The Japanese Yen is under pressure while the US dollar remains firm. Global asset rotation is underway, and silver surged close to the $67 key level.

The Bank of Japan raised its benchmark interest rate by 25 basis points, which to some extent alleviated the risk of carry trade unwinding. Coupled with Micron Technology’s impressive quarterly report, market risk sentiment has clearly recovered, with the VIX fear index falling by 11.57%. Driven by a rebound in investment demand and pressure from global supply constraints, silver prices surged significantly, breaking through the $67.0 level and hitting a new all-time high. Gold prices remained volatile at high levels, forming a doji star candlestick for the second consecutive trading day. USD/JPY rose by 1.39%, gradually approaching the 158.0 level.

Global Stock Markets Rise Together, Tech Stocks Lead

Last Friday was the monthly settlement day for the US stock market, involving futures and options expirations, with a total contract volume of up to $7.1 trillion. The three major US indices generally closed higher: Dow Jones +0.38%, S&P 500 +0.88%, Nasdaq Composite +1.31%. The China Golden Dragon Index also rebounded by 0.86%.

European stock markets moved upward in sync: Germany DAX30 +0.37%, UK FTSE 100 +0.61%, France CAC40 +0.01%. Among popular tech stocks, Oracle gained 6.6%, Nvidia and Broadcom rose by 3.9% and 3.2% respectively, with Nvidia becoming the strongest performer among Dow components. Conversely, Nike fell by 10.5% due to weak performance in the Chinese market.

In cryptocurrencies, Bitcoin is at $88,020, down 0.34% in 24 hours; Ethereum is at $2,976, down 0.03% in 24 hours. In Hong Kong night session futures, the Hang Seng Index futures closed at 25,843 points, 152 points above the previous close of 25,690; China A-shares futures closed at 8,958 points.

Rising Bond Yields and Diverging Central Bank Policies

The Bank of Japan’s rate hike pushed Japanese government bond yields higher, with the 10-year yield surpassing 2%, reaching a new high since 1999. This indicates market expectations that the BOJ will continue to adjust its policies. In the US, the 10-year benchmark Treasury yield rose to 4.15%, up 3 basis points; the more sensitive 2-year yield increased by 3.2 basis points to 3.492%. In France, due to stalled budget negotiations, the 30-year government bond yield rose to 4.525%, the highest since 2009.

Although the nominal interest rate differential for the yen remains supported, the appeal of the yen as a funding currency for highly leveraged global hedge funds has significantly diminished. The Federal Reserve’s recent reserve management purchase program has had a similar market effect to quantitative easing. Whether the BOJ’s monetary policy adjustments will prompt the Fed to accelerate rate cuts remains a key market focus.

Japanese Finance Officials Signal Intervention to Prevent Excessive Currency Fluctuations

Japanese Finance Minister Shunichi Suzuki stated after participating in the G7 finance ministers’ online meeting that Japan will take necessary measures to address excessive exchange rate volatility. He emphasized: “There have been obvious unilateral and violent fluctuations in the past few hours,” noting that some of these movements were driven by speculative funds. According to the September US-Japan joint statement, intervention measures will be limited to responding to excessive fluctuations.

Suzuki also approved of the BOJ’s rate hike decision, believing it was based on wage and price trends, aiming to achieve the 2% inflation target in a stable manner. He expects the central bank to work closely with the government to implement appropriate monetary policies.

Weak US Consumer Confidence and Persistent Budget Concerns

The US December consumer confidence index rose less than expected. The final University of Michigan data showed the index increased to 52.9, below economists’ median forecast of 53.5. The survey respondents pointed out that, despite signs of improvement at year-end, consumer confidence remains far below December 2024 levels, with economic conditions still the most concerning issue for consumers.

Notably, the current conditions index fell to a historic low of 50.4, reflecting deteriorating perceptions of current large-item purchases to the lowest point in history. The expectations index rose to a four-month high.

Diverging Fed Officials, Uncertain Rate Cut Outlook

New York Fed President Williams stated that the Fed currently sees no urgency to further adjust interest rates, believing that the recent rate cuts have put policy in a good position. Williams expressed hope that inflation will return to 2% while avoiding unnecessary harm to the labor market.

Cleveland Fed President Mester was more cautious, stating that after three rate cuts in recent meetings, there is no need for further adjustments in the coming months, and the current 3.5% to 3.75% range should be maintained at least until spring. She expressed concerns that inflation could rise more than worries about a fragile employment market. The latest Fed projections released last week show officials only expect one rate cut in 2025, indicating a shift in policy stance.

Commodity and Forex Market Overview

Gold rose slightly by 0.14%, trading at $4,338.6 per ounce. Silver broke through the $67.0 key level, increasing market awareness of gold’s current status. WTI crude oil gained 1.14%, trading at $56.5 per barrel. The US dollar index rose 0.3% to 98.7, USD/JPY increased by 1.39%, and EUR/USD slightly declined by 0.12%.

Tech and Space Sector Updates

President Trump confirmed that the US will prioritize achieving crewed lunar missions by 2028, followed by establishing a lunar base, temporarily shelving plans for Mars missions. Trump signed an executive order requiring the US to establish initial lunar outpost facilities by 2030 and confirmed plans to deploy nuclear reactors on the Moon and in orbit. The goal is to outpace China, which plans to complete crewed lunar landings and establish bases by 2030. Billionaire Elon Musk was sworn in as NASA’s 15th Administrator, advancing the Artemis lunar program.

US House Republicans called for congressional oversight of AI chip exports similar to military sales. House Foreign Affairs Committee Chairman McCaul proposed the “AI Export Control Act,” requiring notification to Congress for AI chip sales to adversarial countries. The draft stipulates that any processor with performance equal to or higher than Nvidia H200 will be regulated; H200’s performance is about six times that of the current H20 chips allowed for sale to China under existing rules.

ByteDance reported record-high profits; sources say the company could reach approximately $50 billion in profit in 2025, a new record, with nearly $40 billion in net profit accumulated in the first three quarters. If achieved, ByteDance’s profit will approach Meta’s estimated $60 billion this year. An internal memo revealed that ByteDance has signed binding agreements to spin off TikTok’s US operations into a US-investor-controlled joint venture to ensure platform operation and reduce Chinese company control. Chinese regulators have yet to comment on whether they will approve the deal.

Today’s Focus

UK Q3 current account data, US 6-month Treasury auction, and UK Q3 GDP annual final figures will be released today.