Nikkei Survey on Japan’s wages and lower payment
The latest survey published by the Nikkei, a Japanese daily, reveals that the Bank of Japan (BOJ) and Japanese government are hoping for wages to rise to help fuel spending and inflation.
Key findings of the survey:
The paper’s surveyed nearly 220 firms
Summer bonus payments fell 2.75% y/y
Firms cite lower earnings due to the rebound in the yen
Manufacturing paying 3% less
Service companies bonus payments down around 0.4%
Saudi Arabia – inclusion of small producers to oil output cut extension enough to reduce oil inventories
The Saudi Energy minister, Khalid al-Falih told a news conference in Riyadh on Sunday that extending the output cut deal plus adding one or two small producers will be more than adequate to reduce oil inventories to the five-year average.
Russia and Saudi Arabia agreed last week to prolong the deal on cuts which is due to expire in June, until March 2018. Most other OPEC producers have expressed support for Russia and Saudi’s proposal.
Trump investigation & what it means for fiscal policy – Goldman Sachs
Analysts at Goldman Sachs offered some insights over the weekend on the recent uncertainty surrounding the US politics and what it implies for fiscal policy.
“Recent developments regarding the investigation into the Trump campaign have further weighed on a fiscal policy process that was already bogged down by House passage of the AHCA, which will consume valuable time in the Senate, an uncertain outcome on the FY18 budget resolution, without which tax legislation would become much less likely, and a lack of clear forward movement on tax reform”
“We are lowering our expectations for fiscal policy changes over the next year”
“Rather than the $1.75 trillion/10 years tax cut we had previously assumed, we now assume a cut of $1 trillion”
“This reflects an expectation of a tax cut that could be considered close to revenue-neutral under the loose definition that congressional Republicans have been using”
“Market expectations appear to have declined even more, and do not imply much if any expectation of tax reform, infrastructure spending, or financial regulatory easing”
“The silver lining for fiscal policy from recent events is that the appointment of a special counsel may reduce the risks around the expiration of spending authority on September 30 and the debt limit deadline around the same time”
“With a credible investigation underway, the issue is less likely to enter into fiscal negotiations at that point, as had looked likely”
Brent oil clocks fresh one-month high in Asia
Brent oil clocked a fresh one-month high of $54.04 in Asia as traders priced-in a possibility of a bigger and much deeper extension of the output cut deal.
OPEC likely to extend supply cuts this Thursday
OPEC and other major oil producers are on track to extend the supply cuts at a meeting on Thursday. Most producers have backed Russia and Saudi Arabia’s proposal of extending the output cut deal until next March.
Saudi talks about deeper cuts
“We believe that continuation with the same level of cuts, plus eventually adding one or two small producers, if they wish to join, will be more than adequate to bring the five-year balance to where they need to be by the end of the first quarter 2018”, said Saudi’s Energy Minister Khalid al-Falih on Sunday.
Oil is well bid in Asia on the back of a bullish sound bite from the Saudi’s Minister, although the gains are still being capped by the prospects of higher Shale output. The Baker Hughes data released on Friday showed the US energy companies added oil rigs for an 18th week in a row. The total rig count stands at 720; the most since April 2015.
Brent Technical Levels
A break above $54.49 (78.6% Fib R of Apr high – May low) would expose hurdle at $55.00 (zero levels). On the lower side, breach of support at $53.79 (session low) could yield a pullback to $52.81 (61.8% Fib R of Apr high – May low).