A Reuters Open Interest newsletter |
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What matters in U.S. and global markets today |
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Wall Street's 'fear gauge' of implied stock market volatility touched its highest in almost four months on Tuesday as a fresh wave of AI excitement jostled with trade war tensions and the onset of the third quarter earnings season. The VIX earlier hit its highest since mid-June as U.S.-China trade exchanges turned sour again overnight following Monday's Broadcom-led stock rebound. Tuesday's packed diary includes Q3 updates from the big U.S. banks, a keynote speech from Federal Reserve Chair Jerome Powell and the International Monetary Fund's World Economic Outlook. U.S. stocks snapped back on Monday, with chipmakers leading the charge as Broadcom soared 10% on news of an OpenAI partnership and Google announcing $15 billion of investments in datacenters in India. But weekend hopes of cooling U.S.-China trade tensions were undermined again as the two countries began charging additional port fees on ocean shipping firms that move everything from holiday toys to oil. Treasury Secretary Scott Bessent said there was still a chance to avert 100% U.S. tariffs on November 1 and that a meeting of the two countries' leaders was still possible. U.S. stock futures relapsed about 1% before Tuesday's bell, however, and yields on Treasuries, which had not traded on Monday's Columbus Day holiday, plunged further. The 30-year bond yield plummeted to its lowest since the April trade shock even as the dollar firmed, with Bessent saying the ongoing government shutdown was hitting the economy and "getting serious". Overseas, Japan's Nikkei dived 2.5% after a long weekend, clocking its sharpest one-day drop since April as investors fretted over uncertainty around the country's next prime minister. In France, newly re-appointed Prime Minister Sebastien Lecornu addresses parliament on Tuesday to spell out his budget priorities. U.S. crude oil prices slipped to their lowest since May, and gold hit a new record at $4,179 per ounce - but bitcoin continued its sharp retreat and is now down more than $10,000 from its October 6 peak. |
- Broadcom jumps on OpenAI partnership: Broadcom surged almost 10% after partnering with OpenAI to produce the startup's first in-house AI processors, turbocharging a broader chip rebound as the PHLX semiconductor index jumped nearly 5% and AI bellwethers such as Nvidia and Micron rallied. The move reinforced AI as the market's primary dip-buyer theme, even as U.S.-China trade tensions simmer in the background.
- JPMorgan Chase launched a $1.5 trillion plan on Monday to facilitate, finance and invest in industries deemed critical to U.S. national security and economic resilience, including defense, energy and advanced manufacturing. JPMorgan, Goldman Sachs, Citigroup and Wells Fargo report today, kicking off a season that doubles as a macro proxy while official releases are delayed. Investors will parse net interest income resilience, the market's rebound and any tariff or shutdown dents to activity, with consensus pointing to high-single-digit S&P 500 earnings growth.
- Japan stumbles: The Nikkei fell as much as 3% and the yen firmed after Japan's finance chief flagged the need for a new strategy that addresses inflation, adding to political uncertainty already weighing on risk appetite. With BOJ policy expectations and leadership cross-currents in the mix, Japan's equity volatility is bleeding into broader Asia risk.
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Gold buyers dodging bubbles may be blowing one |
Some investors may be buying gold to dodge the next bubble, whether that be overheated tech stocks, rising government debt or even elevated inflation. But what if the scramble for gold itself is the real bubble? The 56% rise in gold so far this year has been remarkable mainly because it's coincided with a steep rebound in U.S. and global stocks since April. Global trade fears and geopolitical risks may reasonably have explained the surge in demand for physical gold as a safe haven or diversification tool immediately following Donald Trump's return to the White House in January. But the bullion boom has continued even as stock markets have recovered sharply from the April lows and uncertainty gauges have eased somewhat. |
Graphics are produced by Reuters. |
To be sure, lax global fiscal and monetary policies - including threats to the independence of the Federal Reserve and other central banks - have also boosted global inflation concerns, weighing on real interest rates and flattering the zero-yielding precious metal. And there's the fairly open desire of the Trump administration to weaken what it sees as an overvalued dollar. But determining whether a gold rally has gone too far is tricky. Unlike stock valuations, which are pretty straightforward, there's no consensus view on how to value gold. So gold has more than doubled in five years and is up over 250% in the past decade. When is that too much? |
What's not in doubt is that almost everyone still appears bullish - the sort of behavior often associated with bubbles. And that fact alone may be a good reason for investors to be skeptical about what happens next. |
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Graphics are produced by Reuters. |
The AI boom ignited by ChatGPT's launch in late 2022 has continued to fuel staggering capital outlays and data center expansion despite a brief crisis of confidence sparked by China's cheaper DeepSeek model and periodic market concerns over Trump's tariff policies. Citigroup last month raised its forecast for AI-related infrastructure spending by tech giants to surpass $2.8 trillion through 2029, from $2.3 trillion estimated earlier, citing aggressive early investments by hyperscalers and growing enterprise appetite. |
- U.S. NFIB small business survey for September (6:00 AM EDT); Canada August building permits
- Federal Reserve Chair Jerome Powell speaks (12:20 PM EDT) in Philadelphia, Fed Board Governor Christopher Waller speaks in Washington, Boston Fed President Susan Collins speaks in Boston; European Central Bank policymakers François Villeroy de Galhau and Sharon Donnery speak in New York; Bank of England policymaker Alan Taylor speaks in London
- The International Monetary Fund releases World Economic Outlook (9:00 AM EDT) as IMF-World Bank meetings get underway in Washington. Speakers at the IMF meeting include Federal Reserve Vice Chair for Supervision Michelle Bowman, European Central Bank President Christine Lagarde, Irish Central Bank Governor Gabriel Makhlouf
- French Prime Minister Sebastien Lecornu addresses parliament to spell out his budget priorities (8:00 AM EDT)
- U.S. corporate earnings: JPMorgan, Goldman Sachs, Citigroup, BlackRock, Wells Fargo, Johnson & Johnson, Domino's Pizza
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