Nicholas Smith

The yen is proving to be a massive headscratcher, all of the things that had been working with regard to yen weakness have fallen apart.

The selling that we're seeing this morning has been pretty tepid, i think we're pretty much done with the serious downward pressure we've seen and it would be a fairly dangerous time to be short on the market with so many Japanese companies poised to announce share buybacks.

The FOMC pushed out rate hikes because of concerns about the rest of the world, and the rest of the world took that as bad news being good news, in Japan, bad news is just bad news, and markets are reacting to fears of slowing global growth and a stronger yen.

Value is starting to snap back and some sectors that pretty recently were hanging around all-time lows are showing signs of life, the general updraft in oil is helping confidence as well. Investors aren't yet ready to take on a lot of risk, but they are adding to their positions.

Kuroda had been saying that he didn't think something like this would help so it is a bit surprising and it's clear the market has been surprised by it, the banking sector is getting smoked right now, though everything else seems to be doing just fine. This has obviously had a big effect on inflation and on inflation expectations.

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We're seeing a really nice bounce today as lots of people close their short positions but that doesn't necessarily mean we've seen the bottom, it's tough to know when a panic is going to subside but it does look like we're starting to get there.

The market was massively oversold by the end of trading yesterday, so it's no surprise that we're seeing a snap back, we've seen a state of panic recently, and now that people are coming around to the view that things aren't really all that bad investors are snapping up these oversold low price to book stocks, which are roaring today.

At the moment people are assuming that oil is a barometer of global trade and they worry that falling oil prices mean there is no demand, but all other concerns pale in significance to next week's Fed meeting. The trouble with this recent volatility is it makes it harder to work out sentiment surrounding a possible rate hike.

I think some of the braver hedge funds were mulling it, and are now feeling really lucky that they hadn't pulled the trigger.

We've had a decent run and a lot of the panic we've seen in the markets has subsided because things are looking so strong in the U.S., today looks like a fairly defensive day, with domestics like retail and pharmaceutical taking the lead.

They were practically giving steel stocks away a week ago and the snap back has been tremendous, steel was on fire yesterday, and to see it gain a bit more today, is incredible.

It's not a very healthy recovery when pharmaceuticals are leading the charge, investors are picking up defensives and pretty expensive defensives at that.

We've been on the lookout for growing consumption so it's really good to see such a strong number in the household survey, conditions for making money in Japan are good, it's the rest of the world that scares me. When a panic hits it's Japanese shares that get dumped because the market is so liquid compared to the rest of Asia.

Retail is reheating over the past couple of months, which is an incredible relief when the export side of the economy is looking so bad, drugstores are doing well, electronics stores are finally seeing some growth after suffering a lot following the consumption tax hike. Restaurants have also accelerated quite a bit.

There is also a sense of relief at seeing Abe turn his attention back to the economy after putting so much of his focus toward a controversial security bill, the markets need him to keep an eye on the economy, and he's starting to do that because of the elections ahead.

U.S. private sector employment data was just strong enough to give the expectation that non-farm payrolls shouldn't be a shock in either direction, still, markets are in a state of caution because the question of how Friday's data will impact U.S. policy is on everyone's mind. Japanese policymakers are nervous because they can't do anything until it's clear what the Fed will do, which has kept investors on edge.

We had a big recovery last week but it's now reversed so people are taking profits on shares that had a good bounce, japan saw some of the biggest swings last week because it's such a liquid market, which makes it the natural place to go when there's a bit of chaos in Asia. So the last week was spent riding the wave of volatility and now people are starting to have a deeper think about what the fall in China really means for Japan.

The panic is starting to subside, so, instead of being intensely focused on China, people are starting to look more broadly at the international picture, and, the rest of the developed world seems to be chugging along reasonably well outside of some problems in commodities nations and emerging markets. North America and Europe are doing just fine and that's what really drives things as far as Japan is concerned--the shopping malls of rich nations.

The yen strengthened simply because of panic, but there is plenty of data that tells us the world is not ending, once the markets recover their composure, the yen will drop back into broadly the same kind of 120-125 range that it's been sitting in for so long.