GGMA Markets Briefing: Yen Jumps on BoJ Repricing as Oil Eases and Bonds Steady
Oil fell and bonds steadied as President Trump said the renewed strikes on Iran would likely be short-lived, while the yen rose to its strongest in nearly a month on a hawkish repricing of Bank of Japan expectations (BBG). Asian stocks pared their gains and Nasdaq futures dropped after technology shares in South Korea erased an earlier advance (BBG).
In stocks, MSCI's Asia Pacific gauge gave up most of an early advance and Korean technology shares reversed (BBG). The Nikkei slipped 0.4% to 64,110 as the stronger yen weighed on exporters, the ASX rose 0.6%, the Hang Seng eased 0.2%, and MSCI's emerging-market index fell 1.1%. On Wednesday, the Nasdaq rose after the ten-year Treasury yield touched its highest since 2023 and then pulled back (CNN). S&P 500 futures were down 0.2% and Nasdaq futures 0.3%, while European futures were little changed. Reuters reports that with the second-quarter earnings season over, investors see a move in the ten-year yield towards 5% as the trouble spot for equity valuations, with the S&P 500 trading at 19.7 times forward earnings against a long-run average of 16 (Reuters).
Regarding the Bank of Japan, the yen's overnight jump followed board member Hajime Takata's call for nimble rate hikes, and traders have started to price a move larger than 25 basis points at the 18 September meeting (BBG).
Bloomberg reports that investors are on alert for intervention during the Silver Week holidays that begin shortly after the decision, as authorities acted during a long holiday in April, and that Japan spent a record 96.4 billion dollars supporting the currency over the past month with US backing (BBG). Treasury Undersecretary Erin Browne told Nikkei that rising Japanese long-term rates are spilling over into US markets because Japan is such a large holder of developed-market debt, and that both countries have a mutual interest in stabilising FX volatility (Nikkei). Japan's 30-year auction passed smoothly with the yield above 4% and a bid-to-cover ratio above its twelve-month average, although the tail widened (BBG).
Regarding the Fed, Williams said inflation expectations are well anchored and that there are no clear signs yet whether policy is sufficient to return inflation to target. He added the surge in Treasury yields reflects a strong economy fuelled by investment in AI and data centres rather than financial stress, and that he has to wait and see whether a rate hike is necessary. (CNBC) According to Bloomberg, Chair Warsh's Jackson Hole dashboard shows an economy with few signs of restraint: capital expenditure growing around 9%, elevated profit margins, easy loan standards and a labour market he judges consistent with full employment, while 54% of the PCE basket rose more than 3% over the past year against 32% before the pandemic (BBG). In Australia, RBA Assistant Governor Sarah Hunter told a Senate panel that the rate rises earlier this year are working and can be seen in the data, that monetary transmission has not changed much, that lending standards are very good and that she sees no signs of systemic stress among borrowers (BBG). In Canada, the Bank of Canada held on Wednesday but signalled its readiness to tighten to rein in inflation (Reuters).
Currently, STIR traders price 15 basis points of tightening for the Fed's September meeting, a 61% probability of a rate rise, and 37 basis points cumulatively by December. For the BoJ, markets price 30 basis points of tightening for the September meeting, more than fully priced, and 45 basis points cumulatively by December. For the RBA, markets price 16 basis points of tightening for the September meeting, a 65% probability of a rate rise, and 31 basis points cumulatively by December. For the ECB, markets price 29 basis points of tightening for the September meeting, fully priced, with the Governing Council now in its pre-decision quiet period.
In currencies, the dollar index fell 0.2% to 99.416. The Australian dollar was little changed at 0.7161 near a three-month high after the GDP beat, the New Zealand dollar recovered 0.1% to 0.5859 after Wednesday's fall, and the rupee firmed 0.5% against the dollar. Bloomberg reports that pension funds and insurers across six markets including Japan, Canada and Taiwan hedged only 41% of their foreign-currency exposure as of June, the lowest since at least 2015, and that a five-point rise in hedge ratios would mean around 230 billion dollars of dollar selling (BBG).
In bonds, the US ten-year yield was at 4.76%, down 1.4 basis points, after touching its highest since October 2023 on Wednesday (CNN). The thirty-year yield was at 5.24%, down 1.9 basis points, and the two-year at 4.36%, down 0.8 basis points. The Japanese ten-year yield fell 6.0 basis points to 2.97% and the two-year eased 1.3 basis points to 1.85% after the 30-year auction (BBG). The Australian ten-year yield fell 5.3 basis points to 5.17% and the three-year 6.5 basis points to 4.75%. Bloomberg's Mark Cranfield wrote that solid demand at a yield above 4% should be enough to stabilise long-term JGBs and that the read-across for the US curve is marginally positive (BBG).
In commodities, Brent fell 0.9% to 94.75 and WTI 0.8% to 90.32 after Trump told reporters he does not think the bombing campaign will last too long and said the US took out the equipment Iran had built along the strait (BBG). The US announced no strikes on Wednesday night, while Kuwait said its air defences were responding to missile and drone threats early on Thursday (BBG). Reuters reports that Iran blacklisted 11 more ships, taking the total to 56 vessels it considers subject to fines or seizure if they transit Hormuz without permission, and that Energy Secretary Wright said more than 17 million barrels exited the strait on Monday (Reuters). CNN reported that the US military escorted 40 commercial vessels through the strait on Tuesday (LS). Bloomberg reports that Europe still needs more than 100 terawatt-hours of gas to reach even its lowest 75% storage target, an injection pace not seen this late since 2022, with Germany's sites just over half full and analysts warning winter prices could exceed 100 euros a megawatt-hour (BBG). Gold rose 1.0% to 4,426 dollars an ounce. Bitcoin fell 0.2% to 77,262.
In geopolitics, Iran said its aim is now to drive US forces from the region after striking bases in Bahrain, Jordan, Kuwait and Iraq, and Reuters reports that Trump's aides are trying to keep the war quiet ahead of the midterms, with polls showing Americans oppose it by more than two to one (Reuters). Trump said he is prepared to strike again at any time (BBG).
In corporate news, Broadcom forecast AI chip revenue doubling to about 115 billion dollars in fiscal 2027 and 230 billion the year after, with Anthropic expected to become its largest custom-chip customer, although fourth-quarter revenue guidance missed estimates (BBG). Elliott has built a sizeable stake in Deutsche Telekom and wants it to drop a potential merger with T-Mobile US, and Hewlett Packard Enterprise fell in late trading after sales missed high expectations (BBG). The FCA found liquidity risk concentrated in UK real estate funds, where 10% of net asset value can be redeemed within 30 days against 7% of liquid assets, and said private credit assets have more than doubled since 2021 (Reuters).
In other news, this article caught my eye: A Revolt Over $100 Billion Data Center Shows Spreading Backlash (BBG). Bloomberg reports that organised local opposition toppled a Blackstone and Brookfield-backed data-centre campus in Virginia after five years of zoning fights and lawsuits, and that the backlash has become a national movement with moratoriums in New York, effective freezes in Texas and at least 75 sites disrupted in the first quarter.
Data and the day ahead: China's RatingDog services PMI rose to 51.4 in August from 50.4 against a 50.6 consensus, diverging from the official survey's second month of contraction (BBG). Australia's trade surplus narrowed to A$1923m in July from A$2341m but beat the A$1500m consensus. New Zealand's terms of trade fell 9.0% q/q in the second quarter against a 1.9% decline expected. Japan's final composite PMI was revised up to 53.5 from 53.4 and Australia's to 52.7 from 52.5. Still to come: Swiss inflation at 08:30 CET, where consensus looks for a slight pickup from July, and Swiss second-quarter GDP at 09:00 CET. Final euro-area and UK services PMIs follow from 09:55 CET, with euro-area producer prices at 11:00 CET. In the US, Fed Governor Waller speaks at 14:30 CET, alongside weekly jobless claims and the July trade balance, and the ISM services index at 16:00 CET is the last major data print before Friday's payrolls. BoE Chief Economist Pill speaks in Edinburgh at 17:00 CET, and Cleveland Fed President Hammack and Chicago Fed President Goolsbee speak this evening.
Time Stamp: 3 September 2026, 07:31 CET