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The Bank of Japan wins the prize for surprise-bonkers move-of-the-day by introducing a negative interest rate of -0.1% for certain cash reserves. This news has shaken up markets like a snow globe, catapulting equity markets higher, sending the yen spiraling lower, while funds flood into global government bonds as a 0.1% yield on a JGB (Japanese government bond) looks all the more attractive (as does 1.95% on the 10-year Treasury apparently, and 0.35% on a 10-year German Bund). There is a voracious flight to the dollar, yet the crude complex is unperturbed; it has laced up its rally boots, and is adopting a solid risk-on stance.

Japanese interest rate (source: investing.com)

In terms of economic data-flow, Japan underscored its economic fragility as industrial production dropped for a third consecutive month down 1.4% MoM. Inflation remained at 0.2% YoY, while household spending disappointed, down 4.4% YoY. The baton of bearish broadcasts was passed on to Europe, with German retail sales dropping 0.2% MoM (vs. +0.5% expected). Preliminary Eurozone inflation came in better than consensus though, up 1.0% YoY (vs. +0.9% expected).

Onto the US, and preliminary Q4 GDP came in just shy of expectations at 0.7%, while the Chicago PMI has given some reason for good cheer, rebounding to expansion at 55.6, a country mile away from the consensus of a contractionary 45. Uni of Michigan sentiment data saw current conditions come in better than expected, while the future (expectations) looked bleaker. Plehp..

As we all know, all paths lead back to energy, hence the Bank of Japan's announcement coincides with the news that power usage in Japan last year View Full Article