The Nikkei closes at its lowest level in three weeks

Nikkei 29-01

There is a hint of risk aversion ahead of European trading as Asia sees red for the most part on concerns about a retail trading frenzy as the chaos from the memes took over the market in trading yesterday and that is reverberating to today.

Adding to that is talk of a liquidity squeeze in China with overnight repo rates surging to its highest level in almost six years not helping.

The PBOC did little to calm nerves as the ¥100 billion injection today is largely insufficient to deal with liquidity shortage that may arise from the coming Lunar New Year holidays.

Elsewhere, the Hang Seng is down by 0.6% and Shanghai Composite down by 0.9%. Meanwhile, US futures are also being dumped with S&P 500 futures down 1.1% and Nasdaq futures down 1.3% as we look towards European trading.

This is all contributing to a stronger dollar for the moment with commodity currencies lagging slightly. But as we learned from yesterday, things can quickly turn around in the coming hours but just be wary that conditions may be trickier today amid the month-end.