Good morning, Happy Friday and Quad Witching,
 
Yesterday equites had a solid bounce back from the post-FOMC selloff on Wednesday.  The S&P rose 1.1%, equal-weight 0.5% and Russell 2000 0.6%. A sharp pullback in yields erased all of the 2y’s rip higher on Wednesday, and the long end came in as well. Oil also came in, helped by news that China reached out to Iran about reigning in the Houthis. There was a lot of incremental AI news that supported the demand picture and Tech was an outperformer. Discretionary also led and 9/11 sectors were higher overall with only Financials and Staples fractionally lower. Crypto saw gains after the SEC filled the void left by the Clarity Act failing in Congress, proposing a regulatory framework for tokenized stock trading.
 
US equity futures are flat to modestly lower, having pulled back from overnight highs throughout the early morning as Brent came off its lows and yields backed up. Those moves coincided with the yen notably weakening following a “less hawkish than it could have been” rate increase by the BOJ. It also coincides with today’s Quad Witching (single stock future are back on the menu), which is expected to be near-or at record levels, and index rebalancing. The big corporate news was Warren Buffet announcing he’s stepping down as Chairman of Berkshire Hathaway, effective immediately. What an incredible run.
 

 
The treasury yield curve is flattening with 2y +5bp and 10y +2bp. It’s a quiet day for econ data with Industrial Production out right before the Open and the return of Fed Speak as the blackout window opens up. The US Dollar Index is higher, trading back above 100.  
 

• US 2yr +5bps to 4.73%, 5yr +5bps to 4.85%, 10yr +5bps to 4.98%, 30yr +2bps to 5.31%
• USD index: +$0.20 to $100.19

 
Brent crude is down modestly but off its lows. Gold is slightly higher but other precious metals are outperforming despite dollar strength. Ag is modestly lower. Crypto is higher, adding to yesterday’s gains. The CFTC followed the SEC’s lead yesterday with its own regulation/guidance update, exempting certain crypto software providers from registering as brokers in crypto and predictions markets if they passively collect and route orders to regulated entities.
 

 
Markets in Asia moved higher overnight following the strength in US tech stocks yesterday. The Bank of Japan raised rates by 25bps as expected but unlike the Fed the vote was not unanimous with two dissenters preferring to leave rates unchanged, who were both recently appointed by PM Takaichi.  The Middle East, AI demand and the weak Yen were all cited as inflation risks. Governor Ueda said monetary policy remained accommodative and maintained optionality not pushing back against back-to-back or 50bps hikes but overall, his commentary was viewed as less hawkish than feared. Local yields were largely unchanged, but the Yen has weakened by >1% to ~158 ¥/$, trading just under its 200d ma. In response the finance minister reiterated that Japan “would not hesitate” to carry out another round of intervention. Ahead of the rate decision Core CPI came in slightly below estimates and last month’s reading at 1.7% y/y. The Nikkei was up 1.4% with tech accounting for pretty much all of the gains while financials, consumer related and autos all moved lower. The Kospi was up nearly 3% leaving the index slightly lower for the week. Samsung and SK Hynix were both up >3% despite more reports that CXMT is preparing to enter the NAND market. Major indices in China/Hong Kong closed modestly higher ahead of President Xi’s US visit next week. The administration will reportedly delay announcing any new tariffs on China ahead of the meeting. European indices have been moving lower throughout the session currently down ~1%. ECB inflation expectations moved higher across all time horizons and Germany PPI came above estimates. UK retail sales came in ahead of estimates. Yields across the region are moving higher particularly in France and Italy where there are growing concerns about fiscal deficits. The equity weakness is broad based with some modest outperformance in tech and healthcare.
 

 
Economic Data:
US:

• 9:15am Industrial Production
• 9:30am Fed Bowman speech
• 10:00am Leading Indicators
• 11:45am Fed Schmid speech
• 1:00pm Rig count

Global:

• Japan rate decision: Hike 25bp as expected
• Japan Core CPI y.y: 1.7% vs 1.8% expected, prior 1.8%
• China FDI (YTD) y.y: -5.3% vs prior -6.2%
• Germany PPI m.m / y.y: 1.1% / 4.6% vs 0.4% / 4.1% cons, prior 1.1% / 3.0%  
• UK Retail Sales m.m / y.y: 0.5% / 2.4% vs -0.2% / 1.9% cons, prior -0.5% / 1.2%
• ECB Inflation Expectations: 3.0% vs prior 2.9%