JAPAN DATA: Offshore Investors Dump Local Stocks
Offshore investors were heavy sellers of local Japan stocks last week, see the table below. Last week's net outflow was the largest since mid September. It also marks the fourth straight week of outflows dating back to the end of January. This fits with the price action in local stocks, with the Nikkei 225 threatening to break under 38000. Indeed we may have seen such outflow trends continue this week, given the tech related equity losses seen in recent sessions.
- Offshore investors continued to buy local bonds though. This marked the second straight week of inflows, although the cumulative trend back to late 2024 is around flat for this segment (unlike equities which have been negative).
- In terms of Japan outbound flows, we saw net selling of offshore bonds, largely offsetting the prior week's purchases.
- Local investors continued to purchase offshore equities, albeit in very modest size.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending Feb 21 | Prior Week |
| Foreign Buying Japan Stocks | -1038.0 | -351.9 |
| Foreign Buying Japan Bonds | 438.0 | 789 |
| Japan Buying Foreign Bonds | -200.8 | 239.6 |
| Japan Buying Foreign Stocks | 19.7 | 345.4 |
Source: MNI - Market News/Bloomberg
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OIL: Data Show US Crude Stock Build As Canada Tariff Looms
Oil prices rose moderately on Tuesday driven by the persistent threat of an increase in protectionism. Oil is the most important Canadian export to the US and the US imports over half of its crude from Canada. President Trump has threatened 25% tariffs from Saturday, which would likely increase domestic fuel prices. They have been trending lower since mid-January but are still higher on the month.
- WTI rose 1.1% to $73.98/bbl after reaching $74.31 and then falling to $72.93. The 50-day EMA is at $72.16, clearance of this would signal scope for a deeper retracement. While the benchmark is down 0.9% so far this week, it is still up 3.8% on the month. It has started today slightly lower at $73.90. Initial and key resistance is at $79.48.
- Brent is 0.7% higher at $77.63/bbl after a high of $78.18 followed by a low of $76.85, remaining above the 50-day EMA at $76.01. It is down 1.1% this week but up 4% in January. Initial resistance is at $82.63, January 15 high.
- Bloomberg reported that US inventories rose 2.86mn barrels last week, according to people familiar with the API data. There has been a sharp increase of flows from Canada to beat the February 1 introduction of tariffs. Gasoline stocks rose 1.89mn while distillate fell 3.75mn. Official EIA data is released later today.
- Tightened sanctions on Russia and expectations of greater enforcement of those against Iran had boosted prices earlier in January. Crude fell yesterday following reports that Russia is attempting to avoid sanctions by shipping crude to India on restricted vessels anyway. The EU has proposed further measures on Russian banks and shadow fleet tankers.
JGB TECHS: (H5) Trend Needle Points South
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 141.06 @ 16:12 GMT Jan 28
- SUP 1: 140.00 - Round number support
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.
JGBS: Futures Little Changed Overnight, BoJ Minutes Due, FOMC Later Today
In post-Tokyo trade, JGB futures closed slightly weaker, -3 compared to settlement levels, after US tsys finished the NY session little changed ahead of today’s FOMC decision.
- US tsys pared early losses after lower-than-expected Durable Goods Orders and down-revision to prior, while Capital Goods were higher than expected.
- The Conference Board consumer survey saw confidence disappoint in January at 104.1 (cons 105.9) after an upward revised 109.5 (initial 104.7) for its lowest since September. Declines were seen in both main categories, also to their lowest since September, but were most pronounced for the present situation.
- Stocks rebounded, semiconductors outperforming software & hardware makers as markets had more time to contemplate the new competition for US AI developers.
- Moves are underway that would allow Japan’s Government Pension Investment Fund to participate directly in government bond auctions, according to people familiar with the matter. The Ministry of Finance will soon invite public comments and amend a government ordinance that defines participants in JGB auctions. (per BBG)
- Today, the local calendar will see BOJ Minutes of the Dec. Meeting and the Consumer Confidence Index alongside 5-year GX supply.
