Fed Rate Calls Reflect Echo Chamber, Says Standard Chartered — Market Talk

2140 ET - Standard Chartered says that it is finding it hard to go against market expectations for interest rate increases by the Federal Reserve. Steven Engander, co-head of FX Research at SC, says he can only imagine how hard it is for Fed Chairman Kevin Warsh to stare down the market. Yet there seems to have been a market echo chamber pushing up expectations despite a limited amount of incoming data, and little sign that inflation is going up, he adds. Some indicators suggest that underlying inflation is much lower if tariffs are removed, he adds. There is a very low cost to waiting, he says. ([email protected]; X @JamesGlynnWSJ)2132 ET - Bitcoin drops in early Asia trade, slipping further below the $80,000 handle as oil prices sharpen rate-hike expectations. The prospect of tighter financial conditions tends to drag on non-yielding assets, while alarm over the continued Middle East conflict and its inflationary impact dulls risk appetite. Traders might be feeling extra cautious ahead of two events that will influence crypto markets: The Federal Reserve's decision and a vote on U.S. crypto legislation. Legislative progress would reduce regulatory uncertainty and brighten Bitcoin's outlook, says Mahmoud Mashal at VT Markets Dubai. A hawkish Fed would create a more challenging backdrop in an environment of already-high yields, he adds, while a more measured tone would have the opposite effect. Bitcoin falls 1.6% to $77,753. ([email protected])2109 ET - The Commonwealth Bank of Australia raises its estimate of Australia's current nominal neutral official cash rate to 3.85%, from around 3.7% projected in July. The range across the bank's models is now 3.2% to 4.3%, says Trent Saunders, an economist at CBA. Over the medium to long term, CBA sees risks tilted towards a higher neutral rate and a higher average level of the cash rate. However, a higher neutral rate does not mean the cash rate will move in one direction, he says. The Reserve Bank of Australia's OCR currently sits at 4.35%. ([email protected]; X @JamesGlynnWSJ)2054 ET - Sales of new homes in Australia declined for a fourth consecutive month in August to their lowest level in more than a year, ensuring that a housing market slowdown is now set to occur in 2027, the Housing Industry Association says. The new home market cannot absorb further interest rate increases on top of the tax increases announced in this year, it adds. Sales of new homes fell nationally by 10.0% in August and down 19.3% since May. This is a tangible and significant deterioration, it adds. ([email protected]; X @JamesGlynnWSJ)2045 ET - Indonesia's appointment of a new finance minister could lead to improved policy communication and a gradual return to orthodoxy, Citi economists say, reducing the risk of negative ratings action. While the general environment of impromptu political leadership decisions probably continues, Citi's base case is for clearer MOF communication with investors and stakeholders, particularly global bond investors and ratings firms. That said, Finance Minister Suahasil Nazara inherits a budget with limited fiscal space, set against large social programs and swelling energy subsidies. Citi doesn't expect strategic changes to the budget posture or bond supply outlook, but sees scope for a gradual de-emphasizing of base-money growth targeting that could improve the predictability of banking-system liquidity and BI's operational independence. ([email protected])2020 ET - Japanese stocks are lower in early trade, weighed by concerns about the Iran conflict and higher energy costs. Chip-related stocks and trading houses are leading declines. Tokyo Electron Ltd. is down 2.7% and Marubeni is 1.7% lower. The dollar is at 154.48 yen, compared with Y154.22 as of Monday's Tokyo stock market close. Investors are closely watching developments in the Middle East and crude oil prices. The Nikkei Stock Average is down 0.2% at 63338.88. ([email protected]; @kosakunarioka)2019 ET - Indonesia's finance minister pick, Suahasil Nazara, looks credible to OCBC economists, who note his technocratic background and extensive policymaking experience. The announcement wasn't entirely unexpected, given speculation regarding a ministerial reshuffle. Moreover, the prior finance minister's policy measures delivered--at best--mixed results, OCBC's Lavanya Venkateswaran and Ahmad A Enver say. Suahasil's main challenge will be to keep the fiscal deficit below the 3% of GDP ceiling. That seems manageable, but complicated by the need to balance President Prabowo's growth ambitions against limited fiscal space and an increasingly tough external environment. As oil prices rise again, Indonesia's fuel subsidy bill could reach as much as 1.1% of GDP, necessitating expenditure cuts, OCBC says. ([email protected])2010 ET - Long-term Japanese government bond yields rise, driven by concerns about higher prices of energy and other products. A rise in domestic yields has come after escalating fears over energy prices and inflation drove the 10-year U.S. Treasury yield above 5% overnight. Investors are focusing on developments in the Middle East ahead of the Fed and Bank of Japan policy meetings later this week. The 10-year JGB yield is 1.5 basis points higher at 3.000%. ([email protected]; @kosakunarioka)1948 ET - Japanese stocks may decline as concerns about the Iran conflict and energy costs continue. Nikkei futures are down 0.2% at 63125 on the SGX. The dollar is at 154.36 yen, compared with Y154.22 as of Monday's Tokyo stock market close. Investors are focusing on developments in the Middle East and crude oil prices. The Nikkei Stock Average fell 0.8% to 63492.99 on Monday. ([email protected])1859 ET - Dave & Buster's Entertainment has adjusted its pricing strategy to simplify the customer experience and try to get consumers to stay longer, CEO Darin Harper tells analysts on a call. Customers have reported that the kiosk where they buy a card to use for arcade games is confusing and the price structure is difficult to figure out, Harper says. The company has simplified the kiosk experience and adjusted pricing to allow guests to play for longer. So far, time spent on the gaming floor is up 20%, Harper says. This helped boost revenue from food and dining during the quarter, as well, he says. ([email protected])1851 ET - Australian stocks look set to move lower at the open, following U.S. equities into the red amid higher oil prices and elevated bond yields. Local stock futures are down by 0.2% ahead of Tuesday's session, suggesting that the S&P/ASX 200 will reverse from a week-opening 0.1% advance that snapped a four-day losing streak. The benchmark index is 3.6% lower so far this month. Ahead of the open, coal miner New Hope reported a 63% fall in annual profit. Wealth manager Netwealth said it agreed to acquire advice platform Paradino for up to 29 million Australian dollars. In the U.S., the DJIA lost 0.3%, the S&P 500 fell 0.5%, and the Nasdaq Composite gave up 0.6%. ([email protected])1846 ET - Dave & Buster's Entertainment says it has had a decline in groups coming without children. The new executive team is looking to drive demand from adults to visit, without alienating families, Chief Executive Darin Harper says on a call with analysts. Halloween will be an early opportunity for the company since the holiday falls on a Saturday this year and is a high-spending day for consumers. "It creates this unique opportunity for our business to serve family demand earlier in the day and then convert into a differentiated adult occasion at night," Harper says.([email protected])