Fed expected to hold, with Warsh seen signaling more hikes
Markets overwhelmingly expect the Federal Reserve to leave rates unchanged this week, following September's increase. The CNBC Fed Survey found 93% of respondents expect a pause. The focus is on whether Chair Kevin Warsh points the way to further hikes. Former Fed economist Claudia Sahm argues that waiting is the bigger risk, since persistent inflation could force much larger hikes later. MarketWatch notes that tighter and costlier AI financing could help Warsh get his way with fewer hikes. Gold held near $4,000 an ounce ahead of the decision, and Amundi expects a recovery to about $4,500 after a selloff took the metal to a three-month low. Economists say mortgage rates above 7% are the "new normal," with high inflation and competition for investor dollars keeping long-term rates elevated.
Bank of Japan seen holding this week but staying hawkish
A CNBC survey shows the Bank of Japan is expected to hold rates at its meeting this week. All respondents expect it to set the stage for a hike in December or January as inflation and wages continue to rise. The signal matters for global funding markets. Bloomberg reports that the yen's role as the funding currency for the Latin American carry trade has withstood the Brazil rout. Separately, Japan's life insurers are swapping out of lower-yielding bonds into higher-yielding debt to lift portfolio returns.
Bond investors doubt gridlock will ease deficit fears
Bond investors are growing skeptical that a return of gridlock on Capitol Hill would ease their worries about the US fiscal trajectory, as it has for decades. Bloomberg's Markets Pulse survey found that Democrats winning both houses of Congress in the Nov. 3 midterms is the outcome most likely to set up a bond rally. JPMorgan Asset Management's Bob Michele sees US bonds returning 7% to 8% over the next 12 months. In Asia, Samsung Life priced the largest dollar bond ever sold by a South Korean insurer, even though volatile debt markets have forced some issuers to pull deals.
China profits rise on AI boom while stocks slip and yields hit record low
China's industrial profits posted their strongest growth in three months. The global AI boom and higher commodity prices tied to the Iran war lifted earnings at miners, chipmakers and raw-material suppliers, widening the divide between tech-linked sectors and the rest of the economy. Chinese stocks extended their slide in the final hour of trading as investors disappointed by a lack of "national team" buying dumped shares. The five-year government bond yield fell to a record low after the central bank increased its cash injection into the banking system. Iron ore dropped to its lowest level in more than two years on a weaker demand outlook and rising supply through year-end.
Anthropic's IPO filing revives the AI trade, with caveats
Anthropic's 240,000-word S-1 lifted sentiment in AI-linked equities. Semiconductor stocks rallied in South Korea and Japan, global equities rose, and optical names such as Lumentum led the S&P 500 higher on Monday. US futures stalled on Tuesday as traders turned back to earnings, the Fed and Middle East tensions. The prospectus shows explosive growth alongside steep losses, about $6.2 billion in debt and roughly $800 billion of data-center commitments. It flags data-center moratoriums as a key risk and warns the company may need more financing sooner than anticipated. It says little about a path to an investment-grade rating. A founder-controlled governance structure leaves everyday shareholders with little voice.
Meta moves to raise $95 billion as Nvidia invests $3 billion
Meta announced plans to raise a total of $95 billion to fund its AI infrastructure buildout, including the sale of common and preferred stock. Nvidia will invest $3 billion in Meta, deepening the partnership between the two tech giants. The size of the raise highlights how far the largest AI spenders now rely on external capital. CNBC's Jim Cramer warned that a flood of massive IPOs and capital raises could threaten the bull market's rally.
AI financing pushes bond issuance to a record and widens spreads
US investment-grade bond sales set an annual record on Monday as AI spending drove companies to borrow hundreds of billions of dollars. Morgan Stanley strategists expect spreads on asset-backed securities funding data-center developments to widen further as issuers tap more debt markets. Blackstone-backed data-center operator QTS is seeking about $800 million in a private placement, and Pimco bought a $4 billion slice of a huge SpaceX AI financing package. Marathon's Bruce Richards warns that a big swath of CCC-rated borrowers have "no way out" but default as refinancing grows more expensive.
Strategists question AI valuations as rates rise
Citadel Securities' Shah says markets are so invested in the AI trade that there is "no margin for error" if the spending fails to pay off. UBS's Michel Lerner argues AI stocks, which have ignored normal valuation rules, may now have to respect them with rates higher. TS Lombard calls AI a bubble destined to pop, though it cautions against trying to time it. CNBC reports that an S&P 500 without AI stocks is beating the traditional index. CNBC's Santoli notes that Procter & Gamble's valuation has crossed above Alphabet's and calls this a now-or-never moment for the AI trade to rebound.
Oil falls for a second day on Iran diplomacy
Oil declined for a second day, pulling further back from a six-month high as stepped-up diplomacy raised expectations that the US-Iran war will not widen. MarketWatch reports that Supreme Leader Ali Khamenei was quoted as saying it is time to end the "neither war nor peace" limbo and reach a deal, which moved markets modestly. Iran's Persian Gulf Strait Authority said it would take "legal action" against tankers belonging to Sinokor, the world's biggest tanker owner, which has carried millions of barrels out of the Strait of Hormuz in recent weeks. US natural gas futures closed at their lowest since April on warmer forecasts.
Houthi attacks shift Saudi worries to the non-oil economy
Saudi Arabia contained a fire near its Ras Tanura export terminal on the Persian Gulf following an attack in the region. The kingdom's oil industry rode out the early days of the Iran war and kept exports flowing. With deadly Houthi attacks on the kingdom and signs of disruption stacking up, concern has shifted to the rest of the economy. Even so, Investcorp is joining Saudi investors to buy into a fire safety and equipment company, one of the first inbound deals since the escalation. Egypt has backed Saudi defense as regional powers push for Iran talks.
Lula's runoff win triggers Brazil rout
President Luiz Inácio Lula da Silva won Brazil's runoff with 51.8% of the vote against Flávio Bolsonaro's 48.2%, a result prediction markets had not foreseen. The shock produced the worst day for the real in more than 25 years, amid concerns about management of the economy. Brazilian companies had lined up about $6 billion of equity sales for the weeks after the vote, expecting a Bolsonaro win, and those deals are now derailed. Brazil-linked stocks such as PagSeguro slid, and the FT says Lula now faces a fiscal reckoning.
Indonesia's bonds and rupiah hit by MSCI threat and oil
Indonesia's 10-year government bond yield climbed to a four-year high, and the rupiah weakened toward a record low. Elevated oil prices and MSCI's threat to strip Indonesian equities of emerging-market status are hurting sentiment. The fallout has spread to corporate credit, with an Indonesian corporate bond sale shelved. Analysts say Bank Indonesia may need more aggressive measures, including further rate hikes, to lift the currency sustainably.
French confidence hits 13-year low as political risk builds
French consumer confidence fell to its lowest level in 13 years in October. Households were reckoning with a bond-market selloff and protests that descended into rioting. Political risk is now shaping investment decisions. French renewable developers are rushing to lock in state-backed contracts before next year's presidential election, fearing a halt to new projects under a Marine Le Pen government.
Coca-Cola and UPS raise outlooks
Coca-Cola raised its earnings outlook even as it sees lackluster demand in North America. The stock is up about 32% this year, lifting its market cap to roughly $398 billion. UPS beat Wall Street's third-quarter expectations and raised its full-year guidance for the second quarter in a row.
Boeing narrows its loss while Whirlpool and JetBlue struggle
Boeing narrowed its third-quarter loss as defense sales rose, and investors are focused on its 737 Max production outlook. Whirlpool plunged after cutting its full-year outlook for the third time this year and forecasting its first annual loss in decades, citing a sluggish recovery and weakening appliance demand. JetBlue posted a bigger loss on fuel costs, though its CEO says margins are improving as the airline cuts costs and pushes premium revenue.
HSBC disappoints and drags European banks
HSBC reported third-quarter profit in line with estimates and announced a share buyback of up to $1 billion. Investors were nonetheless disappointed, and the benchmark heavyweight pulled the banking sector lower. European stocks fell for a third day in four.
DoorDash in advanced talks to buy Instacart
The Wall Street Journal reports DoorDash is in advanced talks to buy Instacart in a deal valuing the grocery-delivery firm at roughly $17 billion. Analysts say the logic is keeping pace with Walmart and Amazon in delivery.
La Caisse to buy 49.9% of BCE's wireless towers for $1.7 billion
Quebec's public pension manager will buy a 49.9% interest in wireless towers owned by BCE Inc. The deal gives the telecom company money to pare its debt burden or fund its artificial intelligence strategy.
Jio's record IPO and a Dubai listing draw strong demand
Jio Platforms' $3.1 billion IPO, the largest in India's history, is indicated 22% higher in gray-market trading, fueling hopes of a big debut pop. In the Gulf, Dubai's DIP Holding drew enough demand to cover its IPO of up to $543 million within minutes of opening books. It is the UAE's first listing since the Iran war began. India's overnight rates climbed as banking liquidity fell to a little above 500 billion rupees from a record 11 trillion rupees last month.
DWS caps redemptions at its flagship property fund
DWS, Deutsche Bank's asset manager, will honor just 10% of redemption requests at its flagship property fund. The cap aims to preserve liquidity and avoid gating the fund altogether. CNBC separately reports that a wall of commercial real estate debt is coming due now and over the next two years, which some investors see as a "massive" opportunity.