With little fanfare, Treasury Secretary Scott Bessent helped stop Japan’s Yen (FXY) from falling further. The Yen fell to a 40-year low before the intervention.
Japan’s MSCI ETF (EWJ) closed near an all-time high. Lifted by Softbank (SFTBY), Toyota Motor’s (TM) quarterly report, and Honda Motor (HMC) rebounding, investors need to watch the currency intervention results.
The Treasury propped the yen, the first time since 1998, partly to benefit its domestic long-term debt. The 30-year Treasury bond (TLT) yield rose past 5.2%. Typically, when yields rise above 5%, they fell sharply.
Last week, the U.S. government posted a 23,000 drop in jobs. Bond yields barely fell in response. They realized that the weak figure is a result of the local government slashing 50,000 jobs. Temporary jobs related to hosting FIFA games in the U.S. hurt July’s employment.
AI Hyperscaler Rally at Risk
Microsoft (MSFT) led the strong rally in hyperscaler supplier stocks. Amazon (AMZN) jumped, while shares of Tesla (TSLA), Meta Platforms (META), and Alphabet (GOOG) erased some of their recent losses. The $3.5 trillion addition in market capitalization in only four days is potentially too good to be true.
Weak demand for AI chatbots, a moratorium on building AI server farms (pending environmental reviews), and rising bond yields are headwinds for stock markets. Rising capital expenditures paid off for Microsoft’s Azure or Amazon’s AWS. However, many other firms might face falling profit margins if their AI investments flounder.
Related Stories
