Copyright ZeroHedge
US equity futures are under serious pressure this morning with all 3 indices down more than 1% with Palantir’s strong beat and raise not only failing to spur follow-through buying but sparking what appears to be momentum chasing revulsion. Combined with a pullback in crypto and some hawkish Fed remarks, an unwind in pockets of the hyper-momentum trade is taking hold. Separately, headlines pointing to a cautious comments from execs at a Financials industry conference are not helping. As of 8:00am ET, S&P futures are down 1% (and well off session lows hit shortly after the European open), with Nasdaq 100 futs down 1.3%; underperformance in the latter and the broader weakness in risk assets can be traced back to Palantir shares falling over 4% postmarket after earnings (they’re down almost 8% in premarket) while Mag7/Semi names slide down 1% - 3%, though staples are in the green. Sharp declines across various cryptocurrencies has also hampered sentiment as Bitcoin loses another 3% and drops below $104,000, a level first seen in December 2024. At a financial summit organized by the Hong Kong Monetary Authority, several CEOs flagged pullback / correction risk while also flagging risks from valuation, a lack of AI ROI, and private credit. Meanwhile, as noted here yesterday, PLTR had a decent print but as JPMorgan writes today, it "trades at more than 300x its fwd multiple, illustrating the CEOs point on valuation. This comes at a time when several clients flagged the narrow breadth as a red flag for the mkt." Across assets, there is a global risk-off tone with bonds and USD bid, while all 3 commodity complexes are for sale, although oil is a notable laggard. Earnings from HC could trigger a further rotation towards defensive plays. In premarket trading, all Mag 7 stocks are lower (Tesla -2.4%, Nvidia -1.9%, Alphabet -1.6%, Amazon -1.3%, Meta Platforms -1.3%, Microsoft -0.6%, Apple -0.7%). Archer-Daniels-Midland (ADM) sinks 9% after the grain handler cut its adjusted earnings per share guidance for the full year. The firm also reported revenue for the third quarter that trailed the average analyst estimate. Eaton Corp (ETN) falls 4% after the power-equipment company forecast adjusted earnings per share for the fourth quarter of $3.23 to $3.43, a range with a midpoint below what analysts expected. Net sales missed estimates in the third quarter. Fabrinet (FN) rises 6% on light volume after fiscal first quarter results and second quarter guidance beat estimates. Global Payments (GPN) rises 7% after posting quarterly results. Insperity (NSP) sinks 27% after the professional services company cut its adjusted earnings per share guidance for the full year. The reduced outlook missed the average analyst estimate. Norwegian Cruise (NCLH) falls 8% after the cruise operator reported revenue for the third quarter that missed the average analyst estimate. Palantir Technologies (PLTR) falls 7%, taking a breather after rallying more than 170% this year. The data-analysis software company raised its full-year forecast and reported third-quarter results that beat expectations. While analysts are broadly positive on the report, they flag concerns over the stock’s premium valuation. Paymentus Holdings (PAY) rises 9% after the online bill payment company provided fourth quarter guidance that topped estimates. Sarepta (SRPT) tumbles 39% after the drugmaker says the study of Amondys 45 and Vyondys 53 in patients with Duchenne muscular dystrophy missed primary endpoint, raising questions about their future. SunCoke Energy (SXC) rises 5% after narrowing its adjusted Ebitda guidance for the full year. Uber Technologies Inc. (UBER) slips 3% after the company posted a miss on third-quarter operating income and issued an adjusted earnings forecast for the current period that also fell short of analysts’ estimates. Upwork (UPWK) rises 19% after the online recruitment company reported third-quarter results that beat expectations and raised its full-year forecast. Analysts highlighted growth in gross services volume as a notable positive, with AI acting as a tailwind. Whitestone REIT (WSR) climbs 15% as people familiar said MCB Real Estate is making a renewed push to acquire the company. Yum! Brands Inc. (YUM) ticks 2% higher after initiating a strategic review for Pizza Hut, exploring options for the struggling chain. Zoetis Inc. (ZTS) falls 7% after the animal health company cut its revenue guidance for the full year. In corporate news, Norway’s sovereign wealth fund will vote against the $1 trillion pay package proposed for Tesla CEO Elon Musk. Starbucks agreed to sell a majority stake in its China business to Boyu Capital at a $4 billion enterprise value. Amazon alleged that a Berkshire Hathaway-owned utility in Oregon is failing to provide sufficient power for four new data center facilities. Global risk slid after Palantir Technologies raised its annual revenue outlook to $4.4 billion and outpaced analyst estimates for third-quarter sales, yet its shares first jumped only to tumble on concerns about the company’s lofty valuation after a record run-up. “On Palantir, there’s been quite a lot of ‘sell-on-the-news,’ particularly for stocks which had outperformed prior to their earnings,” said Karen Georges, a fund manager at Ecofi Investissements in Paris. “When you have lofty valuations, it’s really not surprising to see harsh market price action.” Meanwhile, as we noted last night, Goldman calculates that CTAs will be small sellers of equities under every scenario over the coming week. At the same time, Wall Street CEOs are warning of a potential equity market drop. Capital Group’s CEO Mike Gitlin notes corporate earnings are strong but “what’s challenging are valuations,” and Morgan Stanley’s Ted Pick said markets have come a long way, but there’s still “policy error risk” in the US and geopolitical uncertainty. Besides the overnight tumble in global stocks, cryptocurrencies are also suffering, with both Bitcoin and Ether mimicking the moves in equity futures and gold is hitting the lows of the day to give this the air of a generalized slide. The Bloomberg Dollar Spot Index is at the highest level since early August. Also adding to the negative sentiment Tuesday was increased uncertainty over the Fed’s policy outlook. Officials presented mixed messages Monday, reflecting divisions within the central bank ahead of its December meeting. Austan Goolsbee emphasized persistent inflation risks, and said the government shutdown shifts risks to inflation, with lack of recent data leaving the central bank “with one eye covered.” Lisa Cook pointed to growing labor-market fragility. Mary Daly said policymakers should “keep an open mind” about another rate cut, and Stephen Miran noted that policy remains restrictive. “It’s the Fed again,” said Anna Wu, a cross-asset strategist at Van Eck. “The inflation comment startled the markets and weighed on sentiment.” For the tape to broaden sustainably, we’ll likely need clearer Fed policy visibility that reduces risk premiums across small-caps and cyclicals, evidence of further top-line firming outside AI or a soft landing with labor and inflation data putting stagflation fears to rest according to Bloomberg, whose equity strategists note small-cap stocks can’t shake the “big-cap shadow” as sector dispersion widened through October. Despite Tuesday’s losses, positioning on the S&P 500 remains bullish and extended, but with profit-taking risks less evident, according to Citigroup Inc. strategists. “We have the stock market trading at an all-time high, whether you look at the US or Europe,” Benedicte Lowe, equity derivatives strategist at BNP Paribas SA, told Bloomberg TV. “Any investor is looking for any signs of downward news. Our view remains bullish until the year-end.” A quick look at earnings, Out of the 336 S&P 500 companies that have reported so far in the earnings season, 82% have managed to beat analyst forecasts, while 14% have missed. Apollo Global, Eaton, Global Payments, Marriott, Norwegian Cruise Line, Pfizer, Shopify, Spotify, Uber, Yum! Brands and Zoetis are among companies expected to report results before the market opens. Shopify will likely highlight several advances in key or emerging-growth avenues, including acquisition of large merchants and agentic commerce according to Bloomberg Intelligence. Earnings from AMD, Amgen, Arista, Live Nation, Pinterest, Rivian and Super Micro Computer follow later in the day. Corporate earnings are strong but “what’s challenging are valuations,” said Mike Gitlin, president and chief executive officer of investment manager Capital Group, during the Hong Kong Monetary Authority financial summit. In Europe, the Stoxx 600 falls 1.6% following a broadly weaker Asian session. All 20 sectors are in the red but mining, retail and telecommunications are the worst performers. Telefonica is among the biggest laggards after reducing its free-cash-flow guidance for the full year. Here are the biggest movers Tuesday: Coloplast shares rise as much as 3.4%, reversing an earlier 3% decline, after the Danish medical-products maker forecast organic revenue growth of about 7% for the 2026 fiscal year Geberit gains as much as 3.7%, the most in almost three months, after the Swiss building materials firm increases its 2025 net sales guidance. Analysts expect this to translate into some minor uplift to consensus numbers Philips shares rise as much as 3.9%, the most in more than three months, after the Dutch medical technology firm reported better-than-expected adjusted Ebita for the third quarter Oerlikon rises as much as 9.1%, before paring some of those gains, after recording a beat on orders in the third quarter. While analysts welcome this strong order development for the Swiss industrial technology group Elmos Semiconductor gains as much as 9.7%, the most since April, as Warburg says that third-quarter results came in slightly ahead of expectations Wereldhave shares rise as much as 3.2% after the investment company posted strong results and raised the midpoint of its guidance, according to analysts Kinepolis shares rise as much as 6.3% after the movie theater operator agreed to buy the operations of US firm Emagine Entertainment. Degroof Petercam said this is “clearly the first decent transaction” struck by the company Telefonica shares slide as much as 11%, the most in more than five years, after the telecom operator reduced free cash flow guidance for 2025 while seeing a higher leverage ratio at the end of the year BioMerieux slides as much as 4.1% after cutting its organic sales forecast for the full year, and delivering revenue below expectations in the third quarter, impacted mainly by worse-than-expected Molecular respiratory sales Fresenius Medical Care shares drop as much as 6.5%, the most in roughly three months, after the German provider of dialysis care and equipment reported third-quarter results. US same market treatment grew 0.1% during the period Schaeffler falls as much as 5.8%, with analysts saying valuation is starting to look stretched. The German firm’s results were seen in-line with a pre-release and brokers called increased momentum in humanoid activities supportive AB Foods falls as much as 2.9% after the UK conglomerate reported earnings and said it is conducting a review that could lead to a separation of the Primark clothing retailer and its Food units Domino’s Pizza Group shares fall as much as 2% in London, extending year-to-date losses, as analysts pointed to declining volumes in the company’s third-quarter trading update Earlier in the session, Asian stocks declined, with South Korea leading the retreat, as traders sold some high-flying tech shares and parsed comments from Federal Reserve officials to gauge the outlook for interest rates. The MSCI Asia Pacific Index dropped as much as 1%, its biggest intraday slump since October 17, with chipmakers Samsung Electronics and TSMC among the biggest drags. SK Hynix slipped after Korea’s exchange issued an investment caution on the stock after its big rally. Key gauges also declined in Australia, China and Taiwan. Risk-off sentiment comes after Fed official Austan Goolsbee said he’s more concerned about inflation than the labor market, spurring caution over the outlook for further rate cuts. With the MSCI Asian benchmark and other indexes around the region trading near record highs, traders have been hoping for supportive policy and comments to help extend the rallies. Stocks also fell in Hong Kong and India. Meanwhile, gauges in Vietnam and the Philippines rebounded as sentiment improves. In FX, the yen is up 0.5% against the greenback and at the top of the G-10 FX leaderboard, boosted by haven demand as global equity markets decline. Some modest jawboning from the Japanese finance minister will have helped. The pound falls 0.5%, although its the kiwi and krone leading declines against the greenback. In rates, treasuries gain, pushing US 10-year yields down 3 bps to 4.09%; US yields are richer by 2bp to 3bp across the curve with 5s30s spread wider by around 1bp. Gilts extended gains during a speech by Chancellor Reeves before fading. UK 10-year borrowing costs are down 3 bps. IG dollar issuance slate has four offerings so far. Monday’s volume was second-highest this year — $34.5 billion from 13 borrowers, led by Alphabet with an $17.5 billion eight-part offering. UK bonds outperformed their European peers after Chancellor of the Exchequer Rachel Reeves signaled that further tax increases may be needed to achieve fiscal consolidation in this month’s budget, while stressing the importance of curbing inflation and keeping borrowing in check. The 10-year gilt yield fell two basis points to 4.41%, while the pound weakened as traders priced in a quicker pace of interest-rate cuts. Today's economic calendar slate empty for the session as US government data continue to be postponed by shutdown that began Oct. 1. Fed speaker slate also blank after Vice Chair for Supervision Michelle Bowman spoke earlier on banking supervision and monetary policy Market Snapshot S&P 500 mini -1.2% Nasdaq 100 mini -1.5% Russell 2000 mini -1.6% Stoxx Europe 600 -1.5% DAX -1.7% CAC 40 -1.6% 10-year Treasury yield -3 basis points at 4.08% VIX +2.9 points at 20.05 Bloomberg Dollar Index +0.2% at 1223.46 euro -0.1% at $1.1506 WTI crude -1.6% at $60.1/barrel Top Overnight News The outlines of a potential deal to end the [US government] shutdown are starting to take shape, although the talks are very fragile at this point and there’s still a long way to go: Punchbowl. Senate Majority Leader John Thune said he was “optimistic” an agreement can be reached this week to end the five-week shutdown as bipartisan rank-and-file talks make progress. Politico A string of alleged frauds by corporate borrowers is spurring a reckoning across Wall Street, sending bankers and investors scrambling to prevent future blowups. WSJ Trump said he is going to ask the Transportation Secretary to take a look at terminating New York City congestion pricing, while he added it is highly unlikely that he will be contributing federal funds to NYC if Mamdani wins the mayoral race. Insurers shopping for better credit ratings on their private credit assets are creating a “looming systemic risk” to global finance, the chair of UBS has warned. FT China called on the US to avoid sensitive issues so that a trade truce can hold. Ambassador Xie Feng named Taiwan, democracy and human rights, China’s political system, and development rights as Beijing’s four red lines. BBG Chancellor of the Exchequer Rachel Reeves declined to reiterate Labour’s manifesto commitment against broad-based tax hikes, as she made an unusual appeal to the British public to support her upcoming budget. BBG China has increased subsidies that cut energy bills by up to half for some of the country’s largest data centers, as Beijing steps up efforts to boost its domestic chips industry and compete with the US. FT South Korea’s headline inflation accelerated at a faster-than-expected pace to a 15-month high in October, lifted by higher prices for agricultural and livestock products. Inflation accelerated to +2.2% Y/Y in Oct (on a core basis), above the consensus forecast of +2% and up from +2% in Sept. WSJ RBA left rates unchanged, as expected, and signaled unease with the recent rise in inflation (the RBA said it expects rates to stay at their present level for “a while”). RBA Chicago Fed President Austan Goolsbee said the government shutdown has left the Fed with “one eye covered,” forcing caution on rates. While he still sees room to ease, Goolsbee told Semafor he worries about “front-loading” cuts without more data. BBG Wall Street seems unworried about the lackluster breadth of the equity market rally, despite parallels to the tech bubble of the late 1990s. The charge is increasingly led by a handful of tech companies, with the ratio of S&P 500 Equal Weighted Index to the S&P 500 at its lowest since 2003. BBG Trade/Tariffs US Treasury Secretary Bessent said he will be at the Supreme Court to emphasise the importance of tariffs, according to Fox News. South Korea’s Industry Ministry said it is to expand financial and policy support for exporters facing US and EU steel tariffs, while South Korea will restructure the steel sector as the industry shows mounting signs of a crisis, and will also take pre-emptive steps to adjust production capacity in oversupplied products. Panama Canal chief said reduction in world trade is likely next year amid economic slowdown and expects passage of LPG vessels to continue increasing, while the chief said Panama Canal’s market share of US LPG exports to Asia rising to more than 95% from 80% and that the long-term reservation system allocated more slots this time than in the previous edition. Chinese Commerce Ministry says regarding Nexperia, that it urges the Dutch government to stop interfering company affairs, adds will resolutely safeguard rights and interests of firms. Dutch government has not demonstrated a constructive attitude and actions, and escalated the global supply chain crisis despite China's reasonable demands. Netherlands should bear the full responsibility of turmoil and chaos in the global semiconductor production and supply chain. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly subdued following the mixed lead from Wall St, where the majority of sectors declined but tech outperformed amid strength in some of the mega-caps following deal announcements. ASX 200 was softer with the downside led by the utilities, materials, mining and resources industries, while participants also awaited the RBA decision in which the central bank kept the Cash Rate unchanged at 3.60%, as expected. Nikkei 225 swung between gains and losses with participants indecisive on return from the extended weekend and alongside a quiet calendar. Hang Seng and Shanghai Comp were lacklustre amid quiet pertinent catalysts and after a report that Trump admin officials torpedoed NVIDIA's push to export AI chips to China. Nonetheless, the downside was limited amid a slew of comments from the Beijing officials at the Global Financial Leaders' Investment Summit in Hong Kong, including from the PBoC's Deputy Governor, who stated they will enhance Hong Kong's status as a global financial centre and will strengthen policy support. Top Asian News Chinese President Xi met with Russian PM Mishustin and said in the meeting that the sides should steadily expand mutual investment and maintain close communication, as well as create new cooperation growth points and cooperate in areas such as AI, digital economy and green development. Chinese Vice Premier He said Hong Kong’s competitiveness and attractiveness prove the city thrives under the 'One Country, Two Systems' framework, while he added that Hong Kong will further enhance and improve its status as a global financial centre. He also stated that Hong Kong should strengthen cooperation with the mainland and hopes that Hong Kong will continue to play an active role in connecting the world and advancing global governance. Furthermore, he stated that the global economic environment has seen new challenges this year and it is important to deepen trade and economic activities with other countries. PBoC Deputy Governor said will work to enhance Hong Kong's status as a global financial centre, and strengthen policy support. China's Financial Regulator Vice Minister said Hong Kong-funded institutions will be supported to develop in the mainland, and they will continue to deepen the Connect programmes, while they will also prevent cross-border financial risks. China reportedly offers its tech giants cheap power to boost domestic AI chips, according to FT. Nintendo (7974 JT) 6-month Net Profit 198.94bln (prev. 108.66bln Y/Y); raises guidance, sees FY Op. Income JPY 370bln (prev. guided 320bln); sees FY Switch 2 Sales 19mln units; raises dividend payout ratio to 60% (prev. 50%). Japan's Finance Minister Katayama says seeing one-sided rapid moves and closely watching FX moves with a high sense of urgency. European bourses (STOXX 600 -1.6%) opened lower across the board, but without a clear driver. As the morning progressed, indices continued to slip and now generally reside at troughs. European sectors are in the red across the board but with a clear defensive bias. The shallowest losses are seen in Food Beverage, Real Estate, Utilities, Healthcare, and Optimised Personal Care Drug and Grocery. On the flip side, Basic Resources, Retail, Telecoms (due to losses in Telefonica), and Industrial Goods and Services at the foot of the pile. Top European News ECB's Rehn says uncertainty about future economic development remains high and risks are skewed downside. French Socialist Party leader Faure said his party will give the government additional time to come up with a budget it deems acceptable before deciding whether to use its power in parliament to topple the administration, according to Bloomberg. ECB's Rehn says uncertainty about future economic development remains high and risks are skewed downside. ECB's Lagarde says currency changeovers can produce a temporary uptick in inflation. SNB's Tschudin says monetary policy is aimed at ensuring price stability. SNB interest rates are where they should be and will only use negative rates when necessary. The value of the Franc is not decisive for the monetary policy of the SNB. Important on how the exchange rate changes and its effect on inflation. Not in a situation where we would like to see lower inflation. UK Chancellor Reeves' Pre-Budget Speech: says will make choices necessary to deliver strong foundations for UK economy; important choices that will shape the future of UK for years to come; Inflation has been too slow to come down. Commitment to fiscal rules is iron clad. The more debt UK tries to sell, the more it will cost. Note, Reeves did not mention the manifesto pledges around taxation during this introductory speech. UK PM Starmer informed Labour MPs at a private meeting that the budget would be determined by "tough but fair decisions", adding that the backdrop to the fiscal update was "worse than even we feared". The article frames it as increasing speculation of income tax rises, by Starmer saying they would reject austerity and protect the NHS. (FT) FX DXY is on a slightly firmer footing and trades at the upper end of a 99.73-100.04 range, reclaiming the 100.00 mark for the first time since early August. Lack of notable newsflow in recent trade, but with traders remaining attentive of the mixed views held at the Fed and the ongoing US Government shutdown. Today's docket will provide little in the way of additional clues. However, tomorrow markets will be presented by the latest ADP employment change and ISM services print. Note, tomorrow will see the commencement of the hearing on the legality of US President Trump's Reciprocal Tariff Policy. After a venture above the 100 mark, DXY has since moved back to flat levels around the 99.90 mark. EUR/USD is a little lower today and trades within a 1.1499-1.1533 range. As above, really not much newsflow driving things today, and ultimately moving at the whim of the USD. This morning ECB commentary has not really moved things for the Single-currency; Rehn highlighted the uncertainty about future economic development, noting that inflation risks are two-sided, whilst Lagarde said currency changeovers can produce a temporary uptick in inflation. Within the Eurozone, attention remains on French politics with the Socialist Party giving the government additional time to come up with a budget it deems acceptable. JPY is the best performer across the majors as Japanese investors return from the long weekend. The bid in the JPY is being driven by a combination of the risk-aversion in the market triggered by selling in global equities and ongoing jawboning from Japanese officials with Finance Minister cautioning against one-sided rapid moves and noting that she is closely watching FX moves with a high sense of urgency. USD/JPY hit a new multi-month high overnight at 154.48 before slipping onto a 153 handle and making a current session low at 153.34. GBP is on the backfoot vs. the USD and EUR with attention in the UK fixated on the fiscal backdrop following a pre-budget press conference by UK Chancellor Reeves. Politically for Reeves, the issue is that in her election manifesto she vowed to "not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”. The mood music in recent weeks has suggested that it is inevitable this pledge will need to be broken. As such, Reeves used today as an opportunity to pitch roll such a decision. That being said, Reeves stopped shy of confirming that the manifesto will be broken and refrained from unveiling specific policy pledges. The negativity surrounding Reeves remarks has weighed on the GBP with Cable back below the 1.31 mark and at its lowest level since mid-April with a current session trough at 1.3060. Antipodeans are both weaker vs. the USD primarily on account of the broad risk-aversion triggered by selling in global equity markets. AUD has also digested the latest RBA policy announcement, which was overall leaned hawkishly. As expected, the RBA opted to keep rates unchanged on hold following last week's hotter-than-expected outturn for Q3 inflation. Within the release, the RBA noted that some of the factors driving the upside were deemed to be temporary. However, markets have focused on the RBA's forecast, which sees just one cut in 2026 vs. the two seen in August. Fixed Income Gilts are outperforming vs peers today, attributed to a speech by the UK Chancellor; more-so on the reports pre-presser rather than any announcement itself. In brief, the Chancellor reiterated her fiscal policy stance, but avoided reiterating her tax related pledges. An omission that has been interpreted as confirming the pre-market briefings regarding the likely manifesto breaking tax increase(s). Her press conference then began and saw her avoid questions around policy specifics and the manifesto pledges. Overall, the main takeaway being she has, as expected, laid the foundation for tax increases in the Budget. In terms of price action, Gilts held around 93.70 into the presser, before then rising as she spoke to a session peak of 93.98; UK paper then scaled back down to pre-presser levels. Elsewhere, 2029 Gilt supply was well received with a b/c in excess of 3x and a smaller-than-prior tail. No move to the results. USTs are firmer, posting gains of a handful of ticks into a session largely devoid of data owing to the shutdown with just RCM/Tipp optimism due. Prior to that, Fed’s Bowman is scheduled though the topic is banking supervision; Bowman hasn’t spoken on policy since mid-October, where she outlined a view for two more cuts before end-2025. Upside this morning that was spurred by a deterioration in the risk tone, as sentiment drifted during the early European morning and into the European cash equity open itself. No fresh catalyst at the time behind the pullback, but it continued the subdued APAC tone and Wall St. handover where sectors ex-tech ended in the red. At a 112-28+ peak, eclipsing Friday’s high by a tick and notching a new WTD peak. As such, we look to 112-29+ from last Thursday and then a gap before last week’s 113-18 best. Bunds are also firmer with the narrative echoing the above. Bunds hit a 129.35 peak just before the European cash equity open and thereafter moved in tandem with Gilts and pulled back to around the mid-point of the day’s 129.09-35 band. More recently, as tone deteriorates as discussed in USTs, Bunds have reverted back to and are probing the earlier peak. If this is eclipsed, we look to 129.46 from Friday before resistance from early last week between 129.62, 129.64 and 129.73. A tepid Schatz outing thereafter had no impact on the benchmark. Commodities Crude benchmarks have been weighed on by the overall risk-off sentiment seen across markets as the European session got underway. After oscillating in a tight c. USD 0.20/bbl range during the APAC session, WTI and Brent extended on Monday’s low at USD 60.51/bbl and 64.33/bbl respectively to a trough of USD 59.94/bbl and USD 63.44/bbl as global risk sentiment sours. Spot XAU continues to oscillate within range formed over the prior 5 days, despite a wider risk-off theme running through markets during APAC trade and into the European session. XAU dipped to a trough of USD 3967/oz as the APAC session ended before a slight bounce to the key USD 4k/oz level. Base metals continue to fall following the tech-led equity selloff in global benchmarks. 3M LME Copper peaked at USD 10.86k/t early in APAC trade before extending on last week’s low at USD 10.81k/t to a trough of USD 10.65k/t. Currently, the red metal is oscillating in a USD 70/t band near the lows of the day. OPEC+ decision on Sunday to keep oil output targets steady in Q1 came after Russia lobbied for the pause because it would struggle to increase exports due to Western sanctions, according to Reuters citing sources. Libya's Oil Minister says there is a target to increase oil output to 2mln BPD (currently c. 1.4mln) in the next five years; looking at 1.6mln BPD in 2026 and then 1.8mln BPD in 2027. Iraq PM orders a pause on imports of gasoline, kerosene and "White Oil", via State News Agency. Shanghai Futures Exchange is to adjust transaction fees for cast aluminium alloy and offset printing paper futures and options products from the close of trading on November 7th. Geopolitics: Middle East Palestinian media reported that IDF vehicles fired at areas in the Maghazi refugee camp in the central Gaza Strip, according to Sky News Arabia. "Iranian government spokeswoman: We will never move towards building a nuclear bomb", according to Sky News Arabia. Geopolitics: Ukraine Blast at a petrochemical plant in Russia's Bashkortostan caused the partial collapse of a workshop, according to TASS. Russia says it struck civilian energy and port infrastructure in a large-scale attack on Ukraine's Odesa region overnight, according to the regional governor. Geopolitics: Other Peru's Foreign Minister announced that the country decided to break diplomatic relations with Mexico, due to Mexico's unfriendly act of starting a process to grant asylum to former PM Betssy Chavez. US Event Calendar 8:30 am: Sep Trade Balance, est. -64.13b 10:00 am: Sep JOLTS Job Openings, est. 7130k, prior 7227k 10:00 am: Sep Factory Orders 10:00 am: Sep F Durable Goods Orders 10:00 am: Sep F Durables Ex Transportation 10:00 am: Sep F Cap Goods Orders Nondef Ex Air 10:00 am: Sep F Cap Goods Ship Nondef Ex Air DB's Jim Reid concludes the overnight wrap Markets have started November with familiar themes, with the S&P 500 (+0.17%) managing to see a gain yesterday but with the Magnificent 7 (+1.18%) and the S&P 500 ex-Mag-7 (-0.30%) diverging once again. The main driver was yet another AI deal, this time Amazon’s with OpenAI. The equal-weighted S&P 500 (-0.30%) fell back as investors weighted up weak data, hawkish Fedspeak, and a government shutdown that’s now the joint-longest in history and at midnight tonight will be the longest. US politics will also be in the spotlight today for other reasons, as we’ve got the New York City mayoral election, as well as gubernatorial races in New Jersey and Virginia. It feels like a mini mid-term in the first half term of this Presidency. Overnight we are seeing a bit more negativity take over after Palantir fell more than -4% after hours. Their results were good but markets were disappointed at the lack of company visibility for the whole of 2026. As Bloomberg shows, the company has the highest price to sales in the S&P 500 at 85, and the stock is up more than 150% this year. For reference, the index has a price to sales ratio of around 3.5. Nasdaq futures are -0.85% this morning and S&P futures -0.59%. Asian markets are mostly lower as we'll see below. In terms of the various drivers in markets yesterday, a weak ISM manufacturing print didn’t help matters - outside of tech which marches to its own drum - particularly because the government shutdown and lack of data is heightening the importance of the limited data we’re still getting. The headline measure unexpectedly fell back to 48.7 in October (vs. 49.5 expected and 49.1 previous). Subcomponents for employment (46.0) and new orders (49.4) did see a tick up but also remained in contractionary territory. So there really wasn’t much to reassure investors on the outlook, particularly given this is one of the early stats we have that covers Q4 and the government shutdown. In the meantime, US Treasuries were also struggling thanks to some hawkish Fedspeak. In particular, Chicago Fed President Goolsbee (a voter this year) said that he was “not decided” about the December meeting, and that he was “nervous about the inflation side of the ledger, where you’ve seen inflation above the target for four and a half years and it’s trending the wrong way.” Daly later said that they should "keep an open mind" ahead of the December FOMC. Our economists had pegged her as an official who would have likely supported a cut next month. Fed Governor Cook did say that downside risks to employment were higher than upside risks to inflation, but stopped short of endorsing a cut for December’s “live meeting”. So all this added to Powell’s comments last week that brought a December cut into question, and yields moved higher across the curve. For instance, the 2yr yield (+3.1bps) moved up to 3.61%, whilst the 10yr yield (+3.3bps) rose to 4.11%. We did hear from Governor Miran as well yesterday, but he stuck to his view that the Fed “is too restrictive”, having voted for a larger 50bp cut at last week’s meeting. All this meant that non-tech equities failed to gain traction as mentioned at the top. The gains were driven by Amazon’s (+4.00%) deal with OpenAI, who are going to pay Amazon Web Services for Nvidia chips in a 7-year deal. Nvidia (+2.17%) and Tesla (+2.59%) also outperformed and Alphabet (+0.90%) reached a new all-time high. But otherwise, it wasn’t a great day, as the equal-weighted S&P 500 (-0.30%) and the small-cap Russell 2000 (-0.33%) both fell, with materials (-0.62%) and consumer staples (-0.47%) sectors leading the declines within the S&P. In the credit space, US IG spreads were +4bps wider on the day to 82bps. That’s their widest level since early July, albeit still only 10bps from recent multi-decade lows. The credit sell off came even as the Fed’s latest quarterly Senior Loan Officer Opinion Survey (SLOOS) suggested that earlier tightness in bank credit conditions was easing. Banks’ willingness to extend consumer loans inched up to its highest since 2022 (+7 net vs +5 previous), while demand for mortgages grew for the first time since 2021. With the SLOOS arguing against downside for US growth, our rates strategists have re-entered a short position on 10yr Treasuries with a target of 4.45% Asian equity markets are lower this morning after Palantir's results. The KOSPI (-2.17%) is leading the sell-off, followed by the S&P/ASX 200 (-0.91%), Nikkei (-0.77%), the CSI (-0.54%), the Shanghai Composite (-0.34%), and the Hang Seng (-0.17%) all of which are lower, along with US equity futures. The RBA has left rates unchanged for the second consecutive meeting, as widely expected. 10yr USTs are a basis point lower. Back to Europe yesterday, markets had followed a broadly similar pattern to the US, with subdued equity gains alongside losses for sovereign bonds. So the STOXX 600 (+0.07%) eked out a modest gain, ending a run of 4 consecutive declines from last week. That came amidst losses for the UK’s FTSE 100 (-0.16%) and France’s CAC 40 (-0.14%) which contrasted with stronger gains for the German DAX (+0.73%) as industrial sectors outperformed led by a +4.23% gain for Rheinmetall. Meanwhile for sovereign bonds, Europe saw similar losses as the US, with yields on 10yr bunds (+3.4bps), OATs (+2.3bps) and BTPs (+2.7bps) all rising. To the day ahead now, and central bank speakers include ECB President Lagarde, the ECB’s Patsalides, Escriva, Rehn, and Nagel, the Fed’s Bowman and the BoE’s Breeden. Otherwise, earnings releases include Uber and Pfizer. Meanwhile, several US elections are taking place, including the New York City mayoral election, and gubernatorial elections in New Jersey and Virginia. Loading recommendations...
