Nikkei 225

Just when traders thought that the biggest and most violent 3-day short squeeze in 7 years was about to end...

... a squeeze that has resulted in 3 consecutive 1%+ sessions for the S&P for the first time since October 2011, overnight we got one of the Fed's biggest faux-hakws, St. Louis Fed's Jim Bullard, who said that it would be "unwise" to continue hiking rates at this moment, and hinted that "if needed", the most natural option for the Fed going forward would be to do further Q.E.

It has been a morning session of two halves.

In Asia, the mood was somber, and stocks fell with the Shanghai Composite (+1.1%) outperforming on another late session binge-fest by the National Team, and the Nikkei 225 (-1.4%), Hang Seng -1%, Kospi -0.2%, ASX -0.6%, Sensex -0.4% and the South Korean Won all down following news of the biggest Chinese Yuan devaluation in five weeks.

One day after markets saw a violent return of optimism, which sent stocks around the globe and US equity futures soaring (the US was closed for President's Day) driven by terrible Japanese and Chinese economic data which in turn hinted at more central bank easing, animal spirits have cooled off despite some truly unprecedented Chinese credit numbers.

Ealier today, we quoted John Plassard, senior equity-sales trader at Mirabaud Securities LLP in Geneva, who explained the surge in global risk as follows: "The Chinese market didn’t react as bad as we feared and with the weak export data there is some big hope that he central banks will react quite fast... It’s a mix of hope of intervention from the Asian central bank, short squeeze and also a relief in some energy and banking sectors, the most shorted sectors."

• China’s Yuan Makes Largest Gain Since 2005 on PBOC Cue (WSJ)
• Japan's Nikkei soars over 7%, for its biggest gain since 2008 (BBG)
• Global shares rise as firmer Chinese yuan eases deflation fears (Reuters)
• Banks' Surge Takes Europe's Stock Rally Into 2nd Day; HSBC Rises (BBG)
• Oil extends rally on prospects OPEC could act to counter low prices (Reuters)
• Europe's Higher-Yielding Bonds Benefit as Global Turmoil Eases (BBG)
• Republicans gear up for Supreme Court battle after Scalia's death (Reuters)