Bitcoin Losing Ground as Spot Demand Takes Lead — Market Talk

1204 ET - After jumping to around $87,000 last week, bitcoin has been turning lower. It starts this week down 1.7% to $83,084, with cryptocurrency among the swath of commodities and equities being weighed down by a negative sentiment among investors. "The macro setup has tightened further since rates were increased earlier this month, even as crypto has decoupled, with fuel-supply constraints rather than excess demand continuing to pressure goods prices," says analysts with Bitfinex in a note. The firm says that bitcoin will require strong demand on the spot market to push toward and past the $87,000 mark, something that has yet to be seen. "Any advance must be carried by spot demand," the firm says. ([email protected])1114 ET - - Saudi Arabia's financing needs could more than double its prewar plan as a temporary oil-price cushion fades and the conflict weighs on second-half revenues, Citi says. The bank expects a 2.4% GDP contraction and a budget deficit of SAR395 billion ($105.3 billion), or 7.7% of GDP, this year, compared with consensus expectations for modest growth and a deficit below 5%. High prices helped second-quarter oil receipts rise 22% on year despite sharply lower production, but Citi expects the lagged impact of weaker output to weigh on receipts in the second half. It estimates gross financing needs at around SAR445 billion, versus the prewar plan of SAR217 billion, though much of the requirement has already been secured. ([email protected])1108 ET — Saudi Arabia's recession remains overwhelmingly an oil-volume shock, with the broader economy showing relative resilience, Citi says. GDP contracted 4.8% on quarter in the second quarter after falling 1.4% in the first, but oil activity plunged 21.6% while non-oil activity slipped just 0.4%. Non-oil activity was still up 0.9% on year, and the kingdom's PMI rose to 53.8 in August, its fifth consecutive month in expansion territory. Citi expects overall GDP to contract 2.4% this year, but says the economy's recovery depends critically on restoring crude production and securing export routes. The budget is less vulnerable to prolonged export disruption than the broader economy, as higher oil prices can offset lost revenue from lower volumes even as reduced production weighs on GDP, Citi says. ([email protected])1102 ET - Risk premiums on credit assets, or credit spreads, widen as volatility in sovereign bond yields extends to corporate bonds, Societe Generale's Juan Valencia says in a note. Global investment-grade credit and high-yield credit indices have widened since the start of the year, to date, although the moves remain very modest on a daily basis, he says. "We believe that spreads will only stabilize and even rally only when sovereign bonds start to stabilize." ([email protected])1053 ET - Higher Treasury yields tighten financial conditions while raising discount rates used to value financial assets, Nuveen's Saira Malik says in a note. She adds that highly-valued stocks could sell off "if investors decide they'd rather take advantage of the currently elevated risk-free [Treasury] rates." On the positive side, higher yields "improve prospective income opportunities across fixed income and have helped the U.S. dollar firm," Malik says. Yields keep hovering near multiyear highs as Middle East tensions resurge. The 10-year Treasury is at 5.234%. ([email protected]; @ptrevisani)1033 ET - The U.K. Treasury chief, John Healey, could undo part of the employer national insurance increase announced by his predecessor Rachel Reeves, XTB's Kathleen Brooks says in a note. This policy has been blamed for the increase in unemployed youth, she says. "There may also be further remedial work on Rachel Reeves' prior budget announcements, including reducing business rates for high street shops." ([email protected])0950 ET - The U.K. could announce a relatively small budget on Oct. 28, due to constrained public finances, Aberdeen Investments' Lizzy Galbraith says in a note. The latest U.K. public finances data show public borrowing stood at 18.3 billion pounds in August, 19% higher than in the same period a year ago. "Tough decisions on welfare, youth unemployment, social care and long-term defense spending" could be pushed to 2027's government spending review or announced at the release of Prime Minister Andy Burnham's 10-year plan, Galbraith says. ([email protected])0947 ET - Bitcoin has pulled back significantly since reaching a near eight-month high last week but is showing some resilience as it remains above support at $80,000, Trade Nation's David Morrison says in a note. Bitcoin spent much of the summer in an extended period of consolidation, he says. This helped the cryptocurrency to build sufficient upside momentum, which wiped out short positions betting on it to fall and provided a basis for fresh buying, he says. "If it can hold and consolidate above $80,000 then this would help to build bullish sentiment." Bitcoin falls 1.2% to $83,522 after earlier hitting a one-week low of $82,516, LSEG data show. Last Monday it reached $87,315, its highest level since late January. ([email protected])0935 ET - Capital Economics thinks the Treasury sell-off mainly comes from changes in near-term rate expectations. The 10-year yield is near its June 2007 high, and economist James Reilly says it reflects higher oil and a strong US economy more than AI debt issuance or fiscal concerns. He says in a note he expects the 10-year yield to "drop all the way to 4.25% by the end of 2027 as the Fed fails to tighten by as much as investors are discounting." He believes that while AI debt issuance will continue to be a source of upward yield pressure, the effect is smaller than headlines suggest and will be outweighed by changes in monetary policy expectations. As for fiscal concerns, he adds that there hasn't been any meaningful fiscal news lately to warrant the yield surge. ([email protected])0906 ET - The Czech National Bank is likely to raise interest rates further in November, but this might not be enough to support the Czech koruna, Commerzbank's Tatha Ghose says in a note. One rate hike wouldn't be sufficient to boost the koruna as inflation will likely accelerate faster during this energy-price upswing than the CNB will be willing to raise rates, he says. The real rate adjusted for inflation will, therefore, fall as it did during the post-Covid rise in inflation, he says. The CNB left rates unchanged earlier this month but the minutes of the meeting showed the central bank is becoming more concerned about inflation risks. The euro rises 0.2% to 24.389 koruna. ([email protected])0900 ET - The global bond selloff resumes, keeping Treasury yields near multiyear highs, as hopes for an imminent solution for Hormuz and the oil trade fade away. President Trump rejects a ceasefire proposal and Iran is under pressure to return to the negotiation table. The impasse sends oil up, fanning inflation fears. The Conference Board Consumer Confidence Index is expected to be stable tomorrow, according to WSJ consensus. On Wednesday, PCE inflation is forecast to remain hot, while payrolls are expected to shrink Friday. The 10-year yield is at 5.215%, near its June 2007 high. The two-year is at 4.912%, both higher than Friday but off overnight highs. ([email protected]; @ptrevisani)0850 ET - The Australian dollar should rise if the Reserve Bank of Australia raises interest rates by 25 basis points to 4.60% on Tuesday as expected and signals further hikes, ING's Francesco Pesole says in a note. Inflation concerns remain elevated, and even if crude prices decline, domestic fuel prices are set to remain sticky for some time, he says. Core inflation measures are high, the labor market is tight and growth has proven stronger than expected, he says. "We therefore expect markets to retain expectations for further tightening after the meeting, offering support to AUD." The Australian dollar trades steady at $0.7022 and ING expects it to reach $0.72 by year-end. ([email protected])