Market Report.
🌀 If the Fed’s wind changes were one of the two bearish factors that scared the markets, yesterday I encouraged them after the words of Waller, favorable to cut rates in December, but perhaps not in January. Will this be enough to get us away from the precipices of Wall Street? Let’s see the details.
💬 Fed Governor Christopher Waller said he does not see inflation as a big problem going forward and highlighted ongoing labor‑market weakness, adding that he is advocating for a rate cut at the next meeting.
🏛️ New York Fed President John Williams said policy is only “modestly restrictive” and that he still sees room for a further near‑term adjustment, which markets interpreted as support for a December rate cut.
🩺 San Francisco Fed President Mary Daly, though not a current voter, voiced support for a rate reduction and described the labor market as “vulnerable” which would reinforce the position of new interest rate cuts, as Wall Street was expecting.
🎙️ Jim Caron, CIO of the Portfolio Solutions Group at Morgan Stanley Investment Management, said on “Bloomberg The Close” that the chances of a Federal Reserve rate cut in December are about 50/50. “Last week there was a 30% cut, this week there is 70%. What that means? that the market has no clue, it is 50/50, I don’t care what the markets say”.
🤖 However, the second bearish factor is still there. Investors are grappling with the possibility of an “AI bubble”, as companies try to deliver on the trillion-dollar AI hype. Factors like continued earnings growth, normalization of interest rates, and lack of speculative excess provide some counterpoints to the bubble narrative.
📉 Michael Burry’s ongoing criticism of Nvidia, the leading artificial intelligence company, despite Nvidia’s pushback on his analysis. Burry, who famously bet against the housing market during the 2008 financial crisis, has criticized Nvidia for its stock-based compensation dilution and stock buybacks. There are concerns that the massive investments being poured into AI infrastructure, including Nvidia’s $100 billion deal with OpenAI, could be inflating the market and tying the fate of numerous companies together.
⚠️ Burry’s criticism of Nvidia comes amid growing concerns from investors about a potential “AI bubble” in the market.
⏳ Additionally, there are questions about the sustainability of spending on AI and how quickly Nvidia’s expensive GPU chips could become obsolete. We recently released another theory in our reports. Last week, the Trump team again suggested that Congress lift restrictions on Nvidia’s chip exports to China. What if what they provide, is the dreaded launch by China of microprocessors similar to Nvidia, ruining their sales, and Trump’s team just want to get more sales deals for the company before that time comes?
💊 However, the tech sector’s volatility has shifted attention to pharmaceuticals, where Eli Lilly is outperforming Novo Nordisk. Trump’s policies have pressured drugmakers by imposing price caps and requiring U.S. prices to match those of other countries within a month, squeezing margins — especially for Novo Nordisk, which has over $4 billions invested in the U.S. At the same time, Trump has offered looser regulation and faster FDA approvals, a dynamic Eli Lilly has navigated more effectively. As a result, Lilly’s stock is surging while Novo Nordisk has sharply declined. The bad results of one of the last trials of Novo was the last push, making it fall strongly once again in the market.
🇬🇧 In UK, Chancellor Rachel Reeves plan to slash the annual limit for tax-free cash ISA savings from £20,000 to £12,000 in the upcoming UK budget. The £8,000 reduction in the annual ISA limit is part of Reeves’ efforts to spur economic growth and raise returns for savers.
💷 Households currently hold a total of £360 billion in cash ISA savings, with an average of £26,900 per account. Between 2021-22 and 2023-24, cash ISA subscriptions have increased by 125%, while money put into stocks and shares ISAs has shrunk by 9%.
📈 These are clear efforts to shift household savings from cash ISAs towards investments in UK stocks.
🇺🇸 Trump has claimed the US is facing a wave of capital worth almost 70% of its annual economic output, which would be the largest capital-spending explosion in post-war US history. However, the White House’s own list of projects details $9.6 trillion in “total US and foreign investments” promised since Trump took office, substantially less than his claim, a $21 trillion estimation.
🔍 Of the $9.6 trillion reported, only $7 trillion constitute actual investments, while $2.6 trillion are not investments but rather trade agreements and purchase commitments. Much of the remaining $11.4 trillion in pledges not found on the White House website are also questionable, including reallocations of earlier plans and vague promises from foreign governments.
⚔️ And speaking of inaccurate agreements with governments, tensions between the US and EU on trade policies return: US Commerce Secretary Howard Lutnick said the US would grant the EU a “cool steel and aluminum” agreement if Brussels rolled back its tech regulations. However, EU antitrust chief Teresa Ribera firmly rejected this, stating that the “European digital rulebook is not up for negotiation.”
💻 The EU has been pressing ahead with enforcing its digital antitrust rules, including issuing fines against tech giants like Google, Apple, and Meta. Lutnick argued the EU needs to resolve outstanding legal cases against American tech companies and make its digital regulations more “inviting” for US companies.
🤝 EU trade chief Maros Sefcovic sought to reassure Lutnick that the EU’s digital rules are “not discriminatory” and “not aimed at US companies.”
📞 Trump spoke with Chinese President Xi Jinping for an hour, marking their first direct contact since reaching a trade truce. Xi pressed Trump on the issue of Taiwan, which did not come up in their previous meeting. Xi framed Taiwan’s return to China as an essential element of the post-WWII international order, invoking their countries’ wartime alliance against fascism.
🇯🇵 Hours later, Trump spoke with Japanese Prime Minister Sanae Takaichi, reaffirming ties with Tokyo and updating her on the situation with China. The ongoing row between Japan and China over Taiwan is injecting fresh uncertainty into the Trump-Xi relationship, just weeks after they reached a trade truce.
⚖️ Trump’s decision to speak with both leaders underscores his determination to avoid getting caught in a spat between a key US ally and China, its top supplier of rare earths.
🕵️ Once again, we suspect that US foreign policy is playing against Trump’s agenda. Japan has not made decisions without the consent of the US since the end of the Second World War. Who is behind the fact that Japan now decides to escalate the war tone with China? Whoever they are, they are not friends with Trump.
Market View.
📈 The Federal Reserve’s renewed positive tone encouraged equity markets, helping them recover part of the losses from recent weeks. S&P 500 futures climbed back above 6,700 points, currently trading at 6,720, while Nasdaq 100 futures did the same, approaching the 25,000 level and now trading at 24,930.
💵 The DXY dollar index remains in a sideways range, holding above the 100 support level and trading at 100.18. This continues to prevent EUR/USD from breaking above 1.1550, with frequent fluctuations around that zone; it is now trading at 1.1520.
🇪🇺 In Europe, DAX 40 futures briefly rose above 23,400 yesterday, but the move was short‑lived, falling back to 23,280. EuroStoxx 50 futures also broke above 5,500, approached 5,600, and then retreated to 5,540.
🛢️ Crude oil continues to weaken. Brent fell below $62 yesterday before recovering later, now trading at $62.45.
🥇 After several days of reduced volatility, gold futures broke above their recent resistance levels yesterday, reaching more than $4,150 per ounce in the past hours before pulling back to $4,128.
₿ Bitcoin continues attempting to recover after recent declines. Yesterday evening it broke above $89,000, but has since slipped back to around $87,400.
