The Bank of Japan's monetary policy outlook came into focus after Nikkei retreated 2.2% from record highs, with growing speculation regarding its future interest rate. U.S. Treasury Secretary Scott Bessent's assertion that the BOJ is "behind the curve" in monetary policy management intensified market concerns about imminent policy tightening. The central bank now faces pressure to abandon its current inflation gauge tied to domestic demand and wage growth, which has so far prevented further monetary tightening efforts. Currency market dynamics reflected these policy expectations, with the yen gaining against the dollar as Federal Reserve rate cut bets increased, creating opportunities for Japanese exporters across multiple sectors. The policy risk might prompt widespread profit-taking after the market's recent 9% rally, though a restart in carry trade unwinding could drag the global market down.

EQUITY

Wall Street cheered on another record high for the second consecutive day, with a rate cut imminent for September, running on a 95% chance on CME FedWatch. Major technology stocks, including Nvidia, Alphabet, and Microsoft, have started pulling back on initial euphoria as investors searched for new growth drivers beyond the "Magnificent Seven" stocks. Paramount Skydance made a record 37% in a single day post-merger, and the CEO is striking long-term deals.

GOLD

Gold prices have fallen after a slight rise for two consecutive sessions, with rate cuts expected to enhance the appeal of the non-interest-bearing precious metal. Treasury Secretary Scott Bessent's comments suggesting a potential 50 basis point rate cut in September have changed the conversation from "if" to "how much". Gold has also found support from geopolitical tensions ahead of the scheduled meeting between President Trump and Russian President Putin.

OIL

Crude oil prices kept falling even with a risk premium ahead of talks between US President Trump and Russian President Putin, with Trump warning of "very severe consequences". The market faces high bearish pressure from oversupply concerns, with the IEA projecting a record global surplus of 2.96 million barrels per day in 2026 from OPEC+ and allies. Adding to the negative sentiment, US crude inventories added 3.036 million barrels last week, defying expectations for a draw.

CURRENCY

The greenback fell to multi-week lows with imminent rate cuts starting in September, in addition to a growing chance of a larger 50 basis point reduction. It was particularly weak against the Japanese yen, dropping to its lowest level since July 24 after Treasury Secretary Scott Bessent urged aggressive Fed cuts while suggesting the Bank of Japan hike. The Indonesian rupiah hit a seven-month high, and the Malaysian ringgit reached a six-week peak as Fed easing supported risk sentiment.