BoJ lifts rates by 25bps, but Ueda strikes a dovish tone, leading to JPY pressure; US equity futures are firmer - Newsquawk US Market Open

The BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote.
In the press conference, BoJ Governor Ueda said the BoJ believes the phase of policy has changed but clarified that the objective is now to stabilise underlying inflation at around 2%.
US equity futures are mixed, with outperformance in tech as gains extend following Nvidia's Huang comments of doubling chip sales in 2027.
DXY is slightly firmer; JPY the clear laggard as 2 dissenters give the BoJ a dovish tilt.
Fixed income benchmarks are lower due to multiple factors which include elevated energy prices and hawkish ECB speak.
Crude prices pare earlier downside despite a clear driver.
Looking ahead, highlights include Quad witching, US Industrial/Manufacturing Production (Aug). Speakers include Fed's Bowman and Schmid. Credit Rating upgrades from Morningstar DBRS on France, Scope Ratings on France, and Moody's on Germany.

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LOOKING AHEAD

Highlights include Quad witching, US Industrial/Manufacturing Production (Aug). Speakers include Fed's Bowman and Schmid. Credit Rating upgrades from Morningstar DBRS on France, Scope Ratings on France, and Moody's on Germany.
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EUROPEAN TRADE

EQUITIES

European bourses have started the final trading session of the week on the backfoot, despite the constructive risk tone in Asia-Pac equities and the downside seen in energy benchmarks. Optimism in Europe has risen and according to a Bloomberg poll, the STOXX 600 will finish 2026 at 670, implying gains of 5% from Wednesday's close. HSBC analysts highlight the improving macroeconomic data as a driver for the upbeat tone in Europe, while welcoming any downside in energy prices.
Sectors point to a negative bias. Telecoms is the sector laggard, followed by Insurance and Retail. On the other hand, Tech is the sector outperformer, with Health Care and Industrials rounding out the sector gainers.
US equity futures continues its post-FOMC reversal, with the ES extending further above the 7,700 mark. The upside is seemingly driven by chip stocks, following on from comments by Nvidia's CEO projecting a doubling of chip sales in 2027. Such comments lifted South Korea's tech giants overnight (SK Hynix +6.4%, Samsung Electronics +3.4%)
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FX

Snapshot: G10s are mixed against the USD; the Aussie slightly outperforms, whilst the JPY is the clear laggard following the BoJ’s policy announcement.
DXY is mildly firmer this morning and currently holds within a fairly narrow 100.19-38 range. The index still remains towards post-FOMC highs, benefiting from higher energy prices and as markets pull forward their calls for further hikes this year.
The JPY is the clear underperformer this morning, after the BoJ decided to lift rates by 25bps (as expected), with the decision made by a 7-2 vote split. The two dissenters were PM Takaichi “reflationist” members; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The announcement itself spurred immediate pressure in the JPY, given the two surprise dissenters and after the BoJ avoided any guidance surrounding a faster pace of rate hikes. Governor Ueda’s presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. USD/JPY is stronger by c. 1.3% on the session so far, and currently holding at the upper end of a 155.87-158.06 range. No doubt, if the theme of widening differentials between the Fed and BoJ returns, USD/JPY will likely head back towards the 158-160 range.
EUR is mildly firmer this morning, amidst a slew of ECB speak, where a number of members are currently in Ireland for an informal meeting of EU ministers. ECB’s Kaasik and Kazaks struck a hawkish tone, with the latter suggesting that a September hike is unlikely to be the last, “unless we find ourselves in a very different scenario than the baseline”. Elsewhere, President Lagarde reiterated that they are not seeing second-round effects. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East.

FIXED INCOME

Global fixed benchmarks are lower this morning. USTs (-3 ticks) are trading on either side of the unchanged mark, whilst Bunds (-30 ticks) and Gilts (-41 ticks) underperform. Pressure today for the latter two is likely an accumulation of factors: 1) BoJ rate hike, 2) elevated energy prices, 3) paring of recent BoE-related strength, 4) hawkish central bank speak from the ECB.
JGBs are net firmer today, following the BoJ’s decision to hike rates by 25bps to 1.25%. However, the decision was subject to dovish dissent, which saw PM Takaichi's “reflationist” appointees vote to hold rates; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. The JGB curve is steepening this morning (in contrast to global peers which are flattening), with underperformance in the short end given the dovish tone from the meeting/Ueda.
USTs are flat, trading on either side of the unchanged mark. Some strength was seen in early morning trade alongside the pressure in energy prices, but this ultimately reversed. Ultimately, USTs are subdued this morning, following global peers with worldwide central banks shifting hawkish – the BoJ the latest to do so. Markets will get clarity out of the Fed later today, with Schmid and Bowman on the docket.
It is worth highlighting that yields are bear-flattening this morning; this indicates that elevated energy prices and hawkish repricing are the main themes in traders’ minds. The US 2s10s currently holds around 24bps vs 34bps earlier in the week.
Bunds have had a number of hawkish ECB speeches today, namely Kaasik and Kazaks. This may, in part, be weighing on the benchmark this morning. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East. Bunds will eye the Mecklenburg-Vorpommern state election, particularly in the context of the AfD’s strong showing in Saxony-Anhalt a few weeks ago.
Australia sells AUD 1.0bln 1.00% November 2031 bonds: b/c 4.47x, average yield 4.9936%.

COMMODITIES

Crude benchmarks continue to pull back from its peak seen earlier in the week, with escalatory strikes in the Gulf seemingly slowing down. There were a couple of UKMTO reports, which failed to move markets as traders now focus on next steps over any potential end to the war. Overnight, US President Trump told Axios he is at a "critical juncture" regarding the war in Iran, weighing whether to launch massive new attacks or pursue a different path to end the conflict. Further, this morning, a source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar. WTI Oct'26 rotates in a USD 99.39-101.57/bbl range while Brent Nov'26 trades either side of the USD 103/bbl mark (USD 101.92-104.27/bbl range).
Precious metals continue to climb post-Fed, with spot gold currently trading at the upper end of its USD 4,334-4,400/oz range. The narrative behind the recent gold upside seems to come from lower yields and energy prices, tempering worries of inflation.
3M LME Copper regains the USD 14.5k/t handle and rose to levels just shy of USD 14.6k/t, as the red metal prepares for its 4th consecutive day of gains. Supporting copper gains are signs that Chinese demand is re-entering the market. The Yangshan premium, a gauge of copper demand, rose to its highest level since November 2022 while domestic copper production fell slightly in August.
Saudi Arabia has sold about 60mln barrels of crude from its Ras Tanura port inside the Strait of Hormuz for loading in September and October, Reuters reported citing sources.
Venezuela nears an agreement to move USD 4bln gold reserve to New York which would allow the interim government to access funding, according to FT.

TRADE/TARIFFS

UK Chancellor Healey is to urge Brussels on Friday to include the UK in ‘Made in Europe’ policy and will indicate that London is willing to negotiate to reach a ‘reset’ deal, according to FT.

NOTABLE EUROPEAN HEADLINES

ECB Consumer Expectations Survey (Aug): 1-year 3.0% (prev. 2.9%), 3-year 2.9% (prev. 2.7%), 5-year 2.5% (prev. 2.4%).

NOTABLE EUROPEAN DATA RECAP

UK Retail Sales (Aug MM) 0.5% vs. Exp. -0.2% (Prev. -0.5%).
UK Retail Sales (Aug YY) 2.4% vs. Exp. 1.9% (Prev. 1.2%).
UK Retail Sales ex Fuel (Aug MM) 0.6% vs. Exp. -0.2% (Prev. -0.9%).
UK Retail Sales ex Fuel (Aug YY) 2.7% vs. Exp. 1.9% (Prev. 1.8%).
German PPI (Aug MM) 1.1% vs. Exp. 0.4% (Prev. 1.1%).
German PPI (Aug YY) 4.6% vs. Exp. 4.1% (Prev. 3.0%).

CENTRAL BANKS

BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote as board members Asada and Sato dissented and voted to hold. BoJ said it will continue to raise rates in response to economic and price developments as well as financial conditions. BoJ said inflation expectations are heightening moderately, with underlying inflation approaching 2%, and it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target. Furthermore, it said the accommodative financial environment will be sustained after the policy rate change, thereby supporting economic activity, and it is necessary to pay attention to the impact of the Middle East situation on financial and FX markets, the economy and prices. In terms of the dissenters, who are both known reflationists appointed by PM Takaichi, BoJ's Asada considered that with the rate of increase in the core CPI below 2% recently, it could not necessarily be said that the economic situation was strong and it was desirable for the Bank to maintain the guideline for money market operations, while Sato considered current economic and price developments did not appear to have substantially accelerated compared with before, and in this context, it was not appropriate for the Bank to raise the policy interest rate at this time.
Overall, Ueda’s press conference did not signal any urgency to accelerate the pace of tightening. He mentioned that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. One hawkish aspect of the presser was that Ueda suggested that the BoJ believes the phase of policy has changed. However, he later clarified that this meant that the objective is now to stabilise underlying inflation at around 2%, essentially removing the initial hawkish remark. Ueda also did not mention anything related to increasing the pace of future rate hikes, which further added to the dovish tone.
RBA's Governor Bullock said various indicators continue to suggest labour market conditions remain close to, but a little tighter than full employment, while she added that monetary policy is well placed to respond to developments. Bullock said lowering inflation is essential, and the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Furthermore, she stated they are in a world of higher-for-longer oil prices and that businesses are now more inclined to pass on cost increases.
ECB President Lagarde, speaking on RTE Radio, said growth is a bit more promising than we thought and that they are not seeing second round effects yet. She also reiterated a meeting-by-meeting approach.
ECB's Vujcic said market bets on further ECB rate hikes are being largely driven by higher energy prices and will look at a wider set of economic indicators when deciding the next policy move. Vujcic said higher inflation through Autumn will dampen GDP. On the current rate hike pace, he said it is worth keeping for the time being.
ECB's Kazaks, speaking to Bloomberg, said the ECB must do everything to avoid second round effects and that all meetings are live meetings. On the neutral rate, he said they are near the upper end of neutral and that quite likely restrictive policy will be needed. Elsewhere, Kazaks told Econostream that the September hike will unlikely to be the last "unless we find ourselves in a very different scenario than the baseline". Kazaks highlighted that an October hike would still be consistent with the September projections. On considering the size of the moves, he said that if the move in inflation is very strong or core inflation is moving up, the ECB can take bigger steps.
ECB's Kaasik said more tightening needed if inflation risks materialise but that the exact level of neutral rate is not a big concern now.

NOTABLE US HEADLINES

OpenAI CEO Altman, NVIDIA (NVDA) CEO Huang and Qualcomm (QCOM) CEO Amon plan to attend the Trump-Xi dinner next week, with AI expected to be a key focus in the summit on September 24th, according to POLITICO.
The US administration is set to announce that all states will see MFN pricing for certain drugs in Medicaid programmes, Semafor reported citing plans shared.
US House Democrats are pressing the Trump administration for answers on the oil deal struck with Venezuela, Semafor reported citing a letter.
US Department of Agriculture confirmed a case of New World screwworm in a horse in Grant County, New Mexico, marking the state's second case since the parasite entered from Mexico in June.

GEOPOLITICS

MIDDLE EAST

Source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar.
US State Department said the US will continue to bar Iranian UN mission officials, visiting officials and their dependents from purchasing wholesale club memberships or luxury goods, and urged New York area retailers to avoid complicity in violations.
US is reportedly expected to send MQ-9 Reaper drones to South America, CNN reported citing sources. The report added that the plan is part of counternarcotics and counterterror operations and that there are still discussions on whether to send some drones to the Middle East.
UKMTO received a report of an incident in the Strait of Hormuz. The CSO of a vessel has reported a tanker being hit by an unknown projectile causing a fire, which was extinguished.
IRGC said Togolese-flagged tanker 'Trend' was hit and stopped after a fire, while it stated the tanker violated Hormuz rules and that the US instigated the transit.
Houthis are reportedly expanding its minefield in Bab al-Mandab and Dhubab, Al Araby reported.
South Korea President Lee said several countries are deploying military assets near the Strait of Hormuz, and added that they won't deploy troops to join conflict but limited actions to safeguard South Korean economic interests and citizens are possible.

RUSSIA-UKRAINE

Turkish President Erdogan and US President Trump may discuss initiatives for negotiations on Ukraine in New York, RIA reported citing sources.

OTHER

US President Trump is making plans for the first-ever meeting with Venezuela's interim President Rodriguez as early as next week, although a meeting is not finalised, according to Axios.
North Korea leader Kim's sister said there is no change to the course of strengthening nuclear war deterrence and the US-led multinational drills are the main source of worsening tensions on the peninsula.

CRYPTO

Bitcoin steadily climbs and resides at the upper end of its USD 76.2k-78.51k range as the crypto pares completely the losses following the failure of the Clarity Act passage.

APAC TRADE

APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where markets reversed the post-FOMC moves amid a Fed credibility boost and lower oil prices.
ASX 200 lagged with the index range-bound trade as gains in tech and miners were counterbalanced by weakness in defensives, telecoms, energy and financials, while there were comments from RBA Governor Bullock that lowering inflation is essential and that the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time.
Nikkei 225 rallied following the BoJ announcement to hike rates by 25bps, as widely expected, with the decision made by a 7-2 vote as Takaichi-appointed board members Asada and Sato dissented. The language from the central bank reaffirmed a hiking bias but didn't signal any major urgency, noting it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target, while the latest inflation data from Japan printed softer-than-expected on all key metrics of the report.
KOSPI advanced with tech stocks buoyed following the outperformance in the Nasdaq stateside, while South Korean President Lee ruled out sending troops to the Strait of Hormuz.
Hang Seng and Shanghai Comp conformed to the broad positive mood, with reports noting that the US is expected to delay announcing excess manufacturing capacity tariffs till after the Trump-Xi summit, while MOFCOM said Chinese and US trade teams remain in close contact over negotiations on mutual tariff reductions covering USD 30bln. In addition, the PBoC conducted 7-day and 14-day reverse repo operations ahead of the National Day holidays in early October.

NOTABLE ASIA-PAC HEADLINES

Japanese Finance Minister Katayama said they will work to maintain an orderly FX market and will not hesitate to conduct further coordinated forex intervention. She added that they maintain close communication with financial authorities of other nations on FX and that it is important to maintain order regarding exchange rates and interest rates.
Japan Economy Minister Kiuchi expects the BoJ to conduct appropriate monetary policy to sustainably and stably achieve its price target while working closely with the government, adding that details of monetary policy are for the BoJ to decide.

NOTABLE APAC DATA RECAP

Japanese Core CPI (Aug YY) 1.7% vs. Exp. 1.8% (Prev. 1.8%).
Japanese CPI (Aug YY) 1.9% vs. Exp. 2.0% (Prev. 1.9%).
Japanese CPI Ex-Food and Energy (Aug YY) 1.9% vs. Exp. 2.0% (Prev. 1.9%).
New Zealand Trade Balance (Aug) -1349MB vs. Exp. -1.775MB (Prev. -2118MB).