There was some hope in early Japanese trading that after a seemingly endless rout in the USD/JPY, which has seen the Yen surge the most in the past two weeks since the 1998 Asian crisis, the BOJ would intervene, if not via policy where it has botched things up beyond repair then directly by selling Yen on the tape: the reason for this is not only yesterday's direct intervention that sent the USD/JPY soaring by over 150 pips briefly, but also after a report that Finance Ministry’s FX chief Masatsugu Asakawa met deputy chief cabinet secretary to discuss market issues; this was followed by a meeting between Kuroda and Abe the news of which promptly allowed the USDJPY to rise to 113.

However, it was not meant to be, and when there was no major intervention during the BOJ's preferred hours of 9-11, the USD/JPY proceeded to tumble all the way down to 111.60, from where it has rebounded modestly and is now trading around 112.45.

As a result, the Nikkei 225 plunged another 4.8%, and following prior day losses of 2.3% and 5.4%, Japan's stock market is now down a whopping 20% just this past week! Perhaps putting all those pensions in stocks was not such a great idea.

Elsewhere, with China still closed, the Hang Seng Index fell 1.2% to 18,319.58, its lowest close since June 2012; it has fallen 5% this week.

However, while Japan crashed and burned, the feeling of some fleeting optimism returned after oil halted its plunge after hitting a 13 year low yesterday following an out of context statement from the U.A.E. minister, who said that "everyone is ready to cooperate,” U.A.E. Oil Minister Suhail Al Mazrouei told Sky News Arabia in Arabic-language interview that was originally posted to website Feb. 10. He added that "Prices are not appropriate, I won’t say for the majority only, but for all producers" which is a far cry from the imminent OPEC supply cut he was spun as saying. Still, for now the algos are happy and his comment helped push oil about 5% higher. It won't last.

Oil also helped Europe, where the Stoxx Europe 600 Index rallied from its lowest close since September 2013 following a Commerzbank AG (+17%) report that led financial institutions higher after saying it returned to profit, while miners and energy producers rose with commodities.

Still, few are optimistic, especially after Marko Kolanovic latest note which sees not only near-term risks, but a potential recession that could be worse than the 2008-2009 crisis.

Here is an example of the hyperbolic pessimism out there: "I’d be weary of calling anything a lasting rebound until I see it,” said Ben Kumar, an investment manager at Seven Investment Management told Bloomberg. "It’s crazy that the market is priced for recession and a complete failure of the financial system. But you wouldn’t want to call it the end of the rout quite yet. Nobody wants to be the first bull now.” Uhm, the S&P is about 15% below its all time high: you will know when the market is priced for a "complete failure of the financial system" - this is not it.

The yield on 10-year Treasuries rose after reaching the lowest since 2012 on Thursday. In Asian trading, Japanese stocks capped their worst week since 2008 and currencies from New Zealand to Thailand slumped.

Industrial metals also advanced. Nickel climbed 1.1 percent to $7,675 a metric ton, rebounding from a 13-year low. Copper rose 1 percent and aluminum added 0.6 percent.

Gold was modestly down from its highest levels in over a year, trading at $1242, and is headed for its biggest weekly gain in four years as investors sought out havens. Silver dropped 0.7 percent.

Market Wrap

• S&P 500 futures up 1.2% to 1846
• Stoxx 600 up 1.8% to 309
• FTSE 100 up 1.5% to 5622
• DAX up 1.4% to 8872
• German 10Yr yield up 3bps to 0.21%
• Italian 10Yr yield down 2bps to 1.69%
• Spanish 10Yr yieldunchanged at 1.78%
• MSCI Asia Pacific down 2.9% to 113
• Nikkei 225 down 4.8% to 14953
• Hang Seng down 1.2% to 18320
• Shanghai Composite closed
• S&P/ASX 200 down 1.2% to 4765
• US 10-yr yield up 2bps to 1.68%
• Dollar Index up 0.17% to 95.72
• WTI Crude futures up 4.5% to $27.40
• Brent Futures up 4.9% to $31.53
• Gold spot unch at $1,242
• Silver spot down 0.7% to $15.65

Global Top News

• Syria Truce Set for Next Week as U.S., Russia Back Peace Bid: Munich summit of 17 nations produces accord on cease- fire
• Cameron and Merkel Head to Hamburg as EU Deal Nears Completion: PM in final push for new U.K. membership terms
• Euro Area Stalls Deal to Shield London Banks From EU Rules: Diplomats only make progress on technical and legal points
• Commerzbank Said to Have Shortlist for Successor to CEO Blessing: cites note to staff obtained by Bloomberg
• DBS, OCBC Said to Submit Bids for Barclays’s Asia Wealth Unit: The two Singapore-based cos submitted non-binding bids for the business, according to people familiar
• Deutsche Bank Ranks Last on Capital Gauge Where Citigroup Excels: U.S. banks outrank Europe’s as regulators demand more capital
• Templeton’s $5.9b Bet on Brazil Bonds Paying Off in 2016: Fund >doubled holdings of Brazil debt last quarter, while country’s local-currency bonds have returned 4.7% this year
• Pandora Said to Explore Sale of Company as Losses Mount: Online radio provider’s talks are said to be preliminary
• Goldman Sachs Bankers Said to Depart on Guidelines Breach: Two bankers in Dubai, one in London said to leave in December

Going quickly through regional markets, we start in Asia where the equity market rout continued with fuel was added to the fire with concerns rising over the health of the financial sector following yesterday's poor earnings from SocGen. Subsequently, Nikkei 225 (-4.8%) yet again experienced another bout of heavy selling pressure amid the rampant JPY, as such, the index has now fallen over 20% YTD. ASX 200 (-0.8%) and the Hang Seng (-0.9%) were dragged lower with losses in financial names, however the latter pulled off worst levels with energy names providing some leeway following the uptick in crude prices. JGB's fell following spill-over selling in USTs while notable underperformance had been observed in the belly of the curve.

Top Asian News

• BOJ Seen as Toothless for Yen Bulls Boosting Currency Forecasts: Barclays sees yen climbing to 95/USD by yr end
• Cash Crunch in India Flips Company Bond Curve as Debt Costs Rise: India’s cash squeeze flipped corporate bond yield curve, making borrowers pay more for s-t debt than they have for almost a yr
• Asia’s Rich Urged to Buy Yen as BOJ Negative Rates Backfire: CS is advising private-banking clients to buy yen vs euro or S. Korean won
• China Turns a Glut of Oil Into a Flood of Diesel Swamping Asia: China’s total net exports of oil products will rise 31% this yr to 25m metric tons
• Rio Tinto Sees Mining Distress Spreading to Majors: Rio has M&A target list for mines not yet for sale, CEO says

European equities take a breather following a hectic week of huge intraday day moves as the banking sector once again comes into focus. One bank under the spotlight is Commerzbank (+16.7%), recover their intraweek losses in today's trade, following a positively received earnings report. In turn financials outperform in Europe, improving the risk sentiment, with equities higher across the board. Energy is also among the best performing sectors with WTI Mar'16 futures up around a dollar in the session, holding onto the USD 27.00 handle.
In line with the long awaited return of risk on sentiment, fixed income products take a hit, with Bunds trading lower by some 50 ticks but still retaining the 165.0 level. Elsewhere peripheral spreads widen, with PE/GE spread wider by 0.8bps, amid concerns over the country's budget plans

Top European News

• PAI Partners Said to Weigh Bid for Dental Clinic Chain Vitaldent: Co. could be valued at about EU500m
• Commerzbank Jumps After Fourth-Quarter Profit Beats Estimates: Bank expects ‘slight’ increase in profit this year from 2015
• Whisky Makers Want a Single Market for Single Malt, Not ‘Brexit’: Diageo, Pernod Ricard among cos supporting free market
• SocGen CIB Earnings Constrained, Cut to Neutral at Mediobanca: SocGen delivering on capital, missing on earnings, Mediobanca says
• Thyssenkrupp Posts Net Loss on Record Chinese Steel Imports: Co. says it needs materials recovery to meet profit target

In FX, the euro declined the most in a week against the dollar, falling 0.3 percent to $1.1287. Europe’s currency slid for a third day against the yen, dropping 0.1 percent to 127.12. The yen was little changed at 112.45, set for its biggest two-week gain versus the dollar since 1998, sparking speculation that authorities will intervene to weaken it. New Zealand’s dollar lost 0.7 percent. The Thai baht slid 0.9 percent, the most since October and the South Korean won fell 0.7 percent. An index of 20 developing-nation currencies declined less than 0.1 percent Friday, taking its drop this week to 0.6 percent, the most since Jan. 15. The gauge is down 1.4 percent this year and reached a record low in January.

In commodities, Brent and WTI have managed to hold on to their modest recovery after major declines this week, following comments from the UAE oil minister saying 'everyone is ready to cooperate' yesterdays, and analysts pondering the thought of producers dropping production rates to bolster markets. Gold is still holding up well on the risk on sentiment we have seen in recent days which saw its largest one day rise in seven years, with the next support coming in at 1232.59/oz. Industrials are mostly trading higher with the emptions of tin that has seen a fall of 0.90%. In the European session there has been a lack of fundamental news for commodities.

Looking at the day ahead, there’s a busier calendar for data for us to sift through today. The key release of note in Europe will be the Q4 GDP report for the Euro area where the print came in at 0.3%, just as expected. In the US the main focus will be on the January retail sales report. Current market expectations are for a +0.1% mom headline and +0.3% ex auto and gas print. Remember to keep an eye on the retail control component given it’s a direct input into GDP. Away from this in the US we’ll also see the January import price index reading, December business inventories and the first estimate of the University of Michigan consumer sentiment survey for February. In terms of Central Bank speakers the Fed’s Dudley is due to speak at 10:00am GMT.

Bulletin Headline Summary from RanSquawk and Bloomberg

• Equities are taking a breather today after a tough week with Commerzbank leading the way higher 15%
• GBP steaming ahead, with Cable looking to trade above the weekly highs with the next resistance around 1.4665-70
• Looking ahead, US Import Prices and Retail Sales and comments from Fed's Dudley
• Long-end Treasuries underperform overnight as European equities and bank stocks rally; retail sales and U. of Mich. sentiment today.
• Deutsche Bank’s riskiest debt was downgraded by Standard & Poor’s due to concerns that potential losses at Germany’s biggest lender could restrict its ability to pay on the obligations
• Deutsche Bank’s co-CEO John Cryan called the company’s balance sheet “rock solid” this week after the firm’s shares and bonds tumbled but its leverage ratio still lags behind every one of its main competitors
• Commerzbank jumped the most in more than two years after fourth-quarter profit beat analyst estimates, as the lender said it plans to wind down its unit for soured loans at a faster pace than forecast
• Commerzbank CEO said “no specific problem” with balance sheet, in Bloomberg TV interview
• Jamie Dimon, JPMorgan chairman and CEO, spent $26.6 million to buy shares of his bank Thursday after they tumbled to the lowest price in more than two years, bringing his total holdings to 6.75 million shares, according to a regulatory filing
• U.K. investors are harking back to 2013 and increasing bets the Bank of England will need to do more to stimulate the economy. The last time traders were this certain the central bank would cut its benchmark rate was almost three years ago
• Fresh doubts over the strength of the British economy emerged Friday as the building industry shrank more than previously estimated in the fourth quarter. Construction output fell 0.4% instead of the 0.1% decline estimated in GDP data last month
• Italy’s GDP rose 0.1% in the 4Q, its slowest pace in a year, prompting concerns that the recovery from the country’s longest recession since World War II might falter in coming months
• Germany’s GDP rose a seasonally-adjusted 0.3% in 4Q, matching the rate of the previous quarter, showing resilience amid an emerging-market slowdown that’s heightened concerns about global growth and sent equities plunging this year
• Greece entered a recession in the fourth quarter, ending a turbulent year with its economy back in the doldrums. GDP contracted 0.6% in 4Q after shrinking a revised 1.4% in the 3Q
• A top U.S. lawmaker questioned the Federal Reserve’s authority to cut interest rates below zero after Janet Yellen disclosed that the central bank was re-examining the tool as a policy option if the economy faltered
• Sovereign 10Y bond yields mixed; European stocks rise, Asian markets drop; U.S. equity-index futures rise. Crude oil and copper rally, gold falls

Key US Events

• 8:30am: Import Price Index m/m, Jan., est. -1.5% (prior -1.2%); Import Price Index y/y, Jan., est. -6.8% (prior -8.2%)
• 8:30am: Retail Sales Advance, Jan., est. 0.1% (prior -0.1%)
  • Retail Sales Ex Auto, Jan., est. 0.0% (prior -0.1%)
  • Retail Sales Ex Auto and Gas, Jan., est. 0.3% (prior 0.0%)
  • Retail Sales Control Group, Jan., est. 0.3% (prior -0.3%)
• 10:00am: Business Inventories, Dec., est. 0.1% (prior -0.2%)
• 10:00am: U. of Mich. Sentiment, Feb. P, est. 92.3 (prior 92)
  • Current Conditions, Feb. P (prior 106.4)
  • Expectations, Feb. P (prior 82.7)
  • 1 Yr Inflation, Feb. P (prior 2.5%)
  • 5-10 Yr Inflation, Feb P (prior 2.70%)
• 10:00am: Fed’s Dudley at press briefing in New York

DB's Jim Reid completes the overnight wrap

It’s hard to know where to start with yesterday’s price action with markets gapping and buckling everywhere following the latest bout of huge risk aversion. The Asia session had thrown open a few warning signs as safe haven flows rolled in for Gold and the Yen. Once the European session kicked into gear however it was all about moves in Banks once again after two days of relative calm. The iTraxx Senior and Sub financials indices closed 12bps and 31bps wider at 140bps and 333bps respectively. The move for the latter in particular meaning it’s now at the widest level since October 2012. That helped Main and Xover widen 9bps and 29bps on the day. European equity markets were heavily hit too with the Stoxx 600 collapsing -3.68%, the 8th time it has closed lower in the last 9 sessions with yesterday’s move the worst single day loss since August. The banking sector fell 6% - not helped by some much weaker than expected results from Societe Generale. Peripheral bourses were again the underperformers with the IBEX and FTSE MIB -4.88% and -5.63% respectively.

Sentiment wasn’t much better in the first half of the US session with the S&P 500 falling as low as -2.30% and testing the January 20th intraday lows of 1810. Focus was also on the tumbling Oil price which was helping to exacerbate the selloff as WTI at one stage traded as low as $26.05/bbl (down over 5% on the day) and the lowest since May 2003. That said, energy prices then turned on a dime which helped the S&P 500 retrace slightly into the close, finishing the day at -1.23%. WTI is actually up nearly 6% this morning with the rebound being attributed to a headline out of the WSJ quoting the UAE energy minister as saying that OPEC stands ready to co-operate on production cuts. This isn’t the first time we’ve seen such a headline in recent weeks so it remains to be seen how credible this really is.

It was the move in Gold which was perhaps the most eye catching of all yesterday. Gold closed up a massive +4.14% yesterday (although had been up as much as 5%), smashing through the $1,200 mark to eventually close at $1,247. That move was in fact the largest single daily gain since January 2009 with the metal now up close to 17% YTD already. Given the magnitude of the risk off moves yesterday, all things considered the closing moves for Treasuries were a little more muted with the 10y yield eventually finishing 1bp lower at 1.659% (although in fairness it did trade as low as 1.529%) and 2y yields nearly 4bps lower at 0.650%. Moves in European rates were a bit more aggressive however with 10y Bunds down over 5bps to 0.185% and slowly but surely creeping in on those astonishing lows made last April.

There’s been little relief for risk assets in Asia this morning. Once again the focus has been on the sizeable declines for Japanese bourses after yesterday's holiday with the Nikkei and Topix currently down over 4.5%. The Nikkei has in fact plummeted over 10% this week. This morning’s move comes despite the Yen being a touch weaker. In Australia the ASX is -1.2% while elsewhere the Hang Seng (-0.8%) and Kospi (-1.4%) are also lower. The South Korean small cap index was however temporarily halted after tumbling 8%. Credit markets are faring little better with iTraxx Aus and Asia indices 3bps and 2bps wider respectively. US equity market futures are however pointing towards a positive start, most probably reflecting a better morning for Oil.

NIRP is a big talking point currently and yesterday we got another flavor of how far central banks are prepared to push the boundaries after the Riksbank cut its benchmark repo rate by more than expected (15bps vs. 10bps expected) to -0.50%. It was telling also that the Bank acknowledged that policy could be made ‘even more expansionary if this is needed to safeguard the inflation target’.

Fed Chair Yellen also made an interesting acknowledgment of the potential for similar policy in her comments yesterday in the Q&A following her remarks to the Senate. While Yellen stuck to her guns in saying that she doesn’t expect the Fed to be in a position anytime soon where it is necessary to cut, she did highlight that ‘we had previously considered them and decided that they would not work well to foster accommodation back in 2010’ but that ‘in light of the experience of European countries and others that have gone to negative rates, we’re taking a look at them again because we would want to be prepared in the event that we needed to add accommodation’.

Wrapping up yesterday, the only data of note out was the latest weekly initial jobless claims print in the US which declined 16k last week to 269k (vs. 280k expected). That was in fact a low for the year and helped to nudge down the four-week average to 281k from 285k.

Looking at the day ahead, there’s a busier calendar for data for us to sift through today. The key release of note in Europe will be the Q4 GDP report for the Euro area where current market expectations are running for a +0.3% qoq print. We’ll also see Q4 GDP reports for Germany and Italy while in France we’ll see the latest quarterly employment indicators. Euro area industrial production for December is also expected. Over in the US this afternoon the main focus will be on the January retail sales report. Current market expectations are for a +0.1% mom headline and +0.3% ex auto and gas print. Remember to keep an eye on the retail control component given it’s a direct input into GDP. Away from this in the US we’ll also see the January import price index reading, December business inventories and the first estimate of the University of Michigan consumer sentiment survey for February. In terms of Central Bank speakers the Fed’s Dudley is due to speak at 3pm GMT.