Today
Premarket trading suggests the rout in tech stocks may be easing, with losses moderating following yesterday’s selloff that saw the Nasdaq fall -2.6% and the S&P 500 decline -1.2%. The selling was concentrated in technology, with the Dow and Russell 2000 managing modest gains. Investors also sought safety in U.S. Treasuries, pushing the benchmark 10-year yield down 19 bps, its largest one-day decline since 2023. Yields are back to 5% this morning, however, as some of yesterday’s defensive positioning appears to be unwinding. With semiconductor valuations and earnings expectations facing greater scrutiny, South Korea’s SK Hynix has shelved plans for a U.S. IPO of Solidigm, its NAND flash memory subsidiary. The company cited market conditions and share price trends rather than concerns about its growth prospects. Solidigm was established following SK Hynix’s acquisition of Intel’s NAND flash memory business in 2020 and has become one of the industry’s largest producers. The proposed IPO was one of several options under consideration to finance additional U.S. production capacity, although the listing had drawn scrutiny from South Korean regulators over concerns about potential dilution of existing shareholders’ interest. Meanwhile, oil prices continue to climb, with Brent crude reaching $115 a barrel, its highest level since May, as markets weigh the risk of further escalation in the U.S.-Iran conflict. Sustained strength in energy prices could complicate the inflation outlook and limit the scope for central banks to ease monetary policy, adding another challenge for markets.
Elevated U.S. inflation is raising the likelihood that additional interest-rate increases will be coming down the line. September consumer prices rose 0.6% month-over-month, the fastest pace in five months, pushing annual headline inflation to 3.7% from 3.4% in August, while core inflation accelerated to 2.6% from 2.4%. Higher energy costs, tariff-related price pressures, and businesses passing increased expenses through to consumers have all contributed to the pickup, while services inflation of 3.2% suggests that price pressures go beyond sectors directly affected by geopolitical and trade disruptions. Rising long-term inflation expectations further complicate the outlook, with a risk that inflation could remain above the Fed’s 2% target without additional monetary tightening. Although Fed Chair Kevin Warsh has signalled a preference for patience ahead of next week’s policy meeting, the risks point to further rate increases, although political sensitivities surrounding the upcoming U.S. midterm elections may discourage immediate action which may delay a decision until December.
China’s CSI 300 has entered bear market territory as weakening domestic consumption, disappointing corporate earnings, and concerns over the profitability of AI investments have erased $2.4 trl in market cap since May. The Index declined -1.8% yesterday, bringing its losses to -20% from its June peak, while both the Hang Seng China Enterprises Index and CSI 300 have both fallen more than -10% YTD, underperforming most major global equity benchmarks. Tech stocks have been especially hard hit, with the Hang Seng Tech Index declining -31% this year as investors question whether substantial AI infrastructure spending will generate sufficient returns, reversing much of the optimism around DeepSeek and China’s tech advancements. Beyond technology, weak consumer confidence, declining investment, and disappointing earnings from major companies continue to weigh on the market. Although China’s Q3 economic growth beat expectations, expansion over the first nine months remained near the lower end of Beijing’s 4.5%–5% annual growth target. Authorities have attempted to stabilize financial markets through targeted interventions and state-backed equity purchases, but analysts caution that sustained buying may be insufficient without improvements to economic fundamentals.
Companies and governments worldwide are scrambling to address vulnerabilities in the widely used PHP programming language after security flaws triggered millions of attempted cyberattacks and widespread shutdowns of essential online services. The vulnerabilities, which have existed in PHP for years before being uncovered using AI, prompted developers to release emergency security patches this week and call for organizations to quickly update their systems. There was a huge acceleration in attempted exploitation following the news, with activity increasing from thousands of attempts before the announcement to millions within a few hours, highlighting the speed at which attackers can capitalize on newly disclosed weaknesses. The disruption has affected financial institutions, airlines, rail operators, telecom companies, and government agencies across the globe. Experts say that the event highlights the cybersecurity risks associated with software, especially as AI becomes more adept at identifying vulnerabilities.
European mid-cap equities are seeing renewed investor interest as attractive valuations, improving manufacturing activity, and increased government spending create opportunities for domestically focused companies. The MSCI Europe Mid-Cap Index is up 15% over the past year, compared with an 11% rise for European large caps, helped by expectations that infrastructure investment, defense spending, and fiscal stimulus will lead to stronger corporate revenues and earnings. Germany’s €500 billion infrastructure and electrification program is one important catalyst for mid caps who may benefit from increased government investment. Strategists are noting that valuations remain compelling despite the recent rally, with European mid-caps trading at eight times forward enterprise value to EBITDA versus 10.4 times for large caps, representing a 25% discount and the widest relative valuation gap in at least 15 years. Investors are keeping a close eye on industrial companies, where conservative earnings forecasts leave room for positive revisions as manufacturing orders recover, while also viewing mid-caps as a diversification opportunity amid the concentration of global equity returns in large U.S. and Asian tech companies. Still, elevated inflation, renewed central bank tightening, higher borrowing costs, and high energy-price are expected to be headwinds for mid cap names in the coming months.
Investors will be keeping a close eye on Brazil’s presidential runoff on Sunday, with Flávio Bolsonaro and incumbent Luiz Inácio Lula da Silva tied at 50% in the latest poll. The election will test the rally driven by expectations of fiscal reform under a Bolsonaro administration. Brazilian equities are up 13% this month, while the real has appreciated 2.5% against the U.S. dollar, helped by $4 bln in foreign equity inflows and bullish recommendations from major Wall Street banks. Investors anticipate that a Bolsonaro victory could lower borrowing costs and drive further gains in Brazilian assets, with strategists projecting the real could strengthen to 4.90 per USD, compared with a potential depreciation to 5.40 under Lula. However, Bolsonaro has provided few details on how he would address Brazil’s growing public debt, while both candidates have proposed spending commitments that could complicate meaningful fiscal improvements. Although institutional investors remain optimistic, the tight election, elevated interest rates, and deteriorating credit conditions have prompted some to reduce exposure, highlighting that sustaining Brazil’s market rally will ultimately depend on the election outcome and the next government’s ability to deliver fiscal reforms.
Kenny G’s time to shine. The saxophone is seeing a resurgence in pop music after decades in the decline, driven by renewed interest in cross-genre experimentation and nostalgia. Once a defining feature of jazz, rock, and pop music, the instrument fell out of favour during the 1990s as saxophone solos became seen as dated, with research showing that their presence in Billboard Top 40 hits declined from more than 60 songs annually in the late 1950s to virtually none in the last 25 years. A new generation of musicians has helped restore the instrument’s appeal by incorporating it into hip-hop, Afrobeat, electronic music and contemporary jazz. Beyond professional music, educators and instrument manufacturers are reporting growing interest among amateur players looking to get into music. Manufacturers such as Yamaha are also capitalizing on the trend through digital saxophones designed to make learning more accessible, although high instrument prices and potential U.S. tariffs on imported products could impact sales.
Diversion: Blast from the past
