Market Report.
⚖️ The U.S. Supreme Court appears skeptical of the legality of the global tariffs imposed by President Trump: During a hearing, key justices suggested that Trump had overstepped his authority in implementing the tariffs.
💹 Supreme Court’s skepticism towards the Trump tariffs contributed to the broad rise in Treasury yields on Yesterday. Yields got another boost around midday as the U.S. Supreme Court appeared skeptical about the legality of the tariffs imposed by the Trump administration.
❓ Justice Sotomayor questioned whether the tariffs should be considered taxes, which could force the White House to return the revenue collected from them if the court rules against the administration. A ruling on the legality of the tariffs could come as soon as the end of this year. Even if the tariffs are ultimately struck down by the Supreme Court, the president has other legal avenues to potentially pursue them, leaving companies and countries in a state of limbo.
📈 Strong economic data in the US economy were published yesterday:
📊 The ISM services index rose to 52.4%, above the expected 50.5%. ADP’s October survey showed a 42,000 increase in private sector payrolls, above the expected 22,000 gain. The report provides some hope that the labor market is not in danger of sinking, though the recovery remains tepid. With the government shutdown, the official BLS jobs report will not be released, leaving the ADP data as a key indicator.
👔 The ADP report suggests private sector hiring picked up slightly in October, but the recovery remains uneven, with large companies driving most of the gains while small businesses continue to struggle.
💻 Tech stocks like AMD, Broadcom, and Micron Technology advanced, rebounding from losses the previous day. The broader Stoxx Europe 600 index also climbed, gaining 0.23%. However, shares of Novo Nordisk fell after the company lowered its growth outlook.
🏦 The Bank of England is set to announce its latest interest rate decision today, which is shaping up to be a close call: Most investors currently expect the BoE to keep its Bank Rate unchanged at 4.0%, but the chances of a 0.25% cut to 3.75% have risen to nearly 1-in-3.
🇬🇧 Britain’s inflation rate of 3.8% remains the highest among G7 economies, but it unexpectedly held steady in September, and recent jobs data suggested easing inflation pressures. However, the upcoming government budget on November 26 is expected to include broad tax increases, which could weigh on the economy.
💷 Investors are currently pricing in a roughly 60% chance of a rate cut by the BoE at its next meeting in December, once more details on the government’s budget are known.
🏛️ The Confederation of British Industry (CBI) is urging UK Finance Minister Rachel Reeves to break her election pledge and raise taxes on working people in order to build “real fiscal headroom” in her upcoming budget: The CBI argues that Reeves’ manifesto commitments are no longer economically viable, and that tax rises and spending cuts are necessary, despite being unpopular. This would likely come at a political cost for the government.
📢 The CBI warns that “death by a thousand taxes” through smaller levies is not a credible way to improve the economy’s long-term prosperity. They are concerned that after last year’s £40 billion in tax hikes, mainly on businesses, another round of smaller increases would further damage corporate confidence. On the other hand, income tax, national insurance or VAT, are the Treasury’s biggest revenue sources.
💰 The National Institute of Economic and Social Research has recommended Reeves build a £30 billion buffer against missing her fiscal rules, higher than the £10 billion she had previously.
🏦 Also institutional private investors overseeing over $5 trillion in assets are urging UK Finance Minister Rachel Reeves to double the size of the country’s fiscal buffer against economic shocks in her upcoming budget: Investors like Amundi, AXA, Allianz, and Franklin Templeton want Reeves to increase the fiscal headroom to around £20 billion ($27 billion). They say raising income tax is the best way to achieve this, as the current £9.9 billion headroom is not enough to provide credibility and flexibility.
✂️ To meet her fiscal rules, Reeves needs to find £20-30 billion in savings, which investors say should come from spending cuts, particularly in welfare and health. Increases in the minimum wage could be seen as inflationary, but tax increases, on the other hand, would contain inflation and facilitate further rate cuts by the Bank of England.
🤖 Nvidia CEO Jensen Huang has publicly stated that China “is going to win the AI race” against the United States. He made this remark during an interview on the sidelines of the Financial Times’ Future of AI Summit. Huang emphasized that China currently lags the U.S. in AI by only nanoseconds but is gaining an edge due to factors like lower energy costs and a more relaxed regulatory environment. He contrasted this with the U.S., where he sees a growing, fragmented regulatory burden with potentially “50 new regulations” that could slow progress.
🇨🇳 These comments come amid ongoing U.S. government restrictions on the export of Nvidia’s most advanced AI chips to China. Huang has expressed frustration over these restrictions and the closed nature of the Chinese market while acknowledging the intense technological competition between the two nations.
🧠 According to Reuters, China has mandated that all new state-funded data centers must use domestically produced AI chips, effectively phasing out foreign-made processors from companies such as Nvidia, AMD, and Intel.
📉 Palantir’s market capitalization has plunged by $42 billion just one day after renowned investor Michael Burry revealed he was betting against the company. The sharp decline reflects heightened investor anxiety following the announcement.
💼 Market View.
🇺🇸 Strong macroeconomic data in the United States seem to have dampened Wall Street’s mood, as they reduce the likelihood of further Fed rate cuts. S&P 500 futures fell below 6,800 yesterday before recovering to their current level of 6,810. The Nasdaq 100 dropped to support levels around 25,200 points, rebounding since to 25,535.
💵 The DXY dollar index briefly exceeded 100.30 yesterday before easing back to 100. This caused renewed losses for both the euro and the pound against the dollar. EUR/USD temporarily dipped below 1.15 but has since recovered, while GBP/USD approached 1.30 before rebounding to 1.3060.
📈 US 10-year Treasury yields climbed to 4.15%, returning to early-October levels amid concern over the Supreme Court’s ruling on Trump’s tariffs.
🇪🇺 In Europe, the DAX 40 is rebounding but has failed to consolidate above 24,100 points and now appears to be slipping below 24,000. The EuroStoxx 50 also bounced during yesterday’s session but could not reach 5,700, now retreating to 5,670.
🛢️ Crude oil has cooled, with Brent crude slipping below $65 to trade at $63.45 per barrel.
🥇 Gold futures have regained the $4,000 per ounce level, currently trading at $4,015.
₿ Bitcoin attempted a recovery yesterday and has regained the $100,000 mark, currently trading at $103,105.
