Nikkei Slips 0.2%, Dragged by Chip-Related Stocks — Market Talk
2015 ET - Japan's Nikkei Stock Average is down 0.2% at 63359.03 as losses in chip-related stocks help offset gains in energy companies and trading houses. SoftBank Group is down 4.2% and Kioxia Holdings is 3.9% lower while Eneos Holdings is up 3.8% and Mitsui & Co. is 3.0% higher. Broader market index Topix is up 0.5% at 4057.60. The dollar is at 155.22 yen, compared with Y154.77 as of Tuesday's Tokyo stock market close. Investors are closely watching developments in the Middle East conflict, crude oil prices and bond yields ahead of the Fed's rate decision later Wednesday. ([email protected]; @kosakunarioka)1945 ET - Japanese stocks may remain rangebound amid caution ahead of the Fed's policy decision later Wednesday. Nikkei futures are up 0.3% at 63480 on the SGX. The dollar is at 155.19 yen, compared with Y154.77 as of Tuesday's Tokyo stock market close. Investors are focusing on developments in the Middle East, crude oil prices and bond yields. The Nikkei Stock Average closed flat at 63484.10 on Tuesday. ([email protected])1546 ET - Treasury yields settle at new multi-year highs as markets price a Fed hike while facing an uncertain long-term outlook. Inflation expectations hover around 2.5%, as measured by one-year swap rates, according to LSEG, higher than the Fed's 2% target. That's up from below-target expectations in early August. A 20-year Treasury auction clears at the highest yield since 1986, shortly before the tenor was discontinued, and since it was reintroduced in 2020. Demand indicators in the sale come on the soft side. The 10-year yield rises 0.035 percentage point to 4.995%, the highest since July 2007. The two-year adds 0.028 points to 4.661%, highest since July 2024. ([email protected]; @ptrevisani)1537 ET - The WSJ Dollar Index rises 0.2%, as the currency keeps tracking U.S. Treasury yields. Bonds sell off as investors face uncertainty regarding government debt, inflation and increasing debt supply. The Fed is expected to raise rates tomorrow, while great weight is put on post-meeting communication. "A higher dot plot and clear willingness to tighten again would support the dollar, while a cautious signal, or a 'dovish hike' market read could trigger a reversal," Convera's Kevin Ford said in an email. The dollar strengthens 0.5% versus the yen and is flat against the euro. ([email protected]; @ptrevisani)1526 ET - Sen. Kirsten Gillibrand (D., NY) voted no on a measure to advance the Clarity Act, a piece of legislation backed by President Trump that would boost the cryptocurrency industry. The measure was ultimately defeated 49 to 50. Gillibrand was the Democrat that Republican Sen. Cynthia Lummis (Wyo.) has been leaning on in her arguments that the bill had bipartisan support. The senators introduced legislation together in 2022 to try to establish a framework for digital assets. Lummis praised Gillibrand at a conference on Friday for her work in pushing the Clarity Act forward. Ahead of Gillibrand's no vote, her Democratic colleague Sen. Elizabeth Warren voiced concerns that the bill lacked adequate safeguards against corruption in the light of President Trump's deep financial ties to the crypto industry. ([email protected])1430 ET - Treasury yields tick higher as investors demand steeper returns to lend money to Washington long-term. A 20-year Treasury bond auction clears at a yield of 5.42%, the highest since 1986, when the tenor was discontinued, and since it was reintroduced in 2020. Still, demand indicators were on the soft side: the 2.57 bid-to-cover ratio was below the previous six-month average of 2.65, while indirect bidders, a group that includes foreign investors, took 52.5% of the bonds, also below average. The 20-year trades at 5.414%, up from 5.401% before the auction, while the 10-year rises to 5.014% from 4.996%. ([email protected]; @ptrevisani)1429 ET - Treasury Secretary Scott Bessent says he will meet with China's Vice Premier He Lifeng this weekend to continue discussing sanctions on Iran. "We have sanctioned three banks with China," Bessent says. "We have had some very good private discussions, and I look forward to those continuing this weekend when I meet my Chinese counterpart," he tells the House Financial Services Committee during a hearing. ([email protected])1311 ET - Rising bond yields beat out the prospect of an AI bubble as the biggest "tail risk," according to the latest Bank of America survey of global fund managers. About one-third of survey respondents named a "disorderly rise in bond yields" as the biggest tail risk, while 28% named an AI bubble, down from 32% in August. Bond yields have been climbing, fueled by surging energy prices brought on by the Iran war and growing national debt among other factors. The 10-year Treasury yield touched 5.04% earlier, its highest level since 2007. ([email protected])1310 ET - The AI data center boom is expected to keep chugging along, according to Bank of America's latest survey of global fund managers. Of those surveyed, 79% said they do not expect one of the AI hyperscalers to announce a cut in capital expenditures this year, up from 71% in August. But investors see the spending as carrying some risk: 42% of respondents named AI hyperscaler capex as the most likely source of a systemic credit event, and net 33% said companies are overinvesting. As for the most crowded trade, 53% identified "long global semiconductors" which matched last month's survey. ([email protected])1203 ET - Investors are increasingly expecting global interest rates to rise, according to findings from Bank of America's September survey of global fund managers. 41% of surveyed investors said they expect the Federal Reserve to raise rates before the U.S. midterms, up from 22% in August, while the proportion of investors who don't expect a rate hike fell to 52% from 72%. A net 32% of investors expect higher short-term rates, and net 25% said global monetary policy is too stimulative - with both metrics at their highest level since September 2022. Net 4% of investors expect lower global inflation, a reversal from the previous month. ([email protected])1133 ET - Bitcoin's price is under pressure from both long-term investors and short-term traders rushing to sell and lock in their profits, analysts with Glassnode say in a note. The cryptocurrency has bounced up to trade near a 47% premium to the average price that traders paid for it, meaning most sales are profitable right now, the analysts say. Long-term and short-term holders seem to be cashing out in roughly equal amounts, they say. But the shift toward profit-taking matches behavior seen during other price surges in recent years, signaling that the latest rally hasn't peaked or collapsed yet, the analysts say. ([email protected])1110 ET - The Iran war is creating sharply different fiscal outcomes across the Gulf depending on countries' ability to keep hydrocarbons flowing, Capital Economics says. Higher energy prices are more than offsetting limited export disruption in the U.A.E. and Oman, improving their budget balances this year. By contrast, budget balances are expected to deteriorate by around 2% of GDP in Saudi Arabia, around 5% in Kuwait and Bahrain, and as much as 10% in Qatar compared with last year. ([email protected])