Global stocks, bonds, and commodities all rise, yen depreciation pressure intensifies—A quick overview of the market landscape at the end of December

Global risk appetite continues to improve. Following the Bank of Japan’s announcement of a 25 basis point rate hike, the risk of carry trade unwind has eased, and coupled with Micron Technology’s strong earnings report, major asset classes have shown steady gains. The US VIX fear index dropped sharply by 11.57%, indicating a significant improvement in market risk sentiment.

Commodity Markets Hit New Highs, Precious Metals Continue to Strengthen

Precious metals remain standout performers. Driven by investment demand and tight supply conditions, silver prices broke through the $67.0 level, reaching a record high. From a moving average perspective, silver has established a high-base pattern at elevated levels, indicating the mid-term upward momentum remains intact. Gold closed for the second consecutive day at a doji star position, fluctuating around $4,338.6 per ounce. The oil market also followed upward, with WTI crude oil rising 1.14% to $56.5 per barrel.

Stock Markets Rise Across the Board, US Major Indices Climb

Last Friday coincided with the US stock “quadruple witching” expiration, with futures and options on indices and individual stocks expiring, totaling $7.1 trillion. Against this backdrop, the three major US indices all rose—Dow Jones up 0.38%, S&P 500 up 0.88%, Nasdaq up 1.31%. Oracle led the blue-chip rally with a 6.6% gain; chipmakers performed well, with Nvidia and Broadcom rising 3.9% and 3.2%, respectively. In contrast, Nike fell 10.5% due to weak performance in the Chinese market.

In European markets, the UK FTSE 100 rose 0.61%, Germany DAX 30 increased 0.37%, and France CAC 40 was nearly flat, up 0.01%. The China Golden Dragon Index also rebounded slightly by 0.86%. Hong Kong night session futures closed at 25,843 points, 152 points higher than yesterday.

Bond Market Adjustments, Yields Rise Across All Tenors

The US 10-year benchmark Treasury yield rose 3 basis points to 4.15%, while the 2-year Treasury yield increased 3.2 basis points to 3.492%. Japan’s rate hike pushed the country’s 10-year government bond yield above 2%, reaching a new high since 1999, signaling growing expectations and pressure for future rate hikes in Japan. France’s 30-year government bond yield rose to 4.525%, the highest since 2009, amid setbacks in budget negotiations.

Forex Market: Yen Depreciation Significantly, Carry Trade Faces Challenges

USD/JPY rose 1.39%, approaching the 158.0 level. Although the rate hike by the Bank of Japan should theoretically support the yen, market performance shows that investor concerns over high-leverage carry trades have not dissipated. For global macro hedge funds, the attractiveness of the yen as a funding currency has greatly diminished, with the nominal interest rate advantage gradually weakening. Meanwhile, the US dollar index rose 0.3% to 98.7, and EUR/USD dipped slightly by 0.12%.

Crypto Assets: Bitcoin and Ethereum Slightly Adjust

Bitcoin declined 0.34% over 24 hours, currently trading near $87,710. Ethereum fell 0.72% in the same period, with prices around $29,400. The market continues to digest macroeconomic data and policy signals.

Macro Focus: Japanese Finance Minister Warns Again on Intervention, Consumer Confidence Under Pressure

Japanese Finance Minister Shunichi Suzuki stated after participating in the G7 finance ministers’ virtual meeting that Japan will take appropriate measures to address excessive exchange rate fluctuations. She specifically pointed out, “Over the past half day or few hours, there have been obvious unilateral and violent fluctuations,” emphasizing that Japan will respond appropriately in line with the September US-Japan joint statement, including addressing excessive volatility driven by speculators.

Regarding the rate hike decision, Suzuki said it was based on wage and price trends, aiming to achieve the 2% inflation target in a sustainable and stable manner. She expects the Bank of Japan to continue working closely with the government to formulate appropriate monetary policies.

The US Consumer Confidence Index also showed signs of weakness. The University of Michigan’s December final consumer sentiment index rose only 1.9 points to 52.9, below economists’ forecast of 53.5. The survey director noted, “Despite signs of improvement at year-end, consumer confidence remains nearly 30% below December 2024 levels.” The current conditions index fell to a historic low of 50.4, with consumers’ willingness to purchase big-ticket items continuing to deteriorate.

Fed Officials Signal No Immediate Need for Further Rate Adjustments

Federal Reserve Bank of New York President Williams stated that there is no urgency for the Fed to further adjust interest rates at present, as recent employment and inflation data have almost not altered expectations. He emphasized that the current rate cuts have created a favorable monetary environment, with the goal of returning inflation to 2% while maintaining stable employment.

Cleveland Fed President Mester further stated that after three consecutive rate cuts, there is no need to adjust rates in the coming months. She opposed the recent rate cuts due to concerns about rising inflation and believes that, at least until spring, there is no need to change the target range of 3.5% to 3.75%.

US November inflation data hit a four-year low, but Williams pointed out that “technical factors” have distorted the data, related to difficulties in data collection in October and early November. However, from a fundamental perspective, inflation is indeed moving toward the target, and the labor market is gradually cooling.

Company Developments: Space Policy Adjustments, AI Chip Regulation on Agenda

US President Trump confirmed that the lunar landing program will be prioritized, aiming for crewed lunar missions by 2028 and establishing initial lunar outpost elements before 2030, temporarily shelving Mars missions. This is his first major space policy move in his second term, intended to surpass China’s lunar exploration plans. SpaceX’s former client, billionaire Elon Musk, has sworn in as NASA’s 15th Administrator.

US House Republicans proposed the “AI Regulation Act,” requiring notification to Congress for AI chip sales to hostile countries. Any processor with performance equal to or higher than Nvidia’s H200 will be subject to regulation. This contrasts with Trump’s early-month promise to allow Nvidia to export H200 chips to China.

ByteDance (TikTok’s parent company) expects profits of $50 billion in 2025, a record high, nearing Meta’s annual profit of around $60 billion. The company has signed a binding agreement to split TikTok’s US operations into a joint venture controlled by US investors, including Oracle.