Bitcoin Caught Between Improving Institutional Adoption, Macro Pressures — Market Talk
0917 GMT - Bitcoin remains caught between improving institutional adoption and persistent macroeconomic pressures, Zaye Capital Markets analyst Naeem Aslam says in a note. Switzerland's financial regulator has approved the country's first retail spot bitcoin exchange-traded fund while J.P. Morgan Asset Management has incorporated bitcoin into its long-term capital market assumptions for the first time, he says. Institutional demand has also improved with bitcoin ETFs recording net inflows. However, Treasury yields and the dollar rise as oil prices jump on Middle East supply disruptions, weighing on bitcoin. Bitcoin's immediate performance remains driven by dollar liquidity, interest-rate expectations, institutional fund flows, and leveraged trading activity, he says. Bitcoin falls 0.1% to $82,727, LSEG data show. ([email protected])0913 GMT - Chinese households are increasingly shifting their wealth into financial products and offshore investments from property and bank deposits in search for for higher returns, according to Moody's Ratings, citing data from asset managers and regulators in China. "This trend is creating growth opportunities for wealth management and cross-border financial services," it says. While tighter regulatory and tax enforcement may slow offshore investment growth in the near term, demand is likely to remain resilient due to the attractive return differentials between offshore and onshore assets, it says. ([email protected])0831 GMT - U.K. government bond yields rise only slightly and by less than their eurozone peers, even after Wednesday's U.K. inflation and public sector borrowing data exceeded expectations. Inflation rose to 3.5% in September. However, there's still little evidence that higher energy prices are spilling into other parts of the inflation basket, ING's James Smith says in a note. The Bank of England is likely to raise interest rates in November and probably February too, he says. "But assuming second-round effects stay contained, we think officials will return to rate cuts by the end of 2027." Meanwhile, public sector borrowing rose to 24.5 billion pounds in September, above forecasts from analysts and the Office for Budget Responsibility. Ten-year gilt yields rise 0.8 basis points to 5.406%, according to Tradeweb.([email protected])0754 GMT - The risk of a rate hike by Taiwan's central bank is increasing, OCBC economist Herbert Wong says in a note. While OCBC's base case is for the Central Bank of the Republic of China to keep rates steady at the December meeting, it thinks there is a growing chance of a 12.5 basis-point hike to 2.125%. "Sticky core and services inflation, strong export demand and elevated monetary growth have strengthened the case for a precautionary adjustment," the economist says. However, a soft property market and an uneven domestic recovery will likely limit the scope for tightening unless inflation broadens further, he adds. ([email protected])0745 GMT - Wednesday's higher-than-expected U.K. inflation data has mixed implications for sterling, Capital.com analyst Daniela Hathorn says in a note. Stronger inflation could provide some support by reinforcing expectations of higher U.K. interest rates, she says. "However, higher inflation is not necessarily positive for the pound if it damages growth prospects or undermines confidence in the U.K.'s fiscal position." Public sector borrowing data also exceeded expectations Wednesday, adding another complication ahead of the October 28 budget, she says. Sterling's direction could depend on whether investors believe the Bank of England can restore price stability without causing a sharp economic slowdown, she says. Sterling trades flat at $1.3377. The euro falls 0.1% to 0.8388 pounds. ([email protected])0733 GMT - China's economy is becoming more reliant on foreign demand while domestic demand continues to struggle, says Nguyen Hoang Nam, China economist at Capital Economics, in a note. Growth picked up in 3Q, but the improvement masks a further weakening in domestic demand, he adds. The detailed breakdown suggests that last quarter's rebound was driven entirely by exports, and even the AI-related boost to growth is becoming increasingly dependent on foreign demand, he says. While rising exports should remain a tailwind in the near term, this growing reliance leaves the Chinese economy vulnerable to rising trade barriers or a reversal in the global AI boom, he says. ([email protected]; @ivy_jiahuihuang)0712 GMT - U.K. inflation should remain above the Bank of England's 2% target for a while, with a November rate rise all but guaranteed, says Thomas Pugh at RSM UK following the latest U.K. inflation data. Inflation rose to 3.5% in September, driven by fuel prices, with higher energy, food and memory chip costs expected to push inflation higher, he says. "We see inflation peaking at 4.5% in early 2027 and doubt it will be back at 2% until 2028." Still, knock-on effects from higher energy prices remain limited. "The [Monetary Policy Committee] will take some comfort that the miss was almost entirely driven by fuel prices and that there is little sign of second round effects so far." Pugh expects another rate rise in 2027. ([email protected])0709 GMT - The dollar recovers as Treasury yields rise and oil prices push higher on worries over supply disruptions due to the Middle East conflict. The dollar is also supported by safe-haven flows and a weaker euro amid ongoing concerns about French debt. On Tuesday, the dollar hit a near three-week low against a basket of currencies following weak U.S. housing data. The dollar's falls also reflected rumors of progress in U.S.-Iran talks, which briefly lowered energy prices, but the move faded overnight, Danske Bank's Jens Naervig Pedersen says in a note. The DXY dollar index rises 0.1% to 101.778 after falling as low as 101.506 Tuesday. ([email protected])0658 GMT - Eurozone government bond yields rise in opening trade, tracking U.S. Treasury yields and higher oil prices. French government bonds, or OATs, underperform German Bunds amid uncertainties around next year's budget, although Belgian OLOs and Italian BTPs are also under pressure. There is no government bond supply in the eurozone on Wednesday. The 10-year Bund yield rises 1.8 basis points to 3.414%, while the 10-year French OAT yield is up 2.9 basis points at 4.948%, according to Tradeweb. ([email protected])0641 GMT - Sterling briefly rises before pulling back following higher-than-expected U.K. inflation data. Annual inflation accelerated to 3.5% in September from 3.1% in August, above the 3.4% expected by economists in a WSJ survey. Core inflation rose to 2.8% from 2.6%, above forecasts of 2.7%. The data strengthen the case for the Bank of England to raise interest rates in November. However, separate data showed U.K public sector borrowing rose more than expected to 24.5 billion pounds in September ahead of the October 28 budget. Sterling falls 0.1% to $1.3370 versus a stronger dollar, compared to $1.3372 before the data, after initially rising to $1.3385. The euro is last 0.1% lower at 0.8390 pounds, versus 0.8389 before the data, after briefly falling to 0.8383. ([email protected])0606 GMT - Commerzbank sees little reason to turn optimistic toward France, rates strategist Erik Liem says in a note. The fact that the debate on the 2027 budget's revenue section was postponed "fits the picture," he says. Given the uncertainties, Commerzbank remains cautious on French government bonds, or OATs, he says. The 10-year OAT-Bund yield spread closed at 152 basis points on Tuesday, according to LSEG. ([email protected])0541 GMT - The Philippine peso weakens to a record intraday low against the greenback on Wednesday, just a day ahead of Bangko Sentral ng Pilipinas' interest-rate decision. The currency is under pressure due to the deterioration in external balances, softer investment inflows and elevated oil prices, OCBC FX strategists say in a report. These factors suggest that the peso may underperform its regional peers even if the dollar softens. Investors are focusing on BSP's meeting Thursday, where further tightening could help temper depreciation pressures, they say. "However, the combination of slowing growth and elevated inflation complicates the policy response," they add. The dollar is currently 0.3% higher at 63.200 pesos, after touching a record intraday high of 63.245 pesos, LSEG data show.([email protected])