[True Flame Observation] Wall Street investment banks hinted that the market may have overbet on the Fed's rate cuts; China is reportedly considering a 10 trillion yuan fiscal stimulus.
Global financial giants such as Citigroup, BlackRock, and Goldman Sachs attended Saudi Arabia's Future Investment Initiative conference. Most of them expressed optimism about the prospects of the U.S. economy, with many executives suggesting that market bets on Federal Reserve rate cuts might be overdone. However, they voiced concerns about weaker economic growth in Europe.
Overnight Highlights
Most U.S. stocks closed higher, with large-cap tech stocks driving the S&P 500 up and the Nasdaq hitting a record closing high, while the Dow fell as investors digested a series of corporate earnings reports. U.S. Treasury prices briefly rose on Tuesday due to an unexpected drop in job openings. The U.S. dollar hit a three-month high against the yen as traders awaited next week's U.S. election and a series of economic data releases. Oil prices closed slightly lower, extending the previous session's decline of over 6%, amid reports that Israeli Prime Minister Benjamin Netanyahu would hold a meeting to seek a diplomatic solution to the Lebanon conflict.
International News
· On Tuesday, Harris delivered a speech at the National Mall, where Trump incited supporters to protest in 2021, warning that a Trump presidency would bring chaos and division rather than addressing the needs of the American people.
· A Reuters/Ipsos poll released on Tuesday showed Harris's lead over Trump narrowing to just one point (44% to 43%) in the final stretch of the U.S. presidential race. Ken Griffin, founder of Citadel, predicted Trump would win the election.
· U.S. consumer confidence in October posted its biggest gain since March 2021, while September job openings fell to their lowest level since early 2021, aligning with a slowing labor market trend.
· Co-CIO of Fixed Income at Neuberger Berman: Given risks of the Fed pausing rate cuts and the resilience of the U.S. economy, the recent sell-off in Treasuries may only be the start of a sustained surge in yields.
· Global financial giants like Citigroup, BlackRock, and Goldman Sachs attended Saudi Arabia's Future Investment Initiative conference, expressing optimism about the U.S. economy but cautioning that market bets on Fed rate cuts might be excessive. They also raised concerns about Europe's weaker growth.
· Japan's October economic report maintained its assessment of a moderate recovery but reiterated the need to monitor global economic risks and financial market volatility.
· The Swiss National Bank governor signaled that further rate cuts may be needed in coming quarters to maintain price stability.
· Alphabet (GOOGL.US) reported Q3 revenue above estimates, driven by cloud growth, sending shares up over 5% after hours.
· AMD's Q4 revenue outlook missed expectations, causing shares to plunge over 7% after hours.
· Reuters reported that OpenAI is collaborating with Broadcom (AVGO.US) and TSMC (TSM.US) to develop its first in-house AI chip.
· Bloomberg: Elon Musk's AI startup xAI is seeking funding at a ~$40 billion valuation, per sources.
Greater China News
· China's top legislature will meet next week amid market anticipation for fiscal stimulus details. Reuters reported that China may approve over 10 trillion yuan in additional bond issuance to boost growth and address local debt risks.
· The EU will impose higher tariffs on Chinese EVs starting Wednesday, adding 8%-35%+ to the existing 10% duty. Bloomberg: BYD plans to hire Stellantis's former UK head to expand in Europe.
· The U.S. and Taiwan will begin talks on double taxation to reduce corporate hurdles and boost chip industry investment.
· Nikkei: TSMC (TSM.US) reportedly halted supplies to at least two chip R&D firms suspected of circumventing U.S. export controls on Huawei.
· Xiaomi (1810.HK) unveiled its luxury SU7 electric sports car, claiming the $114,000 model will be the fastest four-door production car, challenging Tesla and Porsche.
· Hongkong Land, the largest property developer in Hong Kong's financial district, is shifting focus to commercial property management and may eventually establish a REIT.
· HSBC (0005.HK) CEO Noel Quinn stated that restructuring plans do not signal any intent to spin off the bank.
Commodities & Forex
· The dollar rose on month-end flows but pared gains after U.S. job openings fell to a 2021 low while consumer confidence improved. The yen trimmed losses.
· Crédit Agricole strategists view the yen as one of the G-10 currencies most exposed to the U.S. election due to its sensitivity to Treasury yields. USD/JPY could rise toward 160 if Trump wins but fall toward 150 under a Harris victory.
Earnings & Data Watch
· Eurozone Q3 GDP YoY (prev: 0.6%, est: 0.8%)
· U.S. Oct ADP Employment (prev: 143K, est: 115K)
· U.S. Q3 PCE QoQ (prev: 2.8%, est: 3.3%)
Source: Golden Horse Capital Management (Hong Kong) Limited
Author: Terry Chow
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