1. Equity & Commodity Markets: Asian Markets Open Mixed, WTI & Brent Surge
• Morning Movement: Asia-Pacific stock markets opened mixed with a strengthening bias on Wednesday morning, even though Wall Street recorded a decline for two consecutive days overnight ahead of the Fed's interest rate decision announcement.
• Crude Oil Price Surge:
o WTI Futures: Soared +4.38% to USD 105.8 per barrel.
o Brent Futures: Rose +2.90% approaching USD 110 per barrel.
o The war in the Middle East continues to be the main catalyst driving energy prices higher.
2. Bond Market & Global Monetary Policy: UST Yield Touches 5.04%
• US Bond Yield Revolution: The yield on the 10-year US Treasury Note climbed to 5.04%, recording its highest level since 2007.
• Federal Reserve (FOMC Tonight): The market widely anticipates a 25 bps rate hike due to US inflation continuing to stay above the 2% target for more than five years.
• European Interest Rate Divergence (ECB vs. BOE):
o ECB: Officially raised its benchmark interest rate last week.
o BOE: Projected to hold its benchmark interest rate on Thursday amid slowing UK economic growth.
3. Japanese Economy & Monetary Policy: BOJ Hike Prospects & Trade Deficit
• BOJ Rate Hike Expectations (This Friday):
o The Bank of Japan is projected to raise its benchmark interest rate to 1.25% on Friday.
o This hike marks an acceleration of the BOJ's monetary tightening cycle after a six-month pause since the normalization process began in March 2024 (the last hike was in June 2026).
o Inflation Background: Japan's headline CPI for July reached its highest level this year at 1.9% Y/Y due to surging imported energy costs following the US-Iran conflict, while real wages grew 2.4% Y/Y (positive for 7 consecutive months).
• Widening Japan Trade Deficit (August 2026):
o Trade Deficit: Widened significantly to JPY 1,105.6 billion (vs. JPY 294.1 billion in Aug 2025 and the expected deficit of JPY 1,052.6 billion).
o Fourth Month of Deficit: Recorded the largest deficit since January 2026 due to a surge in imports (+28.0% Y/Y) that outpaced export growth (+19.3% Y/Y). #FedRateWatch #dyor