Market Report.
📰 The Federal Reserve is expected to cut interest rates by 0.25 percentage points today, but this decision is based more on inertia than firm economic data. New Governor Stephen Miran is likely to dissent in favor of a bigger cut, while some regional presidents have expressed reluctance to go much further on cuts. Chair Jerome Powell will likely try to strike a middle ground, not wanting to signal a commitment to further rate cuts in December.
📉 Concerns over the labor market are a key driver behind the expected rate cuts, with some economists forecasting the Fed could cut rates multiple times this year to address potential weakness. The lack of economic data due to the government shutdown poses an additional challenge, making it harder for the Fed to assess the state of the economy and inflation.
💰 The Fed will also need to provide more clarity on when it plans to stop reducing its $6.6 trillion balance sheet, with signs that short-term markets are tightening up.
📊 The U.S. consumer confidence index fell to a six-month low in October, offering more ammunition for the Federal Reserve to cut interest rates again. The survey showed consumers are worried about the availability of jobs in the near-term, with the share expecting fewer jobs over the next six months rising to a six-month high. This suggests the unemployment rate has likely remained near a four-year high of 4.3%, though the data is limited due to the government shutdown.
🏠 The housing market also shows signs of cooling, with fewer consumers planning to buy a home despite easing mortgage rates, as home sellers remain unwilling to accept lower prices. Consumers’ inflation expectations remain elevated at 5.9%.
🤝 Donald Trump is anticipated to meet with Xi Jinping tomorrow in South Korea during the APEC summit. The points they plan to address during the talks have already been mentioned in previous reports.
🌱 China has bought at least two cargoes of U.S. soybeans, its first known purchase this season, which may mark a revival of flows as part of a wider trade settlement expected to be agreed between the U.S. and China this week. The soybean purchases may signal a revival of agricultural trade flows between the world’s two largest economies.
📦 China had shunned U.S. soybeans so far this export season, using the commodity as a bargaining chip in the trade war. But this diversification exposed Chinese crushers to higher costs and weather-related risks. U.S. Treasury Secretary Bessent had expected China to make “substantial” soybean purchases after the latest round of trade talks.
🏭 According to a Reuters poll, China’s factory activity likely shrank for a seventh consecutive month in October, underscoring the need for further stimulus to bolster domestic demand. The official purchasing managers’ index (PMI) is expected to slip to 49.6 from 49.8 in September, remaining below the 50-point threshold that separates growth from contraction.
🌍 Exporters are increasingly selling at a loss in new markets like Europe, Latin America, the Middle East, and Africa, as they lose access to the world’s top consumer market – the U.S. China’s economic growth slowed to 4.8% in the third quarter, raising questions about Beijing’s reliance on external demand amid mounting trade tensions.
📈 Asian stocks advanced on optimism that artificial intelligence (AI) will continue to drive profits at major tech companies reporting earnings this week, as well as growing bets on a Federal Reserve interest rate cut. Nvidia’s shares surged over 8% in Asian trading, signaling further gains when U.S. markets open, after President Trump said he plans to speak with the Chinese leader about the company’s Blackwell chip.
💻 Investors are eagerly awaiting earnings reports from the “Magnificent Seven” tech giants – Microsoft, Alphabet, Meta, Amazon, and Apple – which are projected to deliver 14% profit growth in Q3, nearly twice the S&P 500 average.
🤖 The AI spending boom has sent the Magnificent Seven’s share prices to record highs, though there are concerns about whether companies are investing too much in the new technology.
🍎 Apple and Microsoft have both reached a market capitalization of over $4 trillion, a significant milestone for the tech giants. However, they are still behind Nvidia, which remains the world’s most valuable company with a market cap over $4.6 trillion.
📊 Microsoft’s stock climbed around 2% on news that the company finalized a 27% stake in OpenAI’s for-profit business, which it has backed since 2019. Apple’s $4 trillion valuation comes as its shares have surged 25% in the past 3 months, driven by strong sales of the new iPhone 17 models.
📡 Nokia has announced that Nvidia is taking a $1 billion stake in the networking company, the latest partnership for the AI chipmaker. Shares of Nokia soared 22% higher following the news. The two companies have also struck a strategic partnership to work together on developing next-generation 6G cellular technology. Nokia said it will adapt its 5G and 6G software to run on Nvidia’s chips, and the companies will collaborate on networking technology for AI.
🧠 This is the latest in a series of equity investments Nvidia has made in strategic partners, as the company positions itself at the center of the AI world. Other recent investments include Intel, OpenAI, Wayve, and Nscale.
Geopolitics.
🌎 According to President Trump, he threatened India and Pakistan with 250% tariffs earlier this year in an effort to help resolve the conflict between the two countries. Trump claimed he called Indian Prime Minister Modi and Pakistani leaders, telling them he would impose the steep tariffs if they did not stop fighting.
🇮🇳 Trump described Modi as “the nicest looking guy” who is also a “killer” eager to fight, and said he was surprised by Modi’s tough stance when he threatened the tariffs. Modi reportedly skipped a regional summit this week due to concerns that Trump would again mention his role in the ceasefire negotiations.
🤝 While Trump portrayed the leaders of India and Pakistan as “good people”, his comments about Modi’s aggressive stance risk providing political ammunition to the Indian prime minister’s rivals ahead of an important state election.
🇮🇱 Israeli Prime Minister Benjamin Netanyahu has instructed the Israeli army to carry out ‘MASSIVE bombardments’ in the Gaza Strip, after claiming that Hamas has violated the ceasefire. Israeli officials have accused Hamas of violating the ceasefire by launching attacks on Israeli soldiers in Gaza.
Market view.
📈 Euphoria continues to shake the US markets, with Mini S&P 500 futures approaching 6,950 points—uncharted territory. Nasdaq 100 futures are nearing 26,300 points.
💵 The DXY dollar index is strengthening again, approaching 99 points and currently trading at 98.85. As a result, EUR/USD has fallen below 1.1650 once more, currently trading at 1.1635.
📉 Europe does not share the same euphoria as the US. DAX 40 futures have failed to consolidate above 24,400 points and are currently trading at 24,330. EuroStoxx 50 futures, while performing slightly better, also seem to be stalling after reaching 5,700 points.
🛢️ Crude oil appears to have found a base during yesterday’s session, with Brent crude now approaching $64 per barrel again.
🥇 Gold futures, which fell below $4,000 per ounce yesterday, are now attempting to reclaim that level.
₿ Bitcoin remains unable to break past $116,000. After yesterday afternoon’s declines, it is now advancing again towards $113,500.
