Morning Bid: Yield curve control morphs. Tom Westbrook’s outlook for the day’s markets in Europe and worldwide With the Bank of Japan reframing its 1% ceiling on 10-year government bond rates as an “upper bound” rather than a strict objective, Japan’s yield cap has transformed into a reference rate.

It will continue to purchase bonds, but only time will tell if and to what extent it will block yield increases over 1%. The Nikkei newspaper hinted at the shift, and when markets believed the rumor, they sold the truth.

The yen fell to 150 per dollar once more. Following the announcement, Japanese government bond futures surged after hitting a low point in the morning session over ten years ago. The Nikkei 225 (.N225) had a 0.5% increase.

For now, investors believe that the dollar and U.S. interest rates will continue to dominate, leaving the yen to linger at its lowest effective rate ever.

Higher Japanese interest rates may eventually persuade investors in the largest creditor country in the world to hold onto their money domestically rather than invest in an excessive amount of overseas real estate. That could ultimately lead to some improvement for the weak yen.

In the meanwhile, Treasury trade had a slight uptick as a result of the perception that an anchor of some kind still exists.

The emphasis of the bond market now turns to the United States, where the Treasury announces its plans to sell bonds, and the Federal Reserve meets.

The U.S. Treasury Department announced on Monday that it anticipates borrowing $776 billion in the fourth quarter, which is $76 billion less than it predicted in July. The Federal Reserve’s policy decision and comprehensive refunding plans are also coming on Wednesday.

Data on inflation and GDP in Europe is expected later on Tuesday. A sudden downturn in Chinese industrial activity worldwide dashed hopes that the country’s economy had reached a bottom and that a weak but steady rebound was underway.

The MSCI broadest index of Asia-Pacific equities outside Japan fell 0.9% due to declines in Hong Kong and Shanghai.

According to an executive, Samsung Electronics (005930. KS) reported its highest quarterly profit of the year, indicating that the semiconductor sector had hit its lowest point. Shares remained stable.

Australia’s largest shareholder, Origin Energy (ORG.AX), rejected a Brookfield consortium’s takeover offer. At the same time, Treasury Wine Estates (TWE.AX) agreed to pay $900 million to acquire competitor DAOU Vineyards in the United States, gaining exposure in a market it has long battled to control.

As the fighting grew more intense, Hamas said that its fighters outside of marketplaces launched anti-tank rockets against Israel’s invading forces in Gaza early on Tuesday. Significant developments that could affect Tuesday’s markets include:

Economics: Consumer confidence, U.S. employment costs, GDP, and pricing in the eurozone Profits: Bouygues, BASF, BP, Pfizer, Caterpillar, Anheuser-Busch InBev