The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1104 GMT - There are several key things investors should watch in the aftermath of the Binance hack, says Tobias Bauer at Web3 venture capital firm TBV. One is whether withdrawals reopen smoothly and without creating further liquidity or operational stress. Another is whether the post-mortem of the hack shows an isolated endpoint compromise or a broader weakness in internal access controls. Initial findings suggest a compromised computer may have been the entry point. "In other words, the weakest point in a crypto platform can still sit in very traditional operational infrastructure." Other points worth monitoring are how much frozen capital is ultimately recovered, and whether updated reserve disclosures support confidence in the platform's ability to absorb the losses while continuing normal operations, Bauer says. (fabiana.negrinochoa@wsj.com)
1103 GMT - U.K. government bonds yields, or gilt yields, remain fairly steady as investor attention shifts to the tech industry and cryptocurrencies, XTB's Kathleen Brooks says in a note. Concerns about AI-linked spending and the multi-billion dollar heist on the world's largest cryptocurrency exchange are weighing on market sentiment and driving a rush to safe-haven assets such as government bonds, she says. The calm in the gilt markets is an indication that market pressures are elsewhere, Brooks says. Ten-year gilt yields fall 1.2 basis points to 5.278%, Tradeweb data show. (miriam.mukuru@wsj.com)
1056 GMT - The risk of continued volatility in equities driven by growing doubts over AI valuations could weigh further on the dollar's performance, MUFG Bank analysts say in a note. "The U.S. is at the heart of the AI phenomenon, and the strength of the economy is highly dependent on it." That leaves the dollar vulnerable to a turn in AI momentum, they say. A negative aspect for the U.S. economy from AI also comes from the surging trade deficit, they say. The U.S. deficit with South Korea, Taiwan and Mexico is widening as the U.S. imports the products needed for AI. The DXY dollar index falls 0.4% to 101.664. (renae.dyer@wsj.com)
1045 GMT - The rise in energy prices has not appeared to have dampened German households' willingness to spend, KfW economist Dirk Schumacher says. German GDP rose 0.2% in the third quarter, with private consumption the main driver of growth, following 0.3% in the second. However, more problematic is the decline in investment flagged by Germany's statistics agency, he says. "A sustained recovery requires a clear revival in investment activity. Consequently, it is still not possible to speak of a self-sustaining recovery," Schumacher says. (edward.frankl@wsj.com)
1044 GMT - The euro could fall if former Spanish central bank governor Pablo Hernandez de Co replaces Christine Lagarde as the European Central Bank's president when she leaves the role in February, ING analyst Francesco Pesole says in a note. Hernandez de Cos, who is as "dove" in favor of accommodative policy, is a frontrunner for the role along with his Dutch counterpart Klaas Knot, a "hawk" in favor of tightening policy, he says. "Should the former be announced, it could bring some downside risks to the euro."The ECB announced on Thursday Lagarde would step down as president nine months early. The euro rises 0.2% to $1.1195, driven by a weaker dollar on AI concerns. (renae.dyer@wsj.com)
1027 GMT - Increased volatility is to be expected in the wake of the Binance hack but the market reaction has been relatively orderly so far, says Fabian Dori, CIO at Sygnum Bank. He attributes that in part to the timely freezing of some affected assets and Binance's commitment to cover losses. Importantly, the information available so far indicates a compromise of a specific transaction-authorization layer, not the blockchain protocol layer, Dori notes. That suggests long-term institutional adoption won't be affected. Instead, such incidents reinforce the trend toward institutional-grade setups, he says. Dori sees sentiment as increasingly driven by trust in independently audited infrastructure, rather than short-term narratives and price action. "Consequently, the ongoing migration to off-exchange settlement and custody solutions might be accelerated." (fabiana.negrinochoa@wsj.com)
1017 GMT - Data released Friday suggest that GDP growth in the eurozone excluding Ireland probably slowed a touch in the third quarter, as the German economy continued to expand but France's shrank, Capital Economics' Andrew Kenningham says in a note. The biggest news is France's 0.1% contraction in the quarter, meaning it was close to recession even before the recent surge in bond yields and slump in some of the surveys, he says. At this stage household consumption seems to have supported growth across the eurozone. French statistics pointed to a drop in exports--following a sharp increase in 2Q--and a further decline in investment, while household consumption rose. Household spending was also the main driver of growth in Spain, while in Germany, final expenditure rose slightly, Kenningham says. (edward.frankl@wsj.com)
1016 GMT - The dollar's biggest risk Friday is the potential for investors to unwind bets on the currency strengthening ahead of Tuesday's U.S. midterm elections, ING's Francesco Pesole says in a note. A Democratic sweep is trading around 68% in prediction markets and that could be seen as negative for the dollar from a few angles, he says. That includes the higher risk of a government shutdown and gridlock on debt ceiling negotiations along with potential damage to already shaky AI-related sentiment, he says. The DXY dollar index falls 0.4% to 101.684 as fresh AI concerns trigger safe-haven buying in Treasurys. However, whenever tech stocks don't dominate headlines, the dollar has no trouble attracting buyers, Pesole says. (renae.dyer@wsj.com)
1004 GMT - The cost of default protection for French government bonds is steady but remains high due to growing concerns about France's debt sustainability. France faces high political and fiscal uncertainty as public debt is close to 120% of GDP. "France needs to demonstrate that it is taking measures to bring deficits under control," Jefferies' Mohit Kumar says in a note. Data earlier also showed France's GDP fell 0.1% in the third quarter, below analysts' expectations for a 0.1% expansion in The Wall Street Journal's poll. French five-year credit default swaps are steady at 92 basis points, notably higher than 70 basis points at the end of September, and 29 basis points at the start of 2026, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0951 GMT - The cost of protecting euro corporate bonds against default rises as risk sentiment dwindles due to AI spending concerns. Large AI companies including Alphabet, Amazon and Intel have recorded notable declines, weighing on market sentiment. The iTraxx Europe Crossover index of euro high-yield credit default swaps rises 6 basis points to last trade at 320 bps, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0947 GMT - ANZ raises its annual GDP growth forecast for Taiwan to 13.0% from 10.1% after the island's 3Q GDP growth surprised on the upside. Taiwan's 3Q GDP growth came in at 14.36%, which beat market expectations, and was underpinned by its robust exports growth, ANZ economist Raymond Yeung says in a note. However, "the key risk to Taiwan's cyclical outlook is its exceptionally high exposure to the AI investment cycle," he says. While ANZ doesn't think the AI boom is coming to an end, concerns are emerging over the scale of investment by hyperscalers. Taiwan's robust economic growth also gives its central bank ample room to focus on inflation, he says. If Taiwan's inflation approaches 3% in 4Q, an interest rate hike in December is possible, he adds. (sherry.qin@wsj.com)
0933 GMT - An interest-rate hike by the Bank of England on Nov. 5 looks inevitable, Thomas Pugh at RSM UK says in a note. "Strong growth, an improving labor market and rising energy prices mean the BOE is almost certain to raise rates from 3.75% to 4.00%," he says. After this, another hike in February seems likely, says Pugh, who expects this to mark the end of the hiking cycle. "We doubt the Bank will need to raise rates to almost 5%, as markets currently price in... Our base case is that inflation will have peaked by February and growth will have slowed significantly, allowing the [Monetary Policy Committee] to keep rates on hold for the rest of the year."
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