Japan equity morning memo: Stock market falls in response to FOMC

Research evidence excerpt

Japan equity morning memo: Stock market falls in response to FOMC

Global Markets Research

Japan equity morning memo: Stock market 30 July 2026

falls in response to FOMC

EQUITY: JAPAN STRATEGY

Research AnalystsBut concerns about hawkishness and falling

Macro strategybehind the curve are too pessimistic

Tomochika Kitaoka - NSC

tomochika.kitaoka@nomura.comQuick Note +81 3 6703 1815

While the Fed left rates unchanged at the 28–29 July FOMC meeting, three members

voted in favor of a rate hike, and Fed Chair Kevin Warsh made comments at his press

conference that markets interpreted as hawkish, particularly that "there is no soft inflation

target...there's only a target" and "where necessary and appropriate, we will not hesitate

to act." While US rates fell in the short zone, they rose in the long zone, which we interpret

as reflecting concerns that the Fed is behind the curve, but an LLM analysis of the content

of the speech deemed it to be hawkish. Concerns about hawkishness and concerns about

the Fed falling behind the curve are mutually contradictory, and both strike us as signs of

overly pessimistic market sentiment. Expectations for rate hikes fell from the end of the

previous week to 57bp in hikes by September and 126bp by December. Warsh is upbeat

on the slowdown in CPI inflation in June, and if this trend continues in July and beyond,

the urgency to raise rates will diminish, but under his policy of eschewing forward

guidance, the only path for alleviation of the market's concerns about hawkishness and

falling behind the curve would be through announcements of stable monthly inflation data.

In US equities on 29 July, REITs, SaaS stocks, and the Magnificent Seven held up well,

while the SOX, capital goods stocks, and stocks favored by hedge funds fell sharply, and