Global Assets in Motion: Bank of Japan's Rate Hike Shakes Up Forex Market, Tech Stocks Lead US Stocks Rebound

Market Pulse Overview

Last Friday, the US stock market experienced the “Quarter-End Settlement Day,” with all three major indices rising across the board, while the cryptocurrency market remained under pressure. According to the latest data, Bitcoin fell 0.34% in 24 hours, currently at $88,020; Ethereum declined 0.03%, now at $2,976. In contrast, traditional markets are more optimistic—US stock indices generally rose, with the Dow Jones Industrial Average up 0.38%, the S&P 500 up 0.88%, and the Nasdaq up 1.31%. In Hong Kong stocks, the Hang Seng Index night session futures closed at 25,843 points, opening 152 points higher than yesterday.

Tech stocks led the rebound. Oracle’s stock surged 6.6%, while Nvidia and Broadcom increased by 3.9% and 3.2%, respectively. Nvidia performed the best, becoming the strongest component of the Dow Jones year-to-date. However, Nike’s stock plummeted 10.5% due to weak performance in its China business, forming a stark contrast.

Commodity Markets Build Momentum, Weak Yen Moves Global Markets

The most notable movement is in commodity markets. Silver prices rose above $67.0, driven by investment demand and supply tightness, reaching a historic high. Meanwhile, gold closed for the second consecutive day with a doji star, currently at $4,338.6 per ounce, up 0.14%. The oil market also showed strength, with WTI crude rising 1.14% to $56.5 per barrel.

The forex market was dominated by the Bank of Japan’s rate hike decision. USD/JPY surged 1.39%, approaching the 158.0 level. This reflects market disappointment after the BOJ’s 25 bps rate increase, failing to meet expectations of yen appreciation. The US dollar index rose 0.3% to 98.7, while EUR/USD dipped slightly by 0.12%.

Interest Rate Environment Changes, Bond Markets Under Pressure

The Bank of Japan announced a rate hike today, pushing the 10-year Japanese government bond yield above 2%, reaching the highest level since 1999. This marks Japan’s monetary policy entering a tightening cycle and has built expectations and pressure for further rate hikes.

In the US bond market, the 10-year benchmark yield rose to 4.15%, up 3 basis points from the previous trading day. The 2-year yield increased by 3.2 basis points to 3.492%. The European bond market also faces adjustment pressures—France’s 30-year government bond yield rose to 4.525%, the highest since 2009, amid stalled negotiations over the 2026 budget.

BOJ Policy Shift: Risk of Carry Trades Eases, but Concerns Remain

The BOJ’s 25 bps rate hike temporarily alleviates the risk of “carry trades” unwinding. Previously, such trades faced liquidation risks due to yen depreciation. Now, with the rate hike signal, high-leverage hedge funds face increased financing costs, easing extreme volatility temporarily. However, Japanese Finance Minister Shunichi Suzuki warned after attending the G7 finance ministers’ online meeting that, despite the rate hike, the yen is still falling sharply, and Japan will take appropriate measures to address excessive currency fluctuations.

Suzuki emphasized: “There have been obvious unilateral and violent fluctuations in the past half day, which we are concerned about.” He stated that Japan will intervene in excessive volatility driven by speculation, based on the US-Japan joint statement signed in September. He also affirmed the BOJ’s decision to hike rates based on wage and price trends, expecting close cooperation with the government to achieve a 2% inflation target amid wage growth.

Notably, although nominal interest rate differentials still exist, for highly leveraged global macro hedge funds, the yen as a funding currency has become less attractive. The Fed’s recent reserve management purchase program has had a QE-like market effect, raising questions about whether future BOJ policy adjustments will lead to faster Fed rate cuts.

US Consumer Confidence Weak, Fed Rate Cut Outlook Unclear

US December consumer confidence index rose less than expected. According to the University of Michigan’s final report, the index increased to 52.9, below economists’ forecast of 53.5. Consumers’ views on current conditions for big-ticket purchases worsened to a historic low, with the current conditions index falling to 50.4, while the expectations index rose to a four-month high.

This data reflects consumers’ cautious attitude toward the economy. Joanne Hsu, director of the survey, said: “Although there are some signs of improvement at year-end, consumer confidence remains nearly 30% below December 2024 levels, and economic conditions remain a primary concern.”

Fed officials have differing views on future policy. NY Fed President Williams stated that there is no urgency for further rate adjustments, as recent employment and inflation data have hardly changed his outlook. In an interview with CNBC, he said: “I personally do not see urgency and believe no further policy action is needed at this time. The rate cuts we’ve implemented have put policy in a very good place.”

Cleveland Fed President Loretta Mester said that after three rate cuts, the Fed does not need to adjust rates in the coming months. She opposed recent rate cuts and is more concerned about rising inflation, believing no change to the current 3.5% to 3.75% target range is necessary before spring.

Williams noted that inflation slowed to a four-year low in November, but some “technical factors” distorted last month’s report. He personally believes the Fed does not need to rush into further rate cuts. The latest projections show Fed officials only expect one rate cut next year, a significant divergence from market expectations of multiple cuts.

Upgrading AI Chip Export Controls, Urgent Regulation Needed

U.S. House Foreign Affairs Committee Republican Chairman Mike McCaul proposed the “AI Regulation Act” on Friday, requiring notification to Congress before selling AI chips to hostile countries. The draft states that any processor with performance equal to or exceeding Nvidia’s H200 will be subject to regulation. The Center for Strategic and International Studies reports that H200’s performance is about six times that of H20, which is the most powerful chip currently allowed for direct purchase by China under U.S. regulations.

This move signals an escalation in U.S. regulation of AI chip exports, adopting a congressional oversight model similar to military sales. Earlier, President Trump promised to allow Nvidia to export the H200 AI chip to China, but the introduction of this new bill suggests Congress may oppose that decision.

ByteDance Profits Hit Record High, Near Meta’s Annual Level

According to Bloomberg, citing sources on Friday, Chinese social media giant and TikTok parent company ByteDance is expected to achieve approximately $50 billion in profit in 2025, a record high. The company has already accumulated about $40 billion in net profit in the first three quarters of this year, exceeding internal expectations. If achieved, this would be close to Meta’s projected $60 billion for the year.

An internal memo revealed that ByteDance has signed binding agreements to spin off TikTok’s US operations into a joint venture with US investors, including Oracle Holdings, to ensure platform operation and reduce Chinese control. Chinese regulators have yet to comment on whether they will approve the deal.

European Stocks Rise Across the Board, Japan’s Golden Week Approaching Market Outlook

European stocks rose across the board, with Germany’s DAX up 0.37%, France’s CAC 40 up 0.01%, and the UK FTSE 100 up 0.61%. As Japan’s Golden Week approaches in May, liquidity in Asian markets will face testing, and investors should watch for potential market volatility during this period.

Today’s Key Focus

• UK Q3 GDP final annual rate
• UK Q3 current account
• US December 22 6-month Treasury auction