Bitunix Analyst: Non-agricultural disruptions are compounded by Japanese and US intervention, global assets are once again facing high capital cost constraints
Comparing news, non-farm payrolls in the US unexpectedly fell by 23,000 in July, the first negative increase since February this year. Although the unemployment rate fell to 4.1%, the total non-farm payrolls data for May and June were drastically revised, indicating that the resilience of the US job market is weakening. This makes the Fed's policy trade-off between inflation and employment more complicated. In particular, differences among officials over interest rate hikes have widened recently, and the risk premium of monetary policy will still be reflected in US bond yields and dollar asset valuations.
Meanwhile, the summary of opinions from the Bank of Japan's July meeting sent a stronger signal of interest rate hikes. Some members believed that a more flexible and even more active approach to policy normalization should be adopted. The weak yen prompted Japan and the US to rarely intervene in the foreign exchange market, showing that the exchange rate issue is no longer just Japan's own monetary policy issue, but is gradually affecting US debt holdings, US dollar liquidity, and the global arbitrage trading structure. If expectations of Japan's subsequent interest rate hikes heat up further, the cost of Japanese yen arbitrage funds will rise, which may also exacerbate fluctuations in overvalued and highly leveraged assets.
US debt is in another critical position. Basent's recent support for yen intervention, discussions on FIMA liquidity instruments, and adjustments to long-term treasury bond issuance statements are all essentially aimed at reducing the pressure on the long-term US bond market. However, in an environment where fiscal deficits, inflation, and energy costs are still high, the support that the Treasury can provide is limited. What really determines the long-term yield is still the path of inflation, the Federal Reserve's policy, and the market's pricing of US fiscal sustainability.
The industrial side, on the other hand, presents a completely different picture. Demand for SpaceX, AI servers, HBM, and NAND is still booming, and corporate capital expenditure continues to expand, but SanDisk and Western Digital stock prices plummeted after earnings reports, reflecting that the question is no longer just whether performance has increased, but whether the company can continue to exceed already extremely high market expectations. The AI industry's core paradox continues to shift to capital efficiency and affordability.
Therefore, what the market really needs to observe this week is not a single data, but whether cooling employment can offset the pressure of inflation and fiscal factors on long-term interest rates, and whether AI's high capital expenditure can continue to be converted into sufficient cash flow to support high valuations. The US July CPI announced on Wednesday will be an important verification. If inflation is still sticky, weak agriculture may not be enough to provide room for a continued downward trend in interest rates; conversely, if inflation cools down at the same time as employment, the pressure of high interest rates on global risk assets will have a chance to be substantially relieved.
Overall, global assets are still in an environment where high financial demand, high capital expenditure, and high capital costs coexist, and volatility and asset differentiation are expected to remain high.
