ORLANDO, Florida, July 22 (Reuters) - The Nasdaq fell on

Wednesday, dragged down by software stocks ahead of some major

tech earnings reports, while deepening conflict in the Middle

East pushed oil prices sharply higher again and Brent crude

closer to the $100 a barrel mark.

In my column today, I look at the yen's slide to a 40-year low

against the dollar. There are many reasons, including the global

energy shock and yield differentials, but central to the

currency's chronic weakness is Japan's growing policy

credibility deficit in the eyes of global investors.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Google beats quarterly revenue expectations on enterprise

AI surge

2. OpenAI AI models went rogue during testing, triggering

"unprecedented" breach at startup

3. BOJ on alert to price risks that may lead to faster rate

hikes, sources say

4. Separate U.S. talks with Canada, Mexico test North

America's trilateral trade pact

5. Escalating Middle East war could slash global growth to

1.3% in 2026, World Bank chief economist says

Today's Key Market Moves

* STOCKS: Europe +0.6%, UK +1.2% to near 5-month high. Dow

and S&P 500 flat, Nasdaq -0.5%.

* SECTORS/SHARES: Six S&P 500 sectors rise, five fall.

Utilities +2.3%, comms services -1.3%. Google -3% in choppy

trade after earnings, Tesla -3% on after-the-bell earnings.

* FX: Dollar/yen holds above 163.00, euro steady around

$1.14 ahead of ECB. COP hits 5-year high, NOK rises vs EUR for

14th day in last 17.

* BONDS: 2-year JGB yield 1.475%, highest since 1995. U.S.

yields up 3-5 bps across the curve, 20-year auction demand ok

but high tail.

* COMMODITIES/METALS: Oil +3% to 6-week high, Brent closes

in on $95/bbl.

Today's Talking Points

* Open-doors AI

OpenAI said on Tuesday that an autonomous agent powered by its

advanced artificial intelligence models went rogue during a

security test, triggering a hack that compromised AI startup

Hugging Face last week. Essentially, the "unprecedented cyber

incident, involving state-of-the-art cyber capabilities" was a

hack into a different company's systems that had no human

involvement.

This is the stuff of nightmares for ordinary people,

businesses, and regulators. The worry is it won't be the last

such breach and that those to come will potentially have much

more devastating consequences. A glitch in the matrix?

* Call to action

The two-year Japanese government bond yield jumped to 1.475%

on Wednesday, its highest level in 31 years, as traders bet that

the Bank of Japan will accelerate the pace of rate hikes. Of

course, what constitutes a faster pace of rate hikes in Japan is

different from elsewhere in the developed world - only one

quarter-point hike is fully priced over the next six months.

The BOJ is certainly in a tough spot, with oil prices

shooting higher again, the yen at a 40-year low against the

dollar and an all-time low on a "REER" basis. More aggressive

tightening appears to be warranted, but that would not be

welcomed by Prime Minister Sanae Takaichi's government. While

the BOJ sits on its hands, the yen remains under heavy pressure.

* Meanwhile, on Main Street

As energy prices rise, so do bond yields, and so too does

the pressure on households. The latest figures show the average

30-year mortgage rate is at its highest in almost a year and

average gas prices are back above $4 a gallon. Both are set to

rise further - the 30-year Treasury yield is having its longest

stretch above 5.00% since 2003, and crude is up 30% in just

three weeks.

On the plus side for Americans, equity markets are still

holding up well, which is helping to boost the wealth effect and

keep financial conditions loose. But the relief from

softer-than-expected inflation readings for June will likely be

short-lived, and spending power is being squeezed. Main Street

may feel the pinch more than Wall Street.

What could move markets tomorrow?

* South Korea GDP (Q2, advance)

* European Central Bank interest rate decision

* U.S. weekly jobless claims

* U.S. Treasury sells $21 billion of 10-year TIPS at auction

* U.S. earnings, including Intel, Blackstone, T-Mobile

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