MARKET WRAPS
Watch For:
U.K. retail sales; Italy balance of payments; no major corporate events expected
Opening Call:
European stock futures traded lower early Friday. Asian stock benchmarks advanced; the dollar and Treasury yields edged higher; oil futures and gold fell.
Equities:
Stock futures point to a lower open in Europe on Friday with the economic and corporate calendars light.
A rally in tech stocks from chip makers to the Magnificent Seven giants to data storage companies led U.S. stock indexes higher Thursday, bringing relief to investors after a rough stretch in which stocks tumbled and the 10-year Treasury yield reached its highest level since 2007.
A decline in oil prices for the second straight day also helped take the pressure off bonds.
Earlier Friday, the Bank of Japan raised its benchmark interest rate to 1.25%, its highest level since 1995, delivering the fastest rate increase of its current cycle to counter persistent inflation and ease the impact of a weak yen.
Forex:
Sterling could weaken if the Bank of England avoids raising interest rates in November following Thursday's decision to hold rates at 3.75%, Monex Europe's Nick Rees said.
"Markets have also done much of the tightening already, with the 10-year [U.K. government bond yield] now sitting at an uncomfortable 5.2%." With the October budget likely to further squeeze demand, the bar for tightening remains high, he said.
Bonds:
U.S. Treasury yields edged higher early Friday. The 10-year yield fell Thursday despite the Fed rate hike. The slip in oil prices also helped. The decline in yields, however, is curbed by increasing discomfort with rising government debt, while the Middle East remains volatile and keeps crude above $100 a barrel.
Still, the 10-year's recent move to 5% has investors taking notice, said Brian Rehling, co-head of global fixed-income strategy at the Wells Fargo Investment Institute. "The higher that yields go - for at least new money - it becomes more enticing to think about putting money into bonds," Rehling said.
Energy:
Oil prices declined as supply fears fueled by the outage of Saudi Arabia's East-West pipeline eased. Saudi Arabia expects to return about half of the capacity of its damaged East-West pipeline within days, said ANZ Research analysts. The decline in oil prices also reflects some profit-taking after two weeks of gains, they added.
Markets are looking toward the next round of diplomacy that will shape the U.S.-Iran war, MUFG Bank's Michael Wan said.
Metals:
Gold prices fell. The yellow metal may be supported by the pullback in oil prices easing concerns around inflation and future rate hikes by the Federal Reserve, said ANZ Research analysts.
Pepperstone's Ahmad Assiri expects gold prices to be rangebound with the earlier bull market on pause for now, though this is expected to eventually resume due to underlying drivers such as central bank demand.
Copper edged lower following recent gains. The base metal rose in the previous session thanks partly to signs of strong buying from China, said ANZ Research analysts. Premiums that importers in China pay for physical copper above benchmark futures have climbed in recent days, they added.
A call by China's main steel industry group for mills to curb output and reduce inventories is weighing on iron-ore prices, according to Commonwealth Bank of Australia's Vivek Dhar.
CBA expects iron ore to average $95 a metric ton in 4Q, although prices could be lower than anticipated because of headwinds to Chinese steel demand, Dhar said.
TODAY'S TOP HEADLINES
Japan's Central Bank Picks Up Pace of Tightening With Rate Hike
TOKYO-The Bank of Japan raised its benchmark interest rate to its highest level since 1995, delivering the fastest rate increase of its current cycle to counter persistent inflation and ease the impact of a weak yen.
The widely anticipated move brings the policy rate to 1.25% from 1.0%, accelerating the usual pace as concerns mounts over persistent price pressures stemming from the Middle East energy shock and exacerbated by the yen's weakness.
How Warsh Raised Rates Without Drawing Trump's Ire
President Trump spent months attacking the Federal Reserve for keeping interest rates too high. On Wednesday, the central bank raised them, and Trump said he was standing by the chairman he picked.
The mild response was the clearest sign yet that Fed Chairman Kevin Warsh has, for now, reset a relationship in which the White House treated the central bank as an adversary.
The 10-year Treasury is having its worst run in over 100 years. Why investors are buying bonds anyway.
Investors are hoping that a historically bad stretch for the bond market will end at some point. Yet in 2026, they aren't all avoiding bonds entirely while waiting for the trouble to blow over.
The Bloomberg Aggregate Bond Index - the bond market's equivalent of the S&P 500 SPX stock benchmark - was down 1.6% on a total-return basis this year through Wednesday's close, according to Dow Jones Market Data.
Why the Bank of England Didn't Follow the Fed in Raising Interest Rates
The Bank of England kept its key interest rate unchanged Thursday, holding steady at a time when the Federal Reserve and European Central Bank have raised rates, though it left open the possibility of future rises as energy prices continue to drive inflation.
Christine Lagarde Helped Block Binance's Foothold in Europe
Binance was preparing a big announcement in late May that would unlock the European market for the world's largest crypto exchange.
Its application for a Europe-wide license, made through the Greek financial regulator, was complete, Greek officials had told Binance. A company press release, headlining a "Major Milestone," was ready to go. Binance CEO Richard Teng was planning to fly to Athens for a photo shoot with the prime minister, and his local deputy was about to sign an office lease.
Hackers Used Anthropic's Claude to Break Into OpenAI
Two weeks after a swarm of AI agents broke out of containment at OpenAI to hack the company Hugging Face, the ChatGPT maker learned about another AI-powered intrusion-and this time it was the target.
Independent security researchers had used Anthropic's Claude software to gain access to an OpenAI employee's ChatGPT account, giving them a way to read and suggest changes to the company's private cache of software.
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Expected Major Events for Friday 06:00/GER: Aug PPI
06:00/UK: Aug Retail sales
07:30/POR: Jul Balance of Payments
08:00/EU: Jul Euro area balance of payments
08:00/POL: Aug PPI
08:00/POL: Aug Industrial Production Index
08:30/UK: 2Q Bank of England statistics on UK banks' external claims
08:30/UK: Aug Monthly Insolvency statistics
09:00/EU: Jul Construction output
09:00/ITA: Jul Balance of Payments
10:00/POR: Aug PPI
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