Greetings,

We begin with Japan where the central bank ended up disappointing the markets. The BoJ announced a smaller than expected increase in purchases of ETF's. There was no move deeper into negative rates and no QE acceleration. Kuroda probably feels somewhat helpless at this point and is betting on the big increase in fiscal stimulus.

The yen immediately rose by over 2% in response (the chart shows the dollar falling 2% against the yen).

By the way, market participants have bought quite a bit of protection going into the BoJ decision day, with the overnight dollar-yen implied vol hitting a post-crisis high.

Source: @fastFT

The BoJ's announcement also sent the equity markets into a frenzy, generating massive volatility in the Nikkei futures.

Source: barchart.com

Here are several other developments in Japan's economy.

1. The nation's industrial production rose faster than expected.

Source: Goldman Sachs

2. Japan's labor markets continue to tighten as the unemployment rate hits a 21-year low.

 

3. The various CPI measures (adjusted for the consumption tax hike impact) show Japan's inflation continue to drift lower. After the unprecedented QE effort, looking at these results would make most central bankers give up.

Source: Goldman Sachs

Separately, here is the Nintendo stock price. The Pokémon bubble?

Source: Google

1. Switching to the UK, the 10yr gilts yield hit new lows.

2. According to Moody's, UK banks are looking at a £68bn capital shortfall after Brexit.

Source: @fastFT

3. Economic headlines out of the UK continue to indicate elevated uncertainty.

Source: Reuters

4. UK house price appreciation beat consensus - with home prices still growing above 5% per year.

Source: Nationwide

Source: Nationwide

Here is the UK house price-to-income ratio (a measure of affordability).

 

 

Source: Nationwide

5. The British pound implied volatility index hit new lows not seen since May.

Elsewhere in Europe, the Norwegian krone is weakening (vs. the euro) in response to softer oil prices.

Source: barchart.com

1. In the Eurozone, the economy seems to be resilient to Brexit (so far), as business and consumer sentiment beats expectations.

 

2. Germany seems to be gradually pulling out of the disinflationary mode. Is this sustainable? Market-based inflation expectations remain depressed.

3. Italian 5-year government bond auction sold new bonds at the lowest (auction) yield on record (26bp).

4. Spanish unemployment rate falls to 20% - amazingly that's the lowest level since 2011.

1. In emerging markets, the Hungarian unemployment rate is at the lowest level in 13 years. Large public works projects have definitely helped.

2. Turkish tourist arrivals plummet 40 percent in June, which is the biggest drop in at least 22 years. This is pressuring several sectors of the economy

3. Indian stock market is grinding higher.

4. Argentina's official industrial production (IP) was down 6.4% on the year. Separately the FIEL (private) estimate shows IP down by 8.2%.

5. The Russian ruble weakens further (chart shows the dollar buying more rubles). 

Source: Investing.com

6. Here is China's fiscal deficit projection for this year.

Source: @jpmorganfunds

Back in the United States, we see a sharp GDPNow (model) decline on the eve of the official Q2 GDP release.

Source: @AtlantaFed

The decline (above) is based on the preliminary figures released by the Census Bureau, which show weak inventory growth in June.

Source:  The U.S. Census Bureau

US homeownership rate fell to the lowest level since the 1960s.

US rental vacancy rate fell to the lowest level since the 1980s.

The next two charts show owner-occupied and renter-occupied housing inventory trends adjusted by the US population. Welcome to "generation rent".

housing inventory divided by US civilian population

1. In the rates markets, treasury yields rose in response to the BoJ "disappointment".

2. US LIBOR rates continue to climb. By the way, this is a form of monetary tightening because the bulk of larger business loans (and some mortgages) in the US pay interest that is linked to LIBOR.

Source: stockcharts.com

 3. Are retail investors moving back into the stock market (at these levels)? US retail money market fund balances are declining.

1. In the equity markets, US homebuilders are up 15% over the past month.

Source: Ycharts.com

2. Are asset allocators playing the "risk parity" game?

Source: @harlynresearch

1. In the energy markets, WTI crude oil is testing the $41/bbl level.

Source: barchart.com

2. US gasoline futures continue to weaken. 

Source: barchart.com

3. Ethanol is following gasoline lower. Falling corn prices don't help either.

Source: barchart.com

4. US natural gas was up 8.5% on Thursday.

Source: barchart.com

The jump in natural gas prices was due to the inventory increase that was materially lower than forecast (that's from my air conditioner blasting around the clock).

1. In other commodity markets, lean hogs futures tumbled further. US wholesale pork prices are down 7.4% in a week. McRibs coming back now?

Source: barchart.com

2. US grains remain under pressure.

Source: barchart.com

Source: barchart.com

Turning to Food for Thought, we have 5 items today:

1. Here is a new study from Pew on US women in the political process.

- Voting patterns of US women in past elections.

Source: @pewresearch

- Percentage of US women who identify as Democrat (or lean Democratic).

Source: @pewresearch

2. According to Vox.com:

- "More women work in middle-skill jobs than men, but men dominate jobs that actually pay well."

Source: ‏@voxdotcom

-  "Women invest more in their educations but get a worse return on that investment than men." 

Source: ‏@voxdotcom

3. In the United States, more women now earn a 4-year college degree than men.

Source: ‏ ‏@WSJecon 

4. Broad US demographics by age. White kids under 5 are now a minority.

Source: @alec_h_tyson

5. From the New Yorker ...

Source: @NewYorker, @paul1kirby