FOMC remained dovish throughout, causing stock prices to surge! On the second day of U.S.-China trade talks, will stocks end higher or lower? ~Key points on January 31 and the event schedule~

Yesterday the USD/JPY moved sharply. In the Tokyo and European sessions ahead of the FOMC, the USD/JPY was relatively quiet, but after the ADP employment data came out strong, it gradually rose. As it hit a new high, stops were triggered and it climbed to the high 109s. Subsequently, after the FOMC and press conference, it fell below 109. The cross-yen pairs also declined, signaling a risk-off driven by a weaker dollar.

As expectations for a rate hike faded, U.S. long-term yields fell. With yields lowering, stock prices surged.

◎ Today's Points of Focus

1) U.S.-China Trade Negotiations

Today is the second day of U.S.-China trade talks, expected to conclude. The biggest focus is whether U.S.-China relations will improve as a result of the negotiations. Attention is also on tariffs that are affecting the economy—whether they will be added, rolled back, or kept as is remains to be seen.

Additionally, attention is on whether there will be any mention of intellectual property issues involving Huawei, ZTE, and the like.

The outcomes could cause significant moves in both risk-off and risk-on sentiment, so beware.

2) Post-FOMC Market Reaction

The FOMC rate decision announced this morning was a near-term hold as expected. In the statement and Powell's press conference, any rate hikes this year were described as data-dependent, causing rate-hike expectations to retreat. The balance sheet reduction also suggested adjustments. While not a surprise, the overall tone remained modestly dovish, including potential lower inflation risk. The USD/JPY fell sharply, stocks rose rapidly, and the 10-year yield dropped.

Powell's remarks, given the NY trading session's later timing, will be watched to see how they are digested in Tokyo and European sessions.

3) Brexit Plan

Following the Brexit plan vote, statements have emerged from the EU side as well. In the UK, amendments are being voted on, but the EU has said it will not renegotiate the deal agreed in November last year. Even if the UK crafts a new Brexit proposal, there is no guarantee the EU will accept it.

Attention will be on statements from key figures in both the UK and the EU.

◎ Today's Event Schedule

Thursday, January 31

U.S.-China trade talks

09:01 GBP Consumer Confidence

10:00 CNY Manufacturing PMI

16:00 GBP Housing Prices Index

16:45 EUR France HICP (Consumer Price Index)

17:00 EUR Spain HICP (CPI)

17:00 EUR ECB Governing Council member speaking

18:00 EUR Italy GDP

Euro Area Unemployment Rate

19:00 EUR Euro Area GDP

19:15 EURMerkell ECB Executive Director Speaking

22:30 USD PCE Deflator and PCE Core Deflator

22:30 CAD GDP

23:45 USD Chicago Purchasing Managers Index

Friday, February 1

01:00 EUR Balthamond Germany Central Bank President Speaking

06:30 AUD Manufacturing PMI

10:45 CNYCaixin Manufacturing PMI