Investors are navigating a “wall of worry” today, Wednesday, 21 January 2026, as a cocktail of geopolitical tensions continues to shake equity markets. While stocks in Europe and the U.S. struggle with trade uncertainty, the Japanese bond market has seen a notable “dead cat bounce” following a brutal selloff earlier in the week.
Global stock indices are largely in the red as traders price in three major geopolitical risks.
The tariff stand-off is one, in anticipation of President Trump’s upcoming economic speech, which has kept buyers on the sidelines, as threats of 10% universal tariffs and specific 60% levies on Chinese components weigh heavily on multi-national corporations.
There is also the Chagos dispute, seeing the diplomatic rift between London and Washington over the Islands deal (Diego Garcia) fuel a rare friction between the two closest Western allies, impacting UK-linked defense and security stocks.
And of course, the Greenland tensions, a odd but escalating trade spat between the U.S. and Denmark/EU over Greenland which has raised the specter of “Arctic Tariffs,” hurting Nordic markets and European industrial sentiment.
However, following several days of rising yields (and falling prices), the Japanese Government Bond (JGB) market staged a significant recovery today.
The benchmark 10-year JGB yield retreated to 1.05% after briefly touching a multi-year high of 1.12% yesterday.
Investors moved back into the safety of Japanese debt as domestic inflation data came in slightly cooler than expected, easing immediate fears that the Bank of Japan (BoJ) would be forced into an aggressive rate hike in February.
The Nikkei 225 closed down 0.8%, as the stronger Yen (briefly hitting 145 per dollar) pressured export-heavy sectors like electronics and machinery.
Consequently, Hiroshi Tanaka, Chief Strategist at Tokyo Wealth Management has said:
“What we are seeing in the JGB market is a classic corrective bounce. The selloff was overextended, and with the geopolitical noise coming out of the U.S. and Europe, investors are reminded that sovereign bonds, even Japanese ones, still serve as a necessary hedge in a volatile portfolio.”
Beyond bonds, the market “fear bid” is visible in Gold and the Swiss Franc, though the U.S. Dollar continues to dominate the currency space (as reported earlier) as investors await the White House’s next move.
