Weak trade data dealt a blow to Japanese investors during December. Exports had grown at an annualised rate of only 0.2% in October, raising hopes that they would achieve some long-awaited growth in November; however, shipments extended their decline during the month.
- Sentiment improved amongst large Japanese manufacturers
- The Nikkei 225 Index rose by 16% over 2020
- Australia’s economy grew by 3.3% during Q3 2020
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Weak trade data dealt a blow to Japanese investors during December. Exports had grown at an annualised rate of only 0.2% in October, raising hopes that they would achieve some long-awaited growth in November; however, shipments extended their decline during the month, according to the Ministry of Finance (MoF), falling by 4.2% year on year, and dragged down by slower growth in exports to China and a drop in shipments to the US. Elsewhere, imports fell by 11.1% year on year.
“Japan’s government unveiled a fresh raft of stimulus measures”
According to the Bank of Japan’s (BoJ’s) quarterly Tankan survey, business sentiment amongst large Japanese manufacturers picked up during the final three months of 2020, although overall sentiment remained in negative territory. Japan’s economy expanded by 5.3% between June and September 2020, following a record contraction of 8.3% during the previous quarter. The outlook remains clouded, nevertheless, by uncertainties over the ongoing Covid-19 pandemic as countries around the world struggle with fresh waves of infection. During December, Japan’s government unveiled a fresh raft of stimulus measures designed to shore up the economy against the ravages of coronavirus.
The Nikkei 225 Index climbed by 3.8% over December and rose by 16% over 2020. Meanwhile, the Topix Index rose by 2.8% during December and by 4.8% over the year. In comparison, the TSE Second Section Index - which represents medium-sized Japanese companies and is therefore more exposed to the domestic economy – climbed by 1.1% over the month but fell by 9.6% over the year.
Having contracted at a record rate of 7% during the second quarter of 2020, Australia’s economy grew by 3.3% over the third quarter, fuelled by a strong rebound in household consumption, which increased by 7.9%. However, over the first three quarters of 2020, the economy contracted by 3.8% and, looking ahead, the Reserve Bank of Australia (RBA) expects the recovery will be “uneven and bumpy and … drawn out”. The country’s economy will not reach the level of output achieved at the end of 2019 until the end of 2021. Australia’s economy is predicted to expand by 5% in 2021 and 4% in 2022, although RBA Governor Philip Lowe warned that unemployment and underemployment remain a problem, and wage growth is likely to be lacklustre. The ASX All Ordinaries Index rose by 1.6% during December, and by 0.7% over 2020.
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