Macro update
Sell-America theme resurfaces:
Global equities weakened and the United States (US) dollar softened after President Trump threatened new tariffs on Europe over Greenland, reviving concerns about renewed trade disruption and policy unpredictability.
Futures and yields react:
S&P 500 and Nasdaq 100 futures fell more than 1%, while the 10-year US Treasury yield climbed to around 4.27%, a four-month high, signalling pressure across both risk assets and bonds.
Europe under pressure:
European equity futures pointed lower after the STOXX 600 dropped 1.2%, with Citi downgrading European equities to neutral amid heightened tariff uncertainty.
Asia mixed, Japan yields spike:
Asian equities edged lower overall, while a weak 20-year JGB auction pushed Japanese bond yields to record highs, reflecting concerns over fiscal loosening ahead of February’s election.
Currencies and havens:
The dollar index slipped for a second session, the Swiss franc strengthened, and gold surged above $4700 an ounce to a new record as investors sought safe havens.
Political risk in focus:
Attention is turning to Davos and an emergency EU leaders’ meeting later this week, with investors questioning the durability and credibility of future US-Europe trade agreements.
Nikkei 225 comes off record high
The Nikkei 225 is sliding towards its November and 6 January highs at 52,637 – 52,524 amid general risk-off sentiment. Further potential support is seen along the December-to-January uptrend line at 52,280.
Minor resistance may now be spotted around the 16 January high at 54,130 and more significant resistance at last week’s record 54,487 high, made marginally below the psychological 55,000 mark.
Short-term outlook:
Toppish while below the 14 January peak at 54,487.
Medium-term outlook:
Bullish while above the 48,235 mid-November low.