Heisenberg Report

Dramatic Plunge In Japanese Stocks Creates Existential Crisis – Peter Pan Summoned

Look, everyone needs to give the Nikkei a goddamn break on Thursday, ok?

I mean yes, there was a harrowing moment or two in today’s session, but it’s not like things haven’t been going well. Don’t forget, this is a market that just broke a record for most consecutive daily gains in a row and which headed into Wednesday had risen for 23 out of 25 trading days.

That said, something went wrong in the afternoon session today when the benchmark plunged 3.6% from its day highs seemingly out of the clear blue:

Same story in the Topix:

Some folks were convinced this was attributable to people making “adjustments” ahead of futures and options settlements on Friday. And of course there’s the old yen-equities chicken-egg scenario:

“USD/JPY dropped as much as 0.4% to 113.39 low, initially driven by weakness in the Nikkei, which dropped on gamma hedging,” traders in London and Europe told Bloomberg, adding that “sellers of stock index futures took over as soon as 23250 gave way, sending USD/JPY lower.”

Ok. Well whatever the case, Nikkei average stock vol. jumped 25% on the session:

By the end of the day, stocks managed to close just slightly red. But red nonetheless. Now if only we knew anyone who liked to buy the dip in Japanese equities…

Speaking of Kuroda, it’s days like today when you need to remember what he told at a conference in Tokyo back in 2015:

I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘The moment you doubt whether you can fly, you cease forever to be able to do it,’ Yes, what we need is a positive attitude and conviction.