- BoE’s Greene warns waiting for second-round inflation effects would be too late
- Goldman sees Europe reserve release cutting diesel by $11 but shrugs off Russian supply
- Australian business confidence slides to -13 as oil shock and rate hikes bite, NAB says
- Just 32 countries now drive 95% of global growth as AI widens the gap, IMF warns
- Kospi plunges more than 6% below 6,000 as chip selloff and oil fears hit Asian stocks
- AI compute crunch deepens as chip rental costs jump 60% and rivals scramble for power
- PBOC sets USD/ CNY central rate at 6.7298 (vs. estimate at 6.6981), strongest since 2 February 2023
- BlackRock cuts US stocks to neutral and buys Treasuries as 10-year yield nears 5.25%
- RBA minutes show three reasons for hike to 4.60% and leave door open to further increases
- Japan wholesale inflation misses at 6.8% but stays high enough to keep BOJ hike alive
- Goldman Sachs says yuan undervalued by up to 25% and markets underestimate how far it can rise
- BofA sees gold struggling to hold $4,000 as Iran war oil shock keeps Fed hawkish
- Broadcom CEO likens AI boom to a casino even as he targets $230 billion in chip sales
- UK retail sales beat forecasts but fuel bill jump of 17% shows squeeze on shoppers
- Goldman Sachs sees three ways to rein in French bond spread as oil and politics weigh
- More on Standard Chartered adding RLUSD custody in Dubai, eyes LMAX collateral link for clients
- Saudi Arabia eyes 1.2 million bpd pipeline boost within weeks by converting gas line
- Fed’s Hammack says more tightening needed to cool demand, keeps open mind on pace
- JPMorgan says Q3 earnings will support stocks as growth spreads beyond AI
- Goldman Sachs flags power and compute as two chokepoints in the AI boom
Summary:
- Asian equities fell sharply, led by technology and chip stocks; South Korea’s Kospi slid about 7% to below 6,000, its lowest since July 31, while the Nikkei, ChiNext, CSI 300 and Shanghai Composite also fell
- Saudi Arabia is examining plans to raise pipeline crude export capacity to 10 million bpd, and its energy minister said converting a gas line could add 1.2 million bpd within seven to eight weeks; oil edged slightly lower
- US yields eased, helping gold higher and the US dollar softer; the yen firmed as Japan’s wholesale inflation stayed elevated at 6.8%, keeping a near-term BOJ hike in view
- RBA minutes reiterated a hawkish bias, citing inflation risks from capacity constraints, the Iran war and the AI boom, while the NAB survey showed weak conditions alongside strong price pressures
- Fed’s Hammack said she believes rates need to rise further, while BoE’s Greene warned that waiting for second-round inflation effects would be too late
- JPMorgan strategists expect third-quarter earnings to support stocks as US earnings season gets under way; BOJ Governor Ueda appears in parliament from 04:00 GMT (00:00 ET)
Asian equities
Asian stock markets came under heavy selling pressure on Tuesday, with technology and semiconductor shares leading the declines after a selloff in US chipmakers overnight. South Korea’s Kospi, heavily weighted toward chip stocks, extended its slide to about 7%, falling below 6,000 to its lowest level since July 31. Earlier in the session, Japan’s Nikkei was down 2.6%, while in China the tech-focused ChiNext fell 3%, the CSI 300 lost 1.3% and the Shanghai Composite slipped 1.2%.
The selling reflected growing unease over the durability of the AI-driven rally, together with concern that elevated oil prices linked to the Middle East conflict will keep inflation and bond yields high, weighing on expensive growth stocks.
Oil
Oil prices edged slightly lower. Saudi Arabia is examining plans to lift its pipeline crude export capacity to 10 million barrels per day, and Energy Minister Prince Abdulaziz bin Salman said converting a gas pipeline to carry crude could add 1.2 million bpd within seven to eight weeks. The plan would expand the kingdom’s ability to export through the Red Sea, bypassing the disrupted Strait of Hormuz.
Note that UKMTO tallied up Iranian forces reportedly managed to strike 6 commercial vessels in and near the Strait of Hormuz on Sunday alone. 6 ships struck mark the highest single-day tally since the war began.
Currencies, yields and gold
US Treasury yields eased slightly, which supported gold and left the US dollar a little softer. The yen firmed, also helped by Japanese producer price data. Japan’s wholesale prices rose 6.8% from a year earlier in September, below the 7.6% expected but still elevated as companies passed on fuel and chemical costs. Yen-based import prices jumped nearly 25%, keeping expectations of a near-term Bank of Japan rate hike alive. BOJ Governor Kazuo Ueda is scheduled to appear in parliament from 04:00 GMT (00:00 ET).
Australia
Minutes of the Reserve Bank of Australia’s September meeting, at which it raised the cash rate to 4.60%, reiterated the board’s hawkish bias. Members cited inflation risks from tight domestic capacity, the Iran war and the global AI boom, and said they would raise rates further if required. The NAB business survey for September showed weak conditions, with falls in employment and orders, alongside strong price pressures. Business confidence fell to -13.
Central bank speakers
Cleveland Fed President Beth Hammack said she believes interest rates need to rise further to restrain demand fuelled by AI investment and wealth-driven spending. She added that she would approach the 27 to 28 October meeting with an open mind on the timing of the next hike. In the UK, Bank of England policymaker Megan Greene said monetary policy is not that restrictive and argued that waiting for second-round inflation effects to appear would leave the bank acting too late. In her view, the greater risk is failing to act proactively rather than raising rates too soon.
Earnings ahead
Investors are now turning to a busy US earnings week. JPMorgan strategists said they expect third-quarter results to support equities as earnings strength broadens beyond AI. They argued that S&P 500 forecasts look more reasonable beneath the surface and that the bank’s lead indicator points to at least two positive reporting seasons.
This article was written by Eamonn Sheridan at investinglive.com.