Market Report.
🏦 Federal Reserve Chair Jerome Powell stated that the central bank needs to continue balancing the competing risks of high inflation and a weakening job market in upcoming interest rate decisions. Powell acknowledged that near-term risks to inflation are tilted to the upside, while risks to employment are tilted to the downside – a challenging situation for policymakers.
👩💼 Fed Vice Chair Michelle Bowman argued that the Fed should prioritize supporting the labor market by cutting rates, as it is easier to address a weakening job market than to fix it after it’s broken. In contrast, some regional Fed presidents recommended caution about further rate cuts while inflation remains elevated and the impact of policies is still being assessed.
🇪🇺 European Central Bank Executive Board member Piero Cipollone does not see major threats to inflation in either direction, stating that interest rates are currently well positioned. Policymakers appear content to leave borrowing costs where they are for the time being, with inflation at their 2% goal and output in the euro zone continuing to expand despite headwinds from higher U.S. tariffs.
📊 Cipollone highlighted that inflation expectations are key for the ECB, and they have been “consistently nailed to around 2%,” which he finds reassuring.
🗓️ Meanwhile, incoming European Central Bank Governing Council member Alvaro Santos Pereira says the ECB has inflation under control at the moment. Pereira believes monetary policy should maintain space to act on interest rates in the future, in order to have room to maneuver in case of a shock. He describes the overall picture as one with additional inflationary pressures stemming from the tariffs.
🔍 The remarks suggest Pereira is in no rush to add to the eight reductions in borrowing costs enacted by the ECB so far, despite some still seeing scope for another cut this year.
💻 The digital euro could become a reality in 2029, according to European Central Bank Executive Board members.
🏦 The ECB has been pushing for a digital euro for years to reduce the region’s reliance on private firms like Visa and PayPal for retail payments, and fears of dollar-backed stablecoins gaining a foothold in Europe are adding new impetus.
📜 The biggest hurdle is getting the European Parliament to pass the necessary legislation to underpin the digital euro initiative. Following an October 24th progress report, lawmakers will have six weeks to propose amendments and five months for discussions.
🇨🇭 The Swiss National Bank (SNB) is now predicted by almost all economists to keep its interest rate unchanged next week, with just 2 out of 21 forecasters surveyed expecting a rate cut below zero. This is a significant shift from the previous month’s survey, where 7 out of 22 respondents expected a rate cut to -0.25%.
📈 The consensus view of no change on September 25th follows encouraging news for the SNB, as inflation has accelerated slightly and stayed within its target range for three months in a row. The SNB officials, including President Martin Schlegel, have indicated a higher bar for a return to negative interest rates, given the adverse effects on pensions and the financial system.
🇨🇭 The high U.S. tariffs on Switzerland is expected to weigh on growth this year, with the economy seen contracting in the third quarter and stagnating in the final quarter.
🇯🇵 Japan’s manufacturing sector activity fell at the fastest pace in six months in September, with the S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) dropping to 48.4 from 49.7 in August.
📉 The decline in export orders eased from August’s 17-month low, but the broader outlook for Japan’s export-reliant economy remains uncertain due to U.S. tariffs and an expected central bank rate hike. Cost pressures for manufacturers abated somewhat, with input price inflation easing to levels not seen since early 2021, although output inflation accelerated from August.
📊 In contrast, the services PMI remained in expansionary territory at 53.0 in September, only slightly down from August’s 53.1, benefiting from robust domestic demand despite challenges from declining export orders. The composite PMI, which combines both manufacturing and services, decreased to 51.1 in September from August’s six-month high of 52.0, marking the slowest growth in overall business activity since May.
💻 Nvidia CEO Jensen Huang stated that the chipmaker’s AI infrastructure plan with OpenAI is “monumental in size” and will push the boundaries of what is possible.
⚡ Nvidia and OpenAI are aiming to build at least 10 gigawatts of data centers, which is roughly equivalent to the annual power consumption of 8 million U.S. households or New York City’s baseline peak summer demand in 2024. This massive power requirement will strain the already constrained electric grid, and attempts to deploy more power have faced economic and political constraints that make a fast fix unlikely. The U.S. is forecast to add 63 gigawatts of power to the grid this year, but Nvidia’s and OpenAI’s 10 gigawatts of data centers would be equivalent to 16% of that new power.
🏭 The Trump administration is pushing for data centers to use fossil fuels, particularly natural gas, but orders for new gas turbines face long wait times. The tech sector and the White House are working to build new nuclear plants, but it will take years for reactors to connect to the grid, and small advanced reactors are not expected to reach a commercial stage until the end of the decade.
🌍 Geopolitics:
🗣️ President Trump takes a 180-degree turn, and refutes everything he’s been saying about the Ukrainian war. Radical contrast between statements made a few months ago such as: “When you start a war you’ve got to know you can win the war. You don’t start a war against somebody that’s 20 times your size. And then hope that people give you some missiles.” or “Those buildings are down. Those cities are gone… And we continue to give billions of dollars to a man who refuses to make a deal.” to the comments done yesterday: “Ukraine, with the support of the European Union, is in a position to fight and recover its original territory”. “With time, patience and financial support from Europe and NATO, the original borders of Ukraine are a viable option”. “I wish the best for both countries and will continue to supply weapons to NATO for use as you see fit”.
📺 Google has committed to offering YouTube accounts that were permanently banned for political speech the ability to be reinstated. Google admitted that in the past it faced pressure from the Biden administration to remove content related to COVID-19. YouTube “values conservative voices on its platform” and acknowledges that creators “have extensive reach and play an important role in civic discourse”. The Biden administration “created a political atmosphere that sought to influence the actions of platforms” regarding misinformation.
💼 According to a TPUSA insider, organization led by Charlie Kirk, Shillman, who was a major financial backer of Kirk’s organization Turning Point USA, ended his financial support for Kirk just days before Kirk’s assassination. The source suggests there may have been a falling out or disagreement between Kirk and Shillman, “ultra-Zionist billionaire” who has been a major donor to pro-Israel causes and organizations, that led to the withdrawal of Shillman’s financial support shortly before the tragic event.
📉 Market View.
📊 Initial retracements have occurred following the breaches of historical highs in US futures. The S&P 500 futures dipped slightly yesterday to 6,700 points, from where they regained bullish momentum, currently sitting at 6,726 points. Nasdaq futures experienced a similar decline, falling below 25,000 points but are now back in an upward trend, currently at 24,885 points.
💵 The DXY dollar index rebounded during yesterday’s session after early week declines and is approaching 97.50 points. This makes it difficult for the EUR/USD pair to easily conquer 1.18, currently positioned at 1.1790.
🇩🇪 In Europe, DAX 40 futures attempted to surpass 23,800 points but retreated, and are now taking on a positive tone again at 23,745 points. Eurostoxx 50 futures reached 5,500 points yesterday but also pulled back and are currently regaining a positive tone at 5,485 points.
🛢️ WTI crude has risen from $61.85 to nearly $64 per barrel, from where it has slightly retraced to the current $63.55.
💰 Gold futures reached a new historical high yesterday, surpassing $3,824 per ounce, from which they have retraced to the current $3,805.
₿ Bitcoin is attempting to rebound around $112,000 following its decline at the start of the week, currently positioned at $112,690.
