The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0753 GMT - China is likely to be the key exception to Eastspring Investments' view that Asian central banks could tighten monetary policy over the next few quarters. China's deflationary pressures from declining property prices, and excess industrial capacity, could weigh on its inflation and growth, says the asset manager in a report. This could sustain pressure for further monetary policy easing in China over the next two quarters through its interest rates and subsidized credit facilities, Eastspring says. Meanwhile, higher-for-longer energy prices and currency weakness could spur central banks in India, Indonesia, Japan, Malaysia and Taiwan to tighten. Lower energy prices and renewed dollar weakness might allow regional monetary policy to stabilize, Eastspring adds, noting these could emerge around late 1Q-2Q next year. (megan.cheah@wsj.com)
0750 GMT - Asian economic growth is likely to moderate gradually over the next several quarters after broadly larger expansion in the first three quarters of 2026, Eastspring Investments says in a report. The asset manager expects growth in global artificial-intelligence capital expenditure to decline but remain elevated. Any shock to AI spending would weaken growth across the region, it says. Interest rates are likely to start rising through 1Q next year as central banks move toward tightening from a period of easing over 2024-2025. Fiscal policy support for certain economies is likely to be reduced as countries lower energy subsidies to repair budget deficits, Eastspring says. China is the main exception to this as its underspending in 1Q-3Q could reverse through 1H next year, Eastspring adds. (megan.cheah@wsj.com)
0747 GMT - Bank of Japan is likely to keep its policy rate unchanged at next week's meeting, according to UOB. "We continue to expect the Bank of Japan to stay on the monetary policy normalization path, but do not expect an aggressive trajectory," it says in a note. UOB reckons the central bank will hold rates for the rest of 2026 before hiking next year. It projects a 25 basis-point rate increase in late 2Q next year to 1.50%, which will likely be the terminal rate. (tracy.qu@wsj.com)
0741 GMT - The Bank of Japan sees little impact from the Middle East conflict and subsequent oil-price rises, a view that supports its path toward further monetary tightening. "Higher raw material and energy prices appear to be exerting downward pressure on profits, particularly at [small- and medium-size enterprises]," the BOJ says in its Financial System Report. It says, however, that even a hypothetical 100% surge in crude oil prices would increase default probabilities for only a limited number of small firms. That reinforces the central bank's stance that the geopolitical risk is unlikely to cause a serious downturn in the domestic economy. (megumi.fujikawa@wsj.com)
0729 GMT - Gold is headed for a weekly loss of more than 3.5% as elevated energy prices fueled concerns over inflation and interest-rate hikes. In early European trading, New York futures fall 0.8% to $4,026 a troy ounce. "A rising inflation backdrop along with selling pressure to cover losses in equity or bond market positions is a negative combination for gold in the short-term even as the Fed is looking assured to keep rates unchanged at next week's FOMC meeting," says Soojin Kim from MUFG. Bullion is seen as a hedge against inflation, though a higher interest-rate environment tends to diminish the nonyielding asset's appeal. According to the FedWatch tool, traders broadly expect the U.S. central bank to leave interest rates unchanged next week, but they see a nearly 80% probability of a hike in December. (giulia.petroni@wsj.com)
0730 GMT - The 10-year French OAT yield trims falls after weaker-than-expected flash estimate purchasing managers data. The flash estimate composite PMI came in at 48.4 in October, signaling a contraction in business activity, from 51.1 in September. Analysts in The Wall Street Journal's poll expected a print of 50.8. The 10-year OAT yield last trades at 5.070%, down 0.5 basis points on the day, versus a level of 5.067%, down 0.9 basis points on the day, before the data release, according to Tradeweb. (emese.bartha@wsj.com)
0726 GMT - The euro falls further against the dollar after the latest French purchasing managers' index survey came in worse than expected. The French composite PMI fell to a four-month low of 48.4 in October from 51.1 in September. A level below 50 signals a contraction in private sector activity. Economists in a WSJ survey had expected a reading of 50.8. "September's rebound in economic activity proved to be short lived, which is hardly surprising given the rapid tightening of financial conditions and a further increase in political pressures across France during October," S&P's Joe Hayes says in a note. The euro falls 0.2% to an intraday low of $1.1193 after the data from $1.1204 beforehand. (renae.dyer@wsj.com)
0716 GMT - The euro's sensitivity to French fiscal concerns has reduced but that link could re-establish itself if the spread between French and German bond yields widen to new highs, ING's Francesco Pesole says in a note. Should the gap between 10-year German and French yields rise above 200 basis points, the euro could see renewed losses, he says. "We aren't expecting that much further widening for now, but the risks are clearly there, and the euro remains rather unattractive across the board." The euro falls 0.1% to $1.1207 as the dollar recovers but rises 0.1% versus sterling at 0.8377 pounds and 0.3% against the Swiss francs at 0.9223 francs.(renae.dyer@wsj.com)
0657 GMT - Sterling remains weaker against the dollar and steady versus the euro, little moved after worse-than-expected U.K. retail sales data. Retail sales fell 0.4% in September after an upwardly revised 0.7% increase in August. Economists in a WSJ survey expected a 0.1% decline. Markets are now looking ahead to U.K. PMI data at 0830 GMT for a further gauge on the health of the economy. Sterling falls 0.1% to $1.3388 and the euro is steady at 0.8373 pounds, both little changed from levels before the data. (renae.dyer@wsj.com)
0652 GMT - French government bonds take a breather in market opening, with yields falling after Thursday's substantial selloff. Markets await flash estimate purchasing managers data from France, Germany and the eurozone to potentially give new impetus to the bond market. The 10-year French OAT yield declines 2 basis points to 5.055%, having risen to 5.142% on Thursday, the highest level in 24 years. The 10-year German Bund yield is up 0.5 basis points at 3.345%, according to Tradeweb. (emese.bartha@wsj.com)
0646 GMT - Bitcoin rises slightly but struggles for a meaningful recovery as investors balance improving institutional adoption against deteriorating macroeconomic conditions, Zaye Capital Markets analyst Naeem Aslam says in a note. "President Trump's declaration that the U.S. is not negotiating with Iran, alongside warnings that further developments could occur relatively soon, has intensified concerns about Middle Eastern energy supplies." Nevertheless, U.S. spot bitcoin exchange traded funds attracted about $1.08 billion across three sessions, suggesting institutional accumulation has continued, he says. U.S. PMI data at 1345 GMT could help determine bitcoin's moves ahead of the Federal Reserve's October 28 decision, he says. Bitcoin rises 0.7% to $81,738, LSEG data show.(renae.dyer@wsj.com)
0625 GMT - The dollar recovers after reaching a three-week low against a basket of currencies on Thursday as Treasury yields rise and oil prices jump. Fresh tensions in the Middle East propelled Brent crude prices to their highest levels since May, above $114 per barrel. Higher oil prices support the dollar as the U.S. is a net oil exporter while the currency tends to act as a safe haven. Concerns about French debt and civil unrest also weigh on the euro and lift the dollar. The DXY dollar index rises 0.1% to 101.691, having reached a three-week low of 101.446 Thursday driven by concerns about AI investments.
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