The yen's surge to a three-month high of 155.20 per dollar weighed on Japanese exporters, contributing to the Nikkei's underperformance relative to regional peers. A stronger yen reduces the value of overseas earnings when repatriated. Barclays analysts argued that even if the yen strengthens further in the near term, longer-term downward pressures remain in place given Japan's loose financial conditions and wide yield differentials.
Earnings momentum provided a fundamental underpinning for equities. More than 300 S&P 500 companies have reported results so far, with roughly 85% beating expectations, according to LSEG data. Communication services led sector gains with a 4.3% rise, while energy dropped 1.2% as the worst performer. The S&P 500's earnings growth rate for the quarter stands at 29.3% based on the 304 companies that had reported through July 31.
What to Watch
The market's next directional cues will come from whether diplomatic talks over the Strait of Hormuz materialize, the trajectory of USD/JPY as intervention risks linger, and the July U.S. jobs report on Friday, which could influence Federal Reserve rate expectations. With Iran denying direct negotiations and shipping flows still constrained, the central question becomes whether the market's current calm reflects a durable de-escalation or a temporary pause before the next headline-driven reversal.
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