Global market volatility intensifies: Bank of Japan policy turning point impacts exchange rates, US stocks rebound, driving commodities higher

The Bank of Japan initiated a rate hike cycle, creating a complex market landscape. Although policy shifts should be favorable for the yen, the actual trend has shown the opposite—USD/JPY surged to around 158, with a gain of 1.39%. Japanese Finance Minister Shōzō Katayama issued a strong warning, stating that appropriate measures will be taken to address excessive exchange rate fluctuations, directly responding to the G7 online meeting.

There is a deeper logic behind this seemingly contradictory phenomenon. Global macro hedge funds are facing changing financing environments— as Japanese bond yields broke through 2% (a new high since 1999), the previously attractive yen carry trade has significantly underperformed. Meanwhile, the Federal Reserve launched a reserve management purchase program, bringing quantitative easing-like market effects, further widening the expected divergence between the Bank of Japan’s monetary policy and the Fed’s future rate cuts.

US Stocks Rebound, Commodities Rise Together

Market risk sentiment has clearly improved. Last Friday, as the “quarter-end settlement day,” the three major US stock indices generally rose: Dow Jones up 0.38%, S&P 500 up 0.88%, Nasdaq up 1.31%, and China Golden Dragon Index also rebounded 0.86%. European markets also moved higher, with Germany DAX 30 up 0.37% and the UK FTSE 100 up 0.61%.

Micron Technology’s first-quarter earnings were strong, and the VIX fear index fell by 11.57%, laying a foundation for a market rebound. Tech stocks performed notably, with Oracle rising 6.6%, NVIDIA up 3.9%, and Broadcom up 3.2%, with NVIDIA becoming the best-performing Dow component. However, Nike’s stock fell as its China business cooled, dropping as much as 10.5%.

In commodities, performance was eye-catching. Silver prices hit a new high, breaking through $67.0, driven by investment demand and supply tightness. Gold closed for the second consecutive day with a doji star, at $4,338.6 per ounce, up 0.14%. Crude oil also rose, with WTI crude up 1.14% to $56.5 per barrel.

Bond Market Restructuring, Interest Rate Environment Changes

The US 10-year Treasury yield rose 3 bps to 4.15%, but more notably, the 2-year Treasury yield increased by 3.2 bps to 3.492%. France’s 30-year bond yield rose to 4.525% after negotiations for the 2026 budget broke down, reaching the highest since 2009.

Divergence among Fed officials is becoming more apparent. New York Fed President Williams stated that there is no urgency to further adjust interest rates at present, as recent employment and inflation data support the current policy stance. Cleveland Fed President Harker believes that after a cumulative 75 bps rate cut, the Fed does not need to adjust rates in the coming months, and should maintain the target range of 3.5% to 3.75% at least until spring. The latest forecasts show officials only expect one rate cut next year, marking the end of the easing cycle.

Consumer Confidence Dips, Economic Outlook Uncertain

The US December Consumer Confidence Index fell short of expectations, with the University of Michigan’s final index rising to 52.9, below the expected 53.5. The current conditions index dropped to a historic low of 50.4, despite the expectations index rising to a four-month high, consumers’ views on big-ticket purchases have worsened to the lowest level in history. Joanne Hsu, the survey director, noted that although there are signs of improvement at year-end, consumer confidence remains nearly 30% below the beginning of the year, and economic conditions remain the primary concern.

Crypto Assets Show Mild Volatility

Bitcoin fluctuated around , with a 24-hour change of -0.02%. Ethereum is at $2950, up 0.09% over 24 hours. In Hong Kong stocks, the Hang Seng Index night session futures closed at 25,843 points, up 118 points.

Global Policies and Corporate Developments

Trump signed an executive order confirming that the US will land on the Moon and establish a lunar base by 2028, temporarily shelving plans for Mars. US House Republicans also called for congressional regulation of AI chip exports, similar to military sales, with any processor performance equal to or higher than NVIDIA’s H200 to be included under regulation.

ByteDance is expected to reach a profit of $50 billion this year, a record high, with approximately $40 billion in net profit accumulated in the first three quarters, exceeding internal expectations. The company has signed an agreement to spin off TikTok’s US operations, establishing a joint venture controlled by US investors such as Oracle.