Market Awaits Walsh's Speech for Guidance; Korean Stocks Close Down 1.79%, Marvell Falls Over 7% After Hours, Gold Pulls Back Slightly, US Treasuries Under Pressure

Market sentiment has turned more cautious, with U.S. Treasury yields remaining elevated, as global markets broadly take a wait-and-see approach ahead of Federal Reserve Chair Waller’s speech at Jackson Hole.

On Friday, the Korea Composite Stock Price Index closed down 1.79%. Nasdaq 100 futures fell 0.2%, with Marvell dropping over 7% in after-hours trading, weighing on market sentiment. The bid-to-cover ratio for Japan's two-year government bond auction dropped to 2.97, well below the average of 3.74 over the past 12 months, and the tail widened to 0.034, the highest since 2016, indicating rising expectations for tighter Bank of Japan policy.

Global investors are mainly focused on the upcoming speech by the Federal Reserve chair. U.S. Treasury yields have maintained Thursday’s gains, with the two-year yield holding steady at 4.23%. Markets are highly cautious regarding long-end yields due to persistent inflation concerns and U.S. fiscal outlook. U.S. equity futures saw slight declines, while enthusiasm for AI-driven trades sparked by Nvidia's earnings has shown early signs of fading.

Elias Haddad from Brown Brothers Harriman & Co. noted that, given Waller’s usual reluctance to provide forward guidance, a clear policy signal may not materialize. He expects Waller to preview initial research results from the Fed’s five workgroups on communication mechanisms, balance sheet, economic data, productivity and employment, and the inflation framework.

• European stocks opened mixed: Germany’s DAX Index up 0.31%, UK’s FTSE 100 down 0.79%, France’s CAC 40 down 1.68%, and Euro Stoxx 50 down 0.71%.

• Nikkei 225 closed up 0.4% at 66,405.56 points. Japan’s TOPIX ended up 0.7% at 4,146.71. Korea’s KOSPI closed down 1.79% at 6,788.89.

• Nasdaq 100 futures fell 0.2%, with Marvell down over 7% after hours, weighing on sentiment.
• The yen hovered near 159.40 per U.S. dollar.
• Japan’s 30-year government bond yield rose 5 basis points to 4.11%.
• The U.S. 10-year Treasury yield was little changed at 4.68%.
• Gold slipped slightly to around $4,580 per ounce.
• Brent crude dropped 0.5% to about $89.30 per barrel.
• Bitcoin fell to just below $80,000.

Friday’s Japanese two-year government bond auction saw notably weaker results. The bid-to-cover ratio sharply dropped from an average of 3.74 in the past 12 months to 2.97, and the tail widened dramatically from the previous 0.007 to 0.034, the largest since 2016. A wider tail typically means investors are demanding higher yield premiums, reflecting weak demand during the auction.

According to Bloomberg, Tokyo’s core inflation gauge accelerated for a third straight month, with the yen hovering around 159.40 per U.S. dollar. Market expectations for further monetary tightening by the Bank of Japan continue to intensify, leading investors to lose interest in short-dated Japanese bonds. In addition, Japan's Ministry of Finance will release data on monthly foreign exchange intervention spending on Friday, which is being closely watched by the market.

Japan’s long-end bond market is also under pressure, with the 30-year government bond yield climbing 5 basis points to 4.11%, further demonstrating the global upward trend in long-term rates.

The U.S. Treasury market extended Thursday’s losses, with yields across maturities rising 2 to 3 basis points as inflation concerns and the U.S. fiscal outlook continue to weigh on bond market sentiment. The market is awaiting Waller’s speech at the Jackson Hole symposium in Wyoming, with some investors expecting him to deliver a hawkish message.

According to Bloomberg, Apollo Global Management Chief Economist Torsten Slok said in a Bloomberg TV interview, "If he does not offer any policy framework, there is a risk that long-end yields could rise sharply."

HSBC U.S. Rates Strategist Dhiraj Narula wrote that "Waller's Jackson Hole speech is an opportunity to curb persistent long-end Treasury selling; a clear inflation reaction function from the Fed would help compress term premium associated with uncertainty."

However, Elias Haddad from Brown Brothers Harriman & Co. believes that, given Waller's tendency not to provide forward guidance, a clear policy signal is unlikely. He expects that Waller may preview the initial findings of the Fed's five working groups on communication mechanisms, balance sheets, economic data, productivity and employment, and the inflation framework.

Currently, the Federal Reserve held the federal funds rate steady at 3.5% to 3.75% at its latest meeting, with futures markets pricing in room for a 25 basis point hike later this year. Kansas City Fed President Jeff Schmid said current monetary policy is not restraining the economy.

After Nvidia offered an upbeat outlook, U.S. tech stocks rallied on Thursday, sending the major indices higher, but the rest of the market sectors fell across the board. On Friday, the positive impact had markedly faded.

Nasdaq 100 futures fell 0.2%, with Marvell Technology dropping over 7% after hours and dragging market sentiment lower. Korea's KOSPI Index—seen as a bellwether for AI investment—dropped 1.3%.

Frederic Neumann, Chief Asia Economist for HSBC, said, "The tailwind from Nvidia's results could dissipate quickly within the trading day, as investors brace for possible shocks from Fed Chair Waller's speech."

Analysts note that while accelerated investment in the AI space is driving industry growth, it could also further stoke inflation and put upward pressure on bond yields, a contradiction that will continue to add volatility risk to technology stocks.

In other assets, gold edged lower to around $4,580 per ounce; Bitcoin dropped to just below $80,000.

Brent crude fell 0.5% to around $89.30 per barrel, despite new diplomatic hurdles surrounding the Strait of Hormuz. According to Bloomberg citing sources, Venezuela is closely studying plans to exit OPEC.