Global Market Volatility Amid Central Bank Decisions and Corporate Earnings

1

Due to market volatility caused by uncertainty over economic data and Federal Reserve interest rate policies, investors are cautious about the gap between summer market expectations and actual performance. The Nasdaq 100 index surged 3% on Wednesday but fell back almost the same amount on Thursday. The S&P 500 index rose 1.6% before falling 1.4%. As the market anticipates a significant reduction in borrowing costs, the yield on 10-year US Treasury notes fell below 4%, reaching a new low since February 1.

Analysis:

Impact on FX:Market volatility could strengthen the USD as a safe-haven currency.

FX Pair:USD/JPY, EUR/USD, GBP/USD

Impact on Shares:US Stock Market: Increased volatility expected.

Companies:General Market Indices

2

Amazon's sales data fell short of expectations, causing its stock to drop 5% in after-hours trading. Intel's quarterly earnings report missed expectations across the board following two days of massive layoffs, leading to an 18% drop in its stock in after-hours trading.

Analysis:

Impact on FX:Negative earnings could weaken the USD due to decreased investor confidence.

FX Pair:USD/JPY, EUR/USD, GBP/USD

Impact on Shares:Tech Sector: Negative impact on tech stocks.

Companies:Amazon (AMZN), Intel (INTC)

3

Japanese stocks experienced their largest drop since 2020, driven by the Bank of Japan's (BOJ) unexpected rate hike and hawkish comments from Governor Kazuo Ueda. The benchmark Topix index of the Tokyo Stock Exchange has fallen over 10% from its July peak, with an 8% drop over two days. The yen's appreciation has hurt exporters, and financial stocks have also seen significant declines due to profit-taking.

Analysis:

Impact on FX:Rate hike and hawkish stance could strengthen the JPY.

FX Pair:USD/JPY, EUR/JPY, GBP/JPY

Impact on Shares:Japanese Market: Negative impact on export and financial stocks.

Companies:Mitsubishi UFJ Financial Group (8306.T), Sony (6758.T)

4

This week, the world's three major central banks adopted different interest rate policies, reflecting a long-awaited but potentially short-lived divergence in monetary policy. The Bank of Japan unexpectedly raised rates on Wednesday, aiming to lift the benchmark rate from zero; the Federal Reserve kept rates unchanged but hinted at a possible rate cut in September; and the Bank of England cut rates for the first time since the pandemic began. Despite short-term policy differences, most economists expect other major central banks to follow suit once the Fed begins to cut rates. Investors face greater uncertainty, and divergent policies among central banks could increase market volatility.

Analysis:

Impact on FX:Divergent central bank policies could lead to increased currency volatility.

FX Pair:USD/JPY, GBP/USD, EUR/USD

Impact on Shares:Global Markets: Increased volatility expected.

Companies:General Market Indices

5

Apple Inc. predicts that its newly introduced AI features will drive an upgrade wave for iPhones, helping the company overcome sales slowdowns due to weakness in the Chinese market. CEO Tim Cook stated on a conference call that the new Apple Intelligence features will give customers a reason to buy new phones. Despite overall positive third-quarter results, sales in China fell by 6.5%. AAPL shares were flat in after-hours trading.

Analysis:

Impact on FX:Positive sentiment around AI features could strengthen the USD.

FX Pair:USD/JPY, EUR/USD, GBP/USD

Impact on Shares:Tech Sector: Potential positive impact on tech stocks.

Companies:Apple (AAPL)

6

The cable manufacturing industry is playing a critical role in the surge in green energy demand. French company Nexans SA's plant in Halden, Norway, produces the world's largest high-voltage cables, which are used to transmit electricity from offshore wind farms and solar power plants over hundreds of kilometers. Demand for these cables is rapidly growing, but supply is far from meeting demand, with orders already booked until 2028 and beyond.

Analysis:

Impact on FX:Growing green energy demand could strengthen the EUR.

FX Pair:EUR/USD, EUR/GBP

Impact on Shares:European Market: Positive impact on green energy sector stocks.

Companies:Nexans SA (NEX.PA)

7

Australian pension fund Mercer Superannuation Australia Ltd was fined $7.3 million for “greenwashing,” marking the conclusion of the Australian Securities and Investments Commission's (ASIC) first lawsuit on this issue. In February last year, ASIC sued Mercer for misleading investors in the marketing of some sustainable products. The Federal Court ruled on Friday, imposing the agreed-upon fine from earlier hearings.

Analysis:

Impact on FX:Regulatory actions could weaken the AUD.

FX Pair:AUD/USD, EUR/AUD, GBP/AUD

Impact on Shares:Australian Market: Negative impact on companies involved in greenwashing scandals.

Companies:Mercer Superannuation Australia Ltd

8

Warren Buffett has sold shares of Bank of America (BofA) for 12 consecutive trading days, reducing his stake by 8.8% (about $3.8 billion) since mid-July. Despite the sales, Berkshire Hathaway still holds 94.2 million shares of BofA worth $37.2 billion. Buffett has not publicly stated the reasons for the sell-off. This investment began in 2011 when BofA's stock price was around $5. Although BofA's stock price rose 31% earlier this year, it has fallen more than 10% since the sell-off, currently at $39.50.

Analysis:

Impact on FX:Significant stock sales by major investors could weaken the USD.

FX Pair:USD/JPY, EUR/USD, GBP/USD

Impact on Shares:US Banking Sector: Negative impact on Bank of America and possibly other banking stocks.

Companies:Bank of America (BAC)

9

BNP Paribas is in exclusive talks with AXA Group to acquire AXA's asset management division for €5.1 billion ($5.5 billion). The deal would make BNP Paribas one of Europe's largest asset managers. The transaction is expected to be signed by the end of the year, with the combined entity managing about €1.5 trillion in assets.

Analysis:

Impact on FX:Positive acquisition news could strengthen the EUR.

FX Pair:EUR/USD, EUR/GBP

Impact on Shares:European Financial Sector: Positive impact on BNP Paribas and AXA stocks.

Companies:BNP Paribas (BNP.PA), AXA Group (AXA.PA)

10

Bank of England Governor Andrew Bailey stated that interest rates would remain above pre-pandemic levels as policymakers cut rates for the first time since early 2020. In an interview with Bloomberg TV, Bailey noted, “Don't expect rates to go back to zero because zero rates were a product of huge global shocks.” He cited the financial crisis and pandemic, suggesting that while rates would be lower than now, they wouldn't return to zero.

Analysis:

Impact on FX:Interest rate policy could strengthen the GBP.

FX Pair:GBP/USD, EUR/GBP, GBP/JPY

Impact on Shares:UK Market: Potential stabilization of financial stocks.

Companies:General Market Indices

11

Following the Bank of Japan's rate hike, Japanese retail investors have significantly reduced their bullish bets on the Mexican peso against the yen, reaching the lowest level this year, indicating that domestic rate hikes may reduce their interest in high-yield overseas assets. According to data from the Tokyo Financial Exchange's Click 365 platform, on July 31, the day of the BOJ's rate hike, the proportion of long positions held by Japanese forex margin investors in the peso against the yen fell to 87%, matching the lowest level this year. The ratio was as high as 94.5% in early June.

Analysis:

Impact on FX:Reduced interest in high-yield assets could strengthen the JPY.

FX Pair:MXN/JPY, USD/JPY

Impact on Shares:Japanese Market: Potential decrease in capital outflows to high-yield assets.

Companies:General Market Indices