🌳 BOJ's Rate Hike Sparks Analysts' Criticism; Trump Proposes HODL Strategy for U.S. Govt's Crypto Holdings

The Bank of Japan (BOJ) (https://www.bloomberg.com/news/articles/2024-08-05/boj-under-fire-for-rate-hike-timing-after-japan-market-meltdown) is facing criticism for its recent interest rate hike, which has contributed to a dramatic decline in Japanese stocks and heightened volatility in global markets. After raising rates on July 31, the yen rebounded sharply, but its subsequent strength has negatively impacted exporters, leading to significant stock losses. Analysts are questioning the timing of the hike, suggesting it was poorly executed given the weak economic data, including declining consumer spending and production. Some speculate that political pressures influenced the BOJ's decision, reflecting a shift in the government’s stance toward currency valuation. While some economists still see merit in the BOJ's move toward monetary normalization, others argue that the current market turmoil is largely driven by external factors, particularly developments in the U.S. economy. As a result, many have adjusted their expectations regarding future rate hikes, with further increases now seen as unlikely in the near term.

In other news, Nvidia CEO Jensen Huang (https://www.bloomberg.com/news/articles/2024-08-05/nvidia-s-huang-sold-323-million-of-stock-in-july-ahead-of-swoon) sold approximately $323 million worth of shares in July as part of a pre-arranged trading plan, bringing his total sales since June to nearly $500 million. Huang's net worth dropped by $5.9 billion amid the recent market shift, reducing his ranking among the world's wealthiest individuals to 16th place. The July sales were part of a broader trend, with Nvidia insiders collectively cashing out over $1 billion in shares this year, while Huang himself has sold about $1.4 billion since 2020.

Yesterday, Asian markets opened amid the fallout from a historic 12.4% drop in Japan's Nikkei index, marking its largest single-day decline since the infamous Black Monday in 1987. This selloff has created significant global volatility, raising concerns among traders, despite the lack of a clear catalyst for such a drastic fall. Factors such as overextended yen carry trades, a potentially hawkish stance from the Bank of Japan, and fears surrounding the inflated tech bubble in the U.S. contributed to the turmoil. Economic indicators, including robust service purchasing manager index data from both Japan and the U.S., suggest underlying strength rather than collapse, prompting debate about the severity of the market reaction.

The U.S. stock markets also experienced their largest one-day losses in nearly two years, with the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average falling 3.4%, 3%, and 2.6%, respectively. Every sector of the S&P 500 fell at least 1.7%, led by a 3.8% decline in information technology. Major tech stocks like Nvidia and Apple saw steep declines, while the VIX, a measure of market volatility, surged, reflecting heightened investor fear. The yield on 10-year Treasuries dropped to 3.78%, as traders increasingly expected aggressive interest rate cuts from the Federal Reserve, with an 82% likelihood of a half-percentage-point cut in September. Investors will be looking out for the Initial Jobless Claims data due Thursday, 8 August, at 20:30 SGT, which will provide insight into whether the U.S. Economy is heading for a recession.

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