The US Bails Out the Yen, AstraZeneca Explores a Bristol Myers Mega-Merger

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Monday, August 3rd. In today's episode, we'll preview a stacked week ahead, including some big time earnings and the July jobs report. We'll also explain why the US government just stepped in to buy billions of dollars worth of Japanese yen. Then stick around to the end of the show to find out how close the new Spider-Man movie came to breaking a box office record. We got a great show for you today.
Let's go.
The markets are coming off a winning week with all three major indices jumping more than 1% last week, thanks to a late week surge, especially from tech stocks. Some of the big winners last week include Amazon and Microsoft, which both surged more than 15%. Overall, for the month of July, the S&P was down 0.1% and the NASDAQ lost 3.2%. But given where we were at the start of last week, I think I can definitely take that. Now looking ahead, many of the big tech earnings are behind us, but we're still in the thick of earnings season. In fact, this week is pretty stacked as well. We're hearing from Palantir, SpaceX, AMD, Uber, Disney, McDonald's and many more. So we'll have a lot to talk about this week. Personally, I'm really looking forward to what SpaceX has to say in their earnings call. I think there's a lot riding on it. Not to mention we're also getting the July jobs report this week, which should give us more information on the health of the labor market. You know, the labor market could play a major role on what the Fed decides to do with interest rates. If hiring remains strong and the unemployment stays low, then the Fed could use that as room to keep rates elevated or maybe even raise them, especially if inflation remains sticky. In fact, that's what the bond market thinks is gonna happen. The 10-year treasury yield finished Friday at 4.74%. That's the highest level since January of 2025 And then the 30-year treasury yield reached a 19-year high. So the bond market is signaling that the Fed will likely be raising rates again. So we're gonna be staying on top of that. Now we did get some relief this morning when it comes to oil prices. On Sunday, President Trump said that he was calling off a planned strike on Iran, claiming that the two sides have agreed to the framework of a potential deal that would include reopening the Strait of Hormuz. So after those comments, oil prices dropped more than 5%. But personally, it's hard for me to buy into anything when it comes to the conflict because the story changes every other day. Now one day there seems to be strikes, the next day we're talking about peace talks and opening Hormuz again, and then we're back to fighting again in a couple of days. That's been happening for the last three to four months. So the markets will still have to deal with this yo-yo geopolitical conflict in the Middle East. I don't know if that's going away anytime soon. We'll continue to keep an eye on all of it, including the oil markets, bonds, earnings. We're going to be breaking it all down. So if you're new here, definitely get subscribed to the podcast if you haven't already and tune in every day to stay in the loop.
Let's run through some headlines. Starting with the Japanese Yen. The US government bought billions of dollars worth of Japanese Yen for the first time since 1998, and it was to help prop up the currency. The yen has been in freefall lately, falling to 164 yen per dollar. That's the weakest level in about 40 years. And the reason this is happening is because Japan's interest rates are still super low compared to the rest of the world. So investors borrow money cheaply in yen, and then they take that money out of Japan and invest it into high yielding assets like US stocks and bonds. It's a very popular strategy. It's called the yen carry trade, but as more and more investors sell their yen to buy assets overseas, that weakens the currency. Now Japan has already spent over $70 billion trying to support their currency on their own, but those efforts haven't really worked. So on Friday, the US. Treasury got involved. They joined Japan by selling other currencies and buying yen, about $53 billion worth in a single day. And that massive buying pressure helped push the exchange rate back towards 157 yen per dollar. And both governments have said that they will not hesitate to do that again. Now you might be wondering, why does the US government even care about the yen? Well, it has to do with the bond market. Japan is the largest foreign holder of US. Treasuries. And over the last few months, they've had to sell their US. Treasuries to buy up yen, to prop up the currency. And by selling US. Treasuries, that pushes up the bond yields, making borrowing even more expensive for the US government and also companies. And higher borrowing rates have a ripple effect across the economy. So the US government is essentially helping Japan stabilize their currency before Japan was forced to dump even more US. Treasuries. And look, this intervention worked in the short term, but it doesn't solve the underlying problem causing this. Unless Japan starts raising interest rates further to close the carry trade, or they improve the confidence in their economy and public finances, traders will eventually start betting against the yen again. So this is the developing story. I'm definitely keeping my eye on it, especially since US bond yields are at multi-decade highs right now. Let's shift gears and talk about AstraZeneca, because the biggest pharma merger of all time might be on the table, and Wall Street absolutely hates it. Over the weekend, the Financial Times reported that AstraZeneca has been in talks to merge with Bristol Myers Squibb. The combined value of these two pharma giants would be around $400 billion. But the initial reaction by the market is not great. AstraZeneca stock is down around 7% today. There seems to be a lot of confusion from the analyst community on why this merger would be taking place. You know, AstraZeneca is one of the strongest growth stories in the pharma space. The company generated nearly $59 billion in revenue last year, and they're targeting $80 billion in revenue by 2030 The company has a strong pipeline of drugs and a leading portfolio of cancer treatments. Bristol Myers, on the other hand, is facing a pretty serious patent cliff. Some of their biggest drugs are approaching the end of their exclusivity period, and once those patents expire, then cheaper generic versions will hit the market and likely crush sales of Bristol Myers versions. So the market doesn't understand why a healthy growing company like AstraZeneca would buy a struggling company like Bristol Myers. There's also the antitrust wrinkle. Both companies have a huge cancer drug portfolio, and two of their blockbuster drugs literally compete head to head treating lung cancer. So this deal was to go through, it could be tied up with antitrust regulators for years to come. You know, I always wonder if merger talks are leaked on purpose, because the management team at these companies want to see the market reaction. And look, now that AstraZeneca has seen the market reaction, they might back out of any serious talks. Let's talk about some stocks making moves today.