Yesterday, I spoke of the so-called bond vigilantes, those bond investors who typically call time on the party when things go awry in the financial world. I can confirm they are very much back in action, both in the United States and Japan. Tokyo may be far from Washington or Brussels, but what happens there is always under close scrutiny in the West. Not only because Japan is a major creditor of the United States, but also due to the vast and profitable web of global financial interconnections built on currency and interest rate differentials between Japan and the rest of the world, known as the carry trade.

Rising tensions over the US territorial claim to Greenland, coupled with a sudden surge in doubts over the sustainability of Japanese debt, have pushed bond yields higher and equity markets lower since the start of the week. Yesterday, Wall Street slumped after a three-day weekend: the S&P 500 and the Nasdaq 100 both fell by over 2%, marking the worst trading session since early October.

The pressure on the bond market manifested itself in a spike to 4.30% during yesterday's session for the US 10-year yield - a level unseen since September, and all the more striking given the Fed's rate cuts in the interim. This suggests that bond investors are growing more skeptical about the outlook and are demanding higher risk premiums to hold US debt. In Japan, the move was even more dramatic. The curious wall of complacency that had settled following promises of an aggressive stimulus package from the new Prime Minister has crumbled. Japanese bond yields soared, particularly on longer maturities, as investors stopped buying into the official narrative.

The issue is both political and monetary. The new government, flirting with fiscal stimulus in a sluggish economy, is under fire for risking an uncontrolled spiral in an already colossal public debt. The Bank of Japan has indeed begun a timid process of monetary normalisation, but too cautiously and clearly too late. Inflation, stuck at rock-bottom levels for years, is now hovering around 3%, well above target. With its policy rate at 0.75%, the BoJ is behind the curve. Calls for calm from the Japanese Finance Ministry managed to ease yields slightly overnight, but the bond market has clearly drawn a red line in recent hours. The BoJ meets on Friday, but no rate move is expected.

I've dwelled a little on this dual pressure in the bond market this morning because, while it may seem arcane to the uninitiated, it is a genuine concern for financial professionals.

The other big event of the day is the elephant in the china shop. The Donald Trump tornado is expected to land in Davos with his entourage of courtiers, unless a minor delay disrupts protocol. Air Force One was forced to turn back due to a minor electrical fault, which may throw the schedule off. The US President is seeking to bend Greenland, Denmark, and all of Europe to his will over a proposed transfer of ownership of the vast island. He is expected to chastise former allies for their behaviour and showcase American strength. Moreover, he has declined Emmanuel Macron's invitation to attend this week's G7 meeting in Paris.

But that's not all. Today also sees the US Supreme Court rule on the case of Lisa Cook, the Fed Governor whom Donald Trump is seeking to remove. The affair is closely watched as a symbol of the White House's future grip on the US central bank. However, no near-term ruling is expected on the constitutionality of tariffs, barring a surprise. A Bloomberg legal note highlights that the justices are entering a four-week recess with no hearings scheduled until 20 February. Yesterday, when they had the opportunity to address the issue, they handed down rulings in unrelated cases. In the absence of a legal deadline or an immediate institutional crisis, the Court is under no obligation to deviate from its usual practices, Bloomberg notes. As a result, tariffs remain in place. But the longer the deliberation drags on, the heavier the financial and legal implications become, particularly concerning potential refunds.

Elsewhere, earnings season is picking up pace, particularly in the US. Netflix disappointed after the bell last night, with its shares down 5% in after-hours trading. Today, Johnson & Johnson, Charles Schwab and ProLogis, among others, take up the baton.

In the Asia-Pacific region, markets remain cautious. Japan's Nikkei 225 is down 0.5%, India's Sensex is off by 0.8%, and Australia's ASX has slipped 0.4%. Mainland China and Hong Kong are posting modest gains, while South Korea is rebounding 0.6%. Wall Street futures have turned green again, but sentiment remains fragile and highly sensitive to today's developments. Europe is expected to open on an uncertain note, with a slight downward bias.

Today's economic highlights:

Today's agenda includes: the monthly and yearly inflation rates along with core inflation in the United Kingdom; ECB President Lagarde's speech for the Euro Area; FDI data in China; the IEA Oil Market Report in France; the CBI Business Optimism Index and Industrial Trends Orders in the United Kingdom; in the United States, the MBA 30-Year Mortgage Rate and Pending Home Sales; another speech by President Lagarde for the Euro Area. See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,863.52
  • Crude Oil (BRENT): US$64.17
  • United States 10 years: 4.27%
  • BITCOIN: US$89,680.8

In corporate news:

  • Rio Tinto reports record Q4 production, meeting annual Pilbara iron ore targets for 2025, with a significant increase in copper output.
  • Ferrexpo halts mining operations in Ukraine due to strikes on power infrastructure.
  • TechFinancials expands into high-grade iron ore mining by acquiring a majority stake in a Kenyan project.
  • Hochtief partners with Amentum to support Rolls-Royce in nuclear technology rollout.
  • InPost reports record global parcel volumes in Q4 2025.
  • Moncler CEO Remo Ruffini steps down, replaced by Bartolomeo Rongone.
  • Barry Callebaut appoints former Unilever CEO Hein Schumacher as new CEO, reports 9.9% decrease in Q1 sales volume, 8.9% revenue growth to CHF 3.7 billion.
  • Nokia supports EU cybersecurity act for a unified European approach to trusted networks.
  • Qiagen considers strategic options, including a potential sale, leading to a 14% increase in shares.
  • Catena announces a 2.75-billion-SEK directed secondary offering at a 3.8% discount.
  • Apple announces Q4 and full-year 2025 earnings, schedules call to discuss results.
  • Microsoft announces strategic partnership with OpenAI to integrate AI capabilities into its products.
  • Amazon acquires a robotics company to enhance warehouse automation capabilities.
  • Netflix reports $12.1 billion in revenue and 325 million subscribers for the holiday quarter, surpassing expectations.
  • Royalty Pharma reports quarterly earnings, highlighting financial performance and key developments.
  • Morgan Stanley raises target price for Yara to 415 NOK.
  • OpenAI launches chatbot ad pilot for select advertisers.
  • NVIDIA invests $150 million in Baseten.

See more news from UK listed companies here

Analyst Recommendations:

  • The Berkeley Group Holdings Plc: Goldman Sachs maintains its sell recommendation and raises the target price from GBX 3873 to GBX 3875.
  • Vistry Group Plc: Goldman Sachs maintains its buy recommendation and reduces the target price from GBX 731 to GBX 710.
  • Persimmon Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 1446 to GBX 1540.
  • Sse Plc: Berenberg initiates a buy recommendation with a target price of USD 37.60.
  • Vesuvius Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 460 to GBX 520.
  • Volex Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 470 to GBX 480.
  • Wise Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 1330 to GBX 1350.
  • The Weir Group Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 3350 to GBX 3650.
  • Informa Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 1210 to GBX 1240.
  • Legal & General Plc: Goldman Sachs maintains its neutral recommendation and raises the target price from GBX 249 to GBX 263.
  • Admiral Group Plc: Goldman Sachs downgrades to sell from buy and reduces the target price from GBX 3954 to GBX 2920.
  • Anglo American Plc: HSBC maintains its hold recommendation and raises the target price from GBP 29 to GBP 32.50.
  • Informa Plc: Barclays maintains its overweight recommendation and reduces the target price from GBP 11.25 to GBP 11.20.