Bitcoin Rises After Wall Street Indices Hit Fresh Records — Market Talk
0709 GMT - Bitcoin rises after U.S. stock indices reached fresh record highs overnight as expectations for interest-rate cuts from the Federal Reserve boost risk sentiment. Rate-cut bets firmed after data Thursday showed U.S. initial jobless claims rose more than expected to 263,000 last week, the highest since 2021. U.S. inflation rose to 2.9% in August but this was in line with expectations and did little to change rate pricing. The market is now pricing in close to three consecutive rate cuts by year-end, LSEG data show. Bitcoin rises 0.8% to $115,320 after reaching a nearly three-week high of $116,314 overnight, according to LSEG.([email protected])0649 GMT - The dollar edges higher, recovering only slightly from declines on Thursday when data showed further evidence that the labor market is cooling and inflation remains elevated. U.S. inflation rose to 2.9% in August as expected by economists in a WSJ survey. Initial jobless claims rose more than expected to 263,000 last week, the highest since 2021. Despite higher inflation, the market took this as an opportunity to continue betting on significant interest-rate cuts by the Federal Reserve in coming months, Commerzbank's Michael Pfister says in a note. Rate cuts would be damaging to the dollar as it comes amid elevated inflation, he says. The DXY dollar index rises 0.1% to 97.611. ([email protected])0640 GMT - Sterling falls slightly after data showed the U.K. economy stagnated in July as expected. It followed 0.4% growth in June. The data mark another blow to the government ahead of November's autumn budget, Ebury's Samuel Edwards says in a note. Recent poor data alongside the threat of tax rises will "likely pour cold water on any growth revival in the second half of the year." The Office for National Statistics also reported an unexpected decline in manufacturing and industrial production in July. The trade deficit widened to 10.3 billion pounds in the three months to July. Sterling falls to an intraday low of $1.3542 after the data from $1.3558 beforehand. The euro rises to 0.8656 pounds from 0.8651. ([email protected])0633 GMT - The Riksbank will likely cut its policy rate later this month as inflation in Sweden is quickly returning to target amid a weak economic growth outlook, Swedbank economists Glenn Nielsen and Jesper Hansson write. Uncertainty is high, however, and if the Riksbank loses confidence in its inflation analysis, or if it has an optimistic interpretation of growth indicators, the cut could be pushed back to later this autumn. Sweden's 2026 budget contains several proposals that affect inflation, with total tax cuts potentially slicing around one percentage point from inflation next year, Swedbank adds. It thinks the Riksbank will cut the policy rate to 1.75% at its September meeting and indicate a 30% probability of another cut later in 2025. ([email protected])0631 GMT - Fitch Ratings might decide to downgrade France on Friday, adding to investor caution, Societe Generale rates strategists say in a note. "Despite some market relief, a Fitch downgrade to A+ this Friday is likely, reinforcing the case for a defensive stance," they say. France's newly appointed Prime Minister Sebastien Lecornu faces the challenge of addressing the country's debt sustainability, the strategists say. "The political turmoil in France could spill into the covered bond markets as well," they say. The 10-year French government bond, or OAT yield is trading flat at 3.449% after market opening, according to LSEG data. ([email protected])0620 GMT - Markets are still pricing in a 92% probability of a modest 25-basis-point FOMC rate cut at the coming meeting, versus just 8% for a more aggressive 50-basis-point move. But while inflation data weren't particularly surprising, labor market weakness could give the Fed more room to lean toward bolder action if negative signals persist in the weeks ahead, says Rania Gule, senior market analyst at XS.com. Nevertheless, the Fed's current stance appears highly cautious, making a limited step more likely, while leaving the door open for additional easing in subsequent meetings, Gule adds. ([email protected]; X @JamesGlynnWSJ)0617 GMT - The pace of gross government bond supply in the eurozone is set to decelerate beyond September, given lower volumes of syndicated issuance, Barclays' rates strategists say in a note. They forecast the gross government bond issuance to decline to around 106 billion euros in October from around 130 billion euros in September, they say. Meanwhile, redemption volumes are set to pick up sharply next month, rising to around 121 billion euros from 52 billion euros this month, pushing net issuance from 78 billion euros to minus 15 billion euros, they say. ([email protected])0610 GMT - U.S. Treasury yields rise in Asian trade, even as August CPI data published Thursday are unlikely to be a game changer in the Federal Reserve's policy outlook. Following the data, "we left both our Fed outlook and our inflation forecasts unchanged," Pimco's Tiffany Wilding says in a note. Accordingly, Pimco expects a 25-basis-point rate cut next week, "though 50 [basis points] will likely be discussed," the economist says. Pimco continues to forecast 75 basis points of total cuts this year. U.S. headline year-on-year CPI accelerated to 2.9% in August from 2.7% in July. The two-year Treasury yield rises 1.8 basis points to 3.545%, while the 10-year yield is up 2.3 basis points at 4.033%, according to Tradeweb. ([email protected])0552 GMT - It is still too soon for the European Central Bank and the market to fully rule out a rate cut just yet, Santander CIB's Antonio Villarroya says in a note. However, the ECB looks "quite comfortable" in waiting with the deposit rate at 2.00% until the macro data confirm the scenario their own macro projections forecast, the head of G-10 macro and fixed income strategy research says. This might take until later in the year, he says. That said, Santander maintains its long-held view that the ECB will not need to cut the deposit rate below 2%. "This continues to suggest that the risk bias across the euro curve remains tilted to the upside, though it may take until closer to that horizon for materially higher rates to materialize." ([email protected])0550 GMT - Chinese equities have rallied strongly, led by Alibaba, which has jumped after announcing this week a $3.2 billion convertible bond issue, with 80% of proceeds going into data centers and 20% into international commerce. Normally, such fundraising weighs on shares. But this time, investors cheered the signal of heavier investment in AI--now the company's fastest-growing business line amid weakness in e-commerce and trade war headwinds, says Ipek Ozkardeskaya, senior analyst at Swissquote Bank. Despite a 140% rally this year, Alibaba still trades at half its 2020 valuation, she adds. ([email protected]; Twitter @JamesGlynnWSJ)0536 GMT - If the eurozone's economic outlook improves in line with the European Central Bank's new projections, borrowing requirements might lessen, MFS Investment Management's Annalisa Piazza says in a note. This could reduce the risk of government bond supply being a significant catalyst for any overshoot at the long end of the yield curve, the fixed income research analyst says. "Striking a fine balance, we still anticipate steep [bond yield] curves in 2026." On Thursday the ECB left its policy rates on hold, as expected, and slightly tweaked its growth and inflation forecasts. ([email protected])0524 GMT - The two-year German Schatz yield has only limited scope to fall, not more than 10-15 basis points even if the European Central Bank cuts interest rates one more time, says SEB Research's Jussi Hiljanen in a note. Meanwhile, risks are skewed to the upside if remaining rate cut expectations are priced out, the rates strategist says. The German 10-year yield should trade in a 2.60%-2.80% range this autumn, and gradually rise next year, driven by fiscal pressure and Eurosystem balance sheet reduction, he says. On Thursday, the two-year Schatz yield closed at 1.983%, while the 10-year Bund yield finished at 2.647%, according to LSEG. ([email protected])