The immediate trigger for this risk aversion seems to be Japan's unexpected rate hike on Wednesday... This move hit the Japanese stock market like a bolt from the blue.
This decisive rate hike indicates a level of confidence from the central bank that contrasts sharply with past cautious approaches.
As long as the economy doesn't take a severe hit, I believe there's still significant room for further rate hikes... traders are heavily shorting the Nikkei 225 in response to these strong signals.
Japan's tightening monetary policy is causing yen appreciation and a reversal of carry trades... putting additional pressure on equity markets.
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