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Japanese stocks sell off on yen rally concernsThe sharp declines came as the Japanese yen rose to its highest level sinc...
08/04/2024

Japanese stocks sell off on yen rally concerns
The sharp declines came as the Japanese yen rose to its highest level since March against the dollar after the BOJ raised interest rates on July 31...
Japanese stocks plunged on August 1 and this morning (August 2), as the yen's strong rally weighed on exporter stocks and the Bank of Japan's (BOJ) rate hike dragged down real estate stocks.

The Nikkei 225 indexes of the Topix of Japanese stocks fell as much as 5% each at one point this morning, after the Nikkei fell 2.6% and the Topix fell 3.2% on August 1.

In addition to interest rate and exchange rate fluctuations in Japan, the country's stock market was also affected by the August 1 sell-off in the US stock market. Wall Street investors dumped stocks after the latest economic data raised concerns about a recession.

Not only in Japan, the sell-off was recorded in most other major markets in Asia this morning, with the Australian market down 2.1%, South Korea down 3.2%, Hong Kong down more than 2%, and mainland China down nearly 0.5% at around 11am Vietnam time.

The sharp decline was recorded in many large-cap Japanese stocks this morning, such as technology investment group SoftBank down more than 5%; two commodity trading companies Mitsui and Marubeni down more than 8% and 6% respectively. Shares of semiconductor company Tokyo Electron fell more than 9%.

On August 1, real estate stocks led the decline in the Japanese stock market, down 3.7%. Automobile stocks fell 6.6%.

The sharp declines came as the yen rose to its highest since March against the dollar after the BOJ raised interest rates on July 31 and the Federal Reserve signaled on the same day that it could start cutting rates in September.

“The BOJ’s rate hike raises two concerns. One is that the yen’s appreciation will be a headwind for Japanese exporters, who have benefited from the yen’s depreciation until recently. And the other is whether the economy can withstand the pressure of rising interest rates. There are still many uncertainties,” portfolio manager Tesuo Seshimo of Saison Asset Management Co. told Bloomberg.

The outlook for corporate earnings in the second quarter of 2024 is another reason for the decline. Japan's largest company by market capitalization, Toyota, saw its shares fall 8.5 percent, partly due to a stronger yen and partly due to a miss in its operating profit. Toyota was the biggest contributor to the Topix's decline on Aug. 1.

On July 31, the BOJ raised its benchmark interest rate to "around 0.25 percent" from 0-0.1 percent previously. Following the BOJ's move, Japan's largest bank, Mitsubishi UFJ Financial Group Inc., raised its short-term benchmark interest rate, the rate at which home mortgages and other loans are priced.

At a press conference after the market closed on Aug. 1, BOJ Governor Kazuo Ueda made remarks that reinforced the view that interest rates will continue to rise.

"Governor Ueda seemed to be a different person at yesterday's press conference. He was tough. “The prevailing view in the Japanese stock market that ‘interest rates will not rise and the yen will not rise’ has changed,” Tomoichiro Kubota, senior analyst at Matsui Securities, told Bloomberg.

The decline in Japanese stocks comes after both the Nikkei 225 and Topix indexes hit record highs this year on the back of a weaker yen and a rally in global technology stocks. Tech stocks have also been sold off heavily recently as the artificial intelligence (AI) hype cooled and the market became concerned about the BOJ’s policy path.

08/03/2024

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The Bank of England has cut interest rates for the first time since the start of the Covid pandemic.The Bank’s monetary ...
08/03/2024

The Bank of England has cut interest rates for the first time since the start of the Covid pandemic.

The Bank’s monetary policy committee (MPC) voted by a narrow majority to cut its base rate by a quarter of a percentage point to 5%, down from a 16-year high of 5.25%.

The MPC was split by five votes to four, with the governor, Andrew Bailey, casting the deciding vote for the first reduction in borrowing costs since March 2020.

08/03/2024

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Nasdaq 100 Is in Correction Territory With AI Darlings SinkingThe index closed down 2.4% on Friday, taking its loss sinc...
08/03/2024

Nasdaq 100 Is in Correction Territory With AI Darlings Sinking
The index closed down 2.4% on Friday, taking its loss since a July 10 record to more than 10%, passing the threshold that meets the definition of correction. The index closed at its lowest since mid-May on Friday, but remains up nearly 10% for the year. Nasdaq 100 Index into correction territory, wiping out more than $2 trillion in value in just over three weeks, as traders unwound bets that had been minting money for over a year.
The index closed down 2.4% on Friday, taking its loss since a July 10 record to more than 10%, passing the threshold that meets the definition of correction. The index closed at its lowest since mid-May on Friday, but remains up nearly 10% for the year.
Several megacaps have seen concentrated selling, with both Nvidia Corp. and Tesla Inc. down more than 20% from recent highs, putting them in bear-market territory. Meanwhile Microsoft Corp. and Amazon.com Inc. have each lost more than 10%. However, with the exception of Tesla, major big tech stocks remain higher for the year.
“This is an amazing about-face, like we’ve crashed into a brick wall,” said Bill Stone, chief investment officer at Glenview Trust Co. “We had a heck of a straight line up, and those don’t last forever, especially since expectations got so high. You clearly can’t just own tech; you need some exposure to the more defensive areas.”
Amazon and Intel Corp. were among the biggest decliners. Amazon fell 8.8% on Friday on heavy AI spending plans, while Intel plummeted 26% on a grim forecast, its biggest one-day percentage drop since at least 1982, according to data compiled by Bloomberg.
Red flags have been waving for the better part of the year, whether it is that tech stocks are too expensive, AI-fueled gains are overdone, or the market is too concentrated. With some high-profile earnings disappointments cementing those views, investors are now heeding those warnings, pocketing gains and plowing into previous laggards, like utilities, which have been leading the market over the past two sessions Treasury yields tumbling as traders bet on the Federal Reserve cutting interest rates at its next meeting in September.
Read more: Big Tech Fails to Convince Wall Street That AI Is Paying Off
The Cboe NDX Volatility Index, which measures the 30-day implied swings in the Nasdaq 100 Index, briefly spiked above 28, its highest since March 2023. Volatility indexes for Apple and Amazon have also jumped of late. And the Cboe Volatility Index, or VIX, is also at its highest in more than a year.
The rotation away from tech began in earnest after reading on June prices showed cooling inflation, stoking bets the Fed is ready to cut rates. The initial beneficiary was small-capitalization stocks, with the Russell 2000 rising nearly 4% since early July, compared with the Nasdaq 100’s steady decline.
The so-called Magnificent Seven megacap tech companies accounted for much of the S&P 500’s first-half advance, with the cap-weighted index beating its equal-weight cousin by the most since 1999. Valuations soared, with the S&P 500’s information technology index seeing its highest price-to-earnings ratio since 2002.
The tech rout picked up steam after Alphabet Inc. unveiled capital expenses that topped estimates by $1 billion in its July 23 earnings report, owing mostly to outlays for artificial intelligence. That was enough for investors, who have grown wary of seeing unbridled spending with only distant prospects for higher revenue, to head for the exit. Microsoft joined Alphabet and Amazon with a signal of heavy spending on AI.
“I don’t think they’d be doing this kind of spending if demand wasn’t there, which bodes well for the long-term AI story,” said Stone, who said he had been adding to his Microsoft position amid the selloff. “However, there are all kinds of questions about the timing of AI demand, AI spending, and this kind of selling are the bumps in the road that come with that kind of thing.”
There have been some bright spots. Apple Inc. rose 0.7% on Friday, following a positive earnings report, and Meta Platforms Inc. rose earlier this week on its own results.

JPMorgan chief Jamie Dimon issues ominous warning about US economyJamie Dimon - head of the world's biggest bank JPMorga...
08/02/2024

JPMorgan chief Jamie Dimon issues ominous warning about US economy
Jamie Dimon - head of the world's biggest bank JPMorgan Chase - has said that he cannot rule out a 'hard landing' for the US economy.
A 'hard landing' is when there is a marked economic slowdown following a period of rapid growth.
When asked about the worrying prospect during a CNBC interview this morning, Dimon said: 'Could we actually see one? Of course, how could anyone who reads history say there's no chance?'
America's most influential banker also said that the worst outcome for the US economy would be 'stagflation' - which is when inflation continues to go up, but unemployment is high and growth slows.
Economists consider stagflation, last seen in the US in the 1970s, to be worse than a recession. It would send stocks down, hitting 401(K)s and other retirement savings.
The billionaire banker said, in another interview last month, that he worried the US economy 'looks more like the '70s than we've seen before.'
Dimon's warning comes after an analyst who works for him at JPMorgan warned the stock market could soon become volatile - despite reaching record highs this year.
Since taking over in 2006, Dimon, 68, has turned JPMorgan - which has retail as well as investment arms - into the world's biggest and most powerful bank with $4 trillion of assets.
Speaking at the JPMorgan Global China Summit in Shanghai, Dimon said: 'I look at the range of outcomes and, again, the worst outcome for all of us is what you call stagflation, higher rates, recession.
'That means corporate profits will go down and we'll get through all of that. I mean, the world has survived that but I just think the odds have been higher than other people think.'
Despite this, he said the consumer is currently 'in pretty good shape' and would still be even if the economy slips into a recession.
'Unemployment has been below 4 percent now for a year and a half or two years,' he said.
'Wages are going up at the low end which I think is a very good thing. Home prices are up, stock prices are up. Even if we go into a recession, they are in pretty good shape.'
He added that consumer confidence levels are low, which he said was mostly due to inflation.
The newly released minutes from the Federal Reserve's latest meeting showed that policymakers have grown more concerned about inflation - with some members indicating there was a lack of confidence to begin cutting interest rates and easing monetary policy.
The central bank voted to hold benchmark borrowing rates steady at a 23-year-high of between 5.25 and 5.5 percent earlier this month.
Dimon told CNBC that he thinks interest rates could still go up 'a little bit.'
'I think inflation is stickier than people think. I think the odds are higher than other people think, mostly because the huge amount of fiscal monetary stimulus is still in the system, and still maybe driving some of this liquidity,' he said.
According to the CME FedWatch Tool, around half of analysts are forecasting a 25 basis points cut by September.
The central bank has previously predicted a three quarter-percentage cut throughout 2024, but has repeatedly insisted this will only happen if there is confidence inflation is moving sustainably toward its 2 percent target.
But Dimon warned that while market expectations are 'pretty good, they're not always right.'
He added: 'The world said [inflation] was going to stay at 2 percent all that time. Then it says it will go to 6 percent, then it said it's going to go to four... It's been a hundred percent wrong almost every single time. Why do you think this time is right?'
Higher inflation and higher rates are typically bad for the stock market. They mean consumers spend less, while also making it more expensive for businesses to borrow money.
A hard landing and a recession would jolt stocks.
Dimon's comments come after JPMorgan's chief market strategist Marko Kolanovic issued a note on Monday forecasting that the S&P 500 could fall 20 percent to 4,200 by the end of the year.
Kolanovic urged investors not to turn bullish despite the Dow Jones Industrial Average breaching the 40,000-point threshold for the first time last week.
The S&P 500 also marched to 5,297 on Friday, marking 23 record closes this year so far - exciting Americans with 401(K)s containing funds invested in the stock market
Most Americans have at least some of their 401(K) and Individual Retirement Account invested in the Dow Jones, the S&P 500 and the Nasdaq.
They have benefited from a buoyant stock market over the past 12 months, and particularly since the start of this year.
Kolanovic reasoned that interest rates are likely to stay in restrictive territory for longer, combined with lower-income consumers showing signs of weakness and high levels of geopolitical uncertainty, according to Business Insider.
'With very high equity valuations, we do not see equities as attractive investments at the moment and we don't see a reason to change our stance,' Kolanovic said.
However he is fast becoming the exception among big bank analysts, after Morgan Stanley's Mike Wilson - the only other notable bear left on Wall Street - turned bullish earlier this week.
Wilson, who is known as one of Wall Street's most prominent pessimists, said he now sees the S&P 500 rising 2 percent by June 2025 - which is a major turnaround from his previous forecast that the index would tumble 15 percent by the end of the year.

Stock market clues suggest Trump will lose the upcoming electionWith six months to go until the presidential election, h...
08/02/2024

Stock market clues suggest Trump will lose the upcoming election
With six months to go until the presidential election, hidden within the stock market may be clues as to who will occupy the White House come January.
Historically, the state of the US economy in the lead-up to an election has correlated strongly with how the country votes.
Investors often look for patterns in how markets have behaved in the past to predict what might happen in the future.
An analysis of S&P 500 returns over the last 90 years reveals that in election years when the sitting president is re-elected, economic growth is strong beforehand.
By contrast, when the incumbent loses, America's biggest companies appear to be losing steam - sowing seeds of doubt as to the country's economy and leadership.
The performance of the S&P 500 index this year may therefore shine some light on who will win the election in November, when incumbent president Joe Biden will be challenged for a second term by Donald Trump.
Currently, it points to a Biden victory - since it is up more than 5 percent in just four months.
'This specific indicator [the stock market] is trending with the average path for incumbency victories,' said Courtney Gelman, managing director at brokerage Strategas, which published the research.
She added: 'But I would note that we look at several market, economic, and other factors for elections.
'Some of those, like this chart and the US' avoidance of a recession to-date look positive for Biden's re-election.
'Whereas others, such as disposable income growth and Biden's approval rating, look negative.
'We'll be monitoring those indicators, along with others such as the misery index (inflation rate and unemployment rate) ... and the S&P 500's performance for the 3-month period leading into the election as we approach November.'
She also said they would track the price of stocks linked to Trump or Biden.
For example, thanks to Biden's endorsement of electric cars, shares in companies that make or are related to EVs are likely to benefit from additional Biden leadership. Those include Tesla, Ford, and smaller firms like Rivian.
And during Trump's first term, the price of shares in private prisons ballooned as Trump expanded incarceration and caused their earnings to rise.
Prison giants include CoreCivic and the GEO Group. In 2016, Trump's election victory saw shares of CoreCivic rally 43 percent in a day. During the race, rival candidate Hillary Clinton had said she would end federal contracts with private prisons.
Bret Kenwell, an investment analyst at eToro, agreed that the S&P 500's performance this year also pointed towards another Biden term, but was apprehensive.
'The chart is compelling,' he said, but added that 'without a crystal ball' he was hesitant to draw conclusions.
'This year, stocks have performed relatively well on the back of a mostly better-than-expected US economy, a solid earnings outlook, and expectations the Fed will cut interest rates sometime in 2024,' he said.
Nonetheless, Kenwell suggested there was still plenty of time for things to change. 'We know there could be several unknown developments between now and November,' he added.
Peter Gallagher, the managing director of Unified Retirement Planning Group in New York, said that 2024 has been somewhat different from many previous election years.
'The inflation issue within the United States is one that hasn't quite gone away,' he said. As a result, with inflation chipping away at Americans' buying power, overall consumer confidence is low.
'Even my higher net worth clients are more dialed into the cost of living - and how much more it costs for them to fill up their gas tank than it did five years ago,' he said.
'If I were going to poll my my clients, a good litmus test would not necessarily how the S&P 500 is doing, because they don't necessarily look at that as much. It would just be the cost of living.'

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