Rising Oil Prices Could Push Interest Rates 'Significantly Higher' — Market Talk
0404 GMT - A further rise in oil and oil products in the next three to six months may lead to "significantly higher interest rates", according to BofA Securities in a research note. The U.S. two-year nominal interest rate swap, which reflects market expectations for interest rates over the next two years, is up 113 basis points year-to-date. However, this was up 196 basis points on days of higher oil prices and down 83 basis points on other days, the bank notes. U.K. and German rate moves were even more dramatic. BofA notes that the U.S. Fed would be less restricted regarding potential rate hikes if energy inflation rises given the resilience of U.S. growth and consumption, and relatively tight labor markets. ([email protected])0356 GMT - Bitcoin is little changed in Asia trading after falling overnight, as investors await the U.S. October nonfarm payrolls report due later Friday. Stronger-than-expected jobs data could reinforce expectations that the Federal Reserve will raise interest rates beyond December, when markets already expect a hike, says Kudo.com's Konstantinos Chrysikos says in a note. A strong reading could lift Treasury yields and the dollar, weighing on bitcoin, he says. "Weaker figures could extend the decline in yields and provide further support," he says. Bitcoin is last flat at $75,787.78.([email protected])0333 GMT - The Taiwan dollar briefly weakened past the key level of 33 per U.S. dollar early Friday for the first time since April 2025, weighed down by the AI selloff and foreign equity outflows. The Taiwanese currency is closely tied to Taiwan's equity market, which is dominated by chip makers like TSMC. The Democrats' sweeping victory in the U.S. midterm elections has raised concerns about a slowdown in AI data center development, which could weaken demand for Taiwan's AI hardware. The Taiwan dollar is last at NT$32.965 versus the greenback after the island's heavyweight chip makers pared some losses. ([email protected])0211 GMT - Bank Negara Malaysia is expected to deliver a 25bp rate increase in 1H 2027, RHB senior economist Chin Yee Sian says in a note. The move would be a gradual step towards a more neutral policy stance, supported by resilient economic growth and aimed at preserving flexibility to respond to future shocks, she says. She expects the move to be driven by policy normalization rather than immediate inflationary pressures, with 2027 inflation forecast at 1.9%. Malaysia's economy is projected to expand 4.9% next year, supported by investment, resilient household spending, government support and technology-related exports. However, higher food and commodity prices could push inflation above expectations, RHB says. ([email protected])0158 GMT - With Malaysia moving closer to the next general election cycle in 2027, the window for an interest-rate increase could be narrowing, UOB economists Julia Goh and Loke Siew Ting say in a note. However, Bank Negara Malaysia's confidence in the growth outlook and modestly rising inflation risks leave room for further policy tightening, they say. They have pushed back their forecast for a 25bp hike to 1Q 2027 from their previous expectation of a November increase. UOB expects the policy rate to remain at 3.00% for the rest of 2027. Future rate decisions will depend on growth, inflation and external conditions. While the U.S. midterm results have eased near-term policy uncertainty, renewed protectionist measures, supply-chain disruptions and persistent global inflation could tighten financial conditions and affect Malaysia, UOB adds. ([email protected])0140 GMT - Japanese government bond yields are lower as investors seek the safety of sovereign bonds amid stock market selloffs. Recent declines in crude-oil prices have eased fears about rising prices of energy and other related products, lowering expectations for fast-paced rate increases by the Bank of Japan. Investors are also focusing on developments in the Middle East after Democrats won control of Congress in the U.S. following midterm elections. The 2-year JGB yield is down 8.5 basis points at 1.770% and the 10-year yield is 8 basis points lower at 2.675%. ([email protected]; @kosakunarioka)0137 GMT - The Malaysian ringgit is expected to strengthen against the U.S. dollar into year-end, CIMB analysts say in a note. This is supported by a growing trade surplus led by electronics exports, foreign bond inflows and the seasonal conversion of export earnings into ringgit, they say. Continued investment in AI infrastructure should sustain demand for Malaysian electronics, keeping export receipts elevated despite an expected moderation in growth next year. Declining U.S. Treasury yields and a weaker dollar following the midterm elections are also expected to support the ringgit, they add. CIMB expects the dollar to trade at 4.00-4.10 ringgit through year-end, with a bias toward the lower end of the range. The dollar is 0.2% higher at 4.0554 ringgit. ([email protected])0050 GMT - Japanese stocks are sharply lower in early trade after U.S. technology selloffs overnight. Chip-related stocks are leading the declines. Kioxia Holdings is down 10%, Advantest is down 12%, and SoftBank Group is 12% lower. The dollar is at 157.73 yen, compared with Y157.89 as of Thursday's Tokyo stock market close. Investors are closely watching domestic earnings, bond yields and crude oil prices. Mitsubishi Heavy Industries is scheduled to report its quarterly results later Friday. The Nikkei Stock Average is down 5.9% at 57497.16.([email protected]; @kosakunarioka)0040 GMT - Asian currencies are mixed in early trade. However, diminishing risk appetite amid the U.S. tech-stocks selloff overnight driven by earnings and post-election fears about curbed data-center development might weigh on sentiment. The technology sell-off appears to reflect a reassessment of the AI investment outlook and a positioning-driven liquidation, Commerzbank Research analysts say in a note. The U.S. dollar is little changed at 157.73 yen, but the Australian dollar is 0.1% higher at US$0.6938, according to LSEG data.([email protected])2352 GMT - Japanese stocks are likely to fall after U.S. technology selloffs overnight. Nikkei futures are down 6.7% at 56985 on the SGX. The dollar is at 157.47 yen, down from Y157.89 as of Thursday's Tokyo stock market close. Investors are focusing on domestic earnings, bond yields and crude oil prices. Mitsubishi Heavy Industries is set to announce its results later Friday. The Nikkei Stock Average fell 1.8% to 61077.90 on Thursday. ([email protected])2231 GMT - Airbnb says dynamic pricing could be a boon for the short-term rental company. Changing prices based on consumers' data might make booking more affordable for certain customers, Chief Executive Brian Chesky says on a call with analysts. Meanwhile, hosts may earn more by generating a higher volume of bookings with personalized pricing, he says. Because Airbnb's customer base skews younger, affordability is especially important to win over customers, Chesky says. Pricing is an increasingly important focus for the company, as it has also recently implemented reserve now, pay later as a feature, Chesky says. Shares rise 10%. ([email protected])2304 GMT - The Australian 10-year government bond yield has fallen below 5.00% for the first time since late August in a move that follows a rally in U.S. Treasurys overnight as tech stocks fell. The bottom in yields is hard to call here from here, says Jack Chambers, interest-rate strategist at ANZ. Ultimately though the U.S. growth story is still strong right now, and at some point investors should expect that to offset concerns about the possibility of future AI regulation, he adds. Or, at least, this will be the tension for markets over the near term, Chambers said. ([email protected]; @JamesGlynnWSJ)