Tech, Healthcare Key Sectors to Watch as U.S. Midterms Unfold — Market Talk

0439 GMT - Technology and healthcare remain the key sectors to watch with regard to the U.S. midterm elections, says Colin Graham, Robeco's head of multiasset strategies. The U.S. administration has supported investment in AI, which continues to provide a powerful structural tailwind, he says in a note. Healthcare is another area where the election outcome could influence sentiment, given its longstanding role as a political battleground, he says. "Our base case is that markets will look through the election relatively quickly and refocus on growth, inflation and earnings." The biggest risks are a renewed rise in inflation expectations, higher bond yields or a deterioration in earnings momentum, he adds. ([email protected])0433 GMT - The security incident at Binance has raised concerns about the safety of holding assets on exchanges, adding to Ethereum's woes, says Linh Tran at XS.com. The breach has made market sentiment even more cautious, despite Binance's assurances that customer funds remain safe. There is still insufficient information to conclude that the incident is related to the security of the Ethereum network, but until more details emerge, investors may hold back on new purchases or reduce cryptocurrency exposure, Tran says. That comes as spot Ethereum ETFs had already seen consecutive sessions of net outflows. "Even if concerns surrounding Binance subside, ETH still needs a clear improvement in buying demand to recover." Ethereum is down 0.9% at $2,240, paring earlier losses. ([email protected])0413 GMT - The BOJ's hawkish hold makes it clear that it sees further rate increases ahead, says Krishna Bhimavarapu at State Street Investment Management. "More importantly, the Bank is increasingly confident that its price-stability objective is being achieved and that inflation expectations can be anchored around 2% through a self-sustaining wage-price-consumption cycle," the economist says. That's a notably more upbeat assessment than the government's still-cautious stance on whether Japan has really exited deflation. But a still-fragile growth backdrop justifies not rushing the next hike, says Bhimavarapu. Japan's 3Q GDP is likely to show a loss of momentum, with consumption still the weakest link. The GDP print will therefore matter considerably for whether December becomes the next window for a rate increase. ([email protected])0400 GMT - The Bank of Japan's rate decision held no surprises but its economic outlook was a different story, says State Street Investment Management's Masahiko Loo. The BOJ's recognition that underlying inflation is now around 2% brings its assessment closer to the reality that conventional inflation measures have been around or above target for much of the past four years, Loo says. The debate is no longer whether the BOJ normalizes, but where the terminal rate will land. "Our base case remains around 1.75% as Japan joins the synchronized global tightening cycle," says Loo. Taking its cue from the Federal Reserve and ECB, the BOJ has little reason to rush, particularly with the risk of U.S. midterms spurring FX and bond volatility. BOJ Gov. Kazuo Ueda can stay data-dependent, keeping every meeting live. ([email protected])0344 GMT - Japanese stocks extend declines and the yen strengthens after the Bank of Japan's decisions point to further policy tightening. The Japanese central bank says it will accelerate the pace of sales of Japanese stock exchange-traded funds, starting in January. While the BOJ holds its policy rate steady as expected, it says underlying inflation is generally consistent with its 2% target. It raises its forecast for consumer inflation, excluding fresh food, to 2.6% for the fiscal year starting April, up from 2.4% projected previously. Investors will be focusing on Gov. Kazuo Ueda's press conference later Friday. The Nikkei Stock Average extends losses slightly, now down 2.6% at 62972.78. The dollar falls to 157.36 yen from Y157.51 following the BOJ outcome. ([email protected]; @kosakunarioka)0344 GMT - There's a material risk that the Reserve Bank of Australia takes its official cash rate to 5.10% in either December or February, says Adam Boyton, head of Australian Economics at ANZ. Boyton estimates that an OCR of 5.10% (4.60% now) would produce an inflation forecast from the RBA next week of 2.5% for mid-2028 and 2.4% at end-2028. Still, the concerns expressed by senior RBA officials that inflation expectations might be shifting would strengthen the case for returning inflation to target sooner, he adds. It means the interest rate rise expected at Tuesday's policy meeting may not be the last in the cycle. ([email protected]; @JamesGlynnWSJ)0337 GMT - The key takeaway from the Bank of Japan's meeting is that it believes it has won the fight against deflation, Capital Economics' Marcel Thieliant says. After the BOJ held its benchmark rate at 1.25% as widely expected, CE expects the next rate hike to come in December. The BOJ's updated inflation estimates signal that the monetary policy board continues to see risks to inflation as skewed to the upside. It again flagged oil prices and yen weakness as key factors to watch. "Further tightening looks very likely and we expect the policy rate to reach 2% by the middle of next year. If anything, the risks are tilted towards further tightening thereafter," Thieliant says. ([email protected])0324 GMT - The dollar will likely trade between 4.04 and 4.08 ringgit next week, say Kenanga economists in a note. Investors are expected to be cautious ahead of the U.S. midterm elections on Nov. 3, leaving the ringgit exposed to further weakness. While a likely Democratic sweep is expected to limit changes in tariff policy, potential escalation between the U.S. and Iran could push oil prices higher and revive demand for the dollar, they reckon. Bank Negara Malaysia is expected to keep its overnight policy rate unchanged at 2.75% on Nov. 5, while U.S. jobs data will offer clues on the Fed's next rate decision, they add. Kenanga expects the dollar to face resistance at 4.083 ringgit, with support at 4.039 ringgit. The dollar is 0.3% lower at 4.048 ringgit. ([email protected])0244 GMT - The Singapore dollar strengthens against its U.S. counterpart, amid falling U.S. Treasury yields that tend to undermine the allure of U.S. fixed-income assets and demand for the greenback. This is despite stronger-than-expected U.S. 3Q GDP growth and still-elevated U.S. inflation, OCBC FX strategists say in a note. The mixed market response suggests that the U.S. dollar gains may be capped, they add. The U.S. dollar is down 0.1% at 1.2782 Singapore dollars, LSEG data show.([email protected])0204 GMT - Bank Indonesia's efforts to balance support for the rupiah with the need to sustain economic growth, potentially under political pressure, bear similarities to Turkey's experience over the past 15 years, Capital Economics' Jason Tuvey says in a note. Indonesia is still far from the crisis Turkey experienced, when its central bank lost credibility and inflation surged. However, continued policy compromises could gradually weaken confidence in BI's ability to control inflation, he says. While inflation remains within its target range and real interest rates are positive, further complex policy measures could undermine the central bank's credibility, allowing inflation to rise and the rupiah to suffer larger, more volatile declines over time, he adds. ([email protected])0136 GMT - Asian currencies are mixed in early trade, as traders digest the latest U.S. economic data. U.S. 3Q GDP growth exceeded expectations, while September PCE inflation accelerated. "For Asia FX, resilient U.S. growth and sticky inflation keep a December Fed hike in play," says MUFG Bank's Lloyd Chan in a report. Markets also continue to price further tightening into 2027, the senior currency analyst adds. The U.S. dollar is 0.2% lower at 157.36 yen, but the Australian dollar is little changed at US$0.7030, LSEG data show. ([email protected])0122 GMT - South Korea's headline inflation could ease slightly in October but remain above the central bank's 2% target. The median forecast from a Wall Street Journal poll of nine economists is for the consumer-price index to have risen 2.8% from a year earlier, slower than the 2.9% increase in September. On a monthly basis, the index likely edged up 0.2% in October after September's 0.3% gain, the poll shows. Mild weather following the Chuseok holiday likely helped stabilize agricultural prices, while a stronger won also likely eased upward pressure on import prices, Meritz Securities chief economist Seunghoon Stephen Lee says. The CPI data are due on Tuesday. ([email protected])