Market Report.
📈 Longer-term Treasury yields, such as the 10-year and 30-year, jumped last week despite the Federal Reserve’s interest rate cut. Bond investors were not satisfied with the assurances they sought from the Fed, leading them to sell longer-dated bonds, driving down prices and pushing up yields.
🏡 Higher longer-term yields can have implications for mortgage rates, auto loans, and credit card costs. Investors are looking for stronger signals that the central bank will dramatically lower rates.
📊 This week’s personal consumption expenditures (PCE) price index data, the Federal Reserve’s preferred inflation measure, could confirm whether the Fed is making the right move in cutting interest rates this fall. Investors are already pricing in two more quarter-point rate cuts from the Fed this year, but hotter inflation could disrupt those expectations. Inflation continues to run above the Fed’s 2% target, and core PCE is expected to hit 3% in August, up from 2.9% previously.
🇨🇳 First data of the week: China kept its benchmark lending rates, the one-year loan prime rate (LPR) and the five-year LPR, unchanged for the fourth consecutive month in September. The steady LPR fixings reflect China’s cautious approach to monetary easing, despite signs of a domestic economic slowdown and monetary easing by the U.S. Federal Reserve.
📉 Market expect the People’s Bank of China (PBOC) to deliver a 10-basis-point cut in the policy rate and LPR, as well as a 50-basis-point cut in the reserve requirement ratio (RRR) in Q4 to support the economy. The upcoming fourth plenum in October, where policymakers will review the proposals of the 15th Five-Year Plan, is seen as an event to watch for potential domestic policy changes.
🇮🇹 Unusual times. While France faces serious difficulties in adjusting its high-deficit public accounts, it is Italy that exceeds expectations.
📉 Italy’s budget deficit could fall below the European Union’s ceiling of 3% of GDP this year, ahead of schedule, according to Economy Minister Giancarlo Giorgetti. The Italian government had previously pledged to cut the fiscal deficit to 3.3% of GDP this year, down from 3.4% in 2024, with a further decline to 2.8% expected in 2026. However, a steady increase in tax revenue has raised the prospect of faster-than-expected deficit reduction, with tax revenue rising by 5.3% or more than 16 billion euros in the first seven months of the year.
🤔 When asked about the possibility of the deficit dropping below the 3% ceiling as early as this year, Giorgetti said “It is possible.” Reducing the fiscal deficit to less than 3% of GDP this year would allow Italy to exit the EU infringement procedure for excessive deficits by mid-2026.
💰 In Europe, they no longer go for the rich, they go for the savers. According with Reuters, European governments looking to tax the rich more to plug budget deficits and address inequality may find that direct wealth taxes are not the most effective solution. Wealth taxes tend to generate little revenue for governments, as the ultra-wealthy can easily shield their assets through various means. Taxing capital income, such as dividends and capital gains, which are generally subject to lower rates than labor income, may be a more effective approach.
🚫 Is the end of import flows of big minds to the US? After President Trump announced a $100,000 application fee for H-1B visas, tech companies and other employers rushed to warn their H-1B visa holders against foreign travel. The White House later clarified that the new fee only applies to new H-1B visa applications, not renewals or current visa holders. However, the uncertainty caused confusion and concern among companies and visa holders.
🏢 Major tech companies like Microsoft, Alphabet, Amazon, and others told their H-1B employees to return to the U.S. immediately and cancel any plans to travel abroad. The H-1B visa program is heavily used by the tech sector to bring in skilled foreign workers. Companies with the most H-1B visa holders include Amazon, Tata Consultancy, Microsoft, Meta, and Apple. Companies are concerned the $100,000 fee will be unsustainable for their hiring needs.
📱 The foundations for an agreement on the TikTok platform are beginning to be laid: The U.S. operations of TikTok will be majority-owned and controlled by Americans under a deal reached this week to spin off the platform from its Chinese ownership. Americans will hold 6 out of the 7 board seats for TikTok, and the video app’s algorithm will be U.S.-controlled. Oracle will act as TikTok’s security provider, monitor the app for safety, and store Americans’ data in the U.S. with no access by China. The final deal is expected to be signed in the coming days, after a framework agreement was reached earlier this week between U.S. Treasury Secretary Mnuchin and Chinese Vice Premier He Lifeng. ByteDance, TikTok’s current owner, will hold less than 20% of the U.S. operations, with new investors including Oracle, Andreessen Horowitz, and Silver Lake Management.
🔒 The deal will allow American users to continue using the popular TikTok app safely and securely, with the data and privacy led by Oracle and the algorithm controlled by the U.S. President Trump, who was once critical of TikTok, has shifted his views and credited the app with helping him make gains among young voters in the last election.
🏭 The Trump administration is considering a plan to boost domestic manufacturing in the U.S. by supporting the construction of factories and other infrastructure. The plan would use $550 billion from an investment fund pledged by Japan as part of a trade deal with the U.S. The government would invest this money in the development of semiconductors, critical minerals, energy, pharmaceuticals, ships, and quantum computing.
💵 Senate Republicans plan to propose funneling money from Japan’s fund to the government-owned Commodity Credit Corporation to support the U.S. farming industry. President Trump and Commerce Secretary Lutnick have discussed building facilities to produce gas turbines, generic pharmaceuticals, new nuclear power plants, and pipelines.
❓ However, the exact structure of Japan’s $550 billion investment fund remains unclear, with Tokyo’s view differing slightly from Trump’s interpretation of the deal.
🤝 One of Charlie Kirk’s last wishes was for Trump and Musk to get back together for the good of the country. Yesterday, at the ceremony in memory of Kirk, Trump and Musk shook hands and were seen sitting talking. It seems that the assassination of the conservative activist has become a political weapon, since different personalities on the scene in the US gave speeches at the event, with strong political weight.
🌍 The United Kingdom, Australia, and Canada just officially recognized the State of Palestine. Netanyahu with a warning to the whole world after the recognition of Palestine: “There will be NO Palestinian state west of the Jordan”.
⚔️ The Taliban has made it clear to Trump that they won’t be returning Bagram Airbase to the Americans and are prepared to continue the fight for another 20 years if necessary. In response to their refusal to negotiate for a U.S. redeployment, Trump warned the Taliban that if Afghanistan doesn’t return the airbase to its original builders, the United States, then “bad things are going to happen.” It’s worth mentioning that Bagram Airbase was constructed by the Soviet Union back in the 1950s.
📈 Market View.
📊 Equity markets in the United States remain at record highs following the rate cut, with Mini S&P 500 futures positioned above 6,700 points, setting new records. Nasdaq 100 futures exceeded 24,800 points and are currently trading at 24,835 points, also at historical highs. The dollar index continued to strengthen, reaching 97.80 points, from which it has retraced to the current 97. Despite the rate cuts, this has led to a situation where EUR/USD, which temporarily surpassed 1.19 last week, has fallen to the current 1.1748.
📉 In Europe, futures also gained momentum at the close of last week but are starting the week with more negative outlooks. DAX 40 futures have retreated to 23,720 points, while Eurostoxx 50 futures are showing caution, slightly declining after surpassing 5,500 points last week, currently trading at 5,468 points.
📈 Oil begins the week on a positive note, with Brent crude exceeding $67.25 and WTI reaching $62.95.
💰 Gold futures have reached new historical highs, currently standing at $3,750 per ounce.
📉 Bitcoin has experienced a significant decline over the last 24 hours, losing the support level of $116,000 and momentarily dropping below $113,000, with a decrease of more than 3.30% since Sunday, currently trading at $113,010.
