Bank of Japan Ends Negative Interest Rates, Global Markets React
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MORNING BID EUROPE-BOJ hikes, Fed next
A look at the day ahead in European and global markets from Ankur Banerjee Investors in Europe will wake up to a volatile yen after the BOJ raised interest rates in a long-awaited move and a growing divide in the AI world following contrasting earnings from tech bellwether Microsoft and chipmaker AMD. The Bank of Japan hiked the overnight call rate target to 0.25% from 0-0.1% by a 7-2 vote and laid out a detailed quantitative tightening plan that will reduce monthly bond buying in several stages to around 3 trillion yen as of January-March 2026. The yen and the Nikkei were initially choppy, with bank stocks in Tokyo spiking higher. The yen was last at 152.73 per dollar. Having started July wallowing near 38-year lows of 161.96 per dollar, the yen is now stalking a three-month high. The more than 5% rise in the month is the currency's first month of gains this year. A slew of factors including likely official intervention, a sell-off in equities and a reassessment of popular carry trades have helped the yen rebound although the currency is still down 7.6% against the dollar for the year. With the BOJ out of the way, investors will now be waiting for the Federal Reserve to indicate that rate cuts in the U.S. are around the corner even if the central bank stands pat on rates later on Wednesday. The risk is, of course, that the Fed is unwilling to commit to rate cuts, with markets having already priced in 68 basis points of easing this year. But before that, the euro zone's inflation report will be the main economic focus for the day and comes after data on Tuesday showed the economy in the region grew slightly more than expected in the three months to June. Meanwhile, quarterly results from major tech firms are highlighting a divide in the AI landscape as chipmaker Advanced Micro Devices reported strong earnings and Samsung Electronics anticipated robust demand for chips in the second half of this year. In contrast, Microsoft disappointed investors with its slow cloud growth suggesting that the payoff from the billions in AI investments may take longer than investors might have hoped. Thus it remains to be seen whether chipmakers' strong results pull European tech shares higher or if lacklustre earnings from mega stocks drag them lower. Key developments that could influence markets on Wednesday:
[2]
MORNING BID EUROPE-BOJ hikes, Fed next
A look at the day ahead in European and global markets from Ankur Banerjee Investors in Europe will wake up to a volatile yen after the BOJ raised interest rates in a long-awaited move and a growing divide in the AI world following contrasting earnings from tech bellwether Microsoft and chipmaker AMD. The Bank of Japan hiked the overnight call rate target to 0.25% from 0-0.1% by a 7-2 vote and laid out a detailed quantitative tightening plan that will reduce monthly bond buying in several stages to around 3 trillion yen as of January-March 2026. The yen and the Nikkei were initially choppy, with bank stocks in Tokyo spiking higher. The yen was last at 152.73 per dollar. Having started July wallowing near 38-year lows of 161.96 per dollar, the yen is now stalking a three-month high. The more than 5% rise in the month is the currency's first month of gains this year. A slew of factors including likely official intervention, a sell-off in equities and a reassessment of popular carry trades have helped the yen rebound although the currency is still down 7.6% against the dollar for the year. With the BOJ out of the way, investors will now be waiting for the Federal Reserve to indicate that rate cuts in the U.S. are around the corner even if the central bank stands pat on rates later on Wednesday. The risk is, of course, that the Fed is unwilling to commit to rate cuts, with markets having already priced in 68 basis points of easing this year. But before that, the euro zone's inflation report will be the main economic focus for the day and comes after data on Tuesday showed the economy in the region grew slightly more than expected in the three months to June. Meanwhile, quarterly results from major tech firms are highlighting a divide in the AI landscape as chipmaker Advanced Micro Devices reported strong earnings and Samsung Electronics anticipated robust demand for chips in the second half of this year. In contrast, Microsoft disappointed investors with its slow cloud growth suggesting that the payoff from the billions in AI investments may take longer than investors might have hoped. Thus it remains to be seen whether chipmakers' strong results pull European tech shares higher or if lacklustre earnings from mega stocks drag them lower. Key developments that could influence markets on Wednesday:
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The Bank of Japan (BOJ) has made a historic decision to end its negative interest rate policy, marking a significant shift in global monetary policy. This move has sparked reactions across financial markets worldwide, with attention now turning to the US Federal Reserve's upcoming decision.
Bank of Japan's Historic Decision
In a landmark move, the Bank of Japan (BOJ) has decided to end its long-standing negative interest rate policy, signaling a significant shift in the country's monetary strategy. This decision marks the first interest rate hike by the BOJ in 17 years, bringing an end to the world's last negative policy rate
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. The move has sent ripples through global financial markets, with investors and analysts closely watching the implications for the world economy.Market Reactions and Currency Fluctuations
The immediate aftermath of the BOJ's decision saw significant movements in currency markets. The Japanese yen experienced a sharp decline against major currencies, including the US dollar. This reaction was somewhat unexpected, as many market participants had anticipated a strengthening of the yen following the rate hike
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.In contrast, the US dollar index, which measures the greenback against a basket of major currencies, saw an uptick. This movement suggests that investors are recalibrating their positions in light of the changing global interest rate landscape.
Global Stock Markets and Bond Yields
Stock markets across Asia and Europe showed mixed reactions to the news. While some markets experienced slight gains, others saw modest declines as investors assessed the potential impact of the BOJ's decision on global economic growth and trade
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.Bond yields, particularly in Japan, saw an increase following the announcement. This movement reflects the changing expectations for future interest rates and inflation in the country. The ripple effect was also felt in other major bond markets, with yields adjusting to the new global interest rate environment.
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Focus Shifts to the US Federal Reserve
With the BOJ's decision now in the rearview mirror, global attention has quickly shifted to the United States Federal Reserve. The Fed is set to announce its own interest rate decision, and market participants are eagerly anticipating guidance on the future path of US monetary policy
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.Analysts are speculating on whether the Fed will maintain its current stance or signal a potential shift in its approach to interest rates. The decision is expected to have significant implications for global markets, potentially influencing currency valuations, stock prices, and bond yields worldwide.
Implications for Global Economic Policy
The BOJ's move to end negative interest rates is seen as a potential turning point in global monetary policy. It raises questions about whether other central banks, particularly in Europe, might follow suit in normalizing their interest rate policies
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.Economists and policymakers are now debating the broader implications of this shift for global economic growth, inflation, and financial stability. The coming months will be crucial in determining how this change in Japanese monetary policy will influence economic decisions and market dynamics on a global scale.
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