Investors woke up today in good moods. The Asian equities market achieved big gains after positive economic outlook for the region. Japan’s Gross Domestic Product (GDP) grew by 3.7% in the last quarter, twice the expectations. Exports to Asia were the dominant cause of the higher GDP.

Japan’s stock index, the Nikkei 225, rallied 4.3% to 13,600, the biggest jump since March of 2002. Other Asian indices also performed pretty well. Hong Kong’s Hang Seng jumped 3.7% the same as the MSCI Asia Pacific Index.  

Is the situation on global financial markets going back to normal? It seems that currently the situation is stabilizing. The Japanese economy is doing better than expected while higher retail sales in the U.S lifted American stocks yesterday and easing the fear of recession in the biggest economy in the world. Investors need to be careful though. Very important to financial markets will be the monetary policies held by the biggest central banks in the world. As the European Central Bank does not plan to loose its monetary policy (no interest rate cut in the near future), the Federal Reserve might need to slash the federal funds rate one more time. No change in the cost of money is expected in Japan.

Adam Narczewski