The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1102 ET - An unprecedented global capex cycle drives the resilient U.S. expansion fueling recent market trends, Deutsche Bank's George Saravelos says in a note. AI and government spending underpin the cycle, which Saravelos says constitutes a rare event. "CapEx booms tend to be sustained, multi-year events," he says, adding that the current capex boom may be one of the largest after World War II reconstruction and it could last for years. However, the dollar has trended weaker through previous capex cycles. "We would not chase the dollar higher after the last few weeks' repricing," Saravelos says. The WSJ Dollar Index falls 0.3%. (paulo.trevisani@wsj.com; @ptrevisani)
1052 ET - Bitcoin is down 1% in morning trade, to $83,508. While bitcoin has been sliding since rising to as high as $87,000 early this week, analysts don't expect it to completely reverse these gains. "We would treat a retracement toward $80K as an accumulation opportunity rather than a failure of the breakout," says Colin Basco of Coinbase Institutional in a note. Basco adds that the market sentiment around bitcoin is decidedly more positive than the price action seen in the token supports. "Sentiment has run ahead of positioning," says Basco, noting that CoinMarketCap's Fear and Greed index is firmly in 'greed' territory. Ethereum is flat at $2,684, XRP is up 2.6% to $1.57, and solana rises 1.8% to $118.91. (kirk.maltais@wsj.com)
0911 ET - The federal government deficit in Canada widened in the last quarter with a rise in expenses. Statistics Canada data show the general government surplus across the country grew C$2.3 billion on-year to C$10.5 billion in 2Q, excluding social security funds, representing 1.2% of nominal GDP. Yet the federal deficit expanded C$1.1 billion to C$4.1 billion, or 0.5% of GDP. Federal government revenue rose 5.6%, driven by an increase in taxes on income, profits and capital gains, but that was outpaced by a 6.3% rise in total expenses that was led by social benefits thanks to payments under Ottawa's Groceries and Essentials Benefit. Federal government net debt increased by 5.7% on-year to hit C$1.05 trillion as liabilities rose largely due to an increase in debt securities. (robb.stewart@wsj.com; @RobbMStewart)
0903 ET - Treasury yields ease slightly as oil prices ease following reports that U.S. and Iran are discussing a deal to reopen Hormuz. Durable goods orders were unchanged in August, beating WSJ consensus forecast of a small drop. The University of Michigan consumer sentiment index due at 10 a.m. ET is expected to move lower and an upward surprise could trigger another bond selloff, as a resilient economy is perceived as likely to spur rate hikes by the Fed, underpinning the recent increase in yields. The 10-year yield is at 5.179%, down from a 19-year intraday high of 5.224% reached Thursday. The two-year is at 4.899%, after reaching 4.943% late yesterday. (paulo.trevisani@wsj.com; @ptrevisani)
0900 ET - Institutional demand for ether is improving, offsetting the impact of tighter U.S. financial conditions, Zaye Capital Markets analyst Naeem Aslam says in a note. Recent exchange-traded fund inflows, corporate treasury accumulation and ether's ability to retain most of its weekly advance suggest institutional participation has improved materially, he says. If ETF inflows remain positive and large holders continue accumulating ether while the cryptocurrency holds above $2,600-$2,650, it could rise above $2,800 and potentially $3,000, he says. If institutional flows reverse or higher U.S. yields trigger broader crypto deleveraging, that support would weaken, he says. Ether rises 1.1% to $2,714, LSEG data show. (renae.dyer@wsj.com)
0859 ET - Positive sentiment around bitcoin could build if it can consolidate around, or preferably above, the key $80,000 level, Trade Nation's David Morrison says in a note. Bitcoin's sideways movement from early July to mid-August was an extended period of consolidation which helped to build momentum for its surge higher, wiping out bets against bitcoin and providing a basis for fresh buying, he says. A similar consolidation could help bitcoin, he says. Bitcoin rises 0.1% to $84,457 after reaching its highest level since January at $87,315 Monday, LSEG data show. (renae.dyer@wsj.com)
0754 ET - Many investors and traders are likely looking forward to closing out a brutal week for bonds, but next week another potential worry awaits, September payrolls. "Given the decline in initial and continuing jobless claims over the month, the risk of a stronger September reading is rising, which could justify markets pricing in a high probability of an October hike," says JPMorgan in a note. But the economists at Barclays aren't convinced the Fed will move next month. "We expect the FOMC to remain mindful of inconsistencies between the payroll and household surveys, where we expect another flat reading for the unemployment rate (at 4.1%) amid low labor supply growth. In our view, this combination would keep an FOMC hold in play for the October meeting, as it continues to assess data developments, before proceeding with a 25bp rate hike in December." (patrick.sheridan@wsj.com)
0727 ET - The Swiss franc faces further losses as it hits a 16-month low against the dollar and a one-week low versus the euro, ING's Francesco Pesole says in a note. The market is fully pricing an interest-rate rise by the Swiss National Bank by March but this looks unlikely, he says. The SNB held rates at 0% on Thursday and signalled little concerns about inflationary risks. The dollar rises to as high as 0.8298 francs and ING expects it to reach 0.8500 if the Federal Reserve raises rates again in October. The euro rises to a high of 0.9455 francs and ING sees it potentially rising above 0.9480. (renae.dyer@wsj.com)
0724 ET - The dollar's strength should persist until next year, supported by expectations the Federal Reserve will raise interest rates further, Morgan Stanley strategists say in a note. Rate pricing should remain at least as elevated as current levels, they say. Continued U.S. economic resilience and/or persistently high energy prices could prompt a further increase in pricing, they say. Moreover, euro-negative risk premium could increase. "The French Presidential election in spring 2027 remains a key event risk for European macro, while investors increasingly discuss risks of elections in Germany and Italy as well." Morgan Stanley expects the DXY dollar index to rise to 104.000 and the euro to fall to $1.10 by mid-2027, from current levels of 101.047 and $1.1397, respectively. (renae.dyer@wsj.com)
0656 ET - Climbing energy prices means the Bank of England is now on course to tighten policy, Morgan Stanley's Bruna Skarica and Fabio Bassanin say in a note. They change their BOE call to two quarterly interest-rate hikes in November and February. "While we still think--and with a decent degree of conviction--that any signs of an improvement in the supply in oil and refined products would leave the BOE on hold from here, it is challenging to maintain a prolonged hold as a modal call amid the recent Middle East newsflow," they say. The only catalyst for even stronger tightening would be a materially fiscally loose and inflationary budget announced next month, they say. (edward.frankl@wsj.com)
0649 ET - A change in Prime Minister, combined with a boost to consumer spending from the summer's hot weather, has helped drive three straight monthly increases in U.K. consumer confidence for the first time since summer 2024, MHA's Joe Nellis says. The consumer sentiment index edged up to minus 13 in September, from minus 14 in August. However, recent gains could come under threat amid rising inflation, higher borrowing costs and weaker job prospects, he says. Andy Burnham's first budget announcement next month could also dampen confidence. "The fiscal situation remains unsustainable and tax rises are inevitable," Nellis says. "Creating the conditions for a sustained improvement in consumer confidence--rather than a short-lived spike - will be a major challenge for the government," he adds. (edward.frankl@wsj.com)
0550 ET - The Chinese economy's transformation has yet to happen, Fan Gang, economics professor at Peking University, says at an event in Singapore. "We've been saying for years that we shouldn't rely so much on selling stuff abroad, but exports are still holding up the whole economy," Fan says. China's trade surplus is actually getting bigger, he notes. Speaking on a panel at the FutureChina Global Forum, he says that weak consumption isn't just a problem that happened recently, but a problem that has been there for a long time. Improvements in employment and social-welfare systems are needed for China to have a real-economy transformation, Fan adds.
Comments