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The U.S. dollar fell to a 17-month low against the Chinese yuan as the Fed cut rates and the PBoC held theirs, highlighting divergences between the two economies. China&#39;s economy remained stable, but faces challenges. Japanese stocks rallied as the BoJ held rates.

Interest Rate Divergence Weakens Dollar To 17-Month Low Against Yuan: XPeng, Li Auto Among 4 Stock Movers

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Global central banks are cutting interest rates to stimulate growth, but Japan is an outlier with a rate hike. This divergence is affecting markets.

Major Central Banks Slash Rates In Sync, But One Holdout Threatens To Derail Bulls&#39; Momentum: &#39;Carry Trade Is Still Unwinding&#39;

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The U.S. Treasury market rallies on weak job data, boosting odds of Fed rate cuts. Yields fall and curve normalizes, triggering market reactions.

Treasury Yields Plunge, TLT ETF Tops $100, VIX Spikes As 50-Basis-Point Rate Cut Odds Soar In Response To Jobs Data

The U.S. dollar plunged to a 17-month low against the Chinese yuan after the Federal Reserve slashed rates as the People&#8217;s Bank of China held them steady overnight, raising pressures on interest-rate divergences between the <a href="https://www.benzinga.com/topic/china">world&#8217;s two major economies. </a>
The People Bank of China (PBoC) opted to hold the one-year loan prime rate (LPR)—a critical benchmark for most corporate and household loans—at 3.35% during its September fixing. The five-year LPR, a reference for property mortgages, also remained steady at 3.85%.
According to the latest monetary report, China's economy grew by 5% year over year in the first half of 2024, showing resilience despite a complex global environment.
Inflation remained subdued, with the consumer price index (CPI) increasing by just 0.1% year-over-year. The central bank noted that while economic performance was stable, domestic issues such as &#8220;insufficient effective demand&#8221; and &#8220;the transition to new growth drivers&#8221; continue to challenge the economy.
The PBoC&#8217;s accommodative monetary stance is designed to provide necessary financial support for a sustainable economic recovery. However, it highlighted that external conditions remain &#8220;complex, grim, and uncertain,&#8221; contributing to a cautious approach to navigating headwinds.
<h3 class="wp-block-heading">Chinese Stock Market Performance</h3>
Chinese domestic stocks, as tracked by the Shanghai Composite Total Return Index, closed flat for the day, reflecting market uncertainty. However, offshore Chinese stocks fared better, with Hong Kong-listed entities, tracked via the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), advancing by more than 1%.
In U.S. premarket trading, major Chinese stocks listed on American exchanges also saw gains:
<ul>
<li>XPeng Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XPEV#NYSE">XPEV</a>): +3.3%</li>
<li>Li Auto Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LI#NASDAQ">LI</a>): +1.5%</li>
<li>Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>): +1.3%</li>
<li>Tencent Music Entertainment Group (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TME#NYSE">TME</a>): +0.8%</li>
</ul>
<h3 class="wp-block-heading">Bank of Japan Holds Rates; Yen Slips</h3>
In Eastern Asia, the Bank of Japan (BoJ) also held interest rates steady at 0.25%, aligning with market expectations. 
Japan's economy showed a moderate recovery, though signs of weakness were observed in certain sectors, according to the BoJ statement.
On the inflation front, Japan's core CPI (excluding fresh food) has risen by 2.5-3.0% year-over-year, driven by wage increases and moderate price hikes in services.
Following this announcement, the Japanese yen, tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), fell by over 1% against the U.S. dollar. Meanwhile, Japanese equities rallied, with the Nikkei 225 index, as represented by the iShares MSCI Japan Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWJ#NYSE">EWJ</a>), surging by 1.5% after a 3% gain in the earlier session.
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The world's leading central banks have opened a fresh phase of interest rate cuts, spurred by a softening in<a href="https://www.benzinga.com/topic/inflation"> inflation across advanced economies.</a>
With inflation sliding closer to target levels, policymakers are keen to unwind some of the policy restrictiveness that's become a drag on growth. 
But a significant outlier on the global monetary scene is raising eyebrows—and concerns—for an interest-rate-fueled rally in the stock market.
On Thursday, the European Central Bank (ECB) took its turn, delivering a second 25 basis point rate cut following a similar move in June. 
While ECB President Christine Lagarde stopped short of promising more cuts, she hinted that future decisions would be data-driven. 
However, Frankfurt doesn't have the luxury of dragging its feet: growth is already on life support, and Germany, the region's economic heavyweight, is teetering on the edge of a recession.
"We still think that data will end up pushing the ECB to accelerate the cutting cycle," said Bank of America's European economist Ruben Segura-Cayuela in a post-meeting note.
<h3 class="wp-block-heading">Global Central Banks In Sync, Almost</h3>
Earlier this month, the Bank of Canada trimmed its key interest rate by 25 basis points to 4.25%. Policymakers there flagged concerns about missing their inflation targets on the downside—something that would have been unthinkable just a year ago, when inflation overshoot was the name of the game.
Meanwhile, an interest rate cut from the Federal Reserve next week is practically a done deal. 
The only questions lingering for markets now are the magnitude and pace: Will the Fed cut by 25 or 50 basis points? Will it move at every meeting or take a more gradual, every-other-meeting approach?
The Bank of England remains a tight call, with economists forecasting a razor-thin 5-4 vote in favor of a rate cut next week.
"At this stage, markets are only discussing the magnitude and sequencing of this cut and those to follow. But regardless of the outcome, global monetary policy convergence is set to begin," Bank of America economist Antonio Gabriel noted recently.
According to Bank of America this newfound global monetary coordination is likely to weaken the dollar from its historically elevated levels, but any dollar decline could be tempered by potential U.S. policy shifts after the upcoming election. 
<h3 class="wp-block-heading">The Bank of Japan&#8217;s Outlier Stance: A Wildcard For Markets</h3>
The one glaring outlier in this synchronized easing spree? The Bank of Japan (BOJ). 
Tokyo has clearly decided it's not playing by the same rulebook. 
While the world's major central banks are cutting, the BOJ hiked rates in July—its second hike this year following a move in March—and signaled that more hikes could be on the horizon. With annual inflation running at 2.8%, well above the BOJ's 2% target, Japan's monetary policy looks set on a divergent path.
BOJ Governor Kazuo Ueda reiterated earlier this month that the BOJ would continue raising rates if the economy and inflation behave as expected.
Ed Yardeni, the veteran market strategist, weighed in on this divergence, pointing to the ripple effects it's having across markets: "The carry trade is still unwinding. Expectations that the Fed will lower rates while the BOJ continues to hike have boosted the yen, forcing traders to unwind their carry trades."
For those not fluent in financial jargon, the carry trade refers to the strategy of borrowing yen at near-zero interest rates to invest in higher-yielding assets elsewhere, such as long-term Treasuries or even stocks. Now, with the yen appreciating, those trades are being unwound, sparking a rout in some of the market&#8217;s most richly valued stocks.
Yardeni highlighted a key inverse correlation between the yen and the Nasdaq 100, which has been holding since the start of the year.
Whenever the Japanese currency, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), strengthens, the latter, as monitored through the Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), weakens. 
<h3 class="wp-block-heading">Chart: Inverse Relationship Between Japanese Yen And U.S. Tech Stocks</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="442" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-1024x442.png" alt="" class="wp-image-545503" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-1024x442.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-300x129.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-768x331.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-1536x662.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Image: <a href="https://bzresearch.myclickfunnels.com/benzinga-pro-content-webinar-registration/?utm_source=BZprocontent091224&amp;t=be2bearmibe3na1">Benzinga Pro</a></figcaption></figure>
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Image created using artificial intelligence via Midjourney.

Major Central Banks Slash Rates In Sync, But One Holdout Threatens To Derail Bulls' Momentum: 'Carry Trade Is Still Unwinding'

The U.S. Treasury market rallied sharply on Friday after August labor data showed weaker-than-expected job growth, bolstering bets on Federal Reserve <a href="https://www.benzinga.com/topic/interest-rates">interest rate cuts. </a>
The U.S. economy added 142,000 nonfarm payrolls last month, an increase from 89,000 in July but missing the expected increase to 160,000. The unemployment rate ticked down by 0.1% to 4.3% as expected, while wages displayed higher-than-forecasted growth.
Market-implied odds of a 50-basis-point rate cut in September surged to 61% as of 11:05 a.m. in New York, overtaking the 39% probability of a 25-basis-point cut, according to the CME Group&#8216;s FedWatch data.
<h3 class="wp-block-heading">September Rate-Cut Probabilities After August Jobs Data</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>September Rate Cut</td>
<td>Now&#x2A;</td>
<td>1 day ago (Sept. 5, 2024)</td>
<td>1 Week ago (Aug. 30, 2024)</td>
</tr>
<tr>
<td>50 basis points (0.5%)</td>
<td>61%</td>
<td>40%</td>
<td>30%</td>
</tr>
<tr>
<td>25 basis points (0.25%)</td>
<td>39%</td>
<td>60%</td>
<td>70%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">&#x2A; Data as of Sept. 6, 2024 11:05 a.m. ET, CME FedWatch</figcaption></figure>
Traders poured into bonds amid growing expectations of declining interest rates, driving yields sharply lower across the Treasury curve.
The policy-sensitive two-year yield dropped over 10 basis points, reaching 3.59% at 11:15 a.m. in New York, its lowest level since March 2023.
The 10-year Treasury yield fell 6 basis points to 3.67%, marking its lowest point since June 2023.
This movement has led to a positive slope in the Treasury yield curve from the 10-year onward, effectively ending the more than two-year period of yield curve inversion.
<h3 class="wp-block-heading">Chart: US Yield Curve Normalizes, Ending 2-Year Inversion</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="508" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-1024x508.png" alt="" class="wp-image-534918" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-1024x508.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-300x149.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-768x381.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-1536x762.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h3 class="wp-block-heading">Market Reactions</h3>
Rate-cut expectations and falling Treasury yields triggered sharp moves across asset classes, with bonds rallying, the dollar weakening against the yen and equity markets sliding.
&#8220;No sooner than the payroll print hit, the algorithms marched into high gear, pushing Treasury yields lower as the disappointing headline number, coupled with a series of downward revisions, suggested a more dire economic backdrop perhaps requiring a heavier dose of Fed medicine on Sept. 18,&#8221; said Quincy Krosby, chief global strategist for LPL Financial.
Markets are wrestling with whether the August payroll data signals a labor market returning to pre-COVID norms or an economy losing critical momentum, Krosby said. 
<ul>
<li>Treasury-related ETFs surged, with the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) rising 1.1% to $100.65, on pace for its highest close since late July 2023.</li>
<li>The Japanese yen strengthened as well, with the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) gaining over 1%, poised to close at its highest level since early January 2024.</li>
<li>Volatility spiked, as the CBOE Volatility Index (VIX) jumped 14% to 23.</li>
<li>Wall Street flipped to the red, with the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) dropping 1.5% on Friday, extending its weekly decline to 3.9%, on track for the worst weekly performance since March 2023.</li>
<li>Tech stocks were hit hardest, with the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) down 2.4%, pushing its weekly loss past 5%.</li>
<li>Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) tumbled 4%, extending its weekly loss to 14%, its worst performance in two years.</li>
</ul>
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Photo via Shutterstock.

Lower-than-expected private employment growth in August triggered positive reactions Thursday in interest rate-sensitive assets like gold and the Japanese yen, while pushing Treasury yields lower as traders bolster their bets on a 50-basis-point rate cut by the <a href="https://www.benzinga.com/topic/interest-rates">Federal Reserve this month.</a>
U.S. private employers added 99,000 jobs in August, the lowest reading since January 2021 and down from a downwardly revised 111,000 in July, the ADP <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40728795/private-employment-grows-by-99-000-in-august-sharply-misses-forecasts-of-140-000-">National Employment report revealed. </a>
The outcome fell short of the predicted 140,000, highlighting a surprising cooling in labor market conditions last month.
While weekly jobless claims were in line with expectations and offered little new insight, signs of further weakness in the labor market surfaced in the Challenger Job Report, which recorded 75,891 job cuts in August — a sharp 193% increase from the 25,885 cuts in July.
A day earlier, official statistics revealed that job openings fell to 7.673 million in July,&nbsp;the lowest in over three years, with vacancies now almost closing the gap with <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40711148/july-job-openings-fall-to-3-year-lows-gap-with-unemployment-narrows-to-near-parit">the level of unemployment. </a>
Following the slew of Thursday&#8217;s labor market data, market-implied probabilities for a 50-basis-point cut surged to 45%, as per CME Group&#8216;s FedWatch tool, ahead of the highly anticipated official jobs report on Friday.
<h3 class="wp-block-heading">Market Reactions</h3>
Treasury yields moved lower across the board, with the policy-sensitive two-year yield down by 3 basis points to 3.72%, hitting the lowest yield in a month.
The benchmark 10-year yield dropped to 3.73%, marking its lowest level in a month. It also officially surpassed the two-year yield for the first time since July 2022, marking the end of the U.S. yield curve inversion.
In premarket trading, the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) was 0.3% higher at 9:00 a.m. in New York, after closing 1.3% higher on Wednesday.
The Japanese yen rose against the dollar, amid narrowing yield differentials between the two regions. The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) was 0.4% higher. 
Gold prices rallied on the back of disappointing employment data, with the commodity surging to $2,515 per ounce. The SPDR Gold Trust ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) was up by 0.9%.
U.S. major indices are set to open slightly in the red, with S&amp;P 500 futures down 0.1% and Nasdaq 100 futures slipping 0.3%.
Sector-wise, technology stocks, as tracked by the Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>), lagged, down 0.6%. Utilities, as tracked by the Utilities Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>), strengthened the most, up 0.7%. 
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Gold Rallies, Yen Surges, Treasury Yields Fall As Disappointing Payrolls Data Supports Large Rate-Cut Bets

The Japanese yen sent shockwaves through the markets at the start of September, triggering alarms for traders already on edge in what is shaping up to be <a href="https://www.benzinga.com/24/09/40676774/september-market-seasonality-why-this-month-is-historically-the-toughest-for-investors">a highly volatile month.</a>
The yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), appreciated over 0.9% by 11:30 a.m. ET, fueled by hawkish remarks overnight from Bank of Japan (BoJ) Governor Kazuo Ueda and disappointing U.S. manufacturing data.
In a parliamentary speech Tuesday, Ueda reaffirmed that the central bank would continue to raise interest rates if the economy and inflation evolve as expected. Ueda reiterated that the economic environment remains accommodative, despite the July rate hike, as real interest rates continue to be significantly negative.
&#8220;Traders hoping for a dovish pivot didn't get it,&#8221; said analyst Michael Gayed.
According to Gayed, with the Federal Reserve likely to cut rates by 75-100 basis points by the end of the year and the BoJ potentially hiking at least once more during the same period, the interest rate gap could narrow significantly.
Gayed also added, &#8220;This could ultimately trigger the next rally for the yen and potentially drive stock prices higher in the longer term.&#8221;
<h3 class="wp-block-heading">US Manufacturing Sector Contracts, Analysts See Mixed Yen Performance</h3>
In August, the U.S. manufacturing sector remained in a contractionary phase for the fifth consecutive month. However, the pace of decline eased slightly compared to July, according to the <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40689835/us-manufacturing-activity-extends-contraction-for-fifth-month-demand-continues-to">Institute for Supply Management (ISM)</a>.
&#8220;This should be positive news for equities and keeps the door open for more rate cuts,&#8221; said Gina Bolvin, president of Bolvin Wealth Management Group.
Jeffrey Roach, chief economist at LPL Financial, commented, &#8220;Manufacturing employment contracted for the third consecutive month as activity in the sector slowed. While manufacturing now represents a smaller portion of the macroeconomy than in previous cycles, investors should still prepare for a broader slowdown throughout the remainder of the year.&#8221;
Treasury yields fell sharply following Tuesday&#8217;s data release. The yield on the 10-year bond fell 7 basis points to 3.85%. 
Bloomberg reported that Arif Husain, head of fixed income at T. Rowe Price, expects further volatility as the yen-dollar carry trade unwinds, predicting more episodes similar to the one seen in early August.
Husain believes the yen is on an appreciating trend due to Japan&#8217;s ongoing structural transformation, driven by demographic shifts. He also highlighted that persistent inflation is likely to accelerate corporate reforms and influence household asset allocation.
&#8220;The ideal macro environment for yen appreciation usually occurs when U.S. real rates and equities decline together, typically during a U.S. recession,&#8221; said Kamakshya Trivedi, an economist at Goldman Sachs.
Contrarily, Daysuke Takato, an economist at Bank of America, argued, &#8220;The yen&#8217;s weakness has been driven by two main factors: the interest rate differentials between Japan and the rest of the world, and structural capital outflows from Japan.
While the potential for further yen depreciation may be limited in the short term, we believe the yen will resume its downtrend by year-end, as structural outflows persist.&#8221;
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Japanese Yen Rallies On Bank Of Japan's Rate Hike Pledge, US Manufacturing Activity Contraction

The U.S. dollar, oil prices and tech stocks surged Thursday following an upward revision of the second-quarter real gross domestic product growth to 3%, signaling the continued strength<a href="https://www.benzinga.com/government/24/08/40624663/us-economy-expands-by-3-in-q2-surpasses-earlier-estimates-jobless-claims-little-moved-last-week"> of the U.S. economy.</a>
More defensive assets like bonds and the Japanese yen fell as expectations for interest rate cuts were slightly tempered.
What Happened: The U.S. economy continues to display robust health, boasting a notable real GDP growth rate of 3% in the second quarter, revised higher from the initial estimate of 2.8% on Thursday. This represents more than double the 1.4% growth recorded in the first quarter, marking the eighth consecutive quarter of sequential growth for the U.S. economy.
The boost was primarily driven by consumer spending, which surged by 2.9% in the second quarter, an upward revision from the previously reported 2.3% and significantly higher than the 1.5% growth in the first quarter. Corporate profits also showed improvement, flipping from a 2.7% contraction in the first quarter to a 1.7% expansion in the second.
Positive signs also emerged from price pressures, as Personal Consumption Expenditure prices were revised downward in the second estimate.
The revised data also included downward adjustments to nonresidential fixed investment (4.6% vs. 5.2% earlier reported), exports (1.6% vs. 2%), private inventory investment (7.5% vs. 8.4%), government spending at both federal (3.3% vs. 3.9%) and local (2.3% vs. 2.6%) levels, and residential fixed investment (negative 2% vs. negative 1.4%). Imports were adjusted slightly higher (7% vs. 6.9%).
Why It Matters: The resilience of the U.S. economy reduces recession risks that had surfaced earlier this month following a cooler-than-expected July jobs report. 
For markets sensitive to domestic economic conditions, such as small- and medium-cap stocks, a healthy economy signals improved risk sentiment among investors.
The concurrent decline in price pressures bolsters the Federal Reserve&#8217;s confidence that inflation is trending toward its 2% target, paving the way for a September interest rate cut. 
The strong economic activity also represents a factor that could refrain the Fed from making large or swift rate cuts to avoid reigniting inflationary pressures.
Market-implied odds for a 50-basis-point rate cut in September slightly eased from 38% a day ago to the 32.5%, as per CME Group&#8216;s FedWatch data. 
Market Reactions:
<ul>
<li>U.S. Dollar: The U.S. Dollar Index, tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), rallied 0.4% in response to the GDP data, building on a 0.5% gain from Wednesday.</li>
<li>Bonds: Treasury yields edged higher, causing the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) to decline by 0.5%.</li>
<li>Japanese yen: The USD-JPY pair rose 0.7% on Thursday to 145.35 levels. The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) fell 0.7%. </li>
<li>Stocks: The S&amp;P 500 as tracked by the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was up by 0.3%. The tech-heavy Nasdaq 100, tracked by the Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), climbed 0.8%, despite a 2.2% drop in Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>).</li>
<li>Sector Performance: The Technology Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) led sector gains, up 0.9%.</li>
<li>Oil: The United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>) rose by 2.2%, fully reversing Wednesday&#8217;s losses.</li>
<li>Gold: The SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) rose 0.4% to $2,515 per ounce.</li>
</ul>
Read Next:
<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40624107/traders-brace-for-feds-favorite-inflation-report-friday-july-price-pressures-expect">Traders Brace For Fed&#8217;s Favorite Inflation Report Friday: July Price Pressures Expected To Edge Higher</a></li>
</ul>
Illustration created using artificial intelligence via MidJourney.

PowerShares DB US Dollar Index Bullish Fund

Select Sector SPDR-Consumer Discretionary

US Dollar, Oil Prices, Tech Stocks Rise As GDP Roars By 3% In Q2; Bonds, Yen Slip As Bets For Large Rate Cuts Ease

The dollar-yen exchange rate experienced hours of turbulence after the Bank of Japan delivered hawkish remarks overnight, just ahead of Fed Chair Jerome Powell&#8216;s highly anticipated speech at Jackson Hole, set for <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40513380/could-powells-jackson-hole-speech-keep-the-door-open-for-50-basis-point-rate-cut">10:00 a.m. ET on Friday.</a>
During a parliamentary hearing on Friday, BoJ Governor Kazuo Ueda reiterated his commitment to keep raising interest rates if inflation continues to align with the country&#8217;s 2% target, indicating that recent market volatility would not deter the bank&#8217;s long-term strategy for rate hikes.
However, Ueda warned that market jitters could influence the BoJ&#8217;s inflation forecasts, indicating that fluctuations in the yen and stock prices will be pivotal in determining the timing of the next rate hike.
&#8220;Markets at home and abroad remain unstable, so we will be highly vigilant to market developments for the time being,&#8221; Ueda stated.
This seems more in line the previous BoJ&#8217;s reassurances when earlier this month Deputy Governor Shinichi Uchida had vowed not to raise interest <a href="https://www.benzinga.com/markets/asia/24/08/40223986/traders-resume-yen-dollar-carry-trade-as-bank-of-japan-pledges-no-rate-hikes-during-market-volatilit">rates if market volatility persisted.</a>
The yen, tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), gained approximately 0.8% between 8:00 p.m. ET on Thursday and 2:50 a.m. ET on Friday, before slightly paring back those gains.
On Thursday, Japan&#8217;s latest inflation report showed that consumer prices rose by 2.8% year-over-year in July 2024, unchanged for the third straight month and holding at their highest level since February.
<h3 class="wp-block-heading">A Look At The Markets, But Also At The Economy</h3>
Although Ueda stated that the BoJ is monitoring market developments, he also reiterated that if the economy shows clear evidence that prices are moving toward the target, there is no change in the central bank&#8217;s basic stance on normalizing its accommodative monetary policy.
This means that the BoJ remains committed to gradually raising borrowing costs from their current ultra-low levels.
&#8220;Japan&#8217;s short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral,&#8221; Ueda commented, adding that there is still &#8220;very high uncertainty on where rates will eventually rise to.&#8221;
<h3 class="wp-block-heading">BoJ, Fed On Different Policy Paths</h3>
On July 31, the BoJ hiked its key short-term interest rate by 15 basis points to 0.25%, and opted to halve its bond-buying program to JPY 3 trillion from next year. 
This decision, along with unexpectedly weak U.S. economic data, triggered an unwinding of the yen-dollar carry trade. Traders who had been betting on interest-rate differentials between the Fed and the BoJ were hit hard by the rate reversal and subsequent margin calls.
The next BoJ meeting is scheduled for Sept. 20, just two days after the Federal Open Market Committee (FOMC) meeting. The U.S. central bank is widely expected to lower interest rates, with market-implied probabilities favoring a 25-basis-point cut. If the BoJ raises interest rates, it could deliver another blow to the dollar-yen pair, further challenging the resilience of the carry trade.
Read now: 
<ul>
<li><a href="https://www.benzinga.com/general/hedge-funds/24/08/40470248/hedge-funds-swap-yen-for-dollar-in-new-carry-trade-strategy-report">Hedge Funds Swap Yen For Dollar In New Carry Trade Strategy: Report</a></li>
</ul>
Image: Shutterstock

Yen-Dollar Carry Trade Shakes Ahead Of Powell's Speech As BoJ's Ueda Hints At Continued Rate Hikes

The July Consumer Price Inflation report made another step toward the Federal Reserve&#8217;s 2% target, though less pronounced than June&#8217;s, sustaining optimism for <a href="https://www.benzinga.com/topic/inflation">imminent interest rate cuts.</a>
Last month, a basket of goods and services purchased by U.S. consumers rose by 2.9% year-over-year, slightly below the previous and expected 3%, marking the fourth consecutive decline in annual inflation and the <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40365730/july-inflation-rate-falls-more-than-expected-supports-hopes-for-large-fed-rate-cu">lowest rate since March 2021.</a>
The annual core inflation rate also eased as anticipated, from 3.3% to 3.2%, the lowest since April 2021. 
However, the July report was marred by an increase in the shelter component, which, due to its significant weight in the basket, accounted for about 90% of the headline inflation rise.
The decline in annual inflation rates wasn&#8217;t sufficient to bolster expectations for a 50-basis-point rate cut in September. 
Market-implied probabilities for such a substantial cut dropped from 50% to 43% following the report, while the likelihood of a smaller 25-basis-point cut increased to 57%.
<h3 class="wp-block-heading">Market Reactions: Stocks Rise, Yields Steady, But Dollar Strengthens Against Yen</h3>
The July inflation data sparked a positive reaction in stocks, especially in the tech sector, with small caps outperforming their larger-cap counterparts. Treasury yields remained largely stable, while the U.S. dollar gained ground against the low-yielding Japanese yen.
Here are the premarket price reactions of the following exchange-traded funds (ETFs) to the inflation data:
<ul>
<li>The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was up 0.2% at 09:10 a.m. in New York. Major premarket gainers were Kellanova (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/K#NYSE">K</a>) and Cardinal Health Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CAH#NYSE">CAH</a>), up 7.2% and 5.5% respectively. </li>
<li>The tech-heavy Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) rose 0.3%. Top gainers were Arm Holdings plc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ARM#NASDAQ">ARM</a>) and Micron Technology Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MU#NASDAQ">MU</a>) up 3.1% and 3%, respectively. </li>
<li>Semiconductors were the strongest-performing industry, with the VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) up 0.9%. Micron Technology Inc. and ASML Holding N.V. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ASML#NASDAQ">ASML</a>) led gains, with the latter up 2.1%. </li>
<li>The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) rallied 0.5%, with Victoria&#8217;s Secret &amp; Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VSCO#NYSE">VSCO</a>) and AnaptysBio, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ANAB#NASDAQ">ANAB</a>) making the larger gains in the premarket, up 16% and 13%, respectively. </li>
<li>The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) fell 0.2%.</li>
</ul>
Read now: 
<ul>
<li><a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/24/08/40355203/stocks-now-dismiss-recession-fears-but-bond-markets-tell-investors-to-stay-on-alert">Stocks Now Dismiss Recession Fears, But Bond Markets Tell Investors To Stay On Alert</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

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Small Cap

ANAB

ASML

VSCO

S&P 500 Rises, Small Caps Outperform As July Consumer Price Index Fuels Fed Rate Cut Hopes: 5 ETFs to Watch Wednesday

The U.S. dollar-Japanese yen exchange rate endured one of its most turbulent weeks in recent years, with sharp swings driven by pivotal economic events that have left traders reassessing the future of the <a href="https://www.benzinga.com/markets/asia/24/08/40223986/traders-resume-yen-dollar-carry-trade-as-bank-of-japan-pledges-no-rate-hikes-during-market-volatilit">dollar-yen carry trade.</a>
The USD/JPY pair opened the week at 146.36, but quickly plunged to a low of 141.68 on Monday as traders fully priced in a 50-basis-point rate cut by the Federal Reserve in September, with some even speculating on an emergency intermeeting cut. 
The dollar rebounded against the yen later in the week, buoyed by dovish remarks from the Bank of Japan (BoJ) and U.S. economic data that pushed back against fears of an imminent recession.
By the end of the week, the yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), has largely remained unchanged from its previous week&#8217;s close.
This volatile week has traders questioning how much carry trade positioning is left in USD/JPY and whether it&#8217;s time to re-enter the long dollar-short yen trade as a hedge against potential U.S. inflation surprises, or if shorting USD/JPY might be a more effective strategy to guard against a possible recession.
<h1 class="wp-block-heading">Analyst Weigh On Yen-Dollar Carry Trade Strategy</h1>
Adam Turnquist, chief technical strategist for LPL Financial, explained that &#8220;ultra-low rates and easy monetary policy made the yen an attractive funding currency for the carry trade,&#8221; where investors borrow in low-yield currencies like the yen to fund investments in higher-yielding securities elsewhere, such as U.S. Treasuries.
However, recent tightening measures from the BoJ have &#8220;pulled the proverbial thread on this crowded trade, and it started to unravel,&#8221; sparking a surge in yen buying as investors covered short positions.
According to Turnquist, estimating the size of the yen carry trade is challenging due to the opaque nature of currency positioning and transactions. The overall yen borrowing could range from $1 to $4 trillion, with recent reports suggesting that 75% of carry trades have been closed following this week&#8217;s volatility events. 
Turnquist indicated USD/JPY is no longer on an uptrend, implying that the risk of additional downsides remains elevated.
It&#8217;s too early to consider the recent rebound as anything more than a &#8220;relief rally off oversold levels.&#8221; He stated that a close below the 141 support level could signal another potential leg lower, while a rally above 152 would suggest a return to the previous uptrend, reducing carry trade volatility and downside risk.
Read Also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40199218/yen-carry-trade-is-only-halfway-unraveled-wall-street-analyst-says-how-much-more-ro">Yen &#8216;Carry Trade&#8217; Is Only Halfway Unraveled, Wall Street Analyst Says: How Much More Room For Traders To Get Pummeled?</a>
David Morrison, senior market analyst at Trade Nation, observed that the USD/JPY pair hit its lowest level since the beginning of the year on Monday but has since rallied nearly 4%, indicating that the market has &#8220;steadied and most of the unwinding has been completed.
However, Morrison cautioned there is still concern that &#8220;there could be more unwinding of the yen carry-trade to come.&#8221; If this occurs, it could lead to further yen strength, accelerating the unwinding process and putting additional downward pressure on risk assets.
Morrison also noted that the BoJ released minutes from its latest monetary policy meeting, where it unexpectedly tightened policy. Although the minutes suggested that further rate hikes could be on the horizon, the market largely ignored this as dovish comments from the BoJ&#8217;s deputy governor &#8220;effectively neutralized the minutes.&#8221;
Shusuke Yamada, a foreign exchange analyst at Bank of America, suggested that much of the short-term yen carry-trade unwinding &#8220;has run its course&#8221; based on positioning measures and signs of stabilization in equity markets.
However, Yamada warned that &#8220;cyclical hedgers would sell USD/JPY&#8217;s rally to hedge against a U.S. hard-landing scenario.&#8221;
Yamada also highlighted structural outflows, such as corporate foreign direct investment (FDI) and retail investors&#8217; outward equity investments, &#8220;remain intact&#8221; as these trades are not driven by short-term interest rate differentials.
Bank of America has revised its end-2024 USD/JPY forecast to 155 but maintains a &#8220;structurally bearish yen view.&#8221;
Read Now:
<ul>
<li><a href="https://www.benzinga.com/markets/asia/24/08/40274194/mohamed-el-erian-slams-bank-of-japans-soft-tone-pushes-for-reduction-of-risky-yen-carry-trades">Mohamed El-Erian Slams Bank Of Japan&#8217;s Soft Tone: Pushes For Reduction Of Risky Yen Carry Trades</a></li>
</ul>
Photo: Shutterstock

Analyst Color

Dollar-Yen Volatility Sparks Debate Over Carry Trade Positioning: 'We Maintain A Structurally Bearish Yen View,' Analyst Says

To gain an edge, this is what you need to know today.
<figure class="wp-block-image size-large"><img decoding="async" src="https://thearorareport.com/wp-content/uploads/2024/08/2024-08-05_09h14_55.png" alt="" /></figure>
<h3 class="wp-block-heading">Carry Trade Unwinds</h3>
Please <a href="https://thearorareport.com/chart-analysis-stock-market-global-stock-carnage-fxy-mc-08052024">click here</a> for an enlarged chart of Invesco Currency Shares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>).
Note the following:
<ul>
<li>The chart shows the rapid rise in the yen.</li>
<li>The chart shows that the rapid rise occurred after the Bank of Japan raised rates.</li>
<li>As full disclosure, ZYX Allocation by The Arora Report has a long position in yen ETF (FXY). <a href="https://blog.thearorareport.com/fxy-080124/">Click here</a> to read where we previously wrote that FXY would act as a hedge. That call has now proven spot on. FXY is rising while stocks are experiencing carnage.</li>
<li>We have been sharing with you for a while to keep an eye on actions from the Bank of Japan as they may have a large impact on global stocks, including U.S. stocks.</li>
<li>Last week we shared with you that the Bank of Japan raised rates and the carry trade was beginning to unwind. Funds have been borrowing money in yen and buying stocks across the globe. Most notably, funds have been using money borrowed in yen to buy AI related semiconductor stocks and the Magnificent Seven stocks. This is the reason the Magnificent Seven and other AI stocks are now seeing aggressive selling.</li>
<li>There are several other factors entering into the mix to drive stocks lower.
<ul>
<li>We have been sharing with you that sentiment had reached the extreme zone. We have also been sharing with you that when sentiment reaches the extreme, it is a contrary signal, i.e. a sell signal. Now we are seeing the aftermath of sentiment reaching the extreme.</li>
<li>Warren Buffett has become defensive.
<ul>
<li>Buffett's company, Berkshire Hathaway Inc Class B (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BRK#NYSE">BRK</a>), sold about half of its Apple Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>) position.</li>
<li>BRK.B has reached a record $277B cash position on June 30 vs. $189B on March 31. This largely reflects Buffett selling about half of the AAPL position.</li>
<li>This is especially very important because it was only back in May when Buffett said AAPL was a core holding like Coca-Cola Co (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KO#NYSE">KO</a>) and American Express Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AXP#NYSE">AXP</a>). He has held KO and AXP for a very long time.</li>
</ul>
</li>
<li>Delay in NVIDIA Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) next generation Blackwell chip.</li>
<li>Economic data is beginning to show slowing U.S. growth as we shared with you in Morning Capsules last week.  Please read last week's Morning Capsules, <a href="https://blog.thearorareport.com/stock-market-080324/">click here</a> for details. The most notable pieces of data are:
<ul>
<li>ISM</li>
<li>Jobless claims</li>
<li>Jobs report</li>
</ul>
</li>
<li>The momo crowd is facing forced selling due to margin calls.
<ul>
<li>Expect selling pressure to lift when early margin calls are done.</li>
<li>Expect another couple of waves of margin calls during the day unless the market rallies substantially.</li>
<li>Historically, the two times of heavy forced liquidation are around 10:30am ET and 1pm ET.</li>
</ul>
</li>
</ul>
</li>
<li>In addition to the protection band that is protecting The Arora Report members' portfolios, there are additional hedges in the form of gold and silver, as well as hedges on semiconductor stocks and all of the Magnificent Seven stocks with the exception of Tesla Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TSLA#NASDAQ">TSLA</a>). TSLA is not a portfolio holding.
<ul>
<li>These additional hedges on semiconductor stocks and the Magnificent Seven stocks have now become profitable. Consider starting to book profits in small tranches on these hedges starting right now.  </li>
</ul>
</li>
<li>The stock market is very oversold and can quickly bounce after forced selling is done.</li>
</ul>
<h3 class="wp-block-heading">Magnificent Seven Money Flows</h3>
In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>), NVDA, Microsoft Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>), Alphabet Inc Class C (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>), Meta Platforms Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>), TSLA, and AAPL.
In the early trade, money flows are negative in SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and Invesco QQQ Trust Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>).
<h3 class="wp-block-heading">Momo Crowd And Smart Money In Stocks</h3>
Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>). The most popular ETF for silver is iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>). The most popular ETF for oil is United States Oil ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>).
<h3 class="wp-block-heading">Bitcoin</h3>
The Arora Report call that Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) is not a hedge is being proven right now. Bitcoin is being aggressively sold and is now approaching $50,000. Bitcoin whales unloaded bitcoin to unsuspecting retail investors last month.
<h3 class="wp-block-heading">Protection Band And What To Do Now</h3>
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.&nbsp; When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.&nbsp; High beta stocks are the ones that move more than the market.
<h3 class="wp-block-heading">Traditional 60/40 Portfolio</h3>
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever <a href="https://thearorareport.com/generate-wealth-newsletter-benzinga">Generate Wealth Newsletter</a>.

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The Real Reason Behind Global Stock Carnage – Carry Trade Unwinds

Traders rekindled their bullish bets on the yen-dollar carry trade Wednesday after dovish signals from the Bank of Japan prompted a rethink <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40199218/yen-carry-trade-is-only-halfway-unraveled-wall-street-analyst-says-how-much-more-ro">of recent market movements.</a>
The Japanese yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), tumbled over 1.9% past 147 per dollar by 10:00 a.m. in New York as Bank of Japan (BOJ) Deputy Governor Shinichi Uchida pledged not to hike interest rates if markets are volatile. 
&#8220;As we&#8217;re seeing sharp volatility in domestic and overseas financial markets, it&#8217;s necessary to maintain current levels of monetary easing for the time being,&#8221; Uchida said in a meeting with business leaders in Japan. 
&#8220;Personally, I see more factors popping up that require us being cautious about raising interest rates,&#8221; Uchida added in a post-meeting news conference.
Also Read: <a href="https://www.benzinga.com/markets/equities/24/08/40220673/mortgage-rates-fall-to-15-month-lows-boost-homebuyer-demand-as-federal-reserve-hints-at-rate-cut">Mortgage Rates Fall To 15-Month Lows, Boost Homebuyer Demand As Federal Reserve Hints At Rate Cuts</a>
<h2 class="wp-block-heading">Is The Yen-Dollar Carry Trade Strategy Back On Track?</h2>
&#8220;Today's announcement from BOJ about a halt on rate increases suggests the damage from the unwinding of the carry trade still needs to play out, as it&#8217;s possible many hedge funds, etc. still remain offsides,&#8221; said John Lynch, chief investment officer for Comerica Wealth Management.
&#8220;This dampened fears that the BOJ would rush to raise rates further, as it was last week's bigger-than-expected hike which was seen as one of the triggers for the stock market rout. The speech has helped to soften the yen and give back some of last month's outsized gains. That should take some pressure off those still exposed to the yen&nbsp;carry-trade, of which there are still significant numbers,&#8221; said David Morrison, senior market analyst&nbsp;at Tradenation. 
The yen-dollar carry trade has become an increasingly popular trading strategy since the Federal Reserve began raising rates in March 2022, as traders bet on the Bank of Japan maintaining ultra-low interest rates, allowing them to leverage cheap yen borrowing to invest in higher-yielding U.S. dollar assets like Treasuries.
Interest rate differentials between the Federal Reserve and the Bank of Japan drove the dollar up by 40% against the yen between March 2022 and July 2023.
The yen-dollar carry trade abruptly imploded last week after the Bank of Japan raised rates while the Federal Reserve pledged to start cutting interest rates, triggering a sharp reversal in short-term yield differentials between the two regions.
A lower-than-expected U.S. jobs report for July, released last Friday, further accelerated the unwinding of the yen-dollar carry trade as investors increased their bets on Fed rate cuts amid rising recession risks.
However, a stronger-than-expected U.S. services sector report released on Monday prompted a reassessment of recession fears, leading traders to revise again their <a href="https://www.benzinga.com/markets/24/08/40168342/us-services-activity-returns-to-growth-in-july-global-market-selloff-stalls-are-recession-fears-over">expectations on interest rates.</a>
After dropping to a low of 141.60 on Monday, the dollar-yen exchange rate rallied 3.8% by Wednesday morning.
<h3 class="wp-block-heading">Yen-Dollar Carry Trade Unwind Pauses Amid Easing US Recession Concerns, Dovish BOJ Comments</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-1024x576.png" alt="" class="wp-image-481960" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-1024x576.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-300x169.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-768x432.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-1536x864.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
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Treasuries

Traders Resume Yen-Dollar Carry Trade As Bank of Japan Pledges No Rate Hikes During Market Volatility

Global equity markets have been under pressure in recent sessions amid fears of a potential U.S. recession, triggered by cooling labor market conditions <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40141685/s-p-500-falls-for-third-straight-week-middle-east-in-turmoil-fed-holds-steady-but-u">and struggling manufacturing activity. </a>
Despite last month&#8217;s business surveys showing expansion in services activity, investors remain worried that the world&#8217;s largest economy may be slowing down, which could curb U.S. household discretionary spending and reduce corporate profits.
Risky assets have been at the epicenter of the current market turmoil, as stocks worldwide experienced heavy declines. 
<ul>
<li>Over the past three sessions, Japan&#8217;s Nikkei 225 index plummeted by 19.5%, marking its worst three-day drop since the index&#8217;s inception in 1950.</li>
<li>The Russell 2000 index, which tracks U.S. small-cap stocks, experienced a 10% decline during the same period.</li>
<li>The Nasdaq 100, represented by the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), has seen a 12% drop from its all-time highs in July.</li>
<li>The CBOE Volatility Index (VIX), often referred to as the market fear index, surged to briefly hit 60 points on Tuesday, its highest level since March 2020.</li>
</ul>
<h3 class="wp-block-heading">What Has Happened To Interest Rate Futures? </h3>
Recession fears, coupled with global equity market turmoil, have sparked wild speculation about Federal Reserve interest rate cuts.
A week ago, the market assigned only an 11.4% chance to a 50-basis-point rate cut in September, a probability that has now surged to 97.5%, according to the CME Group FedWatch tool.
Similarly, a week ago, the probability of year-end interest rates falling to 4-4.25% was zero, but as of Monday, it has rocketed to 72%.
<h4 class="wp-block-heading">Market-Implied Probabilities For Sept. 18&#8217;s Fed Meeting</h4>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Rate-cut event</td>
<td>Now&#x2A;</td>
<td>1 Day Ago</td>
<td>1 Week Ago July 29, 2024</td>
</tr>
<tr>
<td>50bp to 4.75-5%</td>
<td>97.5%</td>
<td>74%</td>
<td>11.4%</td>
</tr>
<tr>
<td>25bp to 5-5.25%</td>
<td>2.5%</td>
<td>26%</td>
<td>88.2%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: CME Group as of August 5, 2024 11:20 ET</figcaption></figure>
<h4 class="wp-block-heading">Market-Implied Probabilities For Dec. 18&#8217;s Fed Meeting</h4>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Year-end fed funds rate</td>
<td>Now&#x2A;</td>
<td>1 Day Ago</td>
<td>1 Week Ago, July 29, 2024</td>
</tr>
<tr>
<td>4-4.25%</td>
<td>71.8%</td>
<td>66.8%</td>
<td>0.0%</td>
</tr>
<tr>
<td>4.25-4.5%</td>
<td>28.2%</td>
<td>33.2%</td>
<td>0.0%</td>
</tr>
<tr>
<td>4.5-4.75%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>65.1%</td>
</tr>
<tr>
<td>4.75-5%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>34.9%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: CME Group as of August 5, 2024 11:25 ET</figcaption></figure>
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40160872/goldman-sachs-raises-us-recession-odds-treasury-yields-tumble-yen-rallies-as-trader">Goldman Sachs Raises US Recession Odds: Treasury Yields Tumble, Yen Rallies As Traders Bet On Heavy Fed Rate Cuts</a>
<h3 class="wp-block-heading">5 ETFs Rallying On Global Market Turmoil</h3>
While global equity markets have experienced significant declines, safe-haven assets have maintained their status and effectively shielded investor portfolios from volatility.
Moreover, leveraged and inverse investment strategies on equity indices or stocks have also seen sharp rallies amid market selloffs. 
Here are 5 exchange-traded funds (ETFs) that have rallied over the last few sessions: 
<ul>
<li>The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) has been a significant beneficiary of the global market rout, as declining interest rate expectations in the United States have reduced the dollar&#8217;s &#8220;carry trade&#8221; advantage against the yen. Over the past four sessions, the FXY ETF has surged by 6.6%, marking its strongest rally since October 2008.</li>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) has posted gains for eight consecutive sessions, surging over 3.1% last Friday as fears of a cooling U.S. labor market emerged.</li>
<li>The ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>) skyrocketed by over 20% on Monday alone, and by nearly 66% over the last three sessions. </li>
<li>The ProShares UltraPro Short QQQ (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SQQQ#NASDAQ">SQQQ</a>), which aims to achieve investment results equal to three times the inverse of the daily performance of the Nasdaq 100 index, has surged by over 23% in the past three sessions.</li>
<li>The ProShares UltraPro Short Russell 2000 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SRTY#NYSE">SRTY</a>), designed to seek an investment performance equal to three times the inverse of the daily move of the Russell 2000 index, has rallied by nearly 33% in the last three sessions.</li>
</ul>
<h3 class="wp-block-heading">Chart: Inverse And Leveraged ETF Strategies on US Small Caps Spike Amid Market Turbulence</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="440" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1024x440.png" alt="" class="wp-image-476859" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1024x440.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-300x129.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-768x330.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1536x660.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Image: <a href="https://www.benzinga.com/pro/?utm_source=BZprocontent080524&amp;t=be2bearmibe3na1">Benzinga Pro</a>
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How To Navigate Market Volatility: 5 ETFs That Strengthen Your Portfolio During Stock Turmoil

Business sentiment in the U.S. services sector returned to expansion in July, after plummeting in June at the fastest pace since May 2020 and potentially quelling recent market concerns on an ongoing recession for <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40160872/goldman-sachs-raises-us-recession-odds-treasury-yields-tumble-yen-rallies-as-trader">the world&#8217;s largest economy.</a>
The ISM Services Purchasing Managers&#8217; Index (PMI) barometer rose from 48.8% to 51.4%, outpacing expectations of a surge to 51%.
A similar services-related survey, released by S&amp;P Global, confirmed expansionary conditions for the U.S. private sector activity, although at a slower-than-expected pace. The S&amp;P Global Composite PMI edged down from 54.8 to 54.3, missing an increase to 55. The S&amp;P Global Services PMI eased from 55.3 to 55, falling short of a rise to 56. 
<h3 class="wp-block-heading">July ISM Services PMI Report: Key Highlights</h3>
<ul>
<li>The ISM Services PMI rose from 48.8% to 51.4% in July, above market expectations of 51% as monitored by TradingEconomics.</li>
<li>The subindex for Business Activity rose from 49.6% to 54.5% in July.</li>
<li>The subindex for New Orders rose from 47.3% to 52.4% in July, overcoming consensus estimates of 49.8%. </li>
<li>The subindex for Prices rose from 56.3% to 57, above the predicted 55.8%. </li>
<li>The subindex for Employment rose from 47.1% to 51.1%, well above the expected 46.5%.</li>
</ul>
<h3 class="wp-block-heading">Economists React</h3>
"The increase in the composite index in July is a result of an average increase of 5 percentage points for the Business Activity, New Orders, and Employment indexes, offset by the 4.6-point drop in the Supplier Deliveries Index."&nbsp;Steve Miller, chair of the ISM Services Business Survey Committee, said.
Miller noted that businesses maintained a cautious approach ahead of the upcoming presidential election, with one respondent expressing worry about possible tariff increases.
Respondents also indicated that increased costs are impacting their businesses, with generally positive commentary on business activity being flat or expanding gradually.
&#8220;Another strong expansion of business activity in the service sector, which over the past two months has enjoyed its best growth spell for over two years, contrasts with the deteriorating picture seen in the manufacturing sector, where output came close to stalling in July,&#8221; commented Chris Williamson, chief business economist at S&amp;P Global Market Intelligence. 
<h3 class="wp-block-heading">Market Reactions</h3>
Global financial markets experienced a significant broad-based selloff on Monday, driven by widespread investor fears regarding U.S. economic growth following last week&#8217;s disappointing data.
The release of the ISM Services PMI has temporarily halted risk aversion and sparked an attempt to reverse the recent market movements.
The U.S. dollar index (DXY) rose minutes after the release, although the broader dollar gauge, tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), remained in the red by 0.5%.
U.S. major equity indices gained amid diminishing recession fears, with the S&amp;P 500, tracked by the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), trimming session losses to 2.3%.
Other major asset movements following the ISM Services PMI print included: 
<ul>
<li>The Nasdaq 100, as monitored through the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), rallied by 500 points to 17,950 levels, shrinking the daily drop to negative 2.4%.</li>
<li>The Japanese yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), slightly reversed gains vis-à-vis the U.S. dollar. </li>
<li>Long-dated Treasuries, as followed by the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), trimmed gains. </li>
<li>Gold, as tracked by the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), extended losses to -2%.</li>
</ul>
Image created using artificial intelligence via Midjourney.

US Services Activity Returns To Growth In July, Global Market Selloff Stalls: Are Recession Fears Overdone?

Wall Street is experiencing a sharp decline on the last trading day of the week, with all indices in the red at noon in New York, as a cooler-than-expected July jobs report rattled risk sentiment and sparked concerns that the Federal Reserve may have erred in delaying a <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40129796/job-creation-tumbles-in-july-higher-unemployment-strengthens-case-for-interest-ra">rate cut until September.</a>
Nonfarm payrolls slowed to 114,000 in July, a decline of 65,000 from June and well below the expected 150,000. More alarmingly, the unemployment rate increased <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40129796/job-creation-tumbles-in-july-higher-unemployment-strengthens-case-for-interest-ra">from 4.1% to 4.3%.</a>
As a result, market-implied probabilities over a 50-basis-point cut in September have spiked to 73%, according to CME Group FedWatch tool. 
The tech-heavy Nasdaq 100 has <a href="https://www.benzinga.com/markets/equities/24/08/40135090/old-school-summer-risk-off-vix-up-over-50-nasdaq-100-enters-correction-chipmakers-officially-in-">entered a correction phase</a> after surpassing a 10% drawdown since its July peak. Mega-cap, high-quality tech stocks offered no refuge to investors, as the Magnificent Seven giants all suffered losses except for Apple Inc., buoyed by an upbeat earnings report. Collectively, the Magnificent Seven lost over $300 billion in market value on Friday alone.
The CBOE Volatility Index (VIX), popularly known as the market&#8217;s fear gauge, surged over 30% to reach the high-20 levels.
Small caps were again the weakest segment of the market, given their heightened sensitivity to economic fundamentals. The Russell 2000 tumbled over 3%, extending declines after a 3.4% loss on Thursday.
Consumer discretionary and technology were the worst-performing sectors, while semiconductors led the selloff among industries. The iShares Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) plummeted over 5%, marking a double-digit loss in the last two sessions, its worst performance since March 2020.
Nvidia Corp. fell an additional 3.4% following a 6.7% decline on Thursday, as the chipmaker came under investigation by the U.S. Department of Justice for potential antitrust violations.
Treasuries were the biggest gainers among major assets, reflecting a broad-based flight-to-quality sentiment. The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) rallied 2.9%, its strongest performance since the U.S. regional bank crisis in March 2023.
The Japanese yen also gained significantly, with the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) up 1.8%.
Gold edged down slightly by 0.6%, while oil prices fell more than 4% for the day, with West Texas Intermediate (WTI) light crude retreating to $72 a barrel.
Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) fell over 3%.
<h3 class="wp-block-heading">Friday&#8217;s Performance In US Major Indices, ETFs</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Major Indices</td>
<td>Price</td>
<td>1-day Chg %</td>
</tr>
<tr>
<td>Dow Jones</td>
<td>39,492.36</td>
<td>-2.1%</td>
</tr>
<tr>
<td>S&amp;P 500</td>
<td>5,321.21</td>
<td>-2.3%</td>
</tr>
<tr>
<td>Nasdaq 100</td>
<td>18,355.31</td>
<td>-2.8%</td>
</tr>
<tr>
<td>Russell 2000</td>
<td>2,110.14</td>
<td>-3.4%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Updated at 1:05 p.m. ET</figcaption></figure>
According to <a href="https://www.benzinga.com/pro/?utm_source=BZprocontent080224&amp;t=be2bearmibe3na1">Benzinga Pro</a> data:
<ul>
<li>The&nbsp;SPDR S&amp;P 500 ETF Trust&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)&nbsp;was 2.2% lower to $531.13.</li>
<li>The&nbsp;SPDR Dow Jones Industrial Average&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIA#NYSE">DIA</a>)&nbsp;fell 1.9% to $395.39.</li>
<li>The tech-heavy Invesco QQQ Trust Series (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) fell 2.6% to $447.80.</li>
<li>The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) fell 3.5% to $208.99.</li>
<li>Sector-wise, the Consumer Staples Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLP#NYSE">XLP</a>)&nbsp;outperformed, up 0.1%, while the&nbsp;Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) tumbled by 3.4%.</li>
</ul>
<h3 class="wp-block-heading">Friday&#8217;s Stock Movers</h3>
Stocks reacting to earnings reports were: 
<ul>
<li>Amazon, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>) <a href="https://www.benzinga.com/analyst-ratings/price-target/24/08/40135676/10-amazon-analysts-assess-q2-earnings-strong-aws-growth-retail-challenges">down nearly 10%.</a> </li>
<li>Apple, Inc. up by 2.9%</li>
<li>Block, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SQ#NYSE">SQ</a>) up 0.5%, </li>
<li>Booking Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BKNG#NASDAQ">BKNG</a>) down about 8%, </li>
<li>Chevron Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CVX#NYSE">CVX</a>) down 3.2%,</li>
<li>Cloudflare, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NET#NYSE">NET</a>) up over 7%, </li>
<li>Coinbase Global Inc. down 2.8%,</li>
<li>DraftKings Inc. down over 9%,</li>
<li>EOG Resources Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EOG#NYSE">EOG</a>) down 1.9%,</li>
<li>Exxon Mobil Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XOM#NYSE">XOM</a>), down 0.6%,</li>
<li>Intel Corporation, down nearly 28%,</li>
<li>MercadoLibre Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MELI#NASDAQ">MELI</a>) up 11%,</li>
<li>Microchip Technology Incorporated (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MCHP#NASDAQ">MCHP</a>) down over 8%, </li>
<li>Opendoor Technologies Inc. (NASDAQ: OPEN down about 10%, </li>
<li>Twilio Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TWLO#NYSE">TWLO</a>) up over 10%.</li>
<li>Vertex Pharmaceuticals Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VRTX#NASDAQ">VRTX</a>) down 2%. </li>
</ul>
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Magnificent 7 Lose Over $300B As Volatility Index Surges, Traders Question Fed's Timing: What's Driving Markets Friday?

Global markets experienced a major downturn on Friday, continuing the negative sentiment that began the previous day, further exacerbated by U.S. jobs data that came <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40129796/job-creation-tumbles-in-july-higher-unemployment-strengthens-case-for-interest-ra">in cooler than expected.</a>
The U.S. economy is showing signs of underlying weaknesses, as the pace of job creation slowed significantly in July, and the unemployment rate unexpectedly increased, causing concern for the Federal Reserve which last week decided to delay an interest rate cut until September.
U.S. employers added 114,000 nonfarm payroll jobs last month, a significant slowdown from the 179,000 jobs created in June and well below the economist consensus estimate of 175,000, according to TradingEconomics. The unemployment rate unexpectedly rose from 4.1% to 4.3%, the highest level since October 2021. 
Average hourly earnings increased by 0.2% from the previous month, falling short of expectations of 0.3% and indicating a slowdown in wage growth. Overall, the jobs report was weaker than anticipated from every angle.
In response to these disappointing numbers, the market-implied probability of a 50-basis-point rate cut in September spiked to nearly 70%, up from 22% a day earlier, according to the CME Group&#8217;s FedWatch tool.
Meanwhile, geopolitical risks in the Middle East remain extremely high, as Iran&#8217;s allies have vowed to retaliate against Israel <a href="https://www.benzinga.com/markets/asia/24/08/40115510/israeli-stocks-suffer-worst-week-since-october-2023-as-irans-allies-vow-retaliation-for-recent-attac">following this week&#8217;s attacks.</a>
<h3 class="wp-block-heading">Traders Price In Higher Likelihood On A Larger Rate Cut In September</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>September rate cut</td>
<td>Current probability implied by Fed futures</td>
<td>August 1, 2024</td>
<td>26 July, 2024</td>
</tr>
<tr>
<td>50 basis points</td>
<td>69,5%</td>
<td>22,0%</td>
<td>11,5%</td>
</tr>
<tr>
<td>25 basis points</td>
<td>30,5%</td>
<td>78,0%</td>
<td>88,2%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Source: CME Group FedWatch Tool</figcaption></figure>
While only time will tell if the Fed was too late to act, investors are opting to take some chips off the table and seek refuge in safer assets. 
On Friday, equity markets worldwide experienced declines, with negative sentiment beginning in the Asian session. 
The Japanese Nikkei index fell nearly 6%, marking its worst day since March 2020, and the downturn extended to Europe, where all indices traded sharply in the red. 
In premarket trading in New York, major U.S. averages also saw significant drops, with Nasdaq 100 and S&amp;P 500 futures down 2.3% and 1.5%, respectively, at 08:50 a.m.
Here are the major premarket moves in 10 key exchange traded funds:
<ul>
<li>Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) down 0.8%.</li>
<li>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) up 1.8%, potentially on track for its strongest session year to date. </li>
<li>SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) up 1%, nearing record highs. </li>
<li>Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) up 1.8%. </li>
<li>United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>), which tracks the performance of crude WTI futures, down 2.8%. </li>
<li>Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) down 2.6%. </li>
<li>iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) down 3.3%, after similarly closing 3.3% lower on Thursday. </li>
<li>SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>) down 3.6%, extending drops following a 4.4% decline on Thursday. </li>
<li>VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) down 4.6%, after closing 6.5% lower a day earlier. </li>
<li>Utilities Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>) up 0.8%, on track to hit the highest since September 2022. </li>
</ul>
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Photo: Shutterstock

Market Turmoil: July Jobs Report, Geopolitical Risks Spark Stock Sell-Off As Traders Flee To Treasuries, Yen, Gold

Markets are on edge as investors digest a slew of geopolitical events, corporate earnings, and economic data in this final session of July, which promises to be highly volatile ahead of the Federal <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/40042583/will-powell-hint-at-september-rate-cut-what-major-us-investment-banks-expect-from">Open Market Committee (FOMC) meeting.</a>
<h3 class="wp-block-heading">Geopolitical Tensions Flare Up In Middle East, BoJ Moves, US Data Disappoint</h3>
The situation in the Middle East reached a critical turning point after the political leader of Hamas, Ismail Haniyeh, was killed by Israeli forces in Tehran, Iran, on Wednesday morning. Reuters reported that Hamas&#8217; armed wing stated Haniyeh&#8217;s killing would &#8220;take the battle to new dimensions and have major repercussions,&#8221; while Iran declared three days of national mourning and vowed to retaliate, potentially leading to a dangerous escalation in the region.
This incident followed another assassination on Tuesday in Beirut, where Israeli forces killed Fuad Shukr, Hezbollah's most senior military commander and Hassan Nasrallah's right-hand man. According to the Israeli Defense Forces, Shukr was responsible for the death of 12 children in a soccer field on Saturday and had orchestrated 30 years of Hezbollah terrorist attacks.
On the macroeconomic front, the Bank of Japan (BoJ) increased interest rates by 0.15 percentage points to 0.25%, marking the second such move since March. Japan's monetary authorities also announced the reduction in their bond-buying program from JPY 6 trillion to JPY 3 trillion for January-March 2026.
Inflation in the Eurozone unexpectedly rose to 2.6% from 2.5%, contrary to forecasts of a slowdown to 2.4%, raising some questions on the imminent need of further European Central Bank&#8217;s rate cuts. Core inflation, excluding energy and food, remained at 2.9%, missing the expected drop to 2.8%. However, services inflation eased for the first time in three months.
In the U.S., private employers added 122,000 jobs in the past month, the lowest since January 2024 and down from the revised 155,000 jobs in June, according to the ADP National Employment Report. This figure missed the <a href="https://www.benzinga.com/24/07/40066427/us-private-employment-rises-by-122-000-in-july-misses-estimates-if-inflation-goes-back-up-it-wont-be">projected 150,000 job additions.</a>
Mortgage applications fell by 3.9% in the fourth week of July, following a 2.2% drop the previous week, marking the sharpest weekly decline in mortgage demand in nearly two months. This occurred despite 30-year mortgage rates holding at February lows of 6.82%. Applications for new home purchases fell by 1.5%, the third consecutive decline.
<h3 class="wp-block-heading">Market Reactions: Oil Spikes, Dollar Falls</h3>
The most immediate market reaction to the tense situation in the Middle East was a spike in oil prices. West Texas Intermediate (WTI) prompt futures, tracked by the United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>), rallied over 3.5% on Wednesday morning amid fears of supply disruptions due to Iran's involvement. Oil is on track for its strongest session since mid-November 2023.
The U.S. dollar weakened against major currencies, affected by disappointing U.S. labor market data and higher-than-expected Eurozone inflation.
The U.S. dollar index, as tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), fell over 0.4% at 08:40 a.m. in New York.
The Japanese yen, monitored through the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), rallied 1.6% following the BoJ&#8217;s rate hike.
U.S. equity futures surged in premarket trading, with contracts on the tech-heavy Nasdaq 100 up over 2%, poised to recover losses from the previous day.
Semiconductor gains drove overall U.S. major indices higher on Wednesday, following positive results from Advanced Micro Devices Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMD#NASDAQ">AMD</a>). Notably, ASML Holding NV (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ASML#NASDAQ">ASML</a>) rose over 5.7% in European markets, as Reuters reported the company would not be affected by U.S. export restrictions on chipmaking to China.
Shares of NVIDIA Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) were nearly 7% higher in premarket trading. The VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) soared over 5%.
Read now: 
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/07/40053706/veteran-investor-boosts-s-p-500-price-targets-magnificent-7-stocks-will-remain-magn">Veteran Investor Boosts S&amp;P 500 Price Targets: &#8216;Magnificent 7 Stocks Will Remain Magnificent&#8217;</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

Markets On Edge Ahead Of Fed Announcement: Oil Spikes After Hamas Leader's Death, BoJ Hikes Rates, Eurozone Inflation Rises, US Jobs Disappoint

Investor sentiment took a hit on Tuesday as caution prevailed ahead of significant market events, including key tech earnings reports and the Federal <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/40042583/will-powell-hint-at-september-rate-cut-what-major-us-investment-banks-expect-from">Open Market Committee meeting.</a>
The Nasdaq 100, heavily weighted with tech stocks, experienced the most significant decline among major U.S. indices, dropping 1.5%. Semiconductor stocks were particularly affected, with Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) plummeting over 6% to a two-month low, impacting the entire industry. 
Consequently, the iShares Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SOXX#NYSE">SOXX</a>) fell nearly 3%, marking its sixth negative close in the last eight sessions.
The S&amp;P 500 also dipped 0.8%, primarily due to its heavy tech exposure, while the Dow Jones and Russell 2000 managed to avoid losses. Notably, the iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) has outperformed tech stocks by 15% so far this month.
Microsoft Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NYSE">MSFT</a>) declined more than 1% ahead of its post-market earnings announcement, while Apple Inc., Alphabet Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>), and Meta Platforms Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>) experienced smaller losses in anticipation of their reports later in the week.
Crowdstrike Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CRWD#NASDAQ">CRWD</a>) was the worst-performing tech stock on Tuesday, plunging nearly 12% after Delta Air Lines announced it would seek compensation from the cybersecurity firm for last week's outage.
Meanwhile, Treasury yields remained steady, gold edged up 0.3%, and the Japanese yen, tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), gained 0.4% against the dollar in anticipation of a potential Bank of Japan rate hike.
Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) fell 1.5% to $65,812.
<h3 class="wp-block-heading">Tuesday&#8217;s Performance In Major US Indices, ETFs</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Major Indices</td>
<td>Price</td>
<td>1-day %chg</td>
</tr>
<tr>
<td>Dow Jones</td>
<td>40,607.10</td>
<td>0.2%</td>
</tr>
<tr>
<td>Russell 2000</td>
<td>2,242.74</td>
<td>0.1%</td>
</tr>
<tr>
<td>S&amp;P 500</td>
<td>5,422.36</td>
<td>-0.8%</td>
</tr>
<tr>
<td>Nasdaq 100</td>
<td>18,778.20</td>
<td>-1.5%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Updated at 12:38 p.m. ET</figcaption></figure>
<a href="http://www.benzinga.com/pro/register/?utm_source=BZprocontent073024&amp;t=be2bearmibe3na1">According to Benzinga Pro data:</a>
<ul>
<li>The&nbsp;SPDR S&amp;P 500 ETF Trust&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)&nbsp;was 0.7% lower to $541.00.</li>
<li>The&nbsp;SPDR Dow Jones Industrial Average&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIA#NYSE">DIA</a>)&nbsp;rose 0.3% to $406.60.</li>
<li>The tech-heavy Invesco QQQ Trust Series (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) fell 1.5% to $457.06.</li>
<li>The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) rose 0.16% to $222.09.</li>
<li>Sector-wise, the Energy Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLE#NYSE">XLE</a>)&nbsp;outperformed, up 1.2%, while the&nbsp;Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) lagged, down 2.4%.</li>
</ul>
<h3 class="wp-block-heading">Tuesday&#8217;s Stock Movers</h3>
Stocks moving on earnings were:
<ul>
<li>F5, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/FFIV#NASDAQ">FFIV</a>), up over 11%.</li>
<li>Hologic Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/HOLX#NASDAQ">HOLX</a>), up 2.7%</li>
<li>Woodward Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/WWD#NASDAQ">WWD</a>), down 18%.</li>
<li>Chesapeake Energy Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CHK#NYSE">CHK</a>), down 0.6%.</li>
<li>Amkor Technology Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMKR#NASDAQ">AMKR</a>), down 18%.</li>
<li>Crane Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CR#NYSE">CR</a>), down 4%. </li>
<li>Lattice Semiconductor Corporation (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSCC#NASDAQ">LSCC</a>), down 8%. </li>
<li>Procter &amp; Gamble Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PG#NYSE">PG</a>), down 5.6%. </li>
<li>Merck &amp; Company Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MRK#NYSE">MRK</a>), down 10%. </li>
<li>Pfizer Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PFE#NYSE">PFE</a>), down 0.5%. </li>
<li>S&amp;P Global Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SP#NYSE">SP</a>), down 0.7%. </li>
<li>Illinois Tool Works Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ITW#NYSE">ITW</a>), down 0.5%,</li>
<li>PayPal Holdings, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/PYPL#NASDAQ">PYPL</a>), up 7.4%. </li>
<li>Ecolab Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ECL#NYSE">ECL</a>), down 8.4%.</li>
<li>Phillips 66 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PSX#NYSE">PSX</a>), up 5.2%. </li>
<li>American Electric Power Company, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AEP#NASDAQ">AEP</a>), flat. </li>
<li>Gartner Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IT#NYSE">IT</a>), up 6.7%. </li>
<li>Archer-Daniels-Midland Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ADM#NYSE">ADM</a>), down 0.4%</li>
<li>JetBlue Airways Corporation (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JBLU#NASDAQ">JBLU</a>), up 17%.</li>
<li>LGI Homes, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LGIH#NASDAQ">LGIH</a>), up 8%. </li>
<li>Logitech International S.A. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LOGI#NASDAQ">LOGI</a>), up 0.6%. </li>
<li>Restaurant Brands International Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/QSR#NYSE">QSR</a>), down 0.5% </li>
<li>SoFi Technologies, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SOFI#NASDAQ">SOFI</a>) down 1.9%. </li>
</ul>
Companies reporting earnings after the close include: 
<ul>
<li>Advanced Micro Devices, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMD#NASDAQ">AMD</a>)</li>
<li>Arista Networks, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ANET#NYSE">ANET</a>)</li>
<li>Caesars Entertainment, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CZR#NASDAQ">CZR</a>)</li>
<li>DoubleVerify Holdings, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DV#NYSE">DV</a>)</li>
<li>Electronic Arts Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/EA#NASDAQ">EA</a>)</li>
<li>First Solar, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/FSLR#NASDAQ">FSLR</a>)</li>
<li>Freshworks Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/FRSH#NASDAQ">FRSH</a>)</li>
<li>Live Nation Entertainment, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LYV#NYSE">LYV</a>)</li>
<li>Match Group, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MTCH#NASDAQ">MTCH</a>)</li>
<li>Microsoft</li>
<li>Mondelez International, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MDLZ#NASDAQ">MDLZ</a>)</li>
<li>Pinterest, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PINS#NYSE">PINS</a>)</li>
<li>Skyworks Solutions, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SWKS#NASDAQ">SWKS</a>)</li>
<li>Starbucks Corporation (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SBUX#NASDAQ">SBUX</a>) </li>
<li>Qorvo, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QRVO#NASDAQ">QRVO</a>).</li>
</ul>
Read Next:
<ul>
<li><a href="https://www.benzinga.com/economics/macro-economic-events/24/07/40044042/job-openings-hold-steady-in-june-ahead-of-crucial-july-labor-market-data-why-this">Job Openings Hold Steady In June Ahead Of Crucial July Labor Market Data: Why This Analyst Expects Robust Payrolls</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

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Tech Stocks Drop Ahead Of Key Earnings; Nvidia Falls, CrowdStrike Hits 8-Month Low: What's Driving Markets Tuesday?

Three of the world&#8217;s leading central banks are set to meet this week, posing one of the most crucial tests for markets as traders brace <a href="https://www.benzinga.com/topic/interest-rates">for interest rate shifts.</a>
The Federal Reserve will commence its two-day Federal Open Market Committee meeting Tuesday. The policy statement and Fed Chair Jerome Powell&#8216;s press conference are scheduled for 2 p.m. and 2:30 p.m. ET Wednesday, respectively.
Early on Wednesday morning, the Bank of Japan will hold a high-stakes meeting in Tokyo that could result in an interest rate move.
At 1 p.m. ET Thursday, the Bank of England will meet. Analysts perceive this as a tight decision between holding rates steady or enacting rate cut, which would be the first in over four years.
<h3 class="wp-block-heading">What to Expect From The Federal Reserve </h3>
The Fed is expected to keep interest rates unchanged at the upcoming FOMC meeting. Market-implied odds indicate a 95.6% chance that rates will remain on hold at 5.25-5.5%, with a rate cut fully priced in at the next meeting in September.
Traders will closely watch the Fed&#8217;s assessment of recent economic data, progress on inflation and whether Powell signals that a September rate cut is forthcoming.
&#8220;The Fed is optimistic that cuts are likely in the near term, but we do not think it is willing to signal September is a done deal,&#8221; wrote Bank of America this week.
Since the FOMC's June meeting, participants have noted better inflation readings in recent months following firmer prints in the first quarter.
&#8220;We've been very clear that you wouldn't wait for inflation to get all the way down to 2%&#8221; [before cutting interest rates,] Powell said in his latest public appearance this month.
He might also reiterate that an unexpected weakening in the labor market could prompt rate cuts.
&#8220;The main reason that the FOMC is closer to cutting is the favorable inflation news from May and June,&#8221; wrote Goldman Sachs economist David Mericle.
Goldman Sachs expects the FOMC to revise its statement to acknowledge &#8220;further progress&#8221; toward the 2% inflation goal, balancing the risks to the dual mandate more evenly and indicating that it now requires only &#8220;somewhat&#8221; greater confidence in the inflation outlook to start lowering interest rates.
<h3 class="wp-block-heading">What To Expect From The Bank of Japan</h3>
Considerable anxiety surrounds the Bank of Japan&#8217;s meeting, as the decision on a rate hike or hold remains uncertain.
Despite recent market volatility, Bank of America&#8217;s Japan and Asia economist Takayasu Kudo expects the BoJ to proceed with a small hike, raising the policy rate from the current zero to 0.1% to 0.25%. 
&#8220;The BoJ has indicated that it would adjust the degree of monetary easing further should the economy and prices move in line with its baseline scenario. Recent wage and price data, as well as the June BoJ Tankan, point to further progress in underlying inflation,&#8221; Kudo wrote.
The consensus view of economists tracked by TradingEconomics is for the BoJ to remain on hold.
In addition to a potential rate hike, the BoJ will announce details of its planned reduction in Japanese government bond purchases over the next one to two years, though uncertainties remain regarding the exact size and pace of these cuts.
The Japanese yen, tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), has rallied over 4% in July against the dollar, marking its strongest month year-to-date, suggesting traders may be anticipating a rate hike.
<h3 class="wp-block-heading">Chart: Yen Rallies In July, Eyes Strongest-Performing Month Since December 2023 </h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="376" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/29113502/image-56-1024x376.png" alt="" class="wp-image-462852" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/29113502/image-56-1024x376.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/29113502/image-56-300x110.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/29113502/image-56-768x282.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/29113502/image-56-1536x564.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/29113502/image-56.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Image: <a href="http://www.benzinga.com/pro/register/?utm_source=BZprocontent072924&amp;t=be2bearmibe3na1">Benzinga Pro</a>
<h3 class="wp-block-heading">What To Expect From The Bank Of England</h3>
Bank of America&#8217;s U.K. economist Sonali Punhani expects the BoE to cut the Bank Rate by 25bps to 5% in August with a 5-4 vote, citing mixed data and a dovish stance, but emphasizes that this is a close call.
Punhani advises investors not to expect clear guidance on future rate paths, as the BoE is likely to focus on data and proceed cautiously with any future cuts, avoiding signaling the start of a sustained cutting cycle.
Goldman Sachs economist Sven Jari Stehn expects a similar outcome, also noting the decision to lower the Bank Rate is a close call and suggesting a low bar for the Monetary Policy Committee to delay the first cut until September.
&#8220;If the MPC does indeed lower the policy rate, then we would expect the updated guidance to be non-committal on the timing of further cuts,&#8221; Stehn said.
Earlier this month, the British pound reached 1.3045 against the U.S. dollar, its highest level in nearly a year. The Invesco CurrencyShares British Pound Sterling Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXB#NYSE">FXB</a>) is up 1.6% this month.
Read Now:
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/07/40013144/if-economic-performance-were-an-olympic-sport-us-economy-would-win-gold-says-market">If Economic Performance Were An Olympic Sport, &#8216;US Economy Would Win Gold,&#8217; Says Market Veteran</a></li>
</ul>
Illustration of Federal Reserve Chair Jerome Powell created using artificial intelligence via MidJourney.

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Markets Brace For Crucial Interest Rate Shake-Up: What To Expect From Federal Reserve, Bank of Japan, Bank Of England This Week

The past week was a rollercoaster ride for the markets, with inflation data sparking a rush for gold, real estate, treasuries, and yen. Meanwhile, Federal Reserve Chair Jerome Powell&#8216;s comments on the labor market and interest rates kept investors on their toes. Let&#8217;s dive into the top stories of the week.
Inflation Data Sparks Investment Rush &#8211; The recent inflation data triggered a rush among investors towards gold, real estate, treasuries, and yen. Traders are now anticipating a rate cut in September. The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) and SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) are among the notable mentions. <a href="https://www.benzinga.com/markets/asia/24/07/39733667/inflation-data-sparks-rush-for-gold-real-estate-treasuries-yen-traders-see-september-rate-cut-as-don">Read the full article here.</a>
Powell on Labor Market and Interest Rates &#8211; Federal Reserve Chairman Jerome Powell stated that the labor market is strong and not overheated. He added that a policy rate cut would not be appropriate until the Fed gains greater confidence that inflation is heading sustainably toward 2%. He made these comments during his semiannual testimony before the Senate Banking Committee. <a href="https://www.benzinga.com/markets/equities/24/07/39692638/powell-says-labor-market-strong-not-overheated-fed-chair-awaits-right-moment-to-cut-interest-rat">Read the full article here.</a>
See Also: <a href="https://www.benzinga.com/markets/equities/24/07/39708329/as-tesla-surges-44-in-10-sessions-bearish-analyst-smells-stock-manipulation-they-keep-buying-put?itm_source=parsely-api" target="_blank" rel="noreferrer noopener">As Tesla Surges 44% In 10 Sessions, Bearish Analyst Smells Stock Manipulation: &#8216;They Keep Buying Puts To</a>
Analyst Predicts Positive Market Response to Fed Meeting &#8211; David Zervos, Chief Market Strategist of Jeffries, anticipates a positive market response to the forthcoming Federal Reserve meeting. He believes the market will like what they hear at this July meeting, drawing parallels with the dovish tone of the December meeting. <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/07/39743700/analyst-says-markets-going-to-like-what-they-hear-during-july-federal-reserve-meeti">Read the full article here.</a>
Higher Producer Prices Indicate Persistent Inflation &#8211; Economists suggest that inflation may stay elevated beyond people's expectations. The Producer Price Index released Friday showed a higher-than-expected increase in June, surprising investors. Observers anticipate rate cuts on the horizon after a larger-than-expected drop in the monthly Consumer Price Index inflation gauge issued on Thursday. <a href="https://www.benzinga.com/top-stories/24/07/39753316/higher-producer-prices-show-inflation-may-stick-around-longer-than-most-people-expect">Read the full article here.</a>
Housing Market Bubble About to Pop &#8211; A massive bubble has developed in the housing market, and it is about to pop, warns a real estate executive. This comes amidst a rush for real estate investments triggered by inflation data. <a href="https://www.benzinga.com/real-estate/24/07/39727958/a-massive-bubble-in-the-housing-market-has-developed-and-it-is-about-to-pop-real-estate-executive-sa">Read the full article here.</a>
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This story was generated using <a href="https://www.benzinga.com/author/benzinga-neuro">Benzinga Neuro</a> and edited by <a href="https://www.benzinga.com/author/ananya-gairola" target="_blank" rel="noreferrer noopener">Ananya Gairola</a>
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Inflation Data Sparks Rush For Safe Havens, Jerome Powell Says Labor Market 'Not Overheated' And More: Economics Weekly Round-Up

The stars seem to be aligned for a reduction in U.S. interest rates in about two months, as the June inflation report released Thursday may provide policymakers with the confidence that annual consumer price changes are finally trending <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/39728268/inflation-slows-more-expected-to-3-in-june-heightens-expectations-for-rate-cuts-t">toward the Fed&#8217;s 2% target.</a>
The inflation rate fell from 3.3% in May 2024 to 3% year-over-year in June 2024, the lowest since April 2021, according to the Bureau of Labor Statistics. The outcome fell short of the estimated 3.1%. On a month-over-month basis, the consumer basket contracted by 0.1%, marking the first negative reading since May 2020. 
The data sparked a surge in rate cut bets, triggering a rally in interest-rate-sensitive assets.
Market-implied odds for a September rate cut increased from 71% to 91% following the inflation report, according to the CME Group&#8216;s FedWatch tool. Additionally, the implied cuts by year-end rose to 65 basis points, suggesting between two and three rate cuts.
<h3 class="wp-block-heading">Investors Flock To Bonds, Low-Yield Currencies, Real Estate Stocks As Rate Cut Bets Rise</h3>
Yields on two-year Treasury notes tumbled 10 basis points to 4.51% at 11 a.m. ET, on track to hit the lowest since March. 11. Yields on long-dated Treasuries also fell markedly, sending the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) up by 1.2%.
The U.S. dollar index (DXY), as tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), fell 0.6%, on track for the worst session since mid-May.
The low-yielding Japanese yen, tracked through the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), rose 1.8%. The dollar-yen pair dropped to 158.73, marking the second-worst session year-to-date, as traders speculated that a potential Bank of Japan intervention accelerated the move, although authorities did not officially confirm it.
Gold prices, as monitored through the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), rallied 1.9% to $2,415 per ounce, marking the best-performing session since mid-December 2023 and nearing all-time highs.
The broader stock market fell, with the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), falling 0.4%, and the tech-heavy Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) tumbled 1.4%. Rate-sensitive equity sectors and industries reacted differently Thursday, with real estate stocks outperforming.
The Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) rose 2.5% by 11 a.m. ET, outperforming all other S&amp;P 500 sectors.
Among industries, homebuilders, as tracked by the SPDR Homebuilders ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XHB#NYSE">XHB</a>) soared 5.4%, on track for their best day since mid-December 2023. 
Chart: Rate-Sensitive Assets Rally After Cooler-Than-Expected June Inflation Report
<figure class="wp-block-image size-large"><a href="http://www.benzinga.com/pro/register/?utm_source=BZprocontent071124&amp;t=be2bearmibe3na1"><img loading="lazy" decoding="async" width="1024" height="596" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/11110510/image-16-1024x596.png" alt="" class="wp-image-431371" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/11110510/image-16-1024x596.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/11110510/image-16-300x175.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/11110510/image-16-768x447.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/11110510/image-16-1536x894.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/11110510/image-16.png 1810w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure>
Image: <a href="http://www.benzinga.com/pro/register/?utm_source=BZprocontent071124&amp;t=be2bearmibe3na1">Benzinga Pro</a>
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Photo via Shutterstock.

REIT

Inflation Data Sparks Rush For Gold, Real Estate, Treasuries, Yen: Traders See September Rate Cut As Done Deal

The Japanese Yen (JPY) holds ground against the US Dollar (USD) following the Bank of Japan (BoJ) policy decision on Friday, keeping its interest rate at 0.15%, as highly expected.

Japanese Yen Remains Stronger As BoJ Keeps Interest Rate Unchanged As Expected

Nikkei leads gains in Asia-Pacific markets after Wall Street boost; BOJ and PBOC hold rates

EUR/JPY recovers to near 160.00 in Friday's early European session, gaining 0.45% on the day. BoJ's Ueda said central bank will keep adjusting the degree of easing if our economic, price outlooks are to be realised.

EUR/JPY Jumps To Two-week Highs Near 160.00 After BoJ Rate Decision, Eyes On ECB's Lagarde Speech

Bank of Japan Pauses But Signals Normalization Will Continue

The week is winding down and the US dollar is mostly consolidating against the G10 currencies. Two exceptions stand out. First, sterling is the only G10 currency higher on the day.

Consolidation Featured, but the Yen and Mexican Peso are Under Pressure, While PBOC Fixed the Dollar Lower

The euro is trading near $1.12, the strongest in three weeks, benefiting from the overall dollar weakness after the Federal Reserve cut interest rates by 50 bps.

Analytical Overview of the Main Currency Pairs - Friday, September 20

Japan's central bank met on Friday and decided to keep interest rates unchanged. Ueda's speech after the meeting contained little on future rate hikes. The US Central Bank lowered borrowing costs by 50-bps on Wednesday.

USD/JPY Price Analysis: Yen Plunges as Ueda Dodges Hike Signals

Today you will see USDJPY price prediction based on the technical analysis. What is the support and resistance on the daily time frame for USDJPY. What to expect where the price will breakout for the USDJPY based on the supply and demand zones.

USDJPY Analysis & USDJPY Price Prediction Forecast - Saturday, September 21

The Federal Reserve kicked off its easing cycle with a 50 bp rate cut on Sept. 18. It is the seventh G10 central bank to cut rates this year. Japan seems to be going in the other direction, albeit slowly.

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