"Nothing to see here," mocks Goldman Sachs macro trader Bobby Molavi in his latest note to clients.
Quite a start to the week. the stats have already been flying around….and already look out of date post a 7% bounce back in Japan overnight…but to summarise….Monday saw a ~12% sell off for the Nikkei. The single biggest one day fall since 1987. Japan saw the highest turnover day ever for tpx >8trln YEN – so there was real volume backing the move…..Topix had 131 stocks close limit down while Nikkei had 20. At it’s core Japan has become a more crowded long…with a heavy (and levered) domestic retail base…so on moves there was always a risk of an overreaction. That move in turn seem to travel over asia….. Kospi -8.77% - worst move % terms since 2008 and Taiwan -8.35% - worst move % terms since 1976. In all Japan is down over 20% in the last couple of weeks…a substantial drawdown on the back of a 25bp hike (albeit a hawkish one). Beneath the surface, Japanese companies are beating estimates (56% so far this earnings season), seeing positive sell side revisions, seeing more reform to drive more shareholder alignment and seeing record corporate buybacks and dividends.
Then to Europe and the rest of the world. Europe fared much better…down ~3% to start before closing down ~2% on the day. It feels like Europe has seen gradual degrossing over the last few weeks – starting with France, then Trump and Tariff risk, then crowded space de-gross (defence and Eur banks) before a more Europe general de-grossing.
