The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0619 GMT - China's economic momentum is likely to improve for the remainder of 2026, Capital Economics' Nguyen Hoang Nam says in a note. China's official manufacturing purchasing managers index in August rose to 49.8 from 49.2 in July, beating expectations. The subindex for total new orders increased to 50.6, up from 48.5 in July. This suggests that fiscal spending on infrastructure may be on the cusp of picking up again after delays in the deployment of already-allocated funds by local governments, says the China economist.(amanda.lee@wsj.com)
0618 GMT - The U.S. dollar eases, trimming gains it made Friday after Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole symposium. Warsh addressed the necessity to work more to bring inflation back to the Fed's 2% target and hinted at a possible rate hike if necessary. "Fed Chairman Kevin Warsh's Jackson Hole speech was the clear market mover," BNY's Geoff Yu says in a note. "His more hawkish tone drove the market to reprice the probability of a September hike from roughly one-in-three to greater than 50/50, and nearly one and a half cumulative hikes by year end," the senior EMEA macro strategist says. The DXY dollar index falls 0.1% to 99.622, having hit a two-week high of 99.726 on Friday. (emese.bartha@wsj.com)
0554 GMT - Investors see a high probability of a Federal Reserve interest-rate hike in September following Chairman Kevin Warsh's speech at Jackson Hole last Friday. Money markets currently price a 60% probability of a hike on Sept. 16, according to LSEG data. Expectations of a hike jumped immediately after Warsh's speech, initially to around 48% and later in the session to around 57%, from around 35% on Friday morning. (emese.bartha@wsj.com)
0546 GMT - Federal Reserve Chairman Kevin Warsh "was successful in re-establishing confidence," Catalyst Funds' Larry Holzenthaler says after Warsh's speech at the Kansas City Fed's annual Jackson Hole symposium on Friday. "He came across as very focused on inflation and bringing it back in line with the Fed's 2% target," the senior portfolio manager says. The market seems to be reacting exactly the way the Fed wants; short-term rates are higher, while long-term rates are marginally lower following his comments, Holzenthaler adds. "Investors should clearly expect that the Fed is going to raise rates if it needs to." (emese.bartha@wsj.com)
0541 GMT - Fed Chair Warsh's message in Jackson Hole was that "markets, not the Fed, should be doing the forecasting, and investors waiting for a pre-committed reaction function will be waiting through his entire term," says CIFC Asset Management's Natalia Lojevsky in a note. Front-end rates remain the primary tool in Warsh's framework, with the balance sheet and other crisis-era measures held in reserve rather than treated as standing policy, the managing director says. Warsh, however, gave the hawks real material too. "Inflation remains persistently above target in his own account, and he left the door open to moving on it." The market's reaction, with short-end yields rising and long yields easing, was "a classic bear-flattener as investors priced a firmer near-term path without losing confidence in the long-run inflation story."(emese.bartha@wsj.com)
0525 GMT - U.S. Treasury yields edge lower in Asian trade, trimming some of Friday's massive rises in short-end yields following Federal Reserve Chairman Kevin Warsh's hawkish speech in Jackson Hole. "Chair Warsh struck a broadly bullish tone on growth while emphasizing inflation as the Fed's primary concern," TD Securities' strategists say in a note. However, he stopped short of signaling a September hike and TD Securities' base case remains for the Fed to stay on hold, they say. The two-year Treasury yield falls 2 basis points to 4.328%, while the 10-year Treasury yield falls declines 0.8 basis points to 4.713%, according to Tradeweb. (emese.bartha@wsj.com)
0515 GMT - Inflation framing was the centrepiece of Federal Reserve Chairman Kevin Warsh's speech, referenced several times in the context of the work still to do and adherence to the 2% price target, Impax Asset Management's Ross Pamphilon says in a note. "We expect a much quieter Fed with a belief that forward guidance is ill-suited to normal times," the fixed income CIO says. While Warsh gave no direct signal for September, "this speech does increase the odds of a hike," Pamphilon says. Overall, the speech was clearly hawkish and led to a flattening of the curve, with the front end selling off. "The speech left zero doubt with respect to the inflation focus." (emese.bartha@wsj.com)
0514 GMT - Federal Chair Kevin Warsh delivered a clear and hawkish speech at Jackson Hole on Friday, "walking back his communication mistakes in July," SEB's Fed watcher and U.S. economist Elisabet Kopelman says in a note. "While Warsh did not send clear signals on the timing of rate changes, the speech was supportive of market expectations of a rate hike during the fall--whether in September or by year-end," she says. Inflation and the balance within a currently split FOMC will be decisive but the speech indicates an upside risk to SEB's forecast that rates have peaked, Kopelman says. (emese.bartha@wsj.com)
0506 GMT - Federal Reserve Chairman Kevin Warsh's Jackson Hole remarks provided the market with what participants hoped for, a more thorough view of the economy and inflation, which appeared to satisfy investor concerns, Aptus Capital Advisors' John Luke Tyner says in a note. Warsh's comments were tilted more hawkish than the message he delivered at the July FOMC press conference, the portfolio manager and head of fixed income says. "His comments indicated that underlying inflation trends have not meaningfully improved, and if they don't improve quickly there is more work to do at the Fed." This reassured market participants that Warsh and team aren't going to sit back and wait even longer for the inflation target to be achieved, Tyner says. (emese.bartha@wsj.com)
0506 GMT - Fed Chair Kevin Warsh's comments complicate the AI trade, Tiger Brokers market strategist James Ooi says in a note. Warsh said at the Jackson Hole symposium that the Fed policy remains unrestrictive given rapid business capex growth, much of it AI-related. Investors now have to weigh whether capex growth could increase the odds of tighter monetary policy, Ooi says. Higher interest rates raise discount rates, weighing on AI hardware valuations, he adds. Asian tech hardware stocks fall after U.S. semiconductor shares declined following Warsh's hawkish speech on Friday. SK Hynix falls 2.5%, Samsung Electronics drops 1.95% and TSMC loses 1.45%.
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