US stocks declined which appeared to be a retracement of some of the moves seen in recent weeks, with stocks and precious metals selling off from record high territory while the Dollar saw notable upside – there wasn’t a specific headline for the driver, but likely profit taking or extended positioning/over crowded positions. US/China relations saw a knock however, with China implementing rare earth export controls, and Trump implied “maybe” they will have to stop importing massive amounts from China. The weakness in stocks was broad-based, with the majority of sectors in the red and the equal-weighted S&P lagged. Conversely, the Nasdaq “outperformed” thanks to continued gains in NVIDIA (NVDA), which hit highs of USD 195/shr.
USD continued to strengthen, seemingly regaining its haven appeal as desks cited a crowded gold trade, unattractive CHF fundamentals, and political uncertainty surrounding JPY. There remained an absence of data releases which left Fed speak dominating the headlines with Vice Chair Williams supporting further rate cuts, and continues to view the [real] neutral interest rate likely below 1%, while Governor Barr argued for a cautious approach and stated that recent spending data suggests GDP growth remained strong in Q3.
Looking ahead, highlights include New Zealand Business NZ PMI, Japanese PPI & Bank Lending, Comments from RBA Governor Bullock, Assistant Governor Kent & Fed’s Daly, Taiwan Holiday Closure.
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LOOKING AHEAD
Highlights include New Zealand Business NZ PMI, Japanese PPI & Bank Lending, Comments from RBA Governor Bullock, Assistant Governor Kent & Fed’s Daly, Taiwan Holiday Closure.
Click for the Newsquawk Week Ahead.
US TRADE
US stocks declined which appeared to be a retracement of some of the moves seen in recent weeks, with stocks and precious metals selling off from record high territory while the Dollar saw notable upside – there wasn’t a specific headline for the driver, but likely profit taking or extended positioning/over crowded positions. US/China relations saw a knock however, with China implementing rare earth export controls, and Trump implied “maybe” they will have to stop importing massive amounts from China. The weakness in stocks was broad-based, with the majority of sectors in the red and the equal-weighted S&P lagged. Conversely, the Nasdaq “outperformed” thanks to continued gains in NVIDIA (NVDA), which hit highs of USD 195/shr.
SPX -0.28% at 6,735, NDX -0.15% at 25,098, DJI -0.52% at 46,358, RUT -0.61% at 2,469.
Click here for a detailed summary.
TARIFFS/TRADE
US President Trump said tariffs are only good if you want your country to be rich, influential, and powerful, while he added if you want your country to be a third world country, you should vote against tariffs.
US President Trump said maybe they will have to stop importing massive amounts from China, and he wants to discuss soybeans with Chinese President Xi, while he said regarding China export controls, that Commerce Secretary Lutnick and Treasury Secretary Bessent will sort out.
US Commerce Department reportedly probes Singapore company Megaspeed over chip export rules to see if it helped China companies avoid chip rules, according to NYT, which noted that Megaspeed is set to purchase USD 2bln of NVIDIA (NVDA) AI technology in the next year.
China’s Commerce Ministry added 14 foreign firms to its unreliable entity list, including BAE Systems (BA/ LN) and AeroVironment (AVAV).
UK PM Starmer said China is not on the list for a trade deal.
US President Trump’s administration said the US and Saudi Arabia are making progress on an agreement to allow US chip companies to export semiconductors to Saudi Arabia and could finalise a deal soon, according to WSJ.
Indian PM Modi said he spoke with US President Trump and reviewed the good progress achieved in trade negotiations, while they agreed to stay in close touch over the coming weeks.
Brazil’s Minister of Foreign Affairs Viera and US Secretary of State Rubio agreed that the governments would meet in Washington to follow up on trade discussions, according to a Brazilian government statement.
NOTABLE HEADLINES
Fed Governor Barr (voter) said uncertainty about both inflation and jobs warrants a cautious approach to any further interest rate cut, while he added that the rate cut in September was appropriate, but current policy rates are still modestly restrictive. Furthermore, he said the current outlook poses challenges for judging the stance of monetary policy and deciding the right path forward.
Fed Governor Barr (voter) said he does not think there is a generalised spillover of tariffs into services inflation, and some components of services inflation stem from higher stock prices. Barr added there’s a lot of resilience in the US economy and that the effects of AI in the short term are likely smaller than anticipated, while AI is likely to have profound effects on the economy in the medium and long term.
Fed’s Williams (voter) supports further rate cuts but does not think the US economy is on the verge of a recession, according to NYT. Williams said underlying inflation seems to be moving gradually lower toward 2% and the best case for that is in shelter costs, while he added that tariffs have boosted inflation by maybe 25bps-50bps in terms of the price level.
US President Trump said they have made pharmaceutical deals with numerous companies and that the US is winning disputes with countries on drug pricing.
US President Trump said some Democrats are calling him to reopen the government, and he will be making permanent cuts to Democrat programmes in the shutdown.
US House Speaker Johnson said the House remains on a 48-hour notice to return to Washington, according to Punchbowl, while it was noted that “This is a sign that the House does not plan to come back next week — as of now”.
US House Minority Leader Jeffries said there have been no recent talks between House GOP and Democrats, according to Bloomberg TV.
US Agriculture Secretary Rollins said once the shutdown is over, they will be able to roll out the programme for farmers.
FX
USD continued to strengthen, seemingly regaining its haven appeal as desks cited a crowded gold trade, unattractive CHF fundamentals, and political uncertainty surrounding JPY. There remained an absence of data releases which left Fed speak dominating the headlines with Vice Chair Williams supporting further rate cuts, and continues to view the [real] neutral interest rate likely below 1%, while Governor Barr argued for a cautious approach and stated that recent spending data suggests GDP growth remained strong in Q3.
EUR was pressured by a firmer buck and retreated beneath the 1.1600 handle, while ECB Minutes were uneventful and reiterated no immediate pressure to change rates at the meeting.
GBP lagged and tested 1.3300 to the downside with little reaction seen to the reiteration from BoE’s Mann that policy needs to remain restrictive for longer.
JPY ultimately softened against the dollar but with losses stemmed in choppy trade after LDP’s Takaichi commented that she doesn’t want to trigger an excessive yen decline.
US Treasury Secretary Bessent said they directly purchased Argentine Pesos (ARS) and have finalised a USD 20bln currency swap framework with Argentina’s central bank.
FIXED INCOME
T-notes saw gradual selling pressure despite volatility elsewhere, while the latest 30yr US offering was an overall average auction.
COMMODITIES
Oil prices trimmed some of their weekly gains as a rising dollar sparked a reversal of the initial upside seen in commodities.
Saudi Aramco has reportedly put three chemical expansion projects on hold due to weaker oil prices limiting spending, according to Bloomberg citing sources.
US President Trump said gasoline is to be below USD 2 in the near future.
GEOPOLITICAL
MIDDLE EAST
Israel’s Foreign Minister said there is no intention of renewing the conflict and it is committed to the US plan, according to Fox News.
Israeli government spokesperson said the ceasefire in Gaza is to take effect within 24 hours following the cabinet meeting and stated that after the 24-hour period, a 72-hour window for hostage releases will commence.
Israel’s Ben-Gvir said he will bring down the Netanyahu government if Hamas is not dismantled.
Hamas chief said they declared an end to the war today and the start of a permanent ceasefire, while the agreement includes opening the Rafah crossing in both directions and will see the release of all jailed Palestinians. Furthermore, the group received guarantees from mediators and the US admin confirming that the war has completely ended.
Senior Hamas official said no Palestinian accepts disarming and that Palestinians need to weaponise. It was separately reported that a Palestinian source involved in negotiations on the return of the dead hostages said it could take many months, according to Kann News.
Yemen’s Houthi leader said the group is to monitor Israel’s compliance with the Gaza ceasefire agreement and will resume support for Gaza if Israel breaches the agreement.
Iran supports any effort that ends “genocide” and ends the war in Gaza, while it called on the international community to prevent Israel from violating obligations, according to a statement.
US President Trump said they ended the war in Gaza and thinks there will be lasting peace, while he said hostages will be released on Monday or Tuesday. Furthermore, he will try to go to the Middle East and will have a signing in Egypt.
US President Trump said Iran wants to work on peace and that he will work with Iran.
US issued new Iran-related sanctions, according to the US Treasury.
RUSSIA-UKRAINE
US President Trump said the Russia-Ukraine war will be solved and that he might impose more sanctions on Russia.
US Ambassador to NATO Whitaker said the US may transfer additional capabilities to Ukraine.
Russia’s Kremlin said impetus for work on Ukrainian settlement between Russia and the US has not been exhausted and that the work continues, according to TASS.
Russian Deputy Foreign Minister said until power lines are restored at the Zaporizhzhia nuclear power plant, there is no ground to discuss its relaunch, according to Interfax.
Kremlin spokesperson Peskov says the dialogue between Russia and the USA has been put on a “serious pause”, according to CGTN Europe.
EU sanctions envoy O’Sullivan expects additional talks on the 19th sanctions package, with relation to Russia, according to Bloomberg TV.
OTHER
US President Trump said maybe Spain should be thrown out of NATO.
ASIA-PAC
NOTABLE HEADLINES
Japan LDP chief Takaichi did not comment on stock market movements or FX levels and does not see an immediate need to revise the government-BoJ joint agreement, while she added the BoJ is responsible for monetary policy means, but any decision must align with the government’s goal and said she does not want to trigger an excessive yen decline.
Takaichi will immediately issue an order to compile a stimulus package once chosen in parliament to become the next PM, while it was also reported that Takaichi said legislation needs to be passed through parliament to cut gasoline tax and compile a supplementary budget as otherwise, the cost of living would hurt consumption, worsening the economy.**
Japan LPD leader Takaichi adviser Honda said the BoJ should be cautious about raising interest rates and added it is unclear when the next rate hike would be, but Takaichi is likely to be cautious. Honda stated USD/JPY is unlikely to rise above 155 as inflation expectations remain cautious and noted that a weak JPY is positive for the economy when in the recovery phase.
EU/UK
NOTABLE HEADLINES
BoE’s Mann said “the risks to the outlook for the UK economy are two-fold. Inflation remains persistently high and the outlook for growth remains modest”. Furthermore, Mann said she argued that policy needed to remain restrictive for longer to squeeze out inflation persistence.
ECB Minutes said there was no immediate pressure to change policy rates at the meeting and the environment remained more uncertain than usual, while a few members viewed inflation risks as tilted to the upside and several members viewed inflation risks as tilted to the downside.
ECB’s Escriva told parliament that he is seeing unprecedented levels of uncertainty, while Escriva said inflation has already reached 2%.
German Chancellor Merz announces workforce incentives and said that with an active pension, up to EUR 2k will remain tax-free. Merz said the tax-free amount will be in addition to the pension and legislation will be introduced next week.
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