JAPAN DATA: Offshore Investors Sell Local Equities, Outbound Flows To Bonds
In the week ending Sep 12, Japan outbound and inbound investment flows were mixed. In terms of inbound flows we saw sharp net selling of local equities by offshore investors. This marked net outflows in this segment in 3 out of the last 4 weeks. Japan equities have performed quite strongly through Sep to date, but recall we have seen offshore investors build up a strong net inflow position into Japan stocks since April of this year. Hence last week's outflow may be reflective of some rebalancing. Offshore investors bought local bonds in decent size, more than offsetting the prior week's outflow. The cumulative sum of net flows into this segment is still close to flat in recent months though.
- In terms of Japan outbound flows, we saw good net buying of offshore bonds (marking the third straight week of flows into this segment). This fits with the on-going rise in global bond returns (led by rising US Tsys, although this trend has paused post the US FOMC).
- Outbound flows to global equities stayed positive, but were very modest.
Table 1: Japan Offshore Weekly Investment Flows
| Billion Yen | Week ending Sep 12 | Prior Week |
| Foreign Buying Japan Stocks | -2034.0 | 108.6 |
| Foreign Buying Japan Bonds | 1188.6 | -604.8 |
| Japan Buying Foreign Bonds | 1478.5 | 208.0 |
| Japan Buying Foreign Stocks | 29.7 | 891.1 |
Source: Bloomberg Finance L.P./MNI
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JAPAN DATA: Core Machine Orders Above Forecasts, Suggesting Resilient Capex
Japan June core machine orders were better than forecast. We rose 3.0%m/m, versus -0.5% forecast and -0.6% prior. The y/y print was 7.6%, against a 4.7% forecast and 4.4% prior. The chart below overlays y/y core machine orders (the white line on the chart) against capex for Japan in y/y terms (ex Software). Today's machine orders print continues to paint a resilient capex picture for Japan's economy.
- We don't get the full capex read for Q2 until the start of Sep. Still, the recent Q2 GDP print (preliminary) showed business up 1.3% in Q2, which was above forecasts (+0.7%). So today's core machine orders result is consistent with that backdrop.
Fig 1: Japan Core Machine Orders & Capex Y/Y (Ex Software)
Source: Bloomberg Finance L.P./MNI
GOLD: Gold Continues Range Trading
Gold fell 0.5% to $3315.78/oz on Tuesday, close to the intraday low, as markets position themselves ahead of Fed Powell’s speech on Friday. Not a quite full 25bp Fed Funds cut is priced for September 17 and this appearance will be watched closely for the Chair’s thinking on the immediate policy outlook. Meanwhile, President Trump continues to put pressure on Powell. The US dollar was stronger with the BBDXY up 0.15% but Treasury yields slightly lower. Bullion has started today around $3314.7.
- Gold continues to range trade between support at $3268.2, 30 July low, and resistance at $3409.2, 8 August high, but appears to be corrective. However, moving average studies continue to signal that the metal remains in a bull mode.
- Silver underperformed dropping 1.7% to $37.393 after a low of $37.280. It had reached $38.149 before the decline. It is currently around $37.370. Technicals continue to signal that silver is in an uptrend. A clear break of the 50-day EMA at $37.077 is needed to strengthen the short-term bearish threat. Initial resistance is at $39.655.
- Equities were mixed with the S&P down 0.6% but Euro stoxx up 0.9%. The S&P e-mini is so far slightly lower today. Oil prices continued falling with WTI -1.4% to $62.51/bbl. Copper is down 0.9%.
MNI: MNI JAPAN JUNE CORE MACHINE ORDERS +3.0% M/M; MAY -0.6%
- MNI JAPAN JUNE CORE MACHINE ORDERS +3.0% M/M; MAY -0.6%
- JAPAN JUNE MACHINE ORDERS POSTS 1ST M/M RISE IN 3 MONTHS
