Summary:

• Shinzo Abe wins in Japans, holds his grip on power for 4 more years
• Yen declines on a prospect of more Abenomics, JAP225 rallies over 1%
• China slightly down despite records on Wall Street
• Catalonia weighs on European opening 

No surprises in Japan – Abe’s LDP along with its junior coalition partner secured a 2/3 majority in a lower house of parliament with 4 seats yet to be decided and Shinzo Abe is set to become the longest serving prime minister in Japan. His trick with early elections turned out a better result than in UK where May’s attempt to reinforce her grip backfired at her. In Japan opposition was too fragmented to take advantage of business scandals that seemed to weaken Abe just few months ago. Abe rallied to the elections on a promise of constitutional changes that would update a status of Self Defense Forces amid a threat from North Korea but any changes here are likely to be balanced because they need to be approved in the referendum. Meanwhile we are sure to see more Abenomics in the short term which is a reason of yen weakness and USDJPY surging to 113.70 as of today’s morning. It’s even better news for the Japanese stock market as more BoJ purchases and weaker yen all provide bulls the reasons to be cheerful. Looking at the JAP225 chart (Nikkei225) we can see that already a previous week built upon a breakout of previous highs (from late 15’) and today we saw extension of this move as the Japanese equity market surged by more than 1%. If there is any correction a zone set by 2015 highs around 20900 pts. should act as a strong support. 

Japan’s Nikkei continues surge above 2015 highs. Source: xStation5 

Let us keep in mind that we still have Party’s Congress in China and after an initial reaction which was positive we can see the Chinese equity market struggling a little bit at the highs. Despite another surge to all time highs on Wall Street on Friday where the Dow quickly added another 300 points to a freshly broken 23000 the Chinese market has been down 0.6% today and a break of 11400 points on CHNComp could result in a larger correction. 

China’s CHNComp struggles above the 11400 support. Source: xStation5 

Europe was unimpressed by Wall Street and Japan too as the DAX opened only marginally higher, probably dragged down a bit by Spain where a conflict over Catalonia does not seem to be going away. Let us recall that the Spain’s Prime Minister decided to strip the regional government in Catalonia out of power after it refused drop its independence goals and party leaders are to meet at 9:30am BST in Barcelona to discuss how to respond. There are speculations that Puigdemont (Catalan PM) could declare independence within days and that would clearly not be liked by the markets.