ASIA: Japanese stocks exploded higher today, but China fell. Japan delivered a swift and brutal surprise to the currency market, intervening for the first time since 1994. The move was surprisingly effective, sending the yen from the 82 per dollar range to above 85 per dollar. Japanese stocks cheered the move, and so did Japanese bonds, with 10-year bond yields falling. Keep in mind that direct intervention in the currency market is essentially a form of monetary easing since it involves printing fresh currency and selling it into the market.
Moreover, remember that, historically, Japanese currency intervention has rarely been a one-off affair, it comes in waves.
In China however, property clamp-down concerns have continued, with property stocks falling. Chinese power consumption was reported to have grown by over 14% in August, essentially maintaining the year’s rapid growth rate.
EUROPE: Is mixed so far. Given Asia and Europe’s reaction, it’s fair to say that Japan’s yen situation is mostly an issue for Japan, and not a big deal for the global economy either way.
MACRO: Gold is near record levels despite a stronger dollar. The dollar has rallied against more currencies than just the yen. Morgan Stanley even wonders whether the Swiss Franc could be the next currency to see direct intervention.
U.S. FUTURES: Are rising so far. Watch for industrial production data at 9:15 AM ET.