Investors in Turmoil: Japanese Interest Rate Hike Shakes Global Markets

The start of the week looked bleak for investors as unsettling news from Japan shook the markets. The Bank of Japan raised interest rates by only 15 basis points – from 0.1% to 0.25%. However, even this slight increase is causing worries for currency traders as they fear that even this minimal rise could jeopardize the yen carry trade. In this mechanism, traders borrow in yen at low costs to invest in higher-yielding dollar-denominated debt securities. If this trend reverses, traders might be forced to sell U.S. debt securities and stocks to repay their yen-denominated loans. This could strengthen the Japanese markets but simultaneously harm U.S. investments. In the morning, shares of Clorox, Twilio, and Atlassian dropped significantly. However, as the day progressed, the situation calmed down. By 12:15 PM ET, Clorox was down by only 0.5%, Twilio recorded a decline of 3.8%, and Atlassian even rose by 1.6%. But why did these three stocks suffer particularly? Typically, the consumer goods company Clorox would not be associated with technology firms like the cloud communications company Twilio and the collaboration software provider Atlassian. As it turned out, these three stocks had something in common. Besides the impacts of the yen carry trade, Barclays lowered the price targets for all three this morning. The reasons provided by Barclays varied. According to TheFly.com, Clorox was downgraded due to weak sales trends (down 6% in the last quarter). In Twilio’s case, the bank fears that the 4% revenue growth is insufficient to justify a 2.6 times revenue valuation. Conversely, Atlassian posted a 20% revenue growth in its most recent quarter. Although Barclays lowered the price targets for all three stocks, Atlassian is still rated as a buy and valued at $250 per share, while the company is currently trading at $147. I agree that the debt-free Atlassian is a better bargain than the indebted Clorox. However, I also like Twilio. While last quarter's revenues were unimpressive, most analysts expect the company to grow its earnings by 30% over the next five years. With a price-to-earnings ratio of only 12, Twilio also appears to be a good buy. Before you invest in Atlassian, however, you should consider the following: The analyst team at Motley Fool Stock Advisor recently identified the 10 best stocks that they believe are currently the best buys for investors ... and Atlassian was not one of them. The ten picks could provide massive returns in the coming years.