Bitcoin Struggles to Recover as U.S.-China Tensions Simmer — Market Talk
0717 GMT - Bitcoin rises slightly but remains at weaker levels following a recent selloff triggered by renewed U.S.-China trade tensions. U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent slammed China's decision to step up curbs on its exports of rare-earth metals. However, Bessent said President Trump still planned to meet with Chinese leader Xi Jinping at the end of the month and was optimistic that tensions could be de-escalated. Trump on Friday threatened an additional 100% tariff on Chinese exports, hitting risk appetite and causing cryptocurrencies to fall sharply. Bitcoin rises 0.3% to $111,549 but remains well below the record high of $126,223 reached last week, according to LSEG. It hit a three-and-a-half-month low of $104,782 Saturday. ([email protected])0710 GMT - Citi expects South Korea's proposed $350 billion investment fund deal with the U.S. to be finalized soon, ahead of a potential summit between the leaders of the two countries expected later this month. The likelihood of a partial compromise is higher, economist Jin-Wook Kim says, noting three key conditions for a deal emerging: the possibility of an imminent deal, no change to the total fund size, and safeguards to mitigate won depreciation risks instead of unlimited Fed-Bank of Korea swap lines. Kim says the U.S. may allow investments through won-denominated accounts or through limited forex swap mechanisms using the U.S. Treasury's Exchange Stabilization Fund. Details of such safeguards will be crucial for assessing the deal's market implications for the won, local bonds and South Korea's forex reserves, Kim says. ([email protected])0651 GMT - China's upcoming Fourth Plenum could have some positive catalysts, according to Morningstar's Kai Wang in a commentary. The tone may be more defiant than normal, given the recent flare up in U.S.-China trade tensions, Wang said. Such a tone, however, may boost domestic investor sentiment for industrial and rare earth industries, in which China is seen to have an advantage over the U.S., he adds. Beijing officials may provide updates in policies aimed at reducing excess production capacity, Wang says, adding that commentary may focus on further supporting the economy and boosting positive sentiment. ([email protected])0650 GMT - The dollar falls after the Federal Reserve's Beige Book cemented expectations for further interest-rate cuts. The report showed economic growth moderated, labor market conditions remained soft and input prices increased. Signals about tariff passthrough were mixed, with some businesses keeping selling prices unchanged and others reporting higher import costs, Evercore ISI analysts say in a note. Overall, the Beige Book "reinforces the view that the economic outlook has changed little since the September Fed meeting." This leaves the Fed on track to cut rates by 25 basis points later this month and most likely in December, they say. The DXY dollar index falls 0.2% to 98.596 after hitting a one-week low of 98.417 late Wednesday. ([email protected])0638 GMT - A potential coalition between Japan's ruling Liberal Democratic Party and opposition Japan Innovation Party is unlikely to worsen the nation's fiscal conditions immediately, Daiwa Securities analysts say. The opposition party's policies, such as designating a second capital and social security reforms, are unlikely to lead to a sharp increase in government bond issuance in the near term, the analysts say in a research note. "There is a considerably high hurdle for the LDP to accept the ban on corporate and organizational political donations advocated by the Japan Innovation Party. Whether the two parties can reach an agreement remains unpredictable," they say. ([email protected])0633 GMT - Sterling stays higher against the dollar and trades steady versus the euro, showing little reaction after data showed the economy grew in line with expectations in August. The economy expanded just 0.1% on the month following a downwardly revised 0.1% contraction in July. Growth is sluggish and labor market is cooling but with inflation set to rise further the Bank of England is likely to leave interest rates on hold in November, Aberdeen economist Luke Bartholomew says in a note. Sterling rises 0.1% to $1.3412 versus a weaker dollar and the euro trades flat at 0.8690 pounds, both little changed from levels before the data. ([email protected])0632 GMT - Eurozone bond yields edge higher after opening, but the latest bond market rally could continue as a tangible trigger for a change of course remains absent without U.S. data, Commerzbank Research's Hauke Siemssen says in a note. A successful confidence vote for French Prime Minister Sebastien Lecornu is already expected, making "the air for [French government bonds] OATs getting thinner," the rates strategist says. Spanish and French government bond auctions put the latest tightening in yield spreads to test, he says. The 10-year OAT-Bund yield spread is 78.2 basis points, little changed from Wednesday's close, according to LSEG. The 10-year Bund yield is up 0.9 basis points at 2.567%, according to LSEG. ([email protected])0632 GMT - China's near-term growth is slowly picking up pace as the economy undergoes a challenging transition, says Asean+3 Macroeconomic Research Office, noting that its emerging sectors are briskly expanding. Private consumption also contributes more than half of China's 1H growth. However, domestic demand is still constrained by the real estate sector's downturn and an uncertain external environment. "Stronger and sustained growth will require addressing legacy issues forcefully and implementing structural changes to boost household incomes," economist Jae Young Lee says. Amro projects China's economy to grow 4.8% in 2025 and 4.4% in 2026. ([email protected])0624 GMT - Over the next decade, 10-year U.S. Treasury, German Bund and Japanese government bond yields are expected to rise, Goldman Sachs analysts say in a note. The projections see the 10-year U.S. Treasury yield at 4.5% in 2035 versus 4.029% currently; the 10-year German Bund yield at 2.75% versus 2.569% currently and the 10-year Japanese government bond yield at 2.0% versus 1.652% currently. However, the 10-year U.K. gilt yield is expected lower at 4.25% versus Wednesday's close of 4.55%. In Europe, Goldman Sachs expects cyclical tailwinds from German fiscal expansion to moderate by 2035. The analysts see Japan still on track toward a higher equilibrium yield environment, supported by the eventual sustainable return of inflation to 2%. Goldman Sachs Research is introducing long-term forecasts for G-10 government bond markets through 2035 to complement its economists' long-term projections. ([email protected])0553 GMT - U.S. Treasury yields fall in Asian trade after the Federal Reserve's Beige Book, a summary of regional economic anecdotes, confirmed expectations of further interest-rate cuts. "It [the Beige Book] suggests there has been a slight loss of momentum in activity over the past eight weeks," ING's James Knightley says in a note. It supports the messaging from Fed Chair Jerome Powell that the economic situation hasn't improved since the Fed cut rates by 25 basis points in September, the chief international economist says. The two-year Treasury yield falls 1.1 basis points to 3.494%, the 10-year yield falls 1.7 basis points to 4.027% and the 30-year is down 1.7 basis points at 4.621%, according to Tradeweb. ([email protected])0544 GMT - French government bond, or OAT, yield spreads could tighten further below 80 basis points as the Prime Minister Sebastien Lecornu is seen to survive a vote on confidence, Danske Bank's Stefan Mellin says in a note. Lecornu got the backing from the socialists in the parliament as he is postponing pension reform, but this decision isn't without risks. "This is a risky path especially with respect to the rating agencies, where Moody's has France up for review next week," the chief analyst says. Moody's has France on stable outlook, but the outlook is expected to change to negative, he says. The 10-year OAT-Bund yield spread closed just above 78 basis points on Wednesday, according to LSEG data.([email protected])0504 GMT - Hawkish comments from Bank of Japan policy board member Naoki Tamura are unlikely to change the growing view in the market that an immediate interest-rate hike is difficult, SMBC Nikko Securities economists say. "Given the uncertain domestic political landscape, concerns about communication between the government and the BOJ are prominent, and the high hurdle for an additional rate increase at the policy meeting in late October will likely remain unchanged," they say in a research note. In Thursday's speech, Tamura urged the BOJ to start considering resuming rate hikes, given upside risks to prices.([email protected])