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In this report I cover the early market action from London on Wednesday, August 1st, 2018. I look briefly at the precious metals, the stock market, the dollar and the oil price.

Today I go into detail about the Japanese yen Carry Trade and what it means to the overall health of world financial markets. I explain how the Bank of Japan and the Japanese government have implemented a policy of keeping their currency weak and their interest rates near zero or negative all along the yield curve.

I explain how that policy has helped other Central Banks, especially the Fed, withdraw some of the punch from the punch bowl as investors and speculators have been able to borrow in Japanese yen for almost nothing and be assured that the value of the yen has also remained low. This has helped keep assets prices high but in the last few days we have seen Japanese government bond or JGB yields spike to 18-month highs.

My take is that this spike higher in JGB yields could be a warning signal pointing to a massive disruption of the Yen Carry Trade and a great deal of uncertainty in financial markets around the world.

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