Gold Falls as Stronger-Than-Expected U.S. Jobs Data Spurs Rate-Hike Bets — Market Talk
0735 GMT - Gold prices fall after surprisingly strong U.S. jobs data and renewed Middle East tensions reinforced expectations that the Federal Reserve could raise rates next week. In early European trading, New York futures are down 0.8% to $4,442.40 a troy ounce. "Gold has remained volatile around $4,400 after recovering from July lows near $4,000 an ounce," says Soojin Kim from MUFG. "This week's U.S. inflation data will be critical in determining whether the Fed tightens policy at its Sept. 15-16 meeting, with persistent price pressures likely to remain a near-term headwind." According to CME Group's FedWatch tool, traders are now pricing in a 58% probability of a rate hike this month. ([email protected])0732 GMT - Yields on U.K. government bonds, or gilts, rise as oil prices accelerate due to new U.S.-Iran hostilities. The U.S. said it struck three Iranian oil tankers over the weekend, after Iran launched missiles toward two Navy warships. Bond investors are concerned that elevated oil prices could cause higher inflation, raising the risk of the Bank of England increasing interest rates in the coming months. Ten-year gilt yields rise 2.4 basis points to last trade at 5.162%, Tradeweb data show. ([email protected])0731 GMT - Investors are concerned about the deceleration in China's economic growth, according to HSBC analysts in a research note. The weakness in the real economy, excluding the artificial-intelligence segment, is behind investors' cautious sentiment, the analysts say, after HSBC hosted its China conference earlier this month. "Lukewarm consumption growth isn't the biggest concern--the peak in fixed asset investment at the beginning of year was followed by five consecutive months of weakening," the bank says. However, many investors believe the Chinese government will only roll out stimulus measures if the U.S. or European Union raises tariffs on Chinese goods, or if China's GDP growth decelerates further, HSBC says. ([email protected])0728 GMT - Bitcoin edges lower amid low trading activity as the U.S. celebrates Labor day holiday. Last week's stronger-than-expected U.S. jobs data led the dollar to strengthen on Friday, while dollar-sensitive assets such as gold and bitcoin underperformed. The next key focus for crypto assets is U.S. inflation data due later this week. "Softer inflation would reduce pressure for tighter policy, weaken real yields and improve the odds of bitcoin breaking through resistance," says Zaye Capital Markets' Naeem Aslam in a note. Strong inflation numbers pull bitcoin lower, however, he says. Bitcoin falls 0.3% to last trade at $79,671. ([email protected])0719 GMT - Eurozone government bond yields rise in early trade as oil prices increase and investors focus on the European Central Bank's interest-rate decision on Thursday. Markets fully price a 25-basis-point rate hike as the ECB aims to prevent second-round inflation in the wake of high energy prices which have pushed up headline inflation. "Even though hiking by 25 basis points seems a given, we think the balance of risk is towards a dovish market reaction," ING senior European rates strategists Benjamin Schroeder and Michiel Tukker say in a note. "Markets are already pricing in a landing zone of around 3%, which we deem on the hawkish side." The 10-year Bund yield rises 1.2 basis points to 3.353%, according to Tradeweb. ([email protected])0658 GMT - Coming U.S. CPI data is likely to be Bitcoin's next decisive macro catalyst, says Naeem Aslam, CIO at Zaye Capital Markets. The Bitcoin ecosystem now rests on major forces including ETF demand and monetary-policy expectations, he says in a note. A softer inflation print will reduce pressure for tighter policy, weakening real yields and improving the odds of Bitcoin breaking through resistance, he says. Hotter inflation would strengthen the case for restrictive policy and could pull the market back below $80,000 despite continued ETF accumulation, he says.U.S. spot Bitcoin ETFs recorded about $731 million of inflows on Sept. 3 and another $174.6 million on Sept. 4, taking three-session net inflows to roughly $1.01 billion, he notes. Bitcoin is trading at $79,689, according to LSEG data. ([email protected])0638 GMT - The Bank of Thailand is likely to maintain its policy rate at 1.00% through 2026, despite the acceleration in inflation last month, Barclays economists say in a note. Headline CPI rose 2.53% from a year earlier in August compared with 1.95% in July, amid a renewed surge in global energy prices. The latest CPI print is unlikely to surprise markets or the BOT, as inflation is expected to rise at end-3Q and 4Q. The central bank noted at its August meeting that inflation is likely to average lower than its 2.8% forecast in 2026. However, Barclays cautions that energy CPI is likely to remain elevated, due to a fresh uptick in Brent crude oil prices. ([email protected])0637 GMT - The U.S. dollar edges lower, shrugging off rising oil prices. Brent crude is up 1.6% to $97.782, extending last week's move, amid further escalation in the Middle East. "Renewed U.S.-Iran strikes on commercial shipping around the Strait of Hormuz raise concerns over prolonged disruptions to Middle East energy flows," Danske Bank's Emilie Herbo says in a note. U.S. Treasury markets are closed due to Labor Day, thus not giving any input into dollar trading. The DXY dollar index declines 0.1% to 99.085. ([email protected])0600 GMT - Germany is set to lead an anticipated rise in gross government bond issuance in the eurozone in 2027, Morgan Stanley strategists say in a note. They forecast Germany's gross bond supply to rise by 15% to 400 billion euros in 2027 from 348 billion euros in 2026. With that, Germany is set to become the largest issuer in the eurozone, overtaking France and Italy. Morgan Stanley expects a 4% increase in gross bond issuance by the eurozone's 11 largest issuers to 1.533 trillion euros in 2027. ([email protected])0552 GMT - Jefferies has stayed away from long-end bonds since July, "as we did not see an easy way out of the U.S.-Iran war," global economist Mohit Kumar says in a note. Positioning is, however, the one factor that is supportive of rates, as it is at stretched levels, according to Jefferies' indicators. "If we do get a weaker [U.S.] CPI print, we could see a knee-jerk short covering of positions going into the Federal Reserve meeting," he says. August CPI data are due on Friday. Analysts in The Wall Street Journal's poll expect the headline index at 3.4%, unchanged from July. ([email protected])0543 GMT - The rise in intra-eurozone government yield spreads over German Bunds--a consequence of poor fiscal positions in, for example, in France, Italy and Belgium--is justified by fundamentals, Capital Economics' Thomas Mathews says in a note. "That puts those countries' bonds in a tough spot," the head of markets, Asia Pacific, says. "We think that ongoing heavy [bond] issuance and upcoming elections will mean spreads in France and Italy, at least, could widen further over time," he says. ([email protected])0540 GMT - The intriguing question ahead of the European Central Bank's policy decision on Thursday is whether the central bankers will add fuel to the fire or dampen speculation about rate hikes somewhat, LBBW's Elmar Voelker says in a note. Within the new growth and inflation forecasts "in our view, the focus here is on the expected inflation rate for 2028, because the medium-term inflation outlook is of paramount importance for monetary policy," the senior fixed income analyst says. So far, the ECB has projected an inflation rate of exactly 2% for 2028. If the projection were to be revised upward, "we believe this would be an indirect indication that monetary policymakers are leaning towards another hike toward the end of the year." ([email protected])