ORLANDO, Florida, July 22 : The Nasdaq fell on Wednesday, dragged down by software stocks ahead of some major tech earnings reports, while deepening conflict in the Middle East pushed oil prices sharply higher again and Brent crude closer to the $100 a barrel mark.
In my column today, I look at the yen’s slide to a 40-year low against the dollar. There are many reasons, including the global energy shock and yield differentials, but central to the currency’s chronic weakness is Japan’s growing policy credibility deficit in the eyes of global investors.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. Google beats quarterly revenue expectations on enterprise AI surge
2. OpenAI AI models went rogue during testing, triggering “unprecedented” breach at startup
3. BOJ on alert to price risks that may lead to faster rate hikes, sources say
4. Separate U.S. talks with Canada, Mexico test North America’s trilateral trade pact
5. Escalating Middle East war could slash global growth to 1.3 per cent in 2026, World Bank chief economist says
Today’s Key Market Moves
• STOCKS: Europe +0.6 per cent, UK +1.2 per cent to near 5-month high. Dow and S&P 500 flat, Nasdaq -0.5 per cent.
• SECTORS/SHARES: Six S&P 500 sectors rise, five fall. Utilities +2.3 per cent, comms services -1.3 per cent. Google -3 per cent in choppy trade after earnings, Tesla -3 per cent on after-the-bell earnings.
• FX: Dollar/yen holds above 163.00, euro steady around $1.14 ahead of ECB. COP hits 5-year high, NOK rises vs EUR for 14th day in last 17.
• BONDS: 2-year JGB yield 1.475 per cent, highest since 1995. U.S. yields up 3-5 bps across the curve, 20-year auction demand ok but high tail.
• COMMODITIES/METALS: Oil +3 per cent to 6-week high, Brent closes in on $95/bbl.
Today’s Talking Points
* Open-doors AI
OpenAI said on Tuesday that an autonomous agent powered by its advanced artificial intelligence models went rogue during a security test, triggering a hack that compromised AI startup Hugging Face last week. Essentially, the “unprecedented cyber incident, involving state-of-the-art cyber capabilities” was a hack into a different company’s systems that had no human involvement.
This is the stuff of nightmares for ordinary people, businesses, and regulators. The worry is it won’t be the last such breach and that those to come will potentially have much more devastating consequences. A glitch in the matrix?
* Call to action
The two-year Japanese government bond yield jumped to 1.475 per cent on Wednesday, its highest level in 31 years, as traders bet that the Bank of Japan will accelerate the pace of rate hikes. Of course, what constitutes a faster pace of rate hikes in Japan is different from elsewhere in the developed world — only one quarter-point hike is fully priced over the next six months.
The BOJ is certainly in a tough spot, with oil prices shooting higher again, the yen at a 40-year low against the dollar and an all-time low on a “REER” basis. More aggressive tightening appears to be warranted, but that would not be welcomed by Prime Minister Sanae Takaichi’s government. While the BOJ sits on its hands, the yen remains under heavy pressure.
* Meanwhile, on Main Street
As energy prices rise, so do bond yields, and so too does the pressure on households. The latest figures show the average 30-year mortgage rate is at its highest in almost a year and average gas prices are back above $4 a gallon. Both are set to rise further — the 30-year Treasury yield is having its longest stretch above 5.00 per cent since 2003, and crude is up 30 per cent in just three weeks.
On the plus side for Americans, equity markets are still holding up well, which is helping to boost the wealth effect and keep financial conditions loose. But the relief from softer-than-expected inflation readings for June will likely be short-lived, and spending power is being squeezed. Main Street may feel the pinch more than Wall Street.
What could move markets tomorrow?
• South Korea GDP (Q2, advance)
• European Central Bank interest rate decision
• U.S. weekly jobless claims
• U.S. Treasury sells $21 billion of 10-year TIPS at auction
• U.S. earnings, including Intel, Blackstone, T-Mobile
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