A Reuters Open Interest newsletter |
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What matters in U.S. and global markets today |
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With the U.S. government still shut down and China on holiday, world markets lapped up Federal Reserve easing speculation and European stocks hit record highs - riffing off the available U.S. labor market data as well as AI and trade-related themes. Wall Street stocks shook off news of a surprising drop in private sector payrolls last month and the first day of the U.S. government shutdown on Wednesday. All three major indexes finished higher again and interest rate markets priced in a 95% chance of 50 basis points of more Fed rate cuts by yearend. Stock index futures were higher again before Thursday's bell, with short-dated Treasury yields at two-week lows, the dollar softer and crude oil prices at their lowest in four months. Wednesday's stocks bid was led by healthcare after Tuesday's Pfizer-Trump pricing deal set off sector rotation, while chips extended gains. Gold hovered near record highs and Bitcoin hit its best level in almost two months. Helped by the pharma rally and this quarter's start of Germany's fiscal boost, euro zone stock indexes - whose 33% gains this year in dollar terms are more than twice that of the S&P500 - hit new record highs. And with China on its Golden Week break, other Asian markets took the tech cue overnight, with South Korea's Kospi index up almost 3% after Samsung and SK Hynix signed letters to supply memory chips for OpenAI's data centers. Japan's Nikkei was also up almost 1% on a chip-driven rally after four down days. |
- Healthcare picks up the baton: The S&P 500 healthcare sector led gains as pharma names rallied, extending a move that began after Pfizer and President Trump unveiled a deal to cut Medicaid drug prices in exchange for tariff relief. Investors framed the sector pop as catch‑up after underperformance versus tech and the AI trade, with heavyweights like Biogen and Thermo Fisher surging.
- Bad news is good news: ADP showed private payrolls fell 32,000 in September and August was revised down, well shy of forecasts for a 50,000 gain. With the shutdown likely to postpone Friday's nonfarm payrolls release and Thursday's jobless claims update, markets penciled in quarter‑point cuts at both remaining 2025 meetings. With no official employment data likely this week, Challenger's report on September layoffs will be watched more closely than usual.
- Rotation under the hood: Utilities outperformed after AES spiked on a report of a potential $38 billion takeover by BlackRock's Global Infrastructure Partners, while materials lagged broadly. Lithium names bucked the sector's weakness as Lithium Americas and Albemarle rallied on news the U.S. Department of Energy took equity stakes in Lithium Americas and its GM joint venture.
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- President Trump's administration on Wednesday froze $26 billion for Democratic-leaning states, following through on a threat to use the government shutdown to target Democratic priorities.
- Tesla CEO Elon Musk on Wednesday became the first person ever to achieve a net worth of nearly $500 billion, propelled by a rebound in the EV company's shares and surging valuations of the tech entrepreneur's other startups this year.
- OpenAI, the company behind ChatGPT, has reached a valuation of $500 billion, following a deal in which current and former employees sold roughly $6.6 billion worth of shares, a source familiar with the matter told Reuters on Thursday.
- The European Union is currently debating how and when to halt its significant energy imports from Russia. One potentially easier option, writes ROI energy columnist Ron Bousso, would be closing loopholes that currently facilitate substantial imports of niche fuels from Moscow.
- As China faces a growth slowdown, the technology-driven "intelligent economy" and emerging consumption trends offer protection against slackening economic activity, but more targeted government policies will still likely be needed to sustain momentum. Read the latest from Emmer Capital Partners Ltd founder Manishi Raychaudhuri.
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Sign of the times as Swiss buy euros not dollars |
The Swiss National Bank may be a special case, but if you were looking for a switch in the behavior of central bank reserve managers in their currency preference, then the Swiss case is a curious vignette. The dollar is off the menu. The SNB's longstanding battle against the deflationary effects of a super-strong franc resumed in earnest this year as the U.S. tariff-related shock in April sent the dollar plunging and investors in search of safe havens, such as gold and francs. |
Graphics are produced by Reuters. |
With Swiss annual inflation relapsing to negative territory for the first time in four years, the SNB once again floored its policy interest rates back to zero in June. And it intervened with gusto on the open markets to weaken the franc as it soared early in the second quarter. |
On Tuesday, the SNB's quarterly balance sheet update showed it purchased 5.06 billion Swiss francs ($6.36 billion) of foreign currencies in the April-June period - the highest quarterly FX intervention for more than three years to add to its $1.1 trillion stash of reserve assets. What was just as unusual, given the circumstances in the spring and patterns of recent years, was that it appears the latest intervention was nearly all to buy euros. |
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Graphics are produced by Reuters. |
The absence of official U.S. payroll statistics due to this week's government shutdown has put the focus on other cuts of the jobs market - with the Bureau of Labor Statistics showing in its Job Openings and Labor Turnover Survey that hiring declined in August and there are now more people looking for work than there are available jobs. The Conference Board's September consumer confidence survey showed the gap between respondents' views on whether jobs are plentiful or hard to get narrowed to a more than 4-1/2-year low of 7.8 from 11.1 last month. |
- U.S. September layoffs from Challenger (7:30 AM EDT), US August factory goods orders (10:00 AM EDT)
- Dallas Federal Reserve President Lorie Logan speaks; European Central Bank Vice-President Luis De Guindos, French central bank chief Francois Villeroy de Galhau and Ireland's central bank boss Gabriel Makhlouf all speak
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