Market Report.
🏭 A contracting U.S. manufacturing sector, with weak demand, lower production, and easing inflationary pressures, in the absence of official government data: U.S. factory activity shrank for the eighth straight month in October, driven by a pullback in production and tepid demand. New orders remained subdued and suppliers took longer to deliver materials to factories amid the backdrop of tariffs on imported goods. The Institute for Supply Management’s manufacturing index eased 0.4 point to 48.7, indicating contraction (readings below 50). The production index fell 2.8 points to 48.2, marking the second month in the last three that output has contracted. Inflationary pressures continued to ease, with the index of prices paid for raw materials falling 3.9 points to 58, the lowest since the start of the year.
🚚 Tariffs are disrupting supply chains, resulting in longer delivery times to factories. Factories continued to pay more for inputs, though the pace of price increases moderated, supporting views that the impact of tariffs on inflation could be a one-time boost.
⚖️ U.S. Treasury Secretary Scott Bessent stated that he will be present at the Supreme Court this week during a hearing on the legality of President Donald Trump’s tariff policy. Bessent described the tariffs as a “matter of national security” and said he plans to “emphasize that this is an economic emergency.”
🏛️ The Supreme Court is set to hear arguments on the legality of President Trump’s “sweeping import duties” imposed through the tariff policy. When asked if his presence at the court could be seen as potential intimidation, Bessent said he will use the opportunity to emphasize that the tariffs represent an economic emergency.
🐉 China has called on the US to avoid four sensitive issues in order to maintain the trade truce sealed between Presidents Trump and Xi: The four “red lines” identified by Chinese Ambassador Xie Feng are Taiwan, democracy and human rights, China’s political system, and development rights.
🤝 Xie emphasized the need for mutual respect of each other’s “core interests and major concerns” in order to “reassure both our countries and the world economy.” Issues like access to advanced semiconductors and the status of Taiwan remain points of contention, with the US expressing concerns over China’s military activity around Taiwan. And China itself, concerned about the US military presence around the Taiwan Strait, off the coast of China, or the US weapons programs in Taiwan.
🌏 The de-escalation of tensions between the U.S. and China after the Trump-Xi meeting in South Korea stands in stark contrast to the deterioration of U.S.-India ties. The strategic relationship between India and the U.S. built over two decades has substantially eroded due to issues like steep tariffs, H1B visa fees, and Trump’s claims of brokering a ceasefire between India and Pakistan.
🇮🇳 India is now subject to higher U.S. tariffs than China, with the U.S. imposing 50% tariffs on India including secondary duties for its purchase of Russian oil.
💼 The U.S. approach toward India has shifted from “strategic altruism” to “transactionalism”, with Trump not valuing India as a partner in balancing China as much as previous presidents. If the U.S. maintains its transactional approach toward India, it will drive India further toward Russia, the Global South, and even China, which would not be in the interests of either country.
🛡️ However, the U.S. and India did sign a 10-year “Framework for the US-India Major Defence Partnership” on Friday, signaling some continued cooperation in the security domain.
🇬🇧 The UK is still in talks with the Trump administration to address the US tariffs on British steel and whiskey: The US imposed a 25% tariff on UK steel and 10% on British whiskey, which remain in place despite the UK being the first country to reach a trade deal with Trump.
🥃 The British Consul General in Chicago, Richard Hyde, said the UK is pushing to get these tariffs removed, as they are hurting the whiskey industry on both sides of the Atlantic. The UK produces a specific type of steel that the US defense industry needs, but the US requirement that it be “melted and poured” in the UK is an issue after Tata Steel UK closed its last blast furnace.
🏗️ The UK has a lower US steel tariff than other parts of the world, but is still arguing that its steel is not a threat and is needed by specific industries like defense. As part of its trade deal with the US, the UK agreed to open its market to American agricultural exports like beef and corn-based ethanol. The UK and US also recently signed the Tech Prosperity Deal to deepen collaboration in areas like AI, quantum computing and nuclear energy.
💷 British Finance Minister Rachel Reeves will say in a speech Today that her upcoming second annual budget on November 26 will focus on “fairness and opportunity”. Reeves is expected to need to raise taxes by £26 billion ($35 billion) to keep her budget goals on track, likely requiring her to break a pre-election promise not to raise income tax.
📊 The main stock indexes in London dipped on Monday, with the FTSE 100 down 0.2% and the FTSE 250 down 0.3%, as investors prepared for a busy week of corporate earnings and the Bank of England’s interest rate decision. The Bank of England is expected to pause its rate-cutting cycle on Thursday, though recent softer inflation and wage data could strengthen the case for a rate cut. The BoE’s Monetary Policy Committee is “deeply divided” and there are not clear signals on the bank’s next steps.
🏦 Federal Reserve Governor Stephen Miran said monetary policy remains too restrictive and is heightening the risk of a downturn: Miran dissented last week against a 0.25 percentage point rate cut, arguing for a 0.5 percentage point reduction instead. Miran’s remarks highlight the competing views among Fed officials since last week’s divided decision to reduce the benchmark policy rate by 0.25 percentage points.
💬 Kansas City Fed President Jeffrey Schmid, who also dissented, argued that financial markets appear “easy” and don’t suggest policy is restrictive. Miran said Schmid’s view overlooks potential stress developing elsewhere in the financial system and the sluggishness in the housing market.
📉 However, Chair Jerome Powell emphasizing that another rate cut “is not a foregone conclusion.”
💻 In the corporate world, the technology sector continues to play a leading role with new agreements.
🤖 Microsoft has secured export licenses from the U.S. Commerce Department to ship Nvidia chips to the United Arab Emirates, a move that could accelerate the Gulf region’s ambitions in artificial intelligence. This is the first time a company has secured such licenses under the Trump administration, based on “updated and stringent technology safeguards.” The licenses enable Microsoft to ship the equivalent of 60,400 additional Nvidia A100 chips, involving the company’s more advanced GPU technology.
💰 Microsoft is increasing its overall investment in the UAE, bringing its total contribution to $15.2 billion by the end of this decade, including a $1.5 billion equity investment in AI firm G42.
📈 Palantir reported quarterly results that topped analysts’ estimates and issued better-than-expected guidance for Q4, attributing much of its strength to artificial intelligence. They reported adjusted EPS of 21 cents vs. 17 cents expected, and revenue of $1.18 billion vs. $1.09 billion expected.
🛰️ Revenue in Palantir’s U.S. government business grew 52% year-over-year to $486 million, as government sales, particularly from military agencies, have been central to its ongoing growth. The company has announced new partnerships with Snowflake, Lumen, and Nvidia in recent weeks.
🧠 Palantir CEO Alex Karp acknowledged the “excess” in the AI market currently, but said the “strong companies are going to get much stronger” while “the people pretending they’re doing stuff are going to disappear very quickly.”
📉 Despite the strong results, Palantir’s stock initially rose in extended trading before falling about 4%, as the company’s shares have already surged over 170% this year.
☁️ OpenAI has signed a $38 billion deal with Amazon Web Services (AWS) to use AWS infrastructure and Nvidia GPUs for its AI workloads. This is OpenAI’s first major cloud infrastructure contract outside of its previous exclusive agreement with Microsoft.
🏗️ For Amazon, the deal is significant in both size and scale, as it competes with its investment in rival Anthropic’s infrastructure. The agreement is focused on Nvidia chips initially, but leaves room for incorporating Amazon’s own Trainium chips in the future.
🔧 Amazon will also build out additional infrastructure specifically for OpenAI’s growing needs over the next 7 years. This partnership further diversifies OpenAI’s cloud providers, as it had previously announced deals with Oracle, Google, and Nvidia.
📊 Market View.
📉 The lack of data due to the US government shutdown seems to be taking its toll. Despite solid corporate announcements and generally good figures, Wall Street is struggling to move higher. Mini S&P 500 futures are trading around 6,820 points, while Nasdaq 100 futures have fallen below 26,000, currently at 25,775 points.
💵 Yesterday, the DXY dollar index reached 100 points, continuing the upward trend that began in October. This briefly pushed the EUR/USD pair below 1.15 before recovering to its current level of 1.1530.
💶 In Europe, DAX 40 futures continue to lose ground, falling below 24,000 points. EuroStoxx 50 futures also appear to have lost their previous upward momentum, currently down to 5,625 points.
🛢️ Crude oil is seeing a moderate pullback —after surpassing $65 per barrel yesterday, Brent crude has fallen back below $64.50.
🥇 Gold futures approached $4,040 per ounce during yesterday’s session before retreating to around $4,000.
💻 Bitcoin has broken below its recent support zone between $108,000 and $106,000, now trading at $104,500.
