Need to Know: Here’s how U.S. investors can position themselves for the sea change out of Japan, according to Bank of America and Citi

Need to Know: Here’s how U.S. investors can position themselves for the sea change out of Japan, according to Bank of America and Citi


There have been major developments out of Japan this week. The Bank of Japan surprised the market by widening its yield curve target by a quarter point, and then the internal affairs ministry reported that consumer prices excluding fresh food jumped 3.7% in the year ending November.

That rate of inflation would be welcomed in the U.S. and Europe, but for Japan, it marked the fastest core rate since 1981.

Bank of America strategists led by Michael Hartnett say the move means there’s a higher floor for global interest rates. Deflationary Japan had set the floor for global interest rates for the last 30 years, but now that’s changing, and the Bank of Japan may get rid of yield curve control altogether next year. The investment implications? They’re bullish for commodities but not credit, equities outside the U.S., small caps, value stocks, industrials and banks.

In particular, higher Japanese yields will mean a bull market for Japanese banks, the BofA strategists say. And they note that banks and real estate have historically outperformed when Japanese government bond yields rise.

It’s not just Bank of America making that call. Strategists at Citi say going long Japanese banks, in U.S. dollars, has always been its preferred way to position for a Bank of Japan shift. At 0.6 price-to-book value, they are still well below their levels before yield curve control. In particular, they like Mitsubishi UFJ Financial Group
JP:8306
and Resona
JP:8308,
the Citi strategists say.

The market
im 691634

After the 349-point drop for the Dow Jones Industrial Average
DJIA
on Thursday, U.S. stock futures
ES00
 
NQ00
inched higher ahead of key inflation data. The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was 3.70%.

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The buzz

The release of the Fed’s preferred inflation measure, the PCE price index, is set for release, alongside personal income and consumer spending data. Also due to be released will be durable-goods orders for November, and at 10 a.m., the final University of Michigan consumer sentiment reading, as well as new-home sales.

Tesla
TSLA
CEO Elon Musk said he “definitely” won’t sell any more stock in the automaker in the next year, and probably not in the year after.

FTX founder Sam Bankman-Fried was released on $250 million bail after returning to the U.S.

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MCD
is testing its first-ever robot restaurant.

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Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

Ticker

Security name

TSLA Tesla

APE AMC Entertainment preferreds

AMC AMC Entertainment

GME GameStop

AAPL Apple

AMZN Amazon.com

NIO Nio

MULN Mullen Automotive

DWAC Digital World Acquisition Corp.

:
CORZ
Core Scientific

Random reads

The Glasgow restaurateur credited with inventing the chicken tikki masala has died.

The celebrity chief known as Salt Bae is being investigated for touching the World Cup trophy.

The retailer H&M
SE:HM
 has axed the Justin Bieber collection after the singer called it trash.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.



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