The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1032 ET - A rise in Canadian retail sales in August mainly was due to a rebound from the month before rather than any genuine strengthening in demand, says Capital Economics' Bradley Saunders. Still, the economist says there still were signs in the data that households are showing resilience amid higher gasoline prices. "That will add to the Bank of Canada's concerns that weak demand is becoming less of a barrier to firms passing on higher energy costs, supporting a hike next week," Saunders says. Retail sales rose 1.2% on-month in August, more than enough to reverse the prior month's fall.(robb.stewart@wsj.com; @RobbMStewart)
1017 ET - Resilience in Canadian spending numbers supports the expectation the Bank of Canada will raise interest rates next week, Desjardins' Oskar Stone reckons. Retail sales rose 0.2% on-month in August, rebounding from weakness in July and roughly in line with estimates. Sales were up broadly, and sales excluding autos and gasoline were a solid 1.1% higher. The flash estimate suggests sales rose 0.7% in September, with goods prices up for the month it suggests sales volumes were likely flat, Stone says. He estimates 3Q GDP growth is tracking at around 2%. (robb.stewart@wsj.com; @RobbMStewart)
1001 ET - Firm Canadian retail sales for August highlights consumer resilience amid ongoing uncertainty, but a softer September points to cooling momentum heading into the final quarter, Bank of Montreal's Shelly Kaushik says. Retail sales rose 1.2% on-month in August, a tick below the flash estimate, with trade up in all sectors and across six of 10 provinces. Sales also were up 1.2% in volume terms, which Kaushik says puts monthly GDP in line with the 0.2% rebound forecast by Statistics Canada. The preliminary estimate for September sales points to a 0.7% rise, which the economist says was likely largely driven by higher prices. (robb.stewart@wsj.com; @RobbMStewart)
0856 ET - Treasury yields edge higher following Thursday's decline as markets grow convinced the Fed will hold rates steady next week despite rising oil prices. Threats of escalation in the Middle East push Brent crude up 2% to $115 a barrel. Meanwhile, markets price in 92% odds of a Fed hold, according to CME, although a hike is expected for December. U.S. manufacturing and services PMIs at 9:45 a.m. ET are expected to tick lower, according to a WSJ consensus. The October University of Michigan consumer sentiment index, at 10 a.m., is also expected to decline. The 10-year yield is at 4.984% and the two-year at 4.682%, both on pace for a weekly decline. (paulo.trevisani@wsj.com; @ptrevisani)
0844 ET - The launch of the first Swiss-regulated bitcoin ETF this week is better suited to meet the needs of wealth clients and fund selectors than the traditional ETP structure, says Sygnum Bank. Exchange-traded products for bitcoin have existed for years but are typically debt instruments, so investors hold a claim on the issuer and don't physically own the cryptocurrency. A fund under the Swiss collective-investment law ring-fences the asset, meaning bitcoin is owned directly by the investor, which better meets institutional investor requirements, Sygnum Chief Investment Officer Fabian Dori says. "There is now a real choice of structure between direct tokens, an ETP, or a fund." (joseph.wilkins@wsj.com)
0836 ET - Limited partners across the Gulf are increasingly favoring European private markets funds over U.S. managers, according to Asante Capital. "Interest in Europe has been a lot more pronounced over the past 12 to 18 months since Donald Trump took his second term," says Asante director Frank Glock. "A lot of investors are overexposed to the U.S. dollar and are mindful of this, coupled with recent geopolitical tensions and macro development driving lot of investors to Europe, which was historically neglected." The U.S. remains the yardstick for private market allocations, but more minds are looking to pan-European fund managers as a result, Glock adds. (joseph.wilkins@wsj.com)
0830 ET - The U.K.'s composite PMI rose to its highest level in October since the Iran war started, indicating the economy is still weathering higher energy and borrowing costs well, Capital Economics' Paul Dales says in a note. "This will further embolden the Bank of England to raise interest rates from 3.75% to 4.00% at its meeting on Nov. 5 and probably to 4.25% before too long," he says. The reading is consistent with what is shaping up to be a 0.7% quarterly rise in third-quarter GDP being followed by a 0.3%-0.4% gain in the fourth quarter, Dales says. Actual GDP growth has recently been stronger than PMIs suggested, though it excludes the retail sector, which data on Friday showed is weakening, he says. (edward.frankl@wsj.com)
0828 ET - Eurozone PMIs came in below expectations in October as French activity deteriorated, keeping the European Central Bank on course to hold rates next week, ABN AMRO Investment Solutions' Christophe Boucher says. The decline to 51.9 in October form 53.1 in September marks a pause in momentum after economic activity had shown solid strength over recent months, he says. The surveys' input price components unsurprisingly moved higher, though this does not put a rate hike by the European Central Bank back on the table for next week. The central bank is unlikely to add further stress to an already fragile environment, Boucher says. Given the recent rise in long-term yields, it is expected to remain on hold, he says. (edward.frankl@wsj.com)
0826 ET - High energy prices and rising government bond yields appear to be weighing on business sentiment in the eurozone, Commerzbank's Vincent Stamer says in a note. The composite PMI fell to 51.9 in October from 53.1 in September, dragged down by France. The gauge has therefore slipped into a range where the economy has historically grown at a rate below average, or 0.4% quarter-on-quarter, he says. More companies, particularly in the manufacturing sector, report rising input prices, suggesting the renewed rise in energy prices from the Iran war weighs on sentiment. But rapidly rising government bond yields and the deadlocked budget negotiations in France are also likely hurting confidence, he says. (edward.frankl@wsj.com)
0824 ET - Eurozone PMIs showed there was continued decent growth at the start of the fourth quarter, although that is with the notable exception of France, ING's Bert Colijn says in a note. The eurozone composite PMI fell to 51.9 from 53.1, while France's dropped to 48.4 from 51.1. "The direction of travel is clearly negative for the eurozone's second-largest economy," he says. With growth indicators remaining relatively resilient, some hawkish pressure on the European Central Bank is likely to remain, Colijn says. Input prices rose sharply again across the eurozone, mainly due to higher energy costs, showing the energy shock continues to impacting the cost base for businesses. However, the weakness in France's PMI illustrates the conundrum facing the central bank, he says. (edward.frankl@wsj.com)
0804 ET - U.S. tariffs on spirits should also be lowered after President Trump said he would remove duties on Irish whiskey, Nicolas Forissier, France's minister for foreign trade, says. Speaking on the sidelines of a meeting in Dublin Friday, Forissier says he is asking American officials for this on behalf of France. Noting the exemption for Irish whiskey, he says "it should be the same for cognac," and champagne. (edith.hancock@wsj.com)
0635 ET - The U.S. dollar and Treasury yields rise slightly in European midday trade. The dollar gains support from rising oil prices, which often support the currency, both because the U.S. is an oil exporter and due to safe-haven flows. Treasury yields rise after sharp falls the previous day, though their safe-haven role could resurface due to concerns about the sustainability of AI investments and stock-market falls. "Concerns over how technology companies will finance the AI build-out...could limit any meaningful rebound in yields," says VT Markets Dubai's Mahmoud Mashal in a note. The 10-year Treasury yield rises 2.9 basis points to 4.982%, according to Tradeweb. The DXY dollar index rises 0.2% to 101.763.
Comments