Shutdown Risk Rises Amid Second Killing in Minneapolis; NYC Winter Storm | Bloomberg Brief 1/26/2026

Bloomberg Brief - January 29, 2024 - Market Summary

Key Concepts:

• Yen Intervention Speculation: Market anticipation of coordinated US-Japan intervention to support the Yen.
• Government Shutdown Risk: Potential for a partial US government shutdown due to disagreements over funding for the Department of Homeland Security.
• Winter Storm Impact: Disruption to transportation, energy infrastructure, and economic activity due to a major winter storm on the US East Coast.
• Safe Haven Assets: Increased demand for gold and the Swiss Franc as geopolitical and trade tensions rise.
• FOMC Meeting: Upcoming Federal Open Market Committee (FOMC) meeting and anticipated parsing of language regarding future rate policy.
• Tech Earnings: Major tech companies (Meta, Microsoft, Tesla, Apple) reporting earnings this week.
• Debasement Trade: A strategy based on the expectation of currency devaluation, driving investment into assets like gold.

1. Market Overview & Macroeconomic Concerns

The markets are facing a complex landscape characterized by rising geopolitical tensions, potential government shutdown, and the impact of a severe winter storm. Futures are pointing lower, reflecting these concerns. Bond yields are showing some movement, with the 30-year yield at 4.80% and the 10-year yield stabilizing just above 4.20%, indicating a slight flattening of the yield curve and a degree of fear in the bond market. The two-year yield remains steady at 3.58%. The Bloomberg U.S. Surprise Index is falling, suggesting that economic data may not be as strong as previously indicated.

2. Currency Movements & Intervention Speculation

The most significant market movement is the strengthening of the Japanese Yen (JPY) against the US Dollar (USD). The Yen has rallied by 1.3% since Friday, falling below 154 (from 159). This surge is driven by speculation of coordinated intervention by the US and Japan to support the Yen. The New York Fed reportedly contacted currency exchange desks to assess rates, further fueling intervention talk. Prime Minister Takeuchi warned markets of potential intervention, despite avoiding direct commentary on currency policy. The Swiss Franc is also strengthening, potentially prompting intervention from the Swiss National Bank (SNB) as its real effective exchange rate approaches intervention levels. The US Dollar is weakening against all major peers, hitting its lowest level since September.

3. Commodity Markets & Weather Impact

Gold is nearing $5,000 an ounce, driven by dollar weakness and safe-haven demand. However, volatility expressions for gold are exploding above 26%, suggesting a potential for a short-term correction, potentially down to $4,700. Natural gas futures have surged 17% upon market opening, reaching their highest level in three years (since 2022) due to the winter storm.

4. Individual Stock Movers

• Revolution Medicines (-23%): Shares plummeted after The Wall Street Journal reported that Merck terminated acquisition talks, ending a potential $30 billion deal.
• U.S. Rare Earth (+40%): Shares surged on reports that the Trump administration is considering a $600 million investment in the company. A decision is expected today.
• Mining Companies (Positive): Miners are benefiting from the rising gold prices, with shares across the board trading higher.

5. Political & Regulatory Developments

• Government Shutdown Risk: Senate Democrats are threatening to block a government funding package following a second death in Minnesota during an immigration crackdown. This raises the risk of a partial government shutdown less than a week away.
• Canada-US Trade Tensions: President Trump threatened 100% tariffs on Canadian goods if Canada pursues a trade deal with China.
• Minneapolis Shooting: President Trump is reviewing the circumstances surrounding a fatal shooting in Minneapolis involving federal agents. Democrats are demanding a thorough investigation and refusing to fund the Department of Homeland Security.
• Columbia University Presidency: Jennifer Mnookin was named the next president of Columbia University, following a period of leadership turmoil.

6. Economic Data & Analysis

Sonia Martin of D.C. Bank noted that while Q3 GDP was surprisingly strong, underlying economic weaknesses exist, including a falling savings rate and a K-shaped economy. She believes the US economy may be weaker than indicated by official data. She also highlighted the confusion in the market due to unpredictable White House policies and the potential for continued volatility. Regarding gold, she cautioned about the risk of a pullback given the skewed risk-reward ratio. She also expressed concern about the strengthening Swiss Franc and its potential impact on the Swiss economy.

7. Upcoming Events & Earnings

This week is packed with key events:

• FOMC Meeting (Wednesday): The Federal Reserve will announce its latest interest rate decision.
• Tech Earnings (Wednesday & Thursday): Meta, Microsoft, Tesla, and Apple will report their quarterly earnings.
• Winter Storm Impact: Continued assessment of the economic impact of the winter storm.

Notable Quotes:

• Senator Chris Murphy: "We cannot fund a Department of Homeland Security that is murdering American citizens."
• Sonia Martin (D.C. Bank): "There is no denying that White House policies are putting pressure on the dollar."
• Steve Scalise: "Minneapolis has its own problems, failed leadership that has led to all of this, failed leaders need to look in the mirror and tone it down."

8. Technical Terms:

• Yield Curve Flattening: A decrease in the difference between long-term and short-term bond yields, often indicating economic uncertainty.
• Safe Haven Assets: Investments that are expected to maintain or increase in value during times of market turmoil (e.g., gold, Swiss Franc).
• Debasement Trade: A strategy based on the expectation of currency devaluation.
• Quantitative Tightening: A contractionary monetary policy where a central bank reduces the amount of money in circulation.
• K-Shaped Economy: An economic recovery where different segments of the population experience vastly different outcomes.

Conclusion:

The market is navigating a period of heightened uncertainty driven by geopolitical tensions, political risks, and economic concerns. The strengthening Yen, rising gold prices, and potential government shutdown all contribute to a volatile environment. The upcoming FOMC meeting and tech earnings reports will be closely watched for further direction. Investors should remain cautious and prepared for continued market fluctuations.