Unlike Monday’s global PMI deterioration (which sent markets around the globe soaring), there was little in terms of macroeconomic data overnight (German IFO earlier missed on expectations and business climate but beat on current assessment) so the “market made the news.” These came most from the USDJPY which has continued to fall, sliding to 111.85 overnight, and dragging the Nikkei to a -0.4% drop.

Japan’s currency strengthened against all of its 16 major peers and gold rose for the first time in three days after the People’s Bank of China reduced the reference rate by more than some analysts forecast. 

Many are now wondering what if anything the BOJ – a critical member of the “global central bank put” team – can do any more at this point to push the next leg higher in the USDJPY.

“It’s beginning to feel like the BOJ is completely stuck,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management Co. in Tokyo. “The yen had been trading at historically low levels that implied an endless amount of easing, but now doubts are emerging. It’s difficult to imagine any scenarios where the BOJ can take action.”

Elsewhere in Asia, China’s Shanghai Composite (-0.8%) retreated from a monthly high, as financials were pressured on outflow fears after the PBoC weakened the reference rate by the most since early January. Furthermore, now that the PBOC has limited tracking data on offshore or CNH intervention, it will be virtually impossible to quantify just how much intervention the PBOC has engaged in even after the fact, something which will certainly confuse traders and raise suspicions that China’s capital outflow problem is greater than even the worst case scenario.

Emerging-market stocks retreated from a six-week high. BHP Billiton Ltd. (BHP) led commodity producers lower after making a larger-than-expected cut to its dividend. Crude fell and industrial metals declined, with zinc slipping back after entering a bull market on Monday.

European stocks were weighted down by the previously reported first cut in BHP Billiton’s dividend in 15 years and a surprise loss posted by Standard Chartered Plc (SCBFF) confirming that the global slowdown and tumbling prices for metals and oil are weighing on earnings. Britain’s referendum on its membership in the European Union is also raising currency-market risks across the continent, with the cost of options protecting against losses on the euro jumping.

Crude has generally drifted lower today although expect more headline-driven squeezes on headlines out of Houston where Saudi oil minister Ali al-Naimi will deliver the welcome and ministerial address to open day 2 of the IHS CERAWeek conference. In other oil data we also have API weekly inventory data today, with builds expected both nationally and at Cushing delivery hub in EIA data tomorrow.

But the biggest question on all traders’ minds will be whether the bear market short squeeze that sent the S&P higher by 130 points in 6 days, is finally over – with most global market rolling over and with US equity futures unable to find theirsolid early morning footing, it may finally be time to cash out of the bear market rally which so many predicted, and which GSBank yesterday may have top-ticked with perfection.

Where markets stand now:

  • S&P 500 futures down 0.1% to 1933
  • Stoxx 600 down 0.3% to 330.9
  • FTSE 100 down 0.5% to 6008
  • DAX down 0.7% to 9506
  • German 10Yr yield up less than 1bp to 0.18%
  • Italian 10Yr yield up 2bps to 1.54%
  • Spanish 10Yr yieldunchanged at 1.65%
  • S&P GSCI Index down 1% to 297.7
  • MSCI Asia Pacific down less than 0.1% to 121
  • Nikkei 225 down 0.4% to 16052
  • Hang Seng down 0.3% to 19415
  • Shanghai Composite down 0.8% to 2903
  • S&P/ASX 200 down 0.4% to 4980
  • US 10-yr yield up 2bps to 1.78%
  • Dollar Index down 0.01% to 97.37
  • WTI Crude futures down 0.6% to $33.22
  • Brent Futures down 1.8% to $34.05
  • Gold spot up 0.9% to $1,219
  • Silver spot up 0.3% to $15.23
  • Global Top news

  • United Technologies Says Obstacles Scuttled Honeywell Talks: Walked away from preliminary talks about a merger due in part to concerns that a deal wouldn’t win approval from antitrust authorities; Honeywell said to have offered $108 a share last wk
  • Valeant Says It Will Restate Earnings After Board Review: Philidor accounting review showed $58m in rev. recognized in 2014 should have been booked in subsequent periods; sees change reducing 2014 GAAP EPS by ~10c, increasing 2015 GAAP EPS by ~9c
  • German Business Sentiment Falls as Turmoil and China Sow Concern: The IFO institute’s business climate index dropped to 105.7 in Feb. from 107.3 in Jan., median est. decline to 106.8
  • Boeing CEO Muilenburg Named Chairman as McNerney Exits Board: CEO Dennis Muilenburg was named chairman, succeeding former CEO Jim McNerney, who is stepping down as a director
  • Bill Gates Sides With Government in Apple Clash, FT Says: Gates has sided with the U.S. govt. in a dispute over Apple’s refusal to break into a terrorist’s iPhone, breaking ranks with the industry in a face-off with law enforcement, FT reported
  • Fitbit Forecasts Miss Estimates on Global Rollout of New Devices: Sees 1Q adj. EPS breakeven to 2c vs est. 23c; sees 1Q rev. $420.0m-$440.0m, est. $484.6m
  • Brookfield, Qube Consider Joining Forces in Bid for Asciano: Groups led by Brookfield Asset and Qube Holdings are considering joining forces to buy Asciano, 2 groups discussing joint offer of A$9.28 per share in cash
  • J&J Must Pay $72 Million Over Talc Tied to Woman’s Cancer: Company faces about 1,200 more suits over talc products
  • Goldman Sachs, HSBC Back Cameron Push to Keep Britain in the EU: 36 FTSE companies sign letter that backs remaining in bloc
  • OPEC Doesn’t Know How It Can ‘Live Together’ With Shale Oil: Production freeze will be re-evaluated after 3-4 months
  • Drug Spending Slowed in 2015 After Discounts, CVS Health Says: Drug costs for its plans grew 5% in 2015 vs 11.8% in 2014
  • Syrian Cease-Fire to Begin Feb. 27, U.S. and Russia Announce