency since the Tokyo open today, while the Swiss Franc has been the weakest. This points to a continuation of risk-on sentiment.
3. Although US President Biden has vowed to work for a ceasefire in the Middle East, the war is continuing unabated with Israel on the offensive in Lebanon, Yemen, and Syria. It is unclear what capabilities the Hezbollah retain in Lebanon, with many analysts believing it likely it still has at least half of its estimated 150,000 missiles. It may that Hezbollah is unable or unwilling to land more than the relatively light strikes it is currently conducting against Israel. Risk sentiment and the price of Crude Oil currently seem essentially unaffected by the war, but that could change if Iran gets involved, as Israeli PM Netanyahu vowed at the UN last Friday to strike back at Iran if Iran attacks Israel.
4. Some soft commodities have been trading at or near long-term high prices, notably Cocoa and Coffee.
5. Chinese Manufacturing PMI data came in a fraction higher than expected.
6. There will be a release today of German Preliminary CPI data, which is expected to show a month-on-month increase of 0.1%.

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