Sentiment in global financial markets has eased compared to the first trading day of the week, with the majority of equity indices giving back a portion of the gains achieved yesterday.

The overnight Asian session was weaker on the whole, with the Japanese yen clawing back its losses in earnest, and thus acting as a weight on Japanese stocks. The Nikkei finished lower by close to 0.4%, while USDJPY has crumbled by almost 1% as we go to pixels, on comments from Bank of Japan Governor Kuroda that may have signaled the central bank’s potential for a greater reliance on making adjustments to overnight interest rates as opposed to increasing the monetary base on a go forward basis. By indicating that lower interest rates will be pursued to close the output gap as opposed to continued expansion of the monetary base, market participants are skeptical a further foray into the realm of negative rates will be sufficient enough to boost trend growth in the Japanese economy, and subsequently we’ve seen a continued demand for the resilient yen.

The euro was not able to find a strong catalyst to buck yesterday’s weakness against the big dollar, and as such has remained bound to a relatively tight range, witnessing selling pressure on any upward momentum. After Monday’s PMI data that saw purchasing manager activity slide to 15 month lows, the reading on the business climate in German as polled by Ifo slipped below expectations, with the current economic climate weighed down by future expectations. This could be coming from the fact that fourth quarter GDP in Germany, which came in at 0.3% on a quarterly basis, was largely driven by domestic demand and government spending, with the current loftiness of the euro to do little in the way of stimulating the export sector for the largest economy within the common currency bloc. These developments add further credence to the assumption that Draghi will be looking to tweak monetary policy into more accommodative territory when the ECB meets in early March, and thus we could start to see some froth culled from the common-currency if the economic indicators continue to print to the downside ahead of the next meeting.