On Friday, Asian markets closed lower on economic weakness, which has had a foothold in the markets for quite some time now. The NIKKEI was the biggest losing index shedding 1.41% for the day to close at 16,412.21. While this is bad news, the bright side is that the index still managed to finish the week with a gain of 1.89%. This represents some bullishness in a tough economic environment. The Hang Seng Index was the second worst performing index closing down by 0.99%to 19,719.29 because of weak economic data. The ASX 200 traded flat on weak economic data as well, along with a decline in iron ore prices.
Nikkei Strength Halted
The Nikkei had some positive events such as a big company known as Nissan, who took a 34% stake in Mitsubishi. This large stake amounts to 237 billion yen or $2.17 billion. This stake is clearly a positive event for the company, but it got better as it had also released a positive earnings report. Nissan released earnings of the ended 12 months on March 31, which indicated that net income rose by 14.5% year over year to $4.4 billion. While a strong showing is taking place in some companies, that doesn’t dismiss the fact that the Japanese economy is still struggling. Positive events like this tend to help indices, such as the Nikkei trade higher, but there are other negative forces which can bring it down. One of those forces that can bring the Nikkei lower is the yen currency. The yen traded at 108.90 against the U.S. dollar. The yen being stronger than the dollar, leads to major export companies in Japan struggling to increase profits. The higher the currency in a given country, the lower the profits those companies make through the sale of exports. In the case of Japan, its economy is already weak and a higher yen accomplishes nothing other than reducing profits further for its exporters. The only way to bring the yen down against the dollar would be for the Bank of Japan to perform monetary stimulus. This would bring the yen lower, thus freeing up the ability for exporters’ profits to improve. This in turn would boost equities higher, thus helping the Nikkei to trade higher.
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