November lift ahead of tariff hearing

Following last week's meeting between Trump and China's President Xi Jinping in South Korea, the White House announced Saturday that China would lift export controls on rare earths and end probes into U.S. chip firms. But Trump said AI giant Nvidia's most advanced chips would be reserved for U.S. companies and kept out of China and other countries.

October manufacturing surveys are due to give some glimpse of nationwide activity later amid an official economic data outage that's accompanying the ongoing government shutdown, now heading for a record in excess of 35 days this week. Federal food aid lapsing this month is seen by some as one reason politicians may be forced to end the dispute soon.

But however damaging the shutdown may prove to be in the final quarter, the third quarter was an impressive one for corporate America after a turbulent start to the year.

According to LSEG data, Q3 annual profit growth for the S&P 500 is now estimated to be running at almost 14% - five percentage points faster than estimated a month ago and faster than was penciled in at the start of the year.

With the likes of Palantir and Eastman Chemical in today's earnings diary, the picture appears to be brightening beyond the red-hot AI sector.

Wall Street index futures are higher heading into Monday's open, with crude oil prices steady despite the weekend OPEC decision. Treasury yields edged lower from Friday's highs, while the dollar nudged up to three-month highs.

Fed bank presidents on Friday aired their discomfort with the decision to ease policy, and traders are now pricing in just a 68% chance of another 25 bps cut in December. Pushing again for the Fed to ease more, Treasury Secretary Scott Bessent said on Sunday that parts of the economy, particularly housing, may already be in recession because of high rates.

One event being watched closely this week is the start on Wednesday of Supreme Court arguments about the legality of a whole swathe of Trump's tariffs. While even a ruling against may just see the tariffs enacted under different legislation, it could create a hiatus in the process and involve rebates to firms that have paid.

Overseas, the focus was on relatively downbeat factory surveys for last month - with the euro, yuan and yen all a touch weaker. However, most global bourses were higher on Monday.

Seemingly Teflon U.S. Treasuries have good reason to sit up and take notice of another twist in the AI story last week, one that could add pressure alongside a more hesitant Federal Reserve. What if the corporate AI spending spree now starts to compete with the government for borrowed funds?

Amid all the hoopla around another blistering quarter of AI investment plans from America's megacaps, Meta's $30 billion bond sale jumped out as a sign that not all of the hyper-spending is being funded by deep wells of cash. Leverage is creeping into a capex boom that's estimated to hit some $400 billion overall this year alone.

Graphics are produced by Reuters.

The U.S. Supreme Court considers the legality of Trump's global tariffs, with arguments set to be outlined on Wednesday. The court, whose 6-3 conservative majority has backed Trump in a series of major decisions this year, is hearing his administration's appeal after lower courts ruled the Republican president overstepped his authority in imposing sweeping tariffs under a federal law meant for emergencies. A ruling striking down Trump's use of the 1977 International Emergency Economic Powers Act, or IEEPA, to quickly impose broad global tariffs also would eliminate a favorite tool to punish countries that draw his ire on non-trade political matters. Administration officials say the tariffs will remain under one legal authority or another if the court rules against these measures.  

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