Equities are rising to start the week, as optimism over a major regional bank merger in the U.S. and AMD’s new AI partnership with OpenAI fueled hopes for broader M&A momentum, even as the government shutdown entered its second week. Alongside the U.S. government shutdown, Japan is set for a policy reset after Sanae Takaichi won the ruling party leadership, positioning her to become the country’s first woman prime minister. Japan’s Nikkei and Topix stock indexes jumped to all-time highs while the yen weakened on the headlines. In France, Prime Minister Sebastien Lecournu resigned after less than a month, the fourth PM to depart in just over a year, highlighting President Macron’s difficulty in forming a stable government. The CAC 40 slipped and French bond yields rose.
The U.S. government shutdown is set to dominate investor focus this week as markets enter the seasonally strong fourth quarter, with equities near record highs and earnings season approaching. While few expect the political impasse to derail the 14% year-to-date S&P 500 rally, the shutdown threatens to delay key economic data, complicating the Fed’s policy outlook and potentially weighing on growth if prolonged. Still, most investors remain optimistic, citing strong corporate earnings, expectations for further rate cuts, and historical fourth-quarter strength as reasons to remain optimistic.
Deal or no deal? Mark Carney will visit Washington tomorrow to meet Donald Trump as Canada seeks relief from steep U.S. tariffs on steel, aluminum, automobiles, and copper. Joined by key ministers, Carney aims to advance discussions on a new economic and security framework and explore sector-specific tariff deals ahead of next year’s CUSMA review. Despite earlier talks failing to yield a trade deal by Trump’s August deadline (and tariffs now raised to 35%), Canadian officials remain cautiously optimistic about progress. The visit comes amid heightened U.S.-Canada tensions, with Trump recently reviving his “51st state” rhetoric, underscoring the political strain even as both sides signal willingness to negotiate limited tariff relief.
Political shifts are front and center. in Japan, the ruling Liberal Democratic Party chose Sanae Takaichi as its new leader. Her selection signals continuity with supportive monetary policy for now, gradual normalization if wage and price gains hold, and a pro-growth focus on productivity, energy security, and defense. Near term, markets will watch her cabinet picks, the fiscal mix, and any guidance on the Bank of Japan’s path. In France, Prime Minister Sébastien Lecornu resigned after less than a month in office, reflecting President Macron’s difficulty to form a stable government. France’s debt burden and deficits remain a challenge. Recent prime ministers have tried to push through tighter budgets but were met with resistance and only partial measures. The question now is whether the next government can pass a budget that meaningfully reins in spending, and steadies funding costs.
Investor sentiment is turning increasingly positive for Emerging market assets as inflows into equities and bonds accelerate. A recent survey shows EM fund managers are the most optimistic since early 2021, helped by stronger-than-expected growth, easing inflation, and a softer U.S. dollar. The Fed’s rate cuts are giving emerging-market central banks room to loosen policy, while China’s stimulus measures and stock rally are lifting regional sentiment. ETFs tracking EM debt and equities have seen solid inflows, particularly into high-yielding currencies like the Brazilian real and Mexican peso. However, in Asia, hedge funds recently logged their largest selloff in over five months, led by profit-taking in Chinese, Indian, and Taiwanese stocks ahead of regional holidays. Despite this short-term pullback, EM Asia equities remain up 24% for the year, well ahead of global markets, with Korea and China among the standout performers.
China policy makers visiting Washington have been surprised after Trump was seen softening his stance towards Beijing as he pursues a major trade deal with Xi Jinping. Despite having reshaped U.S.-China relations through confrontation and tariffs, Trump is now seen as prioritizing business interests, particularly those of the tech industry, over national security concerns, including easing AI chip export restrictions for Nvidia and AMD and negotiating to keep TikTok operational. While some have criticized these shifts as dangerous concessions to the Chinese Communist Party, tech leaders such as Nvidia CEO Jensen Huang and Trump AI adviser David Sacks argue engagement through technology benefits the U.S. by keeping China dependent on American innovation.
Yes, savage! Twenty-two-year-old Trey Yesavage showed screaming Jays fans and dejected Yankees fans that he is built for the moment. In his playoff debut, and only his fourth major league start, he struck out 11 batters, a Blue Jays postseason-record, while holding New York hitless for over 5 innings. Toronto’s line up did its part by putting up 13 runs to go up 2–0 in the ALDS. The bats once again came to life for the second game in a row. Vladdy Guerrero Jr. found his hitting form again, hitting the first postseason grand slam in franchise history, Varsho nearly hit for the cycle and went 4-for-5 with two homers, and Ernie Clement added a two-run shot. The Jays are one win away from taking the ALDS and will try to finish the job in a very hostile Bronx. New York’s bats have been quiet, and their pricey arms outpitched, but nobody is counting the yanks out yet, especially the Jays. Let’s go Blue Jays.
Diversion: Think that’s out of bounds
