December 22 Financial Breakfast: Yen exchange rate fluctuates wildly, silver hits new high, US stocks generally rebound

The global financial markets are entering a new volatility cycle. After the Bank of Japan announced a rate hike, the yen weakened instead, with USD/JPY rising by 1.39%, approaching the 158 level. At the same time, Japanese Finance Minister Shunichi Katayama issued an intervention warning, stating that appropriate measures will be taken against excessive exchange rate fluctuations, drawing market attention.

Market Highlights: Commodities Lead Gains, Tech Stocks Perform Strongly

Driven by investment demand and supply tightness, silver prices surged to a historic high, breaking through the $67.0 level. Gold formed a doji for the second consecutive day. The VIX index fell by 11.57%, reflecting an improvement in market risk appetite.

The three major US stock indices all rose: Dow up 0.38%, S&P 500 up 0.88%, and Nasdaq leading with a 1.31% increase. Technology stocks performed notably, with Oracle rising 6.6%, Nvidia and Broadcom up 3.9% and 3.2% respectively, with Nvidia becoming the strongest component of the Dow. Conversely, Nike fell 10.5% due to weakness in the Chinese market.

European markets also generally rose, with the FTSE 100 up 0.61%, Germany DAX 30 up 0.37%, and France CAC 40 slightly up 0.01%. The China Golden Dragon Index rebounded 0.86%.

Deep Logic Behind Bond Market Volatility

The Bank of Japan’s rate hike pushed the 10-year government bond yield above 2%, reaching a new high since 1999. This change directly impacts global carry trade—high-leverage macro hedge funds face increased yen financing costs, as the yen was previously an ideal funding currency due to low interest rates, but now its “cost-effectiveness” has significantly diminished.

The US 10-year Treasury yield rose 3 basis points to 4.15%, and the 2-year yield increased by 3.2 basis points to 3.492%. France’s 30-year government bond yield rose to 4.525%, a new high since 2009. Changes in the yield curve reflect complex market expectations about future interest rates.

The Federal Reserve’s recent Reserve Management Purchases (RMPs) have produced market effects similar to quantitative easing. The focus now is whether the BOJ’s monetary tightening will lead the Fed to accelerate policy adjustments.

Cryptocurrency Market: Bitcoin Pullback, Ethereum Remains Stable

Bitcoin fell 0.34% in 24 hours, with the latest price at $91.20, showing some correction. Ethereum declined slightly by 0.03% in 24 hours, currently trading at $3.14, remaining relatively stable overall.

Key Macro Events

Shunichi Katayama Issues New Exchange Rate Warning

Japanese Finance Minister Shunichi Katayama stated after the G7 finance ministers’ online meeting that the significant decline of the yen despite the BOJ’s rate hike is concerning. She pointed out that there have been obvious unilateral and violent fluctuations in the past half day. Japan will take appropriate measures against excessive fluctuations, including those driven by speculators, based on the US-Japan joint statement signed in September. Katayama emphasized that intervention should be limited to addressing excessive volatility.

US Consumer Confidence Slightly Rebounds but Outlook Remains Worrisome

The University of Michigan’s December final consumer confidence index rose to 52.9, up 1.9 points from the previous period, but still below economists’ forecast of 53.5. Notably, the current conditions index fell to a historic low of 50.4, indicating consumer attitudes toward big-ticket purchases have worsened to the lowest level ever. The survey director noted that although there are signs of improvement toward the end of the year, consumer confidence remains nearly 30% lower than the same period last year.

Fed Officials Diverge: Rate Cut Outlook Uncertain

New York Fed President Williams stated that the Fed currently sees no urgency to further adjust interest rates, as recent employment and inflation data have almost not changed expectations. He believes that the rate cuts already implemented have put policy in a good position and hopes to see inflation fall back to 2% without harming the labor market.

Cleveland Fed President Mester argued that after three consecutive meetings with a total rate cut of 75 basis points, there is no need to adjust rates in the coming months, at least until spring, maintaining the current target range of 3.5% to 3.75%. She is more concerned about rising inflation than a fragile employment market.

Commodities and Forex Market

WTI crude oil rose 1.14% to $56.5 per barrel. The US dollar index increased 0.3% to 98.7. EUR/USD declined 0.12%.

Hong Kong night futures closed at 25,843 points, up 118 points, with a premium of 152 points. China Enterprises Index night futures closed at 8,958 points, with a premium of 57 points.

Focus Topics

Trump signed a space executive order aiming to land on the Moon by 2028, then establish a lunar base, with Mars missions temporarily on hold. Billionaire Elon Musk officially took office as NASA’s 15th Administrator.

ByteDance’s profit in 2025 is expected to reach $50 billion, a new record high, approaching Meta’s annual profit level. The company has signed an agreement to spin off TikTok’s US operations.

US House Republicans are calling for congressional regulation of AI chip exports similar to military sales, with any processor performing at or above Nvidia H200’s level subject to regulation.