Nikkei 225 : Unlimited governement action
By Rodolphe Steffan
According to Japanese media, the government is expected to complete a new plan of 1000 billion yen (9.6 billion euros) to support growth. The government should not issue bonds but would draw on reserves of its budget. Using this solution, the government could act directly without parliamentary vote. The funds would be allocated in priority to the renewable energy sector, health and agriculture. According to economists, the impact will be low but this new plan could help companies suffering from the yen's appreciation.
Despite Moody's downgraded Sony recently due to a low cash flow, the Nikkei erased almost all its losses from the previous week due to good U.S. data and quarterly earnings less alarming than expected. Moreover, it seems that the European situation is improving. The Nikkei linked to Europe gained on Wednesday after analysts said Germany agrees to give a credit line to Spain from the ESM.
Technically, the situation remains neutral in weekly data. At the moment, the index preserves the 8450 points support area. A weekly close above the 8850 points level which refers to the 20-day and 20-week moving average would open the way to 9280 points. On the downside, a failure to break the 8850 points level would lead prices to point back down to the 8450 points level. In the case of a break below the weekly level, the index could accelerate towards 8000 points. We could trade the exit of this range using the Nikkei 225 1212 Future (code : NKDXXXX on the Future CME Market).