Today
It didn’t take much to convince investors that the Fed may be in no rush to raise interest rates at its October meeting. Speaking at the IMF’s annual meeting in Bangkok, Fed Chair Kevin Warsh stuck to his usual script, saying he doesn’t “prejudge meetings” or believe in signalling decisions ahead of time, a departure from the forward guidance favoured by his predecessors. He called it “a new chapter at the Fed.” Investors took the lack of a signal as a reason to pare back bets on an October rate hike, despite this week’s hotter-than-expected inflation data. The U.S. dollar slipped, while U.S. and Canadian equity futures are mostly pointing higher, offering some relief after a volatile week. Not all stocks are joining the rebound, however. CoreWeave, the cloud computing provider that rents Nvidia-powered computing capacity to AI companies, is down more than -4% in premarket trading and on track for a weekly decline of nearly -20%, as investors question its ability to finance expansion at higher borrowing costs. Meanwhile, in Asia, Indonesian stocks suffered their worst one-day decline since the 1998 Asian financial crisis after index provider MSCI warned that the country could lose its emerging-market status over concerns about market transparency and investability. Such a downgrade could force index-tracking funds to sell Indonesian equities, adding to pressure on a market already down nearly -40% year-to-date.
North American equities finished higher yesterday as investors rotated away from AI trades into more traditional sectors amid concerns about elevated tech valuations, rising borrowing costs, and persistent inflation. The TSX finished 1.55% higher while the S&P 500 gained 0.33% and the Nasdaq even finished in the green after falling as much as -1.4% earlier in the session. Semiconductor and memory-related stocks remained under pressure, as investors questioned whether expanding Chinese production capacity could eventually create a memory chip glut and undermine current pricing strength. Concerns about the sustainability of AI infrastructure spending also arose following CoreWeave’s decline on Wednesday amid worries about excessive borrowing.
The EU is looking to strengthen its trade defenses against China, including developing measures that could completely block some Chinese goods from entering in some cases. EU leaders have asked the European Commission to present proposals by year-end, alongside potential import quotas targeting industries such as chemicals and machinery, as concerns grow over Chinese subsidies, industrial overcapacity, and aggressive pricing practices. The tougher stance follows a record $34.8 bln EU trade deficit with China last month, when Chinese exports to the bloc rallied 36% YoY, raising concerns about the competitiveness of European manufacturers. Germany, which has been reluctant to impose restrictions in the past, has become a leading advocate for stronger measures, with officials emphasizing the need to protect domestic industries from unfair competition.
Global EV sales declined 2% y/y in September, ending six consecutive months of growth as record demand in Europe failed to offset weakness in China and North America. Worldwide EV sales totalled 2.15 mln vehicles during the month, although year-to-date sales remain 3% higher at 15.5 mln. Europe was the standout market, with nearly 600,000 EV sales, its strongest month on record and 10% above its previous peak in June, helped by strong consumer demand and government incentives. On the other hand, North American EV sales fell -44%, their steepest monthly drop of the year. The weakness was likely due to the expiration of U.S. federal EV tax credits and unusually strong purchases ahead of that deadline last year. Chinese EV sales also weakened, falling -18% to 1.11 mln vehicles, as sluggish domestic demand pushes manufacturers to rely on exports to sustain production and growth. Analysts expect North American year-over-year comparisons to become less drastic in Q4 as the market moves past the elevated sales recorded before the expiration of tax incentives.
Strategists are bullish on EM debt within global fixed-income portfolios, saying that resilient economic growth, attractive real yields, and supportive monetary policies should allow EM bonds to continue outperforming developed-market counterparts over the next 6–12 months. However, some warn that absolute returns may be weak as inflation, higher energy prices, and rising U.S. Treasury yields put upward pressure on global borrowing costs. Strong investment in AI, defense, infrastructure, and supply-chain diversification continues to support EM economies, while relatively high real interest rates and proactive central-bank tightening can provide buffers against any unexpected shocks. Experts expects local-currency EM bonds to slightly outperform U.S. dollar-denominated EM debt, helped by higher yields, stronger credit quality, and the potential for EM currencies to appreciate against the U.S. dollar.
Oh là là. French stocks are having a tough year, lagging their European peers by the widest margin since 2010. The CAC 40 is down nearly -3% this year, compared with a gain of more than 9% for the Euro Stoxx 50, as fiscal concerns and political uncertainty weigh on investor confidence. A sell-off in French government bonds pushed 10-year yields close to 5%, their highest in nearly 25 years, with public debt approaching 120% of GDP. The sell-off has been pronounced among French banks, with Société Générale and BNP Paribas falling more than -20% and -19%, respectively, since August. Luxury brands LVMH, Hermès and Kering have also struggled, while automakers face pressure from U.S. tariffs and Chinese competition. France’s limited exposure to technology and energy stocks has added to the underperformance. With a contentious €54 billion budget savings plan and a presidential election approaching in April, investors are demanding a higher risk premium for French assets. Some strategists see opportunity in discounted valuations, but others warn that continued political uncertainty and weaker economic growth could keep French stocks under pressure.
The gamers vs the hall of famers. In one of baseball’s most improbable postseason upsets, the Milwaukee Brewers swept the two-time defending World Series champions, the LA Dodgers, 4-0 in the NLCS, ending LA’s bid for a historic three-peat. Milwaukee completed the sweep with a 6-4 comeback victory last night, overcoming a 4-0 deficit following a three-run homer from Shohei Ohtani. The contrast between the two teams could hardly be greater. The Dodgers’ estimated payroll and luxury-tax costs total $522.7 million, compared with just $144.5 million for Milwaukee. Perhaps the sweetest part of the story is that the Brewers were swept by these very same Dodgers in last year’s NLCS. Twelve months later, they’ve returned the favour and booked their first trip to the World Series since 1982, where they will go for their first championship. You couldn’t have written a better script. As Brewers manager Pat Murphy put it, “They may have a bunch of Hall of Famers, but we’ve got a bunch of gamers — and the gamers won this week.”
Diversion: Still got it
