Dovish Remarks Stoke Market Optimism as Data Volatility Looms

Market Overview

Yesterday, U.S. equities and Treasuries rallied in tandem after renowned investor Bessent suggested the Federal Reserve could cut rates by 50 basis points in September. The equity rally was broad-based, with the Dow Jones Industrial Average surging more than 460 points. Notably, gains were not concentrated in mega-cap tech stocks—small caps, as tracked by the Russell 2000, significantly outperformed the broader market. Within the “Magnificent Seven,” only Apple and Amazon closed higher. Dovish expectations pushed U.S. Treasury yields lower across the curve, with the benchmark 10-year yield falling 5.6 basis points. Meanwhile, the U.S. dollar index weakened for a second consecutive session.

The cryptocurrency market saw robust performance, with Bitcoin hitting a fresh all-time high and Ethereum gaining over 2%. Gold posted modest gains. Crude oil prices, however, slumped to their lowest level since early June, pressured by a surprise inventory build, downgraded demand forecasts, and market speculation over a potential Trump–Putin meeting.

Hot Topics to Watch

Japanese Government Bonds Under Pressure Again

Concerns over rate hike prospects and tight market liquidity resurfaced, with demand for Japan‘s five-year government bonds falling to its lowest since 2020—auction bid-to-cover came in at just 2.96x. There were no trades in the 10-year JGB throughout Tuesday, the first such occurrence in over two years. Against a global backdrop, relatively moderate U.S. inflation data supported Fed rate-cut expectations for next month, nudging U.S. short-term yields slightly lower. This stands in stark contrast to Japan’s rate hike outlook, underscoring the widening policy divergence between the two economies.

Bridgewaters Q2 U.S. Equity Positioning

In Q2, Bridgewater Associates significantly increased its stake in Nvidia—up 154% from Q1—making it its third-largest holding. Microsoft holdings rose by over 900,000 shares (+112%), Alphabet by more than 80%, and Meta by nearly 90%, ranking as its sixth, fifth, and seventh largest positions, respectively. Ubers stake surged more than fivefold. Meanwhile, the firm trimmed Amazon by nearly 800,000 shares (-6%) and AMD by about 410,000 shares (-19%), and fully exited Alibaba, Baidu, and JD.com positions established in Q1. Bridgewater also initiated a position in Arm. Its top holding remained the SPDR S&P 500 ETF Trust (SPY), while gold ETF holdings were unchanged.

Key Data to Watch (GMT+8)

• 20:30 – U.S. Initial Jobless Claims (week ending Aug 9)

• 20:30 – U.S. July Producer Price Index (YoY / MoM)