Japanese Inflation Soars Nikkei in Trouble

For the entirety of 2023 we have witnessed global equities get pulled higher by just a few large cap names. Names which Magnelibra readers are all too familiar with. These MEGA8s have not only dragged US equities higher but Europe and more so Japanese equities as well. Yes we know the carry trade is a contributor, but we also know that the safe haven trade has been driven largely by the AI mania. Inflation has been coming down in the US and Powell has made it very clear that there is more work to be done. So US yield curves have been getting pummeled and the equity markets continue to push higher and higher with some recent small selling overall.

However when we look for catalysts, something strong enough to solidify a change in sentiment, then we must point it out when we see it. Sometimes it doesn’t come from the domestic US economy, rather overseas gives us a clue as to the next big wave. Well tonight we got a glimpse of Japanese CPI and it was a banger of a number as Core CPI jumped to 4.3% accelerating from 4.1% in the prior reading. This is the largest jump and highest level since 1981! Magnelibra is not taking this reading lightly here is the chart:

Source: Bloomberg, @DavidInglesTV