The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0914 GMT - Qatar and Kuwait are expected to record the steepest economic contractions among Gulf states this year as disruptions to the Strait of Hormuz constrain hydrocarbon exports, Citi Research says. Qatar's economy is forecast to shrink 13.5%, with hydrocarbon output falling 38.8%, while Kuwait's GDP is projected to decline 12.2% as oil activity contracts 27.7%. Neither country has an alternative overland route for crude exports, leaving them particularly exposed to shipping restrictions. Citi also expects Qatar's fiscal deficit to widen to 8.0% of GDP and Kuwait's to 22.1%, highlighting the pressure on government finances from reduced hydrocarbon production. (farhan.rafid@wsj.com)

0913 GMT - A range of indicators suggest the dollar's rally is becoming stretched but this isn't enough to call for a reversal, ING's Francesco Pesole says in a note. "Our short-term valuation model shows the dollar overvalued against every G-10 currency except sterling, where it's at fair value." However, a clear macroeconomic or market catalyst is needed for a reversal of the dollar's strength, he says. Federal Reserve interest-rate rise expectations remain stickier than those for most other central banks, limiting the dollar's scope to fall even if oil prices retreat, he says. Weakness across global bonds also support demand for a liquid defensive currency. The DXY dollar index falls 0.3% to 102.269 after hitting an 18-month high of 102.607 Monday.(renae.dyer@wsj.com)

0909 GMT - The risk of further interventions to support the Japanese yen curtails the currency's scope to fall against a strengthening dollar, MUFG Bank's Lee Hardman says in a note. Japan's Prime Minister Sanae Takaichi reiterated that U.S. and Japanese finance ministers remain in close contact on foreign exchange. The yen has remained at stronger levels since the joint U.S.-Japan intervention in late July. The yen is also supported by building expectations for a faster pace of Bank of Japan interest-rate rises, Hardman says. "In the current environment of broad-based dollar strength, we expect the yen to continue to perform better against non-dollar crosses." The dollar falls 0.4% to 157.93 yen after reaching a two-and-a-half-week high of 158.75 Monday, LSEG data show.(renae.dyer@wsj.com)

0818 GMT - The household support measures presented in Malaysia's 2027 budget is expected to add an initial 0.4 ppts to GDP growth, Ram Ratings says in a note. The measures are in particular expected to help sustain consumption amid external uncertainty, as the government forecasts growth of 4.2%-5.2% next year. The measures include higher minimum wages, income tax relief and larger cash aid. Although the budget includes few significant measures to broaden revenue sources, the targeted fiscal deficit of 3.3% of GDP reflects the government's continued commitment to fiscal consolidation, it says. (yingxian.wong@wsj.com)

0816 GMT - The euro is about 1.5% undervalued versus the dollar relative to short-term fundamentals following recent losses due to French debt concerns, ING's Francesco Pesole says in a note. "This suggests a moderate build-up in France-related risk may be becoming entrenched in the euro, but also that the risk premium could expand further if French bonds continue to lose value." However, expectations that this year's French budget can be passed via decree might help contain the spread between 10-year German and French government bond yields, he says. The euro rises 0.3% to $1.1187 after reaching a 17-month low of $1.1151 Monday, LSEG data. ING sees a risk of it falling below $1.11, although expects some stabilization Tuesday. (renae.dyer@wsj.com)

0812 GMT - BMI raised its average copper price forecast for this year to $13,500 a metric ton from $12,700 a ton, citing tariff-related market disruptions and persistent supply constraints. "For the remainder of 2026, we expect copper prices to remain volatile and highly sensitive to tariff-policy developments, with the eventual Washington decision likely to set the near-term market direction, while broadly intact structural tightness should temper the extent of any correction," analysts at the firm say. Over the longer term, copper prices are expected to be supported by a persistent supply deficit and rising demand as the energy transition gathers pace. BMI forecasts copper prices reaching $17,000 a ton by 2035, driven by electrification and investment in clean-energy infrastructure. In early trading, three-month copper futures on the LME are flat at $14,624.50 a ton. (giulia.petroni@wsj.com)

0814 GMT - Saudi Arabia's economy is expected to contract 2.4% in 2026 after expanding 4.6% last year, as disruption to oil production and weaker non-oil growth weigh on activity, Citi Research says. The bank forecasts a 16.7% decline in oil-sector output, while non-oil growth slows to 1.9% from 5.1%. Although alternative crude-export routes have partly shielded the kingdom from the Strait of Hormuz disruption, Citi warns that a widening fiscal deficit could constrain private-sector borrowing if the government relies heavily on domestic financing. Escalating tensions with the Iran-backed Houthi militia add to the downside risks, it says. (farhan.rafid@wsj.com)

0813 GMT - Yields on U.K. government bonds, or gilts, fall along with oil prices and track lower yields on U.S. Treasurys and eurozone government bonds. The price of Brent crude falls 1.6% to $104.99, helped by Russian diesel supply prospects although the situation in the Middle East remains tense and uncertain. Gilt yields stay near multiyear highs due to global inflation concerns and prospects of interest-rate increases by the Bank of England. Investors are also cautious ahead of the U.K. budget on Oct. 28, although reassurance that the government will stick to its fiscal rules could boost gilts. Ten-year gilt yields fall 4.4% to 5.395%, having hit a 19-year high of 5.527% last week, LSEG data show. (jessica.fleetham@wsj.com)

0811 GMT - Sterling could remain firm against the euro for some time after reaching a 16-month high overnight, ING's Francesco Pesole says in a note. The risk of a weaker euro due to French debt concerns is unlikely to fade anytime soon and the Bank of England has sent a clear enough signal that it is prepared to raise interest rates, he says. Expectations for 100 basis points of BOE rate rises by July are too aggressive but one or two increases look "increasingly likely." The euro rises 0.1% to 0.8454 pounds after reaching a low of 0.8441 overnight, LSEG data show. ING expects the euro to trade in a range of 0.84-0.85 pounds for at least several more months. (renae.dyer@wsj.com)

0742 GMT - NatWest Group is the best placed among U.K. banks to benefit from higher rates, Barclays' Aman Rakkar writes. The bank has a best-in-class structural hedge tailwind, which means it has the clearest potential upside from the sharp repricing higher in U.K. rates, Barclays says. The integration of Evelyn Partners is also progressing well, while the continued rise of term-funding costs should be manageable. Any potential upcoming increase in U.K. bank taxes should have a modest impact, the analyst says. This already seems well discounted in NatWest's share price, Barclays adds. Barclays raises its recommendation on the stock to overweight from equal weight, and increases the price target to 850 pence from 740 pence. Shares are up 3.15% at 674.20 pence. (michael.hennessey@wsj.com)

0733 GMT - The U.A.E. economy is expected to contract by 0.2% in 2026 after growing 6.2% last year, as weakness in non-oil activity outweighs continued oil-sector expansion, Citi Research says. The bank forecasts a 0.8% decline in non-oil output, reversing growth of 6.8% in 2025, while oil-sector growth slows to 1.7% from 4.3%. Citi considers the U.A.E. the most exposed Gulf economy to the Middle East conflict through trade, tourism, imports and domestic demand. However, its strong fiscal position and external buffers give authorities considerable room to respond if disruptions persist, the bank says. (farhan.rafid@wsj.com)

0717 GMT - The Gulf economy is expected to contract by 3.1% this year, reversing growth of 4.5% in 2025, as the regional conflict disrupts oil production and weighs on non-oil activity, Citi Research says. The bank forecasts a 13.7% contraction in oil-sector output, while non-oil growth is expected to slow to 1.0% from 5.1% last year. Citi says the economic impact will vary considerably across the six Gulf states, depending on their access to alternative export routes and exposure to disrupted trade and tourism. Its forecasts assume shipping through the Strait of Hormuz normalizes in the fourth quarter, with prolonged disruptions posing further downside risks.