Crude oil prices surged, with WTI moving into the $100 range. With the US, Japanese and UK central bank meetings approaching, vigilance over long-term interest rates and currency trends is spreading. This week's focus is on the FRB, BOE and Bank of Japan decisions, as well as the impact of developments in the Middle East.
Major equity indices were generally soft last week. The Nikkei 225 remained on a downward trend, while UK and US equity indices ended the week with modest rebounds. WTI crude oil futures moved into the $100-per-barrel range for the first time since May this year, and higher crude oil prices weighed on equity markets. Movements in the US dollar/Japanese yen exchange rate also put downward pressure on the Nikkei 225.
Treasury Secretary Scott Bessent made remarks aimed at restraining yen selling and increased buybacks of long-term government bonds, but long-term interest rates rose in the bond market. As a result, interest-rate movements became a source of greater uncertainty for markets and affected the outlook for equity markets.
This week's market-moving events include the US FRB's FOMC on the 16th, the UK's BOE MPC on the 17th, and the Bank of Japan's Monetary Policy Meeting on the 18th. The rate-hike probabilities priced into markets are seen at approximately 70% for the FRB, just over 20% for the BOE, and nearly certain for the Bank of Japan. In the Middle East, developments surrounding the Strait of Hormuz are continuing, and movements related to provisional shipping routes and Saudi Arabia's pipelines could affect energy markets.
WTI crude oil futures reached the mid-$102 range in trading on the 14th Japan time, prompting renewed concern over risks to crude oil supplies. Long-term interest rates are around 4.98% in the US and approaching 3.00% in Japan, and concerns over fiscal deficits and other factors could put further downward pressure on share prices.