Market Brief, North America

Fear levels are subsiding across financial markets after a week that shattered the typical August calm. The safe-haven yen and Swiss franc are tumbling against a recovering dollar, Treasury yields are edging upward, equity futures are pushing higher ahead of the North American open, and measures of financial stress are reverting toward levels that prevailed ahead of the July non-farm payrolls report. Last week’s moves are now seen as an overreaction. After the Institute for Supply Management’s services index rebounded and weather-related distortions were removed in last week’s initial claims data, the consensus has shifted toward expecting a continued deceleration...

The Bank of Japan raised benchmark lending rates and announced plans to cut its monthly bond purchases by half in last night’s meeting, moving closer to unwinding an unconventional monetary policy programme that began in the late nineties. Surprising—but not shocking—market participants, the central bank under Governor Kazuo Ueda lifted the target for the uncollateralised overnight call rate to 0.25 percent, up from the previous zero-to-0.10 percent range, and said it would gradually reduce government bond purchases to around ¥3 trillion a month by early 2026, down from the current ¥6 trillion. With internal Bank forecasts pointing to a self-reinforcing...