Markets Stabilise, Equity Uptrend Breaks, UK Inflation

While Japanese bonds have stabilised on news Japanese banks are looking to buy JGB’s, and Japan’s finance minister jawboning, gold is still on a tear, up another +2.1% today. The risk of course after such large moves in a crowded trade (Chart 1, BofAmerica) is a sharp retracement. Bitcoin fell 4.6% yesterday and resumes its downtrend, a break below 84,620 will see aggressive liquidation of longs.

JAPAN'S SECOND-LARGEST BANK PLANS BIG JGB PURCHASES AFTER ROUT

KATAYAMA: WANT MARKETS TO CALM DOWN

KATAYAMA: CAN'T SAY WHETHER WE'RE ABOUT TO INTERVENE IN FX

KATAYAMA: FX INTERVENTION REMAINS OPTION THAT WE CAN TAKE

*DANISH PENSION FUND AKADEMIKERPENSION TO EXIT US TREASURIES (insignificant positions but a headline the vol bugs like)

Bessent in Contact with Japan Counterparts to Calm Markets. He also said, “Markets are going down because Japan’s bond market just suffered a six-standard-deviation move in ten-year bonds over the past two days. This has nothing to do with Greenland.”

The equity markets are ripe for a correction. January’s Fund Manager Survey is most bullish since Jul2021: U.S. data is strong, yields rising, Trump/Greenland, cash levels have fallen to a record low of 3.2%, and protection against equity sell-off is at its lowest since Jan2018. BofA’s Bull & Bear Indicator flashing extreme optimism at 9.4. (Chart 2, BofA Global research)

UK inflation rises from 3.2% to 3.4%. While PPI falls to 0.8%.

With US PCE inflation data tomorrow (Feds favoured measure) the correlation between industrial metals prices and 5yr CPI swaps in concerning, especially as yield are rising on debt fears. (Chart 3, Deutsche Bank research, Bloomberg)