Breakfast | Powell hints at continued rate cuts, tech stocks drag down US stocks

Market Overview

Trade concerns reignite, tech stocks pull down US markets. Among the three major US stock indices, only the Dow Jones closed higher. After Powell's speech, the S&P, which initially fell over 1%, turned positive, while the Nasdaq, which initially dropped over 2%, nearly erased its losses at one point. However, by the end of the session, the S&P turned negative, and the Nasdaq's losses widened. The chip index fell over 2%, with Nvidia down over 4% and Broadcom down 3.5%. The China concept index dropped nearly 2%, with Nio down over 5% and Alibaba down over 2%. After reporting strong third-quarter results, luxury goods giant LVMH saw its US stock rise nearly 9%.

US Treasury prices saw a reduction in gains, with the yield on the ten-year Treasury note dipping below 4.0% for the first time in nearly a month during intraday trading, before erasing the decline. The dollar index turned negative after approaching a two-month high; the offshore yuan fell over a hundred points during intraday trading, nearing 7.15; cryptocurrencies retreated, with Bitcoin dropping over 5% and Ethereum at one point down over 9%.

Gold set a new historical high for two consecutive days, with spot gold rising nearly 2%; silver futures continued to set closing highs but turned negative after rising over 4% during intraday trading; copper futures fell over 4% during intraday trading. The IEA raised its expectations for global oil market oversupply, causing crude oil to retreat to a five-month low, with US oil dropping 3% during intraday trading.

During the Asian session, both A-shares and Hong Kong stocks fell, with the ChiNext index dropping nearly 4%. Semiconductor stocks collectively declined, the Hang Seng Index fell over 3% for seven consecutive days, while Shanghai gold and silver retreated after reaching highs, and government bonds rebounded.

Key News

A spokesperson for the Ministry of Commerce of China responded to reporters regarding the implementation of US restrictions on China's shipbuilding and other industries under the 301 investigation: China expresses strong dissatisfaction and resolute opposition; China announced countermeasures against five US-related subsidiaries of Hanwha Ocean Co., Ltd.; CCTV's YuYuan Tan Tian: The Ministry of Commerce has stated four times since May: If you fight, we will accompany you to the end; if you talk, the door is wide open.

Li Qiang presided over a symposium with economic experts and entrepreneurs, emphasizing the need to continuously strengthen domestic demand and enhance the domestic circulation, constantly forming new growth points for expanding domestic demand.

Powell opens the door for Fed rate cuts: There hasn't been much change in the outlook since the September meeting, with significant risks to employment, possibly nearing the end of balance sheet reduction, and signs of tightening liquidity, he will act cautiously to avoid a repeat of the "taper tantrum" in 2019; "New Federal Reserve News Agency": The Fed remains on track for further rate cuts.

Fed Governor Bowman: Two more rate cuts are expected before the end of the year, with a new stress test proposal set to be announced soon.

ECB President Lagarde: Will never say that the European Central Bank has completed rate cuts.

Last week, the precise "whale" targeting the crypto market took new actions, denying "Trump insider trading" and increasing short positions to $340 million.

Oracle's "Analyst Day" on October 16 attracted the attention of the entire market; Oracle Cloud announced it will deploy 50,000 AMD chips, accelerating its move away from dependence on Nvidia

Report: Broadcom will launch new networking chips to challenge NVIDIA's dominance. Broadcom denies that the $10 billion client is OpenAI.

The world's largest luxury goods group LVMH saw an unexpected rebound in sales in the third quarter, with organic revenue reversing the decline and increasing by 1%, while growth in Asia, including China, was 2%. LVMH's stock surged nearly 9% in the US market.

Former Vanke President and CEO Zhu Jiusheng has been subjected to criminal coercive measures, having resigned in January this year.

Market Report

US and European Stock Markets: The S&P 500 fell 0.16%, closing at 6644.31 points. The Dow Jones rose 0.44%, closing at 46270.46 points. The Nasdaq fell 0.76%, closing at 22521.701 points. The European STOXX 600 index fell 0.37%, closing at 564.54 points.

A-shares: The Shanghai Composite Index fell 0.62%, closing at 3865.23 points; the Shenzhen Component Index fell 2.54%, closing at 12895.11 points; the ChiNext Index fell 3.99%, closing at 2955.98 points.

Bond Market: By the end of the bond market, the yield on the US 10-year benchmark Treasury bond was about 4.03%, unchanged from the previous trading day last Friday; the yield on the 2-year US Treasury bond was about 3.48%, down about 2 basis points during the day.

Commodities: WTI November crude oil futures fell 1.33%, closing at $58.70 per barrel. Brent December crude oil futures fell 1.47%, closing at $62.39 per barrel. COMEX December gold futures rose 0.74%, closing at $4163.4 per ounce. COMEX December silver futures rose 0.38%, closing at $50.622 per ounce. COMEX December copper futures fell 2.35%, closing at $5.023 per pound.

News Details

Global Highlights

China Central Television: The Ministry of Commerce of China released multiple messages on Tuesday, with one statement drawing attention. Since May this year, the Ministry of Commerce has made four statements—Fight, we will accompany to the end; Talk, the door is wide open.

The spokesperson of the Ministry of Commerce answered reporters' questions regarding the 301 investigation restrictions on China's shipbuilding and other industries. China expressed strong dissatisfaction and resolute opposition, having announced on October 10 that it would impose special port fees on vessels with American elements, including those flagged, built, owned, or operated by American companies

• China decides to retaliate, taking countermeasures against five U.S. subsidiaries of Hanwha Ocean Co., Ltd. According to the press office of the Ministry of Commerce, on October 14th, U.S. Eastern Time, the U.S. began implementing final measures in the Section 301 investigation into China's maritime, logistics, and shipbuilding sectors, which seriously violate international law and basic principles of international relations, severely harming the legitimate rights and interests of Chinese enterprises. The U.S. subsidiaries of Hanwha Ocean Co., Ltd. assisted and supported the U.S. government in conducting the Section 301 investigation and taking measures against China's maritime, logistics, and shipbuilding industries. China expresses strong dissatisfaction and resolute opposition to this.

The nature of actions against Nexperia is extremely malicious! Global Times editorial: The Netherlands should not underestimate China's determination and ability to safeguard its legitimate rights. The Dutch government has frozen operations of Nexperia, a subsidiary of Chinese company Wingtech Technology, citing "economic security" and suspended Chinese control. Wingtech Technology strongly protests this discriminatory intervention, and the Chinese Ministry of Foreign Affairs clearly opposes the broadening of the national security concept, highlighting the increasing risks to Chinese enterprises' overseas assets amid geopolitical games.

Li Qiang presides over a symposium on economic situation with experts and entrepreneurs. Li Qiang emphasized the need to strengthen and enhance counter-cyclical adjustments, fully utilize policy resources, and address bottlenecks through reform. Efforts should be continuously made to expand domestic demand and strengthen the domestic circulation, constantly forming new growth points for expanding domestic demand. Multiple measures should be taken to create a first-class industrial ecosystem, comprehensively manage disorderly and irrational competition in the industry, and focus on building an innovation ecosystem.

Powell opens the door for Fed rate cuts: Since the September meeting, the outlook has not changed much, with significant downside risks to employment, possibly nearing the end of balance sheet reduction.

• Powell stated that data before the government shutdown indicated that economic growth might be slightly more robust than expected, "the risks of employment downturn seem to have increased"; hiring has slowed, and employment may decline further; reserves remain ample, possibly nearing the level required to stop balance sheet reduction in the coming months; there are signs that liquidity is tightening, will act cautiously to avoid a repeat of the "taper tantrum" in 2019; other indicators cannot replace official data; warned that if the Fed cannot pay interest on reserves, it will lose control of interest rates, causing greater disruption to the market. When asked about rising gold prices, he declined to comment on asset prices.
• "New Federal Reserve News": Powell keeps the Fed on track for further rate cuts.

Federal Reserve Governor Bowman: Two more rate cuts are expected before the end of the year, new stress test proposals to be announced soon. Federal Reserve Governor Bowman expects two rate cuts before the end of the year, with current risks more focused on employment. The Fed is advancing a gradual reform proposal for the stress testing process The central bank has promised to disclose specific stress test models to banks in advance to balance the annual fluctuations in capital adequacy ratios.

European Central Bank President Christine Lagarde: Will never say that the European Central Bank has completed interest rate cuts. Investors and analysts generally believe that after eight interest rate cuts within a year, bringing the European Central Bank's deposit rate down to 2%, the rate-cutting cycle may have ended. Lagarde recently stated that it cannot be announced that the rate-cutting cycle has ended, and preparations are in place just in case, as even in a good state now, situations may still change.

Last week, the "whale" that accurately targeted the crypto circle has new moves, denying "Trump insider," increasing short positions to $340 million! The mysterious trader "whale" has acted swiftly and decisively, depositing $40 million in principal on Monday, and using 10x leverage to establish a short position in Bitcoin with a nominal value of about $340 million. Data shows that the average entry price for this position is $116,009. As of now, this trade has recorded an unrealized profit of over $700,000.

The first new high after the massive liquidation in the crypto circle: Binance Coin (BNB) hits a historic high. Against the backdrop of a $19 billion "epic liquidation" in the crypto circle over the weekend, Binance Coin quickly regained lost ground and reached a historic high of nearly $1,370 on Monday. Reports indicate that Huaxing Capital is planning to raise about $600 million to establish a public investment tool focused on accumulating BNB, and the family office of Binance co-founder Zhao Changpeng also plans to participate in the investment. The number of monthly active addresses on the BNB Chain has reached a record 59 million.

On October 16th "Analyst Day," Oracle attracts the attention of the entire market this time. An unprecedented RPO growth in the first fiscal quarter has created extremely high expectations, and during this "Analyst Day," investors' focus has shifted to the capital expenditures and profit margin impacts required for the success driven by AI. Additionally, analysts have concerns about the feasibility of delivering large-scale AI contracts signed by Oracle with OpenAI, NVIDIA, and others.

• Oracle Cloud announces will deploy 50,000 AMD chips, accelerating the reduction of dependence on NVIDIA. Oracle's data centers will begin deploying 50,000 upcoming MI450 AI chips from AMD starting in the third quarter of 2026. The MI450 is AMD's first AI chip that can be assembled into rack-level systems, allowing 72 chips to work together to support the training and deployment of advanced AI algorithms Report: Broadcom to Launch New Network Chip, Challenging Nvidia's Dominance. Following a significant cooperation agreement with OpenAI, Broadcom has released the Thor Ultra network chip, which can deploy a far greater number of chips in data centers than ever before, providing underlying network support for AI applications such as ChatGPT. The launch of the new chip will strengthen Broadcom's control position in AI data center network communication and create direct competition with Nvidia.

• The $10 Billion Client is Not OpenAI, Does Broadcom Have Other Major Clients? According to reports, the president of Broadcom's semiconductor solutions group has officially clarified that OpenAI is not the mysterious $10 billion client announced in its September financial report. Although Broadcom has indeed reached a cooperation agreement with OpenAI to jointly build a custom AI accelerator, the project is expected to be completed by 2029, but this is not the $10 billion order rumored earlier. With OpenAI excluded, speculation about the identity of Broadcom's mysterious $10 billion client has resumed.

Walmart Partners with OpenAI to Offer Shopping Services on ChatGPT Platform. Users can simply click the "buy" button in ChatGPT to directly purchase Walmart's products. These products include clothing, entertainment, packaged food, and other items from Walmart and its subsidiary Sam's Club.

In the third quarter, the world's largest luxury goods group LVMH saw an unexpected rebound in sales, with organic revenue reversing the decline and increasing by 1%, with revenue growth in both major markets. In the U.S., organic revenue grew by 3%, while analysts had expected a growth of 1.9%. In Asia, excluding Japan and including China, organic revenue grew by 2%, while analysts had expected a decline of 3.6%. Among the major businesses in the third quarter, only fashion and leather goods saw a decline in organic revenue, down by 2%. The specialty retail business, including Sephora, saw a significant organic revenue increase of 7%. After the earnings report, LVMH's U.S. stock rose during trading, closing up 8.8%.

Former Vanke President and CEO Zhu Jiusheng Taken Under Criminal Coercive Measures, Resigned in January This Year. According to Daily Economic News, Zhu Jiusheng served at China Construction Bank Shenzhen Branch from 1993 to 2012 before joining Vanke. In external communications, Zhu Jiusheng has always presented himself as mild, but internally, he is often described as "decisive and efficient."

Domestic Macro

People's Bank of China: Will Continue to Uphold the Decisive Role of the Market in Exchange Rate Formation and Strengthen Expectation Guidance. According to the Financial Times, the head of the monetary policy department of the People's Bank of China stated in an interview that looking ahead, China's macroeconomic fundamentals are solid, and the international balance of payments is expected to maintain autonomous equilibrium, with a solid foundation for medium- and long-term exchange rate stability However, the factors influencing exchange rates are diverse. We will continue to adhere to the decisive role of the market in exchange rate formation, maintain exchange rate flexibility, strengthen expectation guidance, prevent exchange rate overshooting risks, and keep the RMB exchange rate basically stable at a reasonable and balanced level.

Overseas Macro

"Trump's Banker": Helped Trump's Sons Earn Over $500 Million. Investment banker Kyle Wool collaborated with Trump's two sons through his company Dominari Holdings, with the core model being to leverage the Trump family's influence to drive up stock prices. Wool previously worked at major firms like Morgan Stanley and later moved his company's headquarters to Trump Tower, spending years cultivating relationships with the Trump family. He arranged for Donald Jr. to invest in a drone company, yielding a profit of $4.4 million.

Reproduction of Trump's Cryptocurrency Gala? Trump's Allies Frenziedly Sell Sponsorships for "Basent AI Conference," Pay to Participate in VIP Cocktail and Dinner. Whether it’s the raucous cryptocurrency gala in August or the seemingly professional AI summit scheduled for October 21, the core logic appears unchanged—money is being used to buy opportunities to access the centers of power within a framework closely tied to the Trump brand.

BofA Fund Manager Survey: U.S. Stock Allocation Turns Overweight for the First Time in 8 Months, Over Half Believe AI is in a Bubble. BofA's survey shows that about 54% of participants believe tech stock valuations are too expensive, a significant increase from last month. Despite concerns about a bubble in AI stocks, U.S. stock allocations have risen against the trend, with fund managers' exposure to U.S. stocks reaching the highest level in 8 months, returning to levels prior to the resurgence of tariff concerns.

Gold Supported by Central Banks While Silver Is Not, Goldman Sachs: A Slight Decline in Investment Could Lead to Significant Silver Price Corrections. Goldman Sachs believes that as the Federal Reserve cuts interest rates to attract capital inflows, silver's medium-term outlook remains promising for further increases. However, in the short term, the volatility and downside risks faced by silver far exceed those of gold. The silver market has poor liquidity and is only one-ninth the size of the gold market, amplifying price fluctuations. Additionally, silver is the only major commodity lacking structural buying support from central banks, meaning any temporary decline in investment inflows could trigger disproportionate price corrections.

IEA Monthly Report: Record Oil Surplus Expected Next Year. The latest monthly report from the IEA indicates that global oil supply will exceed demand by nearly 4 million barrels per day next year, reaching an unprecedented level of annual surplus. At the same time, the IEA slightly lowered its consumption growth forecast for this year and raised its supply expectations for non-OPEC countries in the coming two years

Overseas Companies

OpenAI "can't stop," adding $350 billion to $500 billion in orders! "If you owe the bank $100, that's your problem. If you owe Broadcom $500 billion, that's Broadcom's problem. If you owe every major tech company hundreds of billions, that's their problem. They will definitely find a way to solve it! Or you will. The money problem will solve itself."

• Collaborating with Broadcom to design AI chips and with Arm to design CPUs, OpenAI's stock price soars in response. OpenAI's partnership with Broadcom has driven its stock price up by 11%, and it has been reported that it is in talks with Arm to design AI server CPUs, causing Arm's stock price to surge over 11% again. This not only highlights OpenAI's ambitions in the chip sector but also underscores the crucial role played by SoftBank as its major shareholder. This series of deep collaborations signals the formation of an "AI alliance," but it also comes with significant capital challenges.

Google invests $15 billion in southern India to build the largest AI hub outside the U.S.. Google's parent company Alphabet announced on Tuesday that it will invest $15 billion over the next five years to build an artificial intelligence data center hub in Visakhapatnam, Andhra Pradesh, making it the company's largest data center facility outside the U.S. The project will feature new energy systems and fiber optic networks, becoming part of Google's global AI center network.

Intel unveils new GPU Crescent Island, customer testing to begin next year.. Intel released its new GPU "Crescent Island" on Tuesday, focusing on high energy efficiency and low-cost AI inference, equipped with 160GB LPDDR5X memory and utilizing the next-generation Xe3P microarchitecture. The card will begin customer testing in the second half of 2026 as part of Intel's strategy to build an open AI system architecture.

LVMH's third-quarter revenue unexpectedly grows by 1%, Sephora shines, ADR surges by 8%.. LVMH achieved a 1% organic revenue growth to €18.28 billion in the third quarter, ending two consecutive quarters of decline. The fashion and leather goods segment fell by 2% but was better than expected, while the luxury retail segment Sephora grew by 7%, showing strong performance. The Chinese market saw a 2% growth, reversing a 9% decline in the first half of the year. Following the earnings report, ADR soared over 8%, boosting the entire luxury goods sector, with Kering Group ADR rising by 5.67% and Richemont Group ADR also increasing by 4% JP Morgan's Q3 profits exceed expectations, investment banking revenue surges 16%, trading business hits record. JP Morgan's Q3 revenue and profits both exceeded expectations, with a slight upward adjustment of the full-year net interest income from approximately $95.5 billion in July to about $95.8 billion. The investment banking business fully recovered, with fee income of $2.6 billion, a year-on-year increase of 16%; ranked first in global investment banking fees; the trading business set a historical high with revenue of $8.9 billion, a year-on-year surge of 25%, setting a Q3 historical record.

Goldman Sachs Q3 revenue hits historical high for the same period, investment banking business strongly recovers, assets under management reach $3.45 trillion. Goldman Sachs reported net revenue of $15.18 billion in the third quarter, setting a record for the highest revenue in the same period in the company's history and the third highest quarterly revenue ever; net profit increased by 37% year-on-year. Driven by a wave of mergers and acquisitions, investment banking revenue soared by 42%, significantly exceeding market expectations. Total assets under management rose to $3.45 trillion, setting a new historical high.

Citi's Q3 performance is strong, with all five business segments achieving record revenue, shareholder returns reach $6.1 billion. Citi's Q3 net income was $22.1 billion, a year-on-year increase of 9%; earnings per share were $1.86. Notably, all five business segments flourished: services, markets, banking, wealth management, and U.S. personal banking all set Q3 revenue records, demonstrating significant results from business transformation; shareholder returns were unprecedented, with approximately $6.1 billion returned to shareholders in a single quarter.

Johnson & Johnson's Q3 performance exceeds expectations, plans to spin off orthopedic business to cope with Trump’s drug price pressure. The company’s Q3 revenue increased by 6.8% year-on-year to $23.99 billion, exceeding market expectations, and the earnings report raised the full-year revenue forecast. Johnson & Johnson plans to separate its orthopedic business from other operations within 18 to 24 months to address tariff pressures.

AI ignites memory demand, Samsung profits reach the highest since 2022, stock price hits a new high. Thanks to the surge in demand for memory chips driven by AI development, Samsung Electronics' operating profit in the third quarter reached 12.1 trillion won, far exceeding the expected 9.7 trillion won, marking the highest quarterly profit since 2022. At the same time, Samsung has made progress in the HBM chip field, having secured orders from AMD and is seeking final approval from NVIDIA, aiming to catch up with competitor SK Hynix. The company's stock price rose over 3% on Tuesday, reaching a new high.

Today's News Preview

China's September CPI and PPI. France's September CPI.

Goldman Sachs predicts: The U.S. government may end the shutdown on October 15.

The Federal Reserve releases the Beige Book on economic conditions.

Federal Reserve Governor Michelle Bowman and Atlanta Fed President Raphael Bostic speak.

European Central Bank President Christine Lagarde speaks.

2025 IMF and World Bank Annual Meetings in the fall.

ASML, Bank of America, and Morgan Stanley release earnings reports