MARKET WRAPS
Watch For:
EU CPI; U.K. BOE decision; trading update from Next
Opening Call:
European stock futures rose early Thursday. Asian stock benchmarks traded mixed; the dollar edged higher; Treasury yields fell; oil and gold futures fell.
Equities:
Stock futures point to a higher open in European markets after Warsh struck a decidedly hawkish tone in remarks following the central bank's decision to raise interest rates for the first time in three years.
"Inflation is too high and has been for too long," Warsh said in remarks to reporters on Wednesday. He later added: "Today's action starts to show that we're serious about this."
The main motivation behind the Fed's decision to hike rates was credibility, given bond market pricing and recent developments in oil markets, said Christian Scherrmann, chief U.S. economist at DWS.
The Fed helped re-establish the new chairman's credibility with its decision to hike rates, said BlackRock Investment Institute's Jean Boivin.
Later Thursday, the Bank of England is set to keep interest rates on hold, though economists think the bank's monetary-policy committee will strike a hawkish tone, as energy prices have climbed since the last policy meeting in July.
Forex:
The Fed hiking is positive for the dollar, but there may not be enough central bank policy divergence out there to move its value much higher, said Juan Perez at Monex USA. Other official decisionmakers are going to be acting in tandem with the Fed, convinced that inflationary pressures are inescapable and necessitate higher rates, especially given the effects of the Middle East war on energy.
While Fed Chair Warsh seems more inclined to "laissez-faire" approaches, he still has domestic opposition in the form of Treasury intervention to provide liquidity for bond markets, as well as a determination to intervene in FX, particularly to aid the yen, Perez said.
Bonds:
The Fed hike, despite being expected, could help stabilize bond markets, Resonate Wealth's Alex Guiliano said. The move "marks a clear pivot for the Federal Reserve from talking tough on inflation to specific action."
Guiliano added that "while we would not be surprised to see one more rate hike this year, this is a Fed that doesn't like to show its cards, which may only increase the market's anticipation before each of the next several Fed meetings, leading to more stock market volatility."
Energy:
Oil fell early Thursday. Softer prices likely reflect optimism about taming the effect of the deep disruption to Middle East crude-oil exports, said XS.com's Samer Hasn. Building U.S. crude oil inventories also likely support oil, he said. The continued flow of barrels through the Strait of Hormuz under U.S. protection and the partial resumption of Saudi flows could push prices down, he said.
The analyst expects oil prices to return to wide sideways trading if the U.S. signals potential negotiations with Iran.
Metals:
Gold rose slightly in Asia after slipping in the wake of the Fed's first rate hike in over three years.
Expectations of how many more hikes lie ahead will set the tone for gold moving forward. Oxford Economics expects the Fed to tighten again in December before moving to the sidelines for an extended pause. Copper edged higher in Asian trade. The base metal sector likely found support from investors, tracking some relief in U.S. stocks and bonds, despite signs of easing tightness in the sector, ANZ said.
However, cash contracts have been trading at a discount compared with three-month futures contracts, likely due to U.S. traders paring back buying on reports of the White House possibly delaying a decision regarding import tariffs on refined metal, ANZ said. Iron ore demand remains subdued, with low end-user consumption and widespread losses among steel mills fueling expectations of production cuts and a negative feedback loop for iron ore demand, Baocheng Futures said.
TODAY'S TOP HEADLINES
Warsh Takes Hawkish Turn With Rate Rise and Hints of More to Come
Investors have been betting the Federal Reserve is at the start of a series of interest-rate increases. On Wednesday, Chairman Kevin Warsh gave them little reason to think otherwise.
The Fed raised rates for the first time in three years, and officials penciled in at least one more increase this year. Warsh said the quarter-point move "removed a dose of accommodation." In central-bank parlance, accommodation means stimulus, so the phrase suggested officials don't think rates are restraining the economy even after lifting them.
An EU-Canada Tie-Up Risks More Problems With U.S. on Trade
The European Union's proposal on Wednesday to make Canada its first "associate member" ahead of Prime Minister Mark Carney's speech to the EU Parliament Thursday could aggravate the spat between the U.S. and Canada.
Both Canada and the EU have been trying to shore up relationships with countries other than the U.S. as tensions with the Trump administration have flared-on trade as well as on broader issues. Canada is in the midst of a trade tit-for-tat with the U.S. following a breakdown in talks last month. The U.S. has banned alcohol and other imports from Canada, increased tariffs, and provoked questions about whether it will renew the U.S.-Mexico-Canada trade pact, which underpins a trade relationship that is critical for both countries.
House Passes Bill Aimed at Punishing Top Importers of Russian Oil and Gas
WASHINGTON-The House passed legislation Wednesday that gives President Trump new authority to level tariffs and is intended to squeeze the biggest importers of Russian oil and gas, a measure designed to punish Moscow for the invasion of Ukraine.
The legislation passed 262 to 159, sending it to Trump's desk for his signature. The bill, which was approved by the Senate last month, received bipartisan support, even as some Democrats opposed it because they were concerned that Trump might misuse the greater tariff authority.
French Bond Yields Are Surging, Too. Will the ECB Step In?
If you are worried about spiking U.S. bond yields, spare a thought for France.
Borrowing costs for the Continent's No. 2 economy surged past Italy's and Greece's this summer. Investors' key metric, French yields' spread over frugal neighbor Germany's, has marched upward toward the psychological landmark of a full percentage point.
OpenAI Shares More Safety Incidents and Adopts New Rules for Reporting Them
An OpenAI model undergoing testing rewrote its own instructions, telling itself to disregard "the roles and identities that bind other chatbots." An AI agent tried to pass a test by uploading a file to the internet, then citing it as a source. Another agent couldn't find the data to create a financial model, so it instructed itself to make up the data and "be transparent only if asked."
OpenAI disclosed these and other previously unreported incidents on Wednesday as the company announced a new framework for reporting instances of misbehavior by its artificial-intelligence models.
Amazon Boosts Minimum Pay for U.S. Full-Time Core Operations Staff to $20 /Hour
Amazon.com is raising the minimum starting wage for its U.S. full-time core operations employees to $20 an hour, a move that comes ahead of its major holiday hiring push.
The $1-per-hour increase applies to the e-commerce company's front-line workers, who handle tasks like sorting, packing and transporting orders. Amazon announced the move on Wednesday alongside new benefits like discounts on groceries through its online platforms and Whole Foods Market locations.
Novo Nordisk Will Use Anthropic's Claude for Drug Research
Novo Nordisk, the Danish drugmaker behind blockbuster diabetes and weight-loss drugs Ozempic and Wegovy, is partnering with Anthropic to use artificial intelligence for drug research.
Novo said Wednesday it would use Anthropic's science-specific platform, known as Claude Science, to help speed up the discovery and development of new medicines and strengthen the pharmaceutical company's software development.
Write to singaporeeditors@dowjones.com
Expected Major Events for Thursday 04:30/NED: Aug Unemployment
06:00/SWI: Aug Trade Balance
06:00/SWE: 2Q Financial accounts
07:00/SVK: Aug Harmonized CPI
07:00/AUT: Aug CPI
09:00/MLT: Aug Harmonised CPI
09:00/CYP: Aug Harmonised CPI
09:00/EU: Aug Harmonised CPI
11:00/UK: UK interest rate decision
12:30/CZE: Czech interest rate decision
All times in GMT. Powered by Onclusive and Dow Jones.