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JGB TECHS

(H2) Stabilising

AUSSIE 10-YEAR TECHS

(H2) Remains Below Recent Highs

AUSSIE 3-YEAR TECHS

(H2) Continues to Fade

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J.P.Morgan’s quant team note that ““Japanese equities were left behind in yesterday’s developed-market rebounds. However, they tend to be seen as cyclical value plays within the global context, meaning that they tend to lead any global risk-off trend and bring up the rear on any relief rally. We accordingly look for Japanese equities to once again follow U.S. and European equities higher at a lag.”

  • “The recent selloff in fact has sentiment on Japanese equities now tilting toward excessive pessimism, and we think this will prove to be the selling climax. Note, however, that Japanese equity factors and JGBs are showing no conspicuous fluctuations, with volatility appearing to be limited to the index.”
  • “In order to visualize the magnitude of the current shock, we have converted sentiment into percentile values. This shows it currently at the 17th percentile, matching the level seen immediately following the “COVID shock” (April 2020). With winter approaching, we believe some caution is in order on domestic case numbers, but we also see no evidence that would logically suggest Omicron poses a serious threat to the Japanese economy. Our screening for previous (2010–19) sharp drops in sentiment (to a level below the 25th percentile) shows them marked by a selling climax for TOPIX lasting around 10 days, followed by a relief rally. We should keep in mind that the same pattern may be set to unfold again.”