21st January 2026

MACRO

Supreme Court to Hear Trump’s Challenge to Fed Independence

The Supreme Court will hear arguments tomorrow over Donald Trump’s bid to fire Federal Reserve governor Lisa Cook. The case has far-reaching implications for US central bank independence and could reshape how much control any president has over monetary policy.

(Financial Times)

Japan Bond Turmoil Rattles Global Markets

Japan’s bond market chaos is spilling into global markets after a brutal selloff pushed super-long yields to record highs.

Treasury Secretary Bessent told reporters at Davos he’s been in contact with Japanese officials, who have assured him they’ll take measures to stabilise the market. Bessent described the move as “six standard deviations” - an extreme rarity that has already affected other markets. Citi warned risk parity funds may need to sell as much as a third of their exposure, potentially triggering up to $130 billion of bond selling in the US alone.

Japan’s longer-dated bonds rebounded on Wednesday after Finance Minister Katayama called for calm. The 40-year yield dropped as much as 22 basis points before settling 18bp lower. Sumitomo Mitsui, the country’s second-largest bank, said it’s ready to double its JGB portfolio to as much as ¥21 trillion and is already buying 30-year bonds. The bank’s global markets head said he wouldn’t be surprised to see dollar-yen hit 180 within three years.

JPMorgan strategists expect debates over tax cuts and sovereign downgrade concerns to keep sentiment depressed for an extended period. Short-term responses could include buybacks of super-long bonds and reduced auction sizes. SMBC Nikko said BOJ intervention is unlikely - if the central bank increased bond purchases while politicians push tax cuts, it would reinforce perceptions the BOJ is subordinate to fiscal policy. HSBC now expects the yen to weaken to 160 per dollar by mid-year, reversing its previous call for strengthening to 150.

(Bloomberg, Wall Street Journal, Reuters)

UK Inflation Comes in Hotter Than Expected

British inflation rose more than forecast to 3.4% in December, driven by higher tobacco prices and airfares. The reading topped the 3.3% consensus and November’s 3.2%. Core inflation held at 3.1% while services - closely watched by the Bank of England - ticked up to 4.5% from 4.4%.

Separately, the UK is close to extending the life of Sizewell B nuclear power station by 20 years. A deal could be agreed in the coming months as Britain seeks to bridge a gap in nuclear generation before new plants come online.

(Financial Times)

Deutsche Bank CEO Dismisses “Dump US Assets” Note

Deutsche Bank CEO Christian Sewing personally called Treasury Secretary Bessent to distance himself from a report by one of the bank’s analysts suggesting European investors should sell US assets. The note had unsettled markets.

(Bloomberg)

China Shrugs Off Global Volatility

China’s seven-year government bond sale drew robust demand on Wednesday as investors looked past the overnight turmoil in global markets. Bridgewater Associates said it remains bullish on Chinese stocks this year after its onshore hedge fund posted a 45% gain in 2025 - its best performance in at least five years.

Chinese QDII funds have expanded rapidly, with assets nearing 1 trillion yuan as domestic investors push for global diversification. Assets rose 59% year-on-year to 970 billion yuan as of 20 January. Analysts cited by China Securities Journal suggest the PBOC may push back broad-based rate cuts after recent targeted reductions.

(Bloomberg, China Securities Journal, Securities Daily)

ECB’s Lagarde: Tariffs Would Have “Minor” Inflation Impact

ECB President Lagarde said uncertainty has returned due to Trump’s latest tariff threats but added that another volley of tariffs would have only a minor impact on European inflation.

EU lawmakers will vote tomorrow on whether to challenge the bloc’s Mercosur trade deal in Europe’s top court. If passed, the move could delay the agreement by two years or potentially derail it entirely.

(Bloomberg, Reuters)

Other Macro Developments

Bank Indonesia held rates steady to safeguard the rupiah, which fell to a record low this week on fiscal worries and concerns over central bank independence. South Africa’s central bank governor said the new 3% inflation target has helped stabilise prices and expects inflation to hover around that level this year.

(Bloomberg)

GEOPOLITICAL

Trump Pushing for “Decisive” Military Options on Iran

Trump is pressing aides for military options he terms “decisive” against Iran, according to US officials. The phrasing has spurred the Pentagon and White House to refine a suite of plans, including some that would seek to push the regime out of power. Officials are also devising more modest options targeting IRGC facilities.

Inside Iran, authorities have intensified their crackdown on dissent following mass protests - launching arrests, seizing property and closing businesses connected to prominent figures accused of fomenting unrest.

(Wall Street Journal, Financial Times)

US Scales Back NATO Presence

The Pentagon plans to cut its participation in elements of NATO’s force structure and advisory groups, according to the Washington Post. It’s the latest sign of the Trump administration’s drive to scale back the US military presence in Europe.

Treasury Secretary Bessent cautioned European nations against ramping up military presence on Greenland and criticised France over calls to conduct a NATO exercise there. France responded by formally requesting a NATO exercise on Greenland and said it’s ready to contribute. The Wall Street Journal notes Putin has long sought to undermine the Western alliance he views as a threat.

European opposition to Trump’s Greenland bid and his proposed “Board of Peace” initiative has disrupted plans for an economic support package for postwar Ukraine.

(Washington Post, Bloomberg, Reuters, Financial Times, Wall Street Journal)

UK-China Business Ties Set for Revival

Britain and China aim to revive a “golden era” business dialogue when PM Keir Starmer visits Beijing next week. Top executives from both sides are expected to participate.

(Reuters)

Europe Urged to Phase Out Russian Nuclear Fuel

Top nuclear fuel executives are pushing Europe to eliminate Russian enriched uranium imports, warning Moscow uses its role as a key supplier for geopolitical leverage. Nearly four years after the full-scale invasion of Ukraine, Russia still supplies almost a quarter of Europe’s enriched uranium needs.

(Financial Times)

EQUITIES

Netflix Beats But Flags Higher Costs

Netflix delivered Q4 results that largely beat Wall Street estimates but issued cautious guidance for the months ahead. The company cited higher programming spending and the cost of closing its deal with Warner Bros Discovery.

(Bloomberg)

Nvidia’s Jensen Huang Planning China Trip

Nvidia CEO Jensen Huang plans to travel to China in late January as he seeks to reopen a critical market for the company’s AI chips. The trip comes as Nvidia navigates new export rules and the 25% fee Trump imposed on China-bound semiconductors.

(Bloomberg)

Trump Restricts Institutional Homebuyers

Trump signed an executive order restricting large institutional investors from competing with individual homebuyers. The White House said the move is aimed at making housing more affordable.

(Reuters)

Johnson & Johnson Talc Lawsuit Advances

In a victory for thousands of women suing J&J over claims that baby powder caused ovarian cancer, a court-appointed special master recommended they be allowed to present expert testimony supporting the link at trial.

(Reuters)

Energy Fuels Acquires Australian Rare Earths Miner

US uranium producer Energy Fuels agreed to pay a significant premium for Australian Strategic Materials as Washington pushes to secure Western supply chains for critical minerals and rare earth elements.

(Reuters)

Japan Financial Stocks Slide on Bond Fears

Japanese financial stocks declined as Tuesday’s government bond meltdown raised alarms about potential losses for lenders and brokerages.

(Bloomberg)

China Vanke Wins Reprieve

China Vanke received a small reprieve as bondholders approved a delay on payments for an overdue bond. The embattled developer continues to negotiate its way through its debt crisis.

(Wall Street Journal)

Other Equity Moves

Nike’s top China executive Angela Dong is stepping down as the sportswear company looks to reverse a sales decline in the market. United Airlines expects earnings to jump this year, with premium seats and its loyalty programme outperforming standard ticket sales.

Burberry sales advanced over the holiday period as Chinese shoppers snapped up tartan scarves and trench coats, bolstering hopes of a luxury rebound. Red Bull increased sales by the most in three years, boosting revenue and operating profit to records. British infrastructure firms are providing upbeat outlooks as Labour’s infrastructure strategy fills order books.

Nestlé’s CEO partly blamed Trump for the company’s failure to talk enough about sustainability. JD Wetherspoon expects full-year trading slightly below last year as higher costs weigh on profitability. Rio Tinto’s copper production climbed 5% in Q4 thanks to expansion at Oyu Tolgoi in Mongolia, while iron ore output at its Pilbara operations hit a record.

(Bloomberg, Financial Times, Wall Street Journal)

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