AI-Infrastructure Buildout Will Remain a Boon to Power Utilities — Market Talk
1056 ET - Power utilities will remain critical for the expansion of AI infrastructure despite the growing number of dedicated electricity generators being built near data centers, Joseph DeCampo, a managing director at investment bank Moelis & Company, says during an industry conference. "While they may start off as behind-the-meter or off-grid projects, data centers ultimately would like to be tied into the grid," DeCampo says. Data centers would be reluctant to rely on off-the-grid power installations alone partly because of their high reliability requirements, other panelists say. That puts utilities in the best position to benefit from surging demand for electricity to power AI systems, DeCampo says. "[Utilities] understand the grid better than anybody out there," he says. "They are the ones who ultimately benefit from the longer-term [power] trends." ([email protected]; @lhvgarcia)1050 ET - The macroeconomic signals seen in trading this week are taking a toll on major cryptocurrencies. "Today's sell-off looks macro-triggered but crypto-amplified," says Lacie Zhang of Bitget Wallet. Zhang cites new record-high Treasury yields and its corresponding push on the U.S. dollar as factors directly pressuring bitcoin and other digital assets--with overall investor sentiment favoring yield-bearing safe assets. Additionally, low trading volumes in crypto have made the moves look sharper, Zhang adds. Bitcoin falls by 3% to $83,098, ethereum is down 5% to $2,564, XRP slides 4.7% to $1.43, and solana is off 4.2% to $115.98. ([email protected])1046 ET - European bank shares fall on Wednesday as bonds sell off again and sour risk sentiment. The STOXX Europe Banks index is down 3.4%, reducing its year-to-date gain to 13%. Among the biggest losers, shares in Societe Generale fall 5.2%, Deutsche Bank is 4.8% lower, UniCredit loses 4.6% and Intesa Sanpaolo retreats 3.8%. "The head of the French central bank said that the ECB does not need to step in to stabilize French bonds, which is spooking investors and triggered this sell off," XTB's Kathleen Brooks says. France's budget talks and nationwide protests have made France the European focus of the selloff. A bond selloff cuts the market value of fixed income portfolios and increases borrowing costs. ([email protected])1004 ET - U.K. government bonds, or gilts, remain attractive as expectations for interest-rate rises by the Bank of England seem excessive, Insight Investment's Andy Burgess says in a note. "With inflation still elevated and the risk of second-round pressures increasing, we believe the Bank of England will ultimately be forced to deliver further rate hikes in the months ahead," he says. Even so, rates are unlikely to rise as much as financial markets currently expect, he says. As such, gilts are one of the most attractive opportunities across developed government bond markets, he says. Ten-year gilt yields rise 8.6 basis points to 5.457%, according to Tradeweb. ([email protected])0956 ET - The euro is unlikely to bounce back anytime soon due to concerns about France's public finances, Commerzbank's Antje Praefcke says in a note. "We've seen in recent days, amid concerns about France's national debt, just how quickly doubts about the credibility of governments can weigh on the euro."Presidential candidate Marine Le Pen has promised to get the budget deficit under control. However, fiscal consolidation in some eurozone countries is fundamentally difficult and politically unpopular, meaning the situation probably won't change fundamentally in the short to medium term, she says. The euro falls 0.7% to $1.1181 after hitting a 16-month of $1.1160 Monday, according to LSEG. ([email protected])0941 ET - Banks joining together to build a stablecoin will drive skeptical investors to trust the digital asset, Commerzbank's Poonam Ahuja says. A consortium of 37 European banks intend to launch Qivalis--the continent's first regulated euro-backed stablecoin--before the end of 2026. Investors wary of stablecoins worry about counterparty risk and operational challenges, Ahuja says at the Digital Assets Week conference in London. A joint approach will encourage investment in the digital asset, as well as widening its distribution, Ahuja says. Banks are well-trusted and can leverage that trust to increase stablecoin adoption, Ahuja says. ([email protected])0939 ET - Data on Canadian mortgage originations reveals a significant shift in household financing choices as markets price in tighter monetary policy, National Bank says. The five-year fixed-rate mortgage that has long been the preferred option for Canadians has been losing ground for several years to shorter terms and, more recently, variable-rate loans. The share of new loans with a fixed rate of five years or more fell to 8.8% in July, its lowest level since records began in 2013, leaving 91.2% of new loans with fixed terms of less than five years and variable rates. National Bank notes the more this financing shifts the more quickly the Bank of Canada's decisions are passed on to borrowers' mortgage payments. ([email protected]; @RobbMStewart)0938 ET - The sharp rise in Treasury yields leaves bitcoin vulnerable as it limits the amount of liquidity available for risky assets, Zaye Capital Markets analyst Naeem Aslam says in a note. Given high long-end yields, bitcoin remains "highly exposed to every shift in the market's view of inflation, monetary policy and global risk appetite," he says. Bitcoin could fall further if the minutes of the Federal Reserve's September meeting at 1800 GMT signal the prospect of further near-term interest rate rises, lifting Treasury yields and the dollar. A more cautious message could improve liquidity expectations and help bitcoin retest recent highs, he says. Bitcoin falls 2.3% to $83,664 after reaching a one-week low of $83,454 earlier, according to LSEG. ([email protected])0934 ET - The U.S. dollar's recent run-up could maintain momentum based on what today's Fed minutes reveal, Infinox's Thadeu Dos Santos says in a note. While an October rate hike has been largely priced out, any evidence of broad support for further hikes could rebuild short-end yields and extend the dollar's gains, the analyst says. A more cautious readout could reverse those gains, he says. After that, Thursday's jobless claims report will provide another potential catalyst, indicating whether the latest signs of labor market weakness is broadening, the analyst says. ([email protected])0852 ET - Treasury yields push higher after two sessions where they fell, as markets wait for Fed minutes and a 10-year auction. Oil rises 1% and the dollar strengthens. Investors will scrutinize the discussions that led the central bank to raise rates for the first time in three years. Inflation data due next week will set expectations for the next move, which is currently priced in as a hold. The Treasury is auctioning $39 billion in 10-year notes. High yields have attracted buyers in recent tenders. The 10-year yield rises to 5.347% from 5.270% yesterday. The two-year increases to 4.823% from 4.789%. The 30-year is at 5.752%, a level not seen since 2002. ([email protected]; @ptrevisani)0846 ET - Use of AI in Canadian organizations has risen more than eightfold in three years but governance is still catching up, says Chartered Professional Accountants of Canada. Its poll of 5,000 CPAs in the country found organizational AI use rose to 43% this year from 5% in 2023, and nearly three-quarters now use AI at least weekly in their professional work. Respondents also report AI is delivering tangible benefits. Still, the study finds that while 67% of CPAs report having access to approved AI tools for professional use, only 45% report a formal AI policy and just 34% say their organization has implemented either employee training or a formal AI strategy. ([email protected]; @RobbMStewart)0829 ET - Ether falls to a two-and-a-half week low as surging long-term Treasury yields damp risk appetite. "With Treasury yields still elevated and bitcoin struggling to decisively break higher, investors have become more selective across crypto, and ether remains especially sensitive to shifts in liquidity because it tends to trade as a [more highly risk sensitive] digital asset," Zaye Capital Markets analyst Naeem Aslam says in a note. Meanwhile, institutional demand is weaker with U.S. spot ether exchange traded funds recently recording outflows, he says. Ether falls 4.4% to as low as $2,572, LSEG data show. ([email protected])