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BOJ NOT THAT HAWKISH AFTER ALL (1120 GMT)

With investors focused on future central banks’ moves, a hawkish outcome from the Bank of Japan's policy meeting might have applied some upward pressure on bond yields globally.

But, according to John Vail, Chief Global Strategist, Nikko Asset Management, overall, BOJ was “relatively dovish,” even if “coupled with a moderately more positive outlook for the economy.”

“The BOJ also cut its gull year 2023 GDP forecast a bit to 1.1%, which is a disappointment, but that is about the natural growth rate for Japan, so it’s not too surprising,” he says.

“In sum, it raised its assessment of the economy but also said economic risks are to the downside, likely due to worrisome oil prices and geopolitics,” he adds.

“The policy update has in reality though proved less eventful,” MUFG analysts say, after mentioning speculation about BOJ debating a possible rate hike if inflation perks up.

The Bank of Japan raised its inflation forecasts on Tuesday but said it was in no rush to change its ultra-loose monetary policy, as rising prices fan speculation it may soon signal a shift in its decade-old stimulus experiment. 

(Stefano Rebaudo)

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STOXX DEEPER DOWN IN THE RED FOR 2022 (0920 GMT)

Selling pressure looks quite intense across the board at the open in Europe, sending the STOXX 600 deeper into loss-making territory so far this year, as rate hike jitters sour the mood.

The pan-European equity benchmark slid around 1.3% in morning deals, and was and down around 2% compared to end-2021.

Tech led declines, down more than 2%, while energy was the only sector in the black, up 0.2% a crude prices climbed to 7-year highs, as you see in the snapshot:

(Danilo Masoni)

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TECH TROUBLE (0754 GMT)

Nasdaq futures are down almost 1% on Tuesday, making it likely the tech-heavy index will add to its year-to-date losses of around 4.5%. Having risen for 12 of the past 13 years, it is under heavy pressure from the prospect of higher interest rates and bond yields, more so than the broader S&P 500 index or MSCI's global equity benchmark.

The 4.5% loss masks deeper falls -- 29 shares have lost 10% or more already this year, according to Capital Economics.

Nasdaq futures positioning has shifted dramatically short, Citi analysts point out, noting that $2 billion worth of remaining long positions are deep in the red.

Those investors will be looking nervously towards bond markets, where two-year U.S. Treasury borrowing costs have risen above 1% for the first time since Feb. 2020. In Europe, German 10-year yields are close to bursting above 0% for the first time since mid-2019.

Inflation is front and centre, as crude oil prices hit seven-year prices. That's good news for some -- the Bank of Japan signalled earlier the country was finally emerging sustainably out of deflation -- but the bond selloff is setting the stage for a dismal stock market session; most Asian bourses fell and Europe looks set to open weaker.

All eyes on central banks now. The U.S. Federal Reserve is now more or less priced to start lifting interest rates from March, Canada could move as early as next week while Britain's forecast-beating labour data on Tuesday, makes it all but certain the Bank of England's Feb 2 meeting will yield a hike.

Key developments that should provide more direction to markets on Tuesday:

-BOJ raises price outlook but maintains ultra-easy policy 

-UK employers add record number of jobs 

-Brent climbs to more than 7-year high on Mideast tensions, tight supply 

-EU finance ministers meeting on minimum corporate tax, recovery fund, EU budget

-ECB Vice President Luis de Guindos speaks

-Bank of France governor Francois Villeroy de Galhau speaks

-Riksbank Governor Stefan Ingves speaks

-German ZEW

-U.S. earnings: BNY Mellon, Goldman Sachs, Charles Schwab

(Sujata Rao)

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EUROPE SET TO FALL AS BUND YIELDS MARCH TOWARDS ZERO (0745 GMT)

With bonds selling off and 10-year German yields marching towards zero, equities are struggling globally, as traders bet the Fed could tighten policy faster to tame inflation.

So, after losses in Asia, European stocks look set to follow with stock index futures down around 0.3%, while U.S. futures pointed to heavy losses for tech stocks later on.

Also in Europe investors will be watching the tech .SX8P space, a sector that has flourished thanks to abundant central bank stimulus boosting valuations, and the COVID-19 pandemic.

Oil meantime is continuing its rally with Brent crude now at a 7-year high, which could possibly help energy stocks further.

(Danilo Masoni)

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