Morning Bid: September storm

• Fed Chair Warsh signaled no urgency to cut rates if inflation persists and stated current policy is not significantly restrictive, shifting September rate hike probability to 67%
• Japan's 10-year government bond yield surpassed 1% for the first time since 1996, with dollar strength against the yen amplifying calls for BOJ rate increases
• Rising crude oil prices due to resumed Iran conflict and upcoming Big Tech earnings (including Broadcom, the 7th most valuable U.S. company at $1.7 trillion) add to market volatility

Market Summary: September Storm

Key Developments:

Global markets face turbulence entering September following Federal Reserve Chair Kevin Warsh's hawkish Jackson Hole speech. U.S. Treasury yields surged, with the benchmark 10-year rate reaching its highest level since President Trump took office in January 2025.

Monetary Policy Outlook:

Warsh indicated the Fed has "no patience" if inflation doesn't return to target and suggested current policy settings aren't significantly restricting the economy. Futures markets now price a two-thirds probability of a rate hike at the September Fed meeting. Rising crude oil prices due to resumed Iran conflict are adding inflationary pressure.

Global Central Bank Action:

The Bank of Japan and European Central Bank are also expected to raise rates this month. Japan's 10-year government bond yield hit 1% for the first time since 1996. Dollar strength post-Warsh speech is pressuring the yen, intensifying calls for BOJ intervention and rate increases.

Equity Markets:

Asian markets traded mixed Tuesday, with Hong Kong's Hang Seng falling 1%, led lower by Shein's lackluster performance. U.S. futures pointed to losses before the open. Key earnings ahead include Dell and Palo Alto Networks (Tuesday) and Broadcom (Wednesday). Broadcom, valued at $1.7 trillion, ranks as Wall Street's seventh most valuable company.

Economic Data:

Investors await U.S. July JOLTS job openings and August ISM manufacturing PMI data, plus remarks from Fed official Michael Barr.

Market Impact:

Rising 10-year yields will ripple through mortgage rates and consumer/business loans, with broader economic implications than the 30-year bond movements.