The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1119 ET - Market capitalization for so-called "stablecoins"--tokens typically pegged to the U.S. dollar--fell for the second-straight month, according to CoinDesk in a report. The firm says that stablecoin market cap fell 1% in July, to $308 billion. That makes it $14.5 billion stablecoin market cap shed since finding an all-time high in May, says CoinDesk. Driving the decline was $5.8 billion leaving Tether since May, with another $3.4 billion leaving USDC. However, the market cap for tokenized bond and money market funds rose 10.6% to $19.2 billion in July, even hitting a new all-time high of $19.3 billion as of July 27. Major cryptocurrencies are lower on this final trading day of July.(kirk.maltais@wsj.com)
1105 ET - The yield difference between short-dated gilts and their long-dated equivalents could widen further, Bank of America strategists say in a note. This week's BOE policy meeting indicated that there are no signs of second-order inflation effects so far, easing concerns about the prospects of rapid BOE rate increases in the coming months. Short-term gilt yields are expected to fall as markets adjust their BOE rate expectations, while long-dated gilt yields could remain elevated due to global geopolitical concerns and U.K. fiscal uncertainty. Two-year gilt yields last trade at 4.388%, while 30-year gilt yields last trade at 5.753%, Tradeweb data show. (miriam.mukuru@wsj.com)
1058 ET - Slack in Canada's economy is being absorbed but not rapidly, and progress could stall next quarter, KPMG Canada's Ali Jaffery says. Monthly GDP data points to annualized growth of more than 3% in 2Q. Jaffery says policymakers in Ottawa will be pleased with the numbers, though the economic recovery is still in its early innings and trade tensions remain elevated. The economist says the Bank of Canada won't be in any rush to raise interest rates, as there is still considerable room for non-inflationary growth. (robb.stewart@wsj.com; @RobbMStewart)
1052 ET - "Reports of my recession were greatly exaggerated," jokes Bank of Montreal's Douglas Porter after Canadian real GDP came in firmer than expected across the board. The economist notes the headline monthly result for May, upward revision for April, flash estimate for June and resulting early estimate for annualized 2Q growth were all above consensus expectations, a rarity. It also puts growth well above the 2.5% expansion for 2Q expected by the Bank of Canada, and north of the 1.55 estimate for U.S. GDP growth, Porter adds. He says it adds to evidence the economy is adapting to trade uncertainty but likely won't change the bigger picture concerns of fresh tariff threats and lofty energy prices, which should keep the Bank of Canada on hold this year. (robb.stewart@wsj.com; @RobbMStewart)
1049 ET - Canadian GDP rebounded strongly in 2Q, yet there is still excess slack in the economy, Says Oxford Economics' Michael Davenport. The economist still expects headwinds from a shrinking population, U.S. tariffs, and elevated trade and geopolitical uncertainty to cause economic momentum to slow in 2H. This, Davenport says, will reinforce the Bank of Canada's patient stance since excess slack in the economy should help prevent higher energy prices from driving a pick-up in core inflation and the need for higher interest rates. (robb.stewart@wsj.com; @RobbMStewart)
1017 ET - Canada's economy looks to have rebounded more strongly in 2Q than the Bank of Canada was anticipating, though after back-to-back weak quarters the chance of the central bank lifting interest rates this year still looks low, reckons Capital Economics' Ariane Curtis. Statistics Canada estimates industry-level GDP expanded 3.4% annualized in the latest quarter, and Curtis says GDP by expenditure may well show even stronger growth when it is released next month given net trade appears to have provided a big boost to the economy. (robb.stewart@wsj.com; @RobbMStewart)
0939 ET - Europe's private credit industry is rapidly expanding, but regulatory screening could slow the pace of growth in the near term, Societe Generale strategists say in a note. European regulators have stepped up their oversight over the direct lending sector, the strategists say. "Heightened regulatory scrutiny--while potentially supportive over the long term, particularly through Solvency II reforms--represents a near-term constraint on the pace of growth." (miriam.mukuru@wsj.com)
0938 ET - The Bank of England's failure to signal imminent interest-rate rises is likely to hold back sterling, MUFG Bank analysts say in a note. The BOE voted 6-3 to keep rates unchanged Thursday with three preferring to raise rates. Policymakers remain concerned about inflation risks but BOE Governor Andrew Bailey said markets shouldn't leave the meeting believing the central bank is edging towards raising rates. "For sterling, the communication remains supportive, but the deliberate pushback against rate hike expectations limits the scope for upside," the analysts say. Sterling drops 0.3% to $1.3419. The euro trades flat at 0.8557 pounds.(renae.dyer@wsj.com)
0925 ET - Private credit investments are expected to accelerate in Europe due to investor enthusiasm towards the region given its fairly stable economy, Societe Generale's strategists say in a note. The U.S. private credit industry is facing challenges as redemption requests have shaken big private credit firms. "Investors are increasingly turning to Europe as the U.S. private credit boom enters a more uncertain phase," the strategists say. (miriam.mukuru@wsj.com)
0854 ET - Treasury yields edge higher, alongside the dollar, as Middle East tensions linger while central banks struggle to curb inflation. WTI crude rises 2%, after falling yesterday. The Bank of Japan holds rates, as expected, while indicating a hike may be upcoming. U.S. employment costs rise 0.9% in 2Q, beating WSJ consensus of 0.8%. The July University of Michigan Consumer Sentiment Index is forecast to increase. The WSJ Dollar Index rises 0.3% as the greenback strengthens 0.5% against the yen. The 10-year yield is at 4.696%, up from yesterday's settle of 4.662%. The two-year rises to 4.283% from 4.227%. (paulo.trevisani@wsj.com; @ptrevisani)
0843 ET - The Bank of England has suggested that the bar to a near-term interest-rate increase is high, Morgan Stanley's Bruna Skarica and Fabio Bassanin say in a note. During Thursday's rate decision, the BOE said that so far there is little evidence of second-order effects of inflation. Nonetheless, the BOE could be pushed to raise rates if energy costs stay elevated for a prolonged period, Skarica and Bassanin say. Markets price in a 28% probability of a BOE rate increase in September, and fully price in the possibility of one quarter-point rate hike by the end of 2026, LSEG data show. (miriam.mukuru@wsj.com)
0842 ET - Canada's economy roared back to life in 2Q. Statistics Canada estimates industry-level GDP increased 0.2% on-month in June following stronger-than-expected growth of 0.3% a month earlier. Based on that, the economy expanded 3.4% annualized in 2Q, the strongest growth since 1Q of 2023 and following two quarters of weakness. Though not based on full data, it points to growth greatly outpacing the 2.5% projected by the Bank of Canada and offers a solid handoff for 3Q even with heightened uncertainty from the latest U.S. tariff threats.
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