Nikkei May Rise as Oil Supply Fears Ease — Market Talk
1950 ET - Japanese stocks might rise as crude oil declined overnight amid easing concerns about Middle Eastern supplies. Nikkei futures are up 0.9% at 64795 on the SGX. The dollar is at 156.03 yen, compared with Y155.58 as of Thursday's Tokyo stock market close. Investors are focusing on developments in the Iran conflict as well as the Bank of Japan's rate decision due later Friday. The Nikkei Stock Average rose 0.3% to 64136.25 on Thursday. ([email protected])1700 ET - The Federal Reserve raising interest rates by a quarter of a point will have more of an impact on regional banks than big global ones, UBS analysts say in a research note. Shareholders are going to be keenly focused on deposit growth and pricing dynamics at regional banks, which are underperforming the bigger banks, the analysts say. Even with no discernable shift in tone on deposit competition at this week's global bank conference, banks are expected to have higher deposit costs in 3Q from having to pay customers higher interest on their savings, they say. The analysts have preferred major global banks to regionals all year and the rate outlook supports that stance, they say. ([email protected])1546 ET - Treasury yields' decline despite the Fed hike, as the central bank seems to convince Wall Street it is serious about bringing inflation down to target. Oil prices also help, slipping 1%. The yields decline, however, is curbed by increasing discomfort with rising government debt, while the Middle East remains volatile and keeping crude above $100 a barrel. The yield curve flattens, with the long end falling faster. The 10-year drops 0.057 percentage point to 4.946%, while the two-year declines 0.038 points to 4.688%. ([email protected]; @ptrevisani)1427 ET - The Fed's hike eases investors' fear that inflation will run unchecked, TwentyFour's Felipe Villarroel say in a note. Another key driver of the bond selloff remains, though: the risk that Washington won't take action to balance the books. Fiscal policy "is not getting any better and the war in Iran and floating plans such as giving voters money...certainly does not help," he says. Villarroel expects only one more hike, with cuts starting in 2028 or 2029. He believes current inflation isn't entirely due to supply shocks and strong economic growth is also to blame. ([email protected])1358 ET - Institutional investors are back to mostly pulling money out of bitcoin ETFs, this after flows returned to being positive in August. Bitcoin ETFs are showing net outflows for 6 out of the past 7 trading sessions, with net outflows Wednesday landing at nearly $300 million, according to data from CoinGlass. "New demand is missing," says Glassnode in a note. "On-chain inflows, ETF flows, stablecoin growth and corporate buying have all stalled." Bitcoin is up 1% to $76,887, while ethereum rises 2.6% to $2,472, XRP is up 0.3% to $1.30 and solana climbing 3.3% to $101.77. ([email protected])1214 ET - The late-summer rebound in bitcoin hit a wall in trying to stay above the $80k mark, but the Federal Reserve's interest rate hike isn't expected to be the catalyst that holds bitcoin prices back. "We believe yesterday's move was a mid-cycle adjustment, not a cyclical change," says Zack Pandl of Grayscale Research in a note. "And we doubt the one or two rate hikes expected for 2026 will lead to much change in capital allocation." Pandl harkens back to a similar occurrence in March 1997, when Alan Greenspan's Fed "did an analogous one-off hike… and the Nasdaq bull market kept rolling on." Bitcoin is up 0.7% to $76,669. ([email protected])1111 ET - TD Bank's economics team pushes back on the widely accepted notion of near-term rate increases from the Bank of Canada. "From our lens, the risks from trade, economic growth, and oil prices should keep the BOC firmly on the sidelines," TD says in an updated quarterly forecast. Officially, TD has forecast no change in the BOC policy rate through 2027. The bank says inflation in Canada is running at a cooler pace relative to the U.S., with core CPI close to 2%. TD adds financial conditions have already tightened via higher bond yields, adding the near-term impacts from the deteriorating US-Canada trading relationship "is unquestionably negative." ([email protected]; @paulvieira)1105 ET - Initial jobless claims fell below estimates to the lowest reading in at least six weeks, a clear message that the U.S. labor market doesn't need help from the Fed, Chris Osmond of Fifth Third Wealth Advisors says in a note. Claims have taken a meaningful step down from August's levels, the labor market is resilient and layoff activity isn't accelerating, Osmond says. "The Fed does not need to trade off its inflation fight against labor market fragility," he says. This level of claims gives the Fed runway to keep policy restrictive for as long as the inflation fight requires, Osmond says. There aren't any distress signals from the labor market that would force an early pivot from the Fed, he says. ([email protected])1058 ET - After declining from the Fed rate hike and the failure of the Clarity Act, altcoins are bouncing back. Some of the strongest gainers include Hyperliquid, which is up 6% to $82.97, and Zcash, which is rising 6.3% to $1,421. Derisking was seen after this week's news, says Nicolai Sondergaard of Nansen in a note, but that appears to be subsiding. Other altcoins--crypto tokens outside of bitcoin and stablecoins--have rebounds outpacing bitcoin. Ethereum rises 2.6% to $2,472, solana climbs 3.1% to $101.68, and dogecoin is up 1.8% to 8.2 cents. Bitcoin rises 0.8% to $76,741. ([email protected])1053 ET - The Bank of England's announcement on the quantitative tightening program eases some pressure in the gilt market caused by uncertainty around the process, Jefferies economist Modupe Adegbembo says in a note. The U.K. central bank slowed the pace of quantitative tightening to an average of 46 billion pounds per year, down from 70 billion pounds per year at the moment. It also announced a plan to sell gilts directly to the Debt Management Office rather than to investors, which came as a surprise to markets. Ten-year gilt yields are down 7.1 basis points at 5.215%, down from 5.295% before the BOE's announcement, where it also held interest rates at 3.75%, Tradeweb data show. ([email protected])1022 ET - The Bank of England is likely to raise interest rates at its next meeting in November, Paul Dales at Capital Economics says in a note. While the central bank kept rates unchanged today, four policymakers who voted to hold suggested that unless energy prices fall back, they will soon vote for rate hikes too, Dales says. "That said, we still believe the market has gone too far pricing in rates rising to 4.75%," he adds. Most officials see higher rates as a precaution, not a response to hotter domestic inflation. "As long as energy prices don't rise much further, one or two 25 basis-point hikes is more likely," Dales says, adding that he expects the bank to cut interest rates late in 2027 or in 2028. ([email protected])1019 ET - The Bank of England announced a plan to sell gilts maturing between 2035 and 2049 directly to the Debt Management Office, rather than to investors. This could allow the DMO to transform the gilts' maturities to shorter-dated gilts, reducing supply of long-dated gilts, Berenberg's Andrew Wishart says. This could ease pressure on long-dated gilts, he says. The move is similar to what U.S. Treasury Secretary Scott Bessent wanted to achieve by increasing bond buybacks, although the BOE is shrinking its balance sheet faster than the Federal Reserve, so it is "significantly less aggressive in terms of the overall impact on bond supply to the private sector," he says. U.K. 30-year gilt yields fall 12 basis points to 5.736%, Tradeweb data show. ([email protected])