The recent decline in Japanese stocks is showing signs of exceeding a simple correction in the AI/semiconductor sector: the Nikkei fell, the EUR/JPY dropped below 176.8, the yen appreciated, and European, American, and Japanese bonds saw buying activity, with CTAs and macro funds covering short positions. Japanese banks and cyclical stocks, previously attracting technology funds, also weakened. Of particular note is the fact that rising oil prices typically depress bond prices, but this time bonds rose instead, suggesting that some funds may be preparing for an "abnormal deterioration in the global economy," focusing on increased trading activity and financial stability risks, rather than just inflation. We therefore suspect that European risks may be approaching a tipping point, but we clearly state that current evidence is insufficient, and the true triggering factor cannot yet be confirmed. (JPMorgan Chase report, October 24)
