- AUD / JPY drives up earnings in Asia as US futures trades in the green.
- Japan entered an economic recession in the first quarter.
- Stocks are still buying, keeping the yen on the supply despite weak data, while the Powell of the Fed reiterates its desire to do more.
AUD / JPY reports marginal gains during Monday’s Asian trading hour amid an increasing mismatch between equity market performance and lived economic reality.
The Japanese economy contracted at an annualized rate of 3.4% in the first quarter after a revised contraction of 7.3% in the last three months of 2019, government data revealed on Monday.
Japan has officially entered a recession with consecutive quarterly economic contractions. Despite this, the S&P 500 futures are gaining ground and keeping the Japanese yen, a safe haven, on the defensive. At the time of publication, the American index futures are up 0.83% and the AUD / JPY is trading at 68.87, which represents a gain of more than 20 pips on the day.
The disconnect between economic reality and the stock markets could be linked to comments by the last chairman Powell of the Federal Reserve, according to which the central bank has not yet exhausted its ammunition and could do more if necessary. In addition, the Fed and other major central banks have injected unprecedented liquidity in the past two months, helping stocks maintain supply despite the growing risks of a global deflationary crash caused by a coronavirus.
In the longer term, the US liquidity-led rebound in liquidity may come to an abrupt halt due to renewed friction between the United States and China over the virus epidemic. The Trump administration has stepped up its anti-China rhetoric this weekend, a senior official suggesting that Beijing has sent airline passengers to spread the infection around the world.