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Dollar firmer on short-term rates, shares rise after Fed hike
Investors bet that the Federal Reserve will finally get ahead of inflation by delivering the 'first rate increase in over three years' and calming down a global bond saleoff which had sent long-term yields soaring. The U.S. Dollar hit a seven week high against major peers. This was backed by an increase in short-term Treasury rates as markets increased bets that the Fed might have to raise rates again. A move by December is fully priced in. This was a negative for commodities as oil prices fell. All eyes are now on the Bank of England. It is expected that it will keep interest rates unchanged later in the afternoon, but everyone will be watching for any hint as to whether high energy prices might force them to raise in November. Bank of Japan is expected to raise interest rates on Friday. European shares will open higher, as stock futures for the entire region are up by 0.5%. Nasdaq Futures rose 0.7%, and S&P500 Futures rose 0.6% after Wall Street's small losses. The Nikkei, Japan's stock market index, also rose by 0.3%. Chinese blue-chips fell by 0.2%, while Hong Kong's Hang Seng dropped 0.7%. The Fed increased interest rates by a quarter-point overnight as expected. However, the unanimous decision was hawkish. The dot plot predicted one more rate increase?this year, but did not indicate any?movements next year. Tai Hui is the APAC chief market analyst at JPMorgan Asset Management. He said that investors will need to reassess valuations of assets, especially tech stocks, if the Fed remains hawkish into 2027. "We believe the chances of U.S. interest rates rising above 5% are still low. He added that a catalyst for extending the equity bull is unlikely to happen in the near future. Futures indicate that there is a 53 percent chance the Fed will follow up on its first hike by announcing a second one as early as next month in order to curb inflation. Three rate hikes are expected for this tightening period. The Treasury yield curve flattened. Short-term bonds took a hit, but long-term bonds breathed a sigh relief. The yield on two-year Treasury bonds fell 1 basis point, to 4.7174%. They had risen 6 basis points overnight and reached their highest level since July 2024. The U.S. Dollar reached a seven-week peak of?100.36 versus its major counterparts, after gaining 0.7% over night, the largest daily gain in the last three months. The yield on the benchmark 10-year note in the United States was back to 5% after dipping as low as 4,9385% overnight. Meanwhile, 30-year bond yields were flat at 5.3522%. This is down from a high of 5,401%, which had been reached 19 years ago. Padhraic G. Garvey is the regional head of ING's research for the Americas. He said that Chair Warsh would be happy to see the moderate decline in inflation expectations as a sign of the market's approval of the hike. "It was a still eloquent show. But it won't save the back end. "We identify 5.25% as the next target for U.S. 10 year yield." The stronger dollar hurt commodity markets. Brent crude futures fell 0.2% to $105.67 per barrel, after falling 2.7% overnight. Saudi Arabia reportedly offered crude cargoes via Oman. This eased some concerns over Middle East supply disruption. Gold showed resilience however, rising by 0.7%, to $4,293 per ounce. This was a recovery from the overnight fall.
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India pledges to protect its energy security and warns that U.S. tariffs may affect ties
India announced on Thursday that it was committed to ensuring the 'energy security of its people, and would continue to purchase supplies from a variety of sellers depending on market dynamics. This came hours after the United States. A new measure was taken to punish these buyers. New Delhi said it also warned Washington about any new actions that could affect the ties between both countries. The statement was made after the U.S. House of Representatives approved sweeping tariffs and sanctions to increase economic pressure against Russia for its invasion of Ukraine. The legislation allows President Donald Trump of the United States to impose tariffs up to 100 percent on certain countries, such as India, in order to reduce their dependency on Russian oil and natural gas as well as extend sanctions against Iran. Trump will be asked to sign the bill into law. The Indian foreign ministry stated that it was aware of the passage and that New Delhi has raised the issue in recent months with different U.S. counterparts and "very clearly articulated the potential consequences" for the bilateral relationship as well as the international energy markets. In a statement, it stated that "the Indian side has also made clear their determination to take all the necessary measures to protect their trade and economic interest." It was added that the government would work closely together with industry and trade bodies to "deal" with the implications of this legislation. India, as the third largest oil importer in the world, is one of the biggest purchasers of Russian 'oil. This is seen to help Moscow replenish its budget since it launched a full-scale invasion of Ukraine 2022, and was then hit with sweeping Western sanctions. New Delhi has repeatedly resisted pressure to reduce its oil trade with Russia. Its large population and economy needs reliable, affordable, and secure energy supplies.
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Indonesia President calls for tougher penalties against those responsible for forest fires
Indonesian President Prabowo Subianto has called for tougher rules and sanctions against those who use slash-and-burn?methods of clearing land. The country is struggling to contain "wildfires" that have been raging in the country for weeks. Indonesia is currently battling the most intense wildfires it has seen in 11 years. "Super El Nino" conditions have drenched the country's fields and forests. The worst affected islands are Borneo, Sumatra and the surrounding areas. This is due to the dangerous haze that has caused respiratory illness. The air quality in Malaysia and Singapore, which are neighbouring countries, is also affected by transboundary pollution. In a meeting with his cabinet, Prabowo said that there would be zero tolerance towards people or companies found to be?responsible? for starting wildfires. He said, "I've asked the State Secretary and the Minister of Law for further investigation into this?specifically regarding legal sanctions", he added. "Maybe we should ask the House of Representatives to stiffen laws and classify this as 'ecological terror'. According to a statement released by the palace late on Wednesday, "This is a serious matter". He also ordered regional governments to abolish immediately exemptions that allow smallholders the use of fire to clear small parcels of land. Prabowo called on the police to investigate companies that violate fire safety standards. Indonesia has deployed over 50 aircraft to conduct cloud seeding and water bombing operations in order to combat the fires. Japan also?joined Indonesia’s water bombing operation on Wednesday. Last week, Japan sent three CH-47 Chinook helicopters but bad?flight conditions prevented their participation. Government data shows that from January to July this year, 202,000 hectares of land (almost 500 000 acres) was burned. Environmental group YKAN estimates that another '600,000 hectares (1.45 million acres) of land was damaged by fire in August. The Forestry Minister Raja Juli Antoni warned the wildfires may last until the early part of November, with the rainy season arriving later than previously expected.
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World Meteorological Organization reports that river flows in 2025 will be among the lowest in many decades.
The World Meteorological Organization reported on Thursday that 2025 would be one of the driest decades for rivers worldwide. This reflects the declining storage of water across the Earth’s surface, and raises concerns about future supplies. According to the WMO's?State of Global Water Resources Report, terrestrial water storage has been declining for over a decade. This trend has "serious implications for the future" according to the United Nations, as these stocks serve as a buffer for our planet in years of extreme drought. "We're depleting this savings account." In a report released alongside the WMO's latest report, WMO Secretary General Celeste Saulo stated that global terrestrial water storage had shown a downward trend from 2014-2016. WMO data revealed that in one of the driest data-collection years in 35 years, over a third (33%) of the world’s river basins had below-normal flows. The report said that some river basins, like parts of South Asia, had too much 'water,' reflecting more unpredictable and erratic water cycles. The report also said that widespread glacier loss was reported across all regions for the fourth consecutive time in 2025, and this would lead long-term to water insecurity.
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Trump: 'We are hopefully nearing the end of the Iran war'
US President Donald Trump stated on Wednesday that he hopes a "final end" to the war against Iran is near. Separately, a media report said he was expected to meet Gulf Leaders on the sidelines the UN General Assembly to discuss the conflict on Tuesday. He made his comments as the Iran War is in its seventh month, with no end in sight. Axios reported on late Wednesday that Trump's meeting next week with Gulf leaders in New York is expected to be centered around US plans for postwar strategy. Unnamed sources were cited in the report. The report said that Trump would meet with foreign ministers or leaders from Gulf Cooperation Council nations: Saudi Arabia, the UAE and Qatar. State Department or the White House have not responded to our requests for comments. Trump had told reporters earlier that evening, "Well, I hope we are nearing the end of this war." They want to do a deal. He reiterated his previous comments on Iran. Trump said that he also heard directly from Iran, without elaborating. Trump has offered changing goals and timelines regarding the war which began on February 28, when the US, Israel and Iran?attacked Iran. Tehran then responded by striking Israel and Gulf states that 'host US bases. US-Israeli attacks on Iran and Israeli strikes on Lebanon has killed thousands of people and forced millions to flee their homes. Trump has cited weakening Iran’s nuclear capability as one of his war objectives. Iran claims that its uranium-enrichment program is only for peaceful purposes and does not possess nuclear weapons. The US is nuclear-armed. Trump's Republican Party has made the rise in oil and gas prices due to the US-Israeli attack on Iran a key issue as it prepares for the midterm elections.
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Demand uncertainty limits gains for iron ore companies on China's pre-holiday restocking
The price of iron ore rose on Thursday for a second session, as Chinese steelmakers increased seaborne purchases in anticipation of a national holiday. However, a shrinking margin at the steel mills clouded the demand outlook. As of 0147 GMT, the most traded iron ore contract at China's Dalian Commodity Exchange rose by 0.35% to $711 yuan (US$105.94) per metric ton. As of 0137 GMT the benchmark October 'iron ore at the Singapore Exchange was 0.26% lower at $96.05 per ton. It has been hovering below the important?psychological levels of $100 for six consecutive sessions. A number of steelmakers have booked seaborne cargoes to be delivered during the week-long National Day Holiday break from October 1-7. Data from Mysteel consultancy showed that the daily?volume of seaborne goods increased by 43% on Wednesday compared to the previous day. Analysts said that mills could slow their restocking because sagging margins discouraged them from increasing production, thereby limiting price increases. Coking coal and coke also saw a rise of 1.18% & 1.31% respectively. The Shanghai Futures Exchange has seen a rise in steel benchmarks. Rebar grew by 0.1%, hot-rolled steel coils?upped 0.24% and stainless steel rose 0.78%. In a recent note, analysts at Zhengxin Futures stated that "the?real steel?demand has not shown any clear signs of recovery, despite?earlier expectations. However, supply 'contraction continued as losses increased."
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Dollar jumps as short-term rates increase, shares tick higher after Fed raises rates
Investors bet that the Federal Reserve will finally get ahead of inflation by delivering its 'first rate hike in more than three years, and calm a global bond saleoff which had sent long term yields soaring. The dollar soared to a seven-week high against its major peers, backed by a jump in short-term Treasury yields as markets increased their bets that the Fed may have to raise rates again. A move by December was fully priced in. The dollar reached a seven-week-high against major peers. This was backed by a surge in short-term Treasury rates as markets increased bets that the Fed might have to raise rates again. A move by December is fully priced in. This was a negative for commodities as oil prices fell. All eyes are now on the Bank of England. It is widely expected that it will keep interest rates unchanged later in the afternoon, but everyone is watching for any indications about whether high energy prices might force them to raise in November. Bank of Japan is, on the other hand, almost certain to raise interest rates this Friday. The Nikkei, Japan's stock market index, gained 0.5%. Chinese blue-chips fell by 0.4%, while Hong Kong's Hang?Seng dropped 0.9%. After a small drop on Wall Street, Nasdaq and S&P futures both gained 0.6%. The Fed increased interest rates overnight as expected. However, the unanimous decision was hawkish, and the board indicated that there would be one more rate increase this year. Goldman Sachs expects that the Fed will raise rates again in October. Goldman analysts said in a recent note that "October is the most probable time for the next step because it's most natural to deliver the hikes the FOMC described today as supporting "a timely return" to the 2% goal at successive meetings." Additional hikes may be possible, but they are not the base case. Futures indicate that there is a 50% probability that the Fed will follow up on its first hike by announcing a second one as early as next month in order to curb inflation. Three rate increases have been price in for the tightening?cycle. The Treasury yield curve flattened. Short-term bonds took a hit, but long-term bonds breathed a sigh relief. After spiking by 6 basis points overnight, the yields on two-year Treasury bonds remained at 4,7145%. This?helped boost U.S. Dollar to a 7-week high against major peers like the yen or euro. It was last trading at 100.33 after rising 0.7% overnight. The yield on U.S. benchmark 10-year notes hovered at 4.9917% and was below the 5% key level. Meanwhile, 30-year bond yields were down 2 bps at 5.3328%. This is a further retreat from a 19-year peak of 5.401%. Padhraic GARVEY, regional head for research in the Americas at ING, said that Chair Warsh would be pleased to see the yield breakout on the 10-year note show a moderate drop in inflation expectations. This signals a market approval of the increase as a measure of inflation containment. "It was a still an eloquent show. It won't save the back end. "We?identify the next target of 5.25% for the U.S. 10 year yield." Commodity markets were hit. Brent crude futures fell 0.7% to $105.05 per barrel, after falling 2.7% over night. Saudi Arabia reportedly offered crude cargoes via Oman. This eased some concerns about Middle East disruption in supply. Gold has shown some resilience. It rose 1%, to $4,305 per ounce. This is offsetting the 0.7% drop overnight.
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Oil prices continue to fall as concerns about Middle East supply disruptions diminish
Early Thursday morning, oil prices continued to fall, adding to the previous day's losses. This was due to reports that Saudi Arabia offered extra crude cargoes via Oman, which reduced concerns about supply disruptions. Brent crude futures fell $1.24 or 1.2% to $104.59 a barrel at 0049 GMT. U.S. West Texas intermediate futures were down by $1.14 or 1.1% to $101.29. Both contracts dropped about $3 on Wednesday. Hiroyuki Kikukawa is the chief strategist at Nissan Securities Investment. He added that "expectations of progress towards easing tensions in the Middle East before the U.S. China summit next week also cap price increases." People familiar with the situation said that Saudi Arabia offers'more' loadings of crude to Asian refiners through ship-to-ship transfers at Oman's Sohar Port, reducing some 'of the damage to global supply caused by attacks on Saudi Arabia's East West pipeline to the Red Sea. The price of oil rose this week to a four-month high after sources in the shipping industry reported that crude loadings had been suspended at Saudi Arabia's Red Sea Export Hub, Yanbu. Riyadh also cancelled certain cargo deliveries to European clients. The suspension was a result of attacks on the East-West Pipeline, which supplies the Saudi port Yanbu. Yanbu was Saudi Arabia's primary oil export outlet after Iran blocked the?Strait of Hormuz following the U.S.-Israeli attack on the country in February. Hormuz used to be the source of one-fifth the world's oil before the war. Three oil and security sources have reported that two pumping stations servicing the East-West Pipeline were damaged by an attack last week. However, a timeline for repair is not clear. Even though the price of oil fell on Thursday, concerns about a Middle East war that is intensifying remain. Saudi warplanes bombarded Yemen, and Houthi fighters fired drones and missiles at Saudi cities. The Iran-backed movement announced this on Wednesday. This comes after a rapid advance which has increased Tehran's influence in the Middle East?war. Meanwhile, the U.S. Energy Information Administration ?on Wednesday reported a smaller-than-expected draw from U.S. ?crude inventories last week. The EIA data revealed that crude oil inventories in the nation's top producer fell by 640,000 barrels during the week. This was less than the 1.62 million barrels expected according to an energy analyst poll.
The Fed raises the bar on BoE's hawkishness in MORNING BID EUROPE
Stella Qiu gives us a look at what the future holds for European and global markets.
It turns out that the man?Trump hired for a rate cut actually raised rates instead. Kevin Warsh, the Fed's chief economist, delivered the first rate hike in over three years. He did it in lock-step with his colleagues.
Warsh did not provide any forward guidance after the Fed’s last rate decision. He insisted he would not fixate on a single data point. The markets are aware that hikes can be like cockroaches. If you see one there's probably more behind the wall.
The dot plot only penciled in one hike this year, but futures prices are pricing three more. Goldman Sachs called for a second hike in October. They argued that it was a natural thing to do to return the Federal Reserve to its 2% inflation goal.
Today, the Bank of England is under pressure from the Fed's decision to raise interest rates. Market watchers expect that the BoE will hold steady. However, the board is likely to split up again in order to listen for any hawkish remarks about sticky energy prices forcing the BoE into a hike next month.
Bank of Japan will almost certainly raise its rate this Friday. If you look at the markets around the globe, they assume that central banks in the U.S. and Europe, Britain, Australia, New Zealand, and Australia will have to tighten their policies again by the end the year.
As Warsh spoke, short-term Treasury rates soared to their highest levels since mid-2024 and boosted the dollar to a seven-week high. The Fed's rediscovered religion of inflation fighting has actually helped longer-dated bonds, as the benchmark 10-year yield is hovering just below the critical 5% mark.
This offered relief to Asian stocks, as most share markets caught a 'bid. European bourses will open with a 0.5% gain, Nasdaq futures up 0.6% and S&P Futures adding 0.5%.
Anyone can guess how long the calm will last. The world is adapting to an era of recurring supply shocks, with inflation running hotter than central bankers would like and interest rates higher that investors expected.
The following are key developments that may influence the markets on Thursday.
Bank of England Interest Rate Decision
The final Eurozone CPI figures are for August
Weekly U.S. jobless claims
(source: Reuters)