Fed Set to Raise Rates Further, But a 50Bp Increase Unlikely — Market Talk
0607 GMT - Upside growth surprises in the U.S. suggest that current monetary policy is not restrictive and support the notion that the Fed has more tightening to do, says SEB's Jussi Hiljanen in a note. Despite hints by Fed Governor Christopher Waller at the possibility of a 50-basis-point interest-rate hike, SEB expects the Fed majority to lean toward smaller and gradual steps at every second meeting, says the chief U.S. and eurozone rates strategist. Accordingly, SEB expects the Fed to hike interest rates by 25 basis points in December, followed by another increase of similar size in March. SEB also anticipates the 10-year Treasury yield hovering near 5% in the coming weeks. The 10-year yield is up 2 basis points at 5.122%, according to Tradeweb. ([email protected])0501 GMT - Westpac's chief economist, Luci Ellis, says she expects that a sharp downturn in Australia's housing market will have a much bigger than anticipated impact on the economy next year. Accordingly, she reckons that the Reserve Bank of Australia is likely done cutting interest rates. While a February interest rate hike is not completely out of the question, policy is clearly restrictive and downside risks are crystallizing, she says. Westpac has lowered its forecasts for GDP, the labor market and the housing sector for 2027.([email protected]; @JamesGlynnWSJ)0451 GMT - Bitcoin tumbles past $70,000, hitting its lowest level in nearly three months as rate-hike bets and risk-off sentiment pressure cryptocurrencies. Bitcoin fell as much as 4% as bears took control. The selloff spread across crypto, with Ethereum crashing past the closely watched $2,000 level, also around three-month lows. Sentiment soured this week as hot U.S. inflation data pumped up expectations of Fed rate hikes. Many other central banks are also expected to tighten, dimming the appeal of non-yielding assets. Bitcoin's fall partly reflects the broader retreat from risk and correlation with tech stocks, says Nic Puckrin, founder of Coin Bureau. ETF outflows and other crypto-specific pressures, namely that MSCI confirmed it is removing Strategy from its indexes, are also weighing. ([email protected])0339 GMT - The People's Bank of China looks more focused on improving monetary transmission and directing credit toward priority sectors than on delivering further broad-based interest-rate cuts, Oxford Economics's Sheana Yue says in a note. The Chinese central bank is likely to rely on liquidity operations, reserve requirement changes and targeted credit facilities to support economic activity while keeping its headline policy rate unchanged, the senior economist says. Targeted credit support will likely increasingly focus on domestic demand and strategic investment. The central bank has highlighted the need to strengthen financial support for domestic demand, technological innovation, small and medium-size enterprises and key infrastructure projects, Oxford Economics says. ([email protected]; @kosakunarioka)0108 GMT - Japanese government bond yields are higher following sharp gains in U.S. Treasury yields overnight. The selloff in U.S. government bonds accelerated on Thursday as Fed officials discussed the path to lower inflation through higher interest rates. A rebound in semiconductors and artificial-intelligence-related stocks in Tokyo is also lessening demand for government bonds as a haven. Investors are focusing on developments in the Middle East and energy prices. The 10-year JGB yield is up 7.5 basis points at 2.865%. ([email protected]; @kosakunarioka)0013 GMT - Japanese stocks are higher, led by chip-related stocks, despite continued uncertainty over the U.S. and Japanese monetary policies. Kioxia Holdings is up 5.6% and Advantest is 4.9% higher. The dollar is at 159.84 yen, compared with Y159.76 as of Thursday's Tokyo stock market close. Investors are closely watching domestic earnings and crude oil prices. Asahi Group Holdings and Asics are scheduled to announce their quarterly results later Friday. The Nikkei Stock Average is up 1.1% at 61494.24. ([email protected]; @kosakunarioka)2347 GMT - Japanese stocks may remain rangebound as uncertainty over the U.S. and Japanese monetary policies continues. Nikkei futures are up 1.1% at 61490 on the SGX. The dollar is at 159.86 yen, compared with Y159.76 as of Thursday's Tokyo stock market close. Investors are focusing on domestic earnings and crude oil prices. Asahi Group Holdings and Asics are set to announce their quarterly results later on Friday. The Nikkei Stock Average fell 0.7% to 60819.36 on Thursday. ([email protected])1820 GMT - Existing home sales suffered a historic setback in October, Realtor.com says. Existing-home sales plunged to a seasonally adjusted annual rate of 3.75 million, down 5.5% from September's downwardly revised pace of 3.97 million, and 8.8% from a year ago, according to the latest data from the National Association of Realtors. It was the lowest market pace since August 2010. Realtor.com Chief Economist Danielle Hale thinks home sales are likely to remain relatively low for the rest of 2026 as mortgage rates remain high, yet she does not believe it's the new normal, according to a press release. "Instead, it reflects a perfect storm of an abrupt shift in the financial environment and large uncertainties in the pre-election period for both policy and the economy just as the housing market usually slows for the season," she says.([email protected])1729 GMT - Travel to the U.S. by Canadian residents continues to recover. Preliminary data indicate Canadian resident return trips from the neighboring country were up 3% on-year in October to 1.9 million, Statistics Canada says. That marks a seventh straight month of annual growth, and includes a 2.2% increase in trips by automobile and 5.6% rise in air travel. Still, travel remains 29% below October 2024 for automobiles and 19.6% down for air travel. U.S.-resident trips to Canada were up 8.1% overall in October to hit 1.5 million, a ninth straight rise. This includes an 8.7% increase in trips by automobile, and 6.5% rise in air travel by Americans. ([email protected]; @RobbMStewart)1725 GMT - U.S. home-sale prices fell for the fourth week in a row, according to Redfin. The median home-sale price was $388,613, down 0.9% year-over-year. That's four straight weeks of declines after three years of increases, handing homebuyers a bit of relief on top of what they're getting from dipping rates. Monthly housing payments dropped to a 6-week low. The median monthly mortgage payment was $2,755 at a 7.18% mortgage rate, the weekly average. Payments are down from $2,820 a month earlier. Homebuying activity held steady. Pending home sales were essentially flat from a week earlier, though they remain at the lowest level in records dating back to 2021. Dipping mortgage rates likely held off a bigger decline in pending sales. ([email protected])1700 GMT - Just three of the 50 most populous U.S. metro areas were seller's markets in October, Rocket says. All three seller's markets are in the Northeast. Nassau County, N.Y., was the number-one seller's market, with 24.7% fewer sellers than buyers. The other seller's markets were Newark, N.J., and Montgomery County, PA. All three seller's markets became less strong seller's markets in October. In Nassau County, there were 28.3% fewer sellers than buyers in September, a bigger gap than October's 24.7%. Newark's gap shrunk from 17.6% to 14.3%, and Montgomery County's shrunk from 20.1% to 12.1%. Milwaukee, which was a seller's market in September, is now balanced, meaning it doesn't favor sellers or buyers. The seller's markets are places where limited homebuilding has kept housing supply tight. ([email protected])1626 GMT - Hitting the Canadian government's goal of 100 million tons of liquefied natural gas annually by 2050 would stimulate nearly C$1 trillion total investment, support close to a quarter million jobs a year, and contribute C$88 billion to GDP to 2050, a study by S&P Global suggests. It sees a pathway for Canada to become the third largest LNG exporter, but argues the window of opportunity is limited. S&P estimates that reaching the target requires a 2.5-times increase in upstream and critical infrastructure investment and a tripling of upstream drilling activity, all at a time when global development competition is high and there is uncertainty over Canada's permitting, policy stability and associated infrastructure constraints. ([email protected]; @RobbMStewart)