Equity futures are at fresh record highs, erasing a modest dip earlier in the session when a probe found that Nvidia violated anti-monopoly laws in China in a 2020 deal. That killed the mood at the start of a big week, with the Fed expected to make the first of a series of rate cuts, however the mood was promptly lifted again just after 6am ET when Elon Musk bought $1BN in TSLA stock sending the market cap soaring by over $100BN and lifting stocks to new all time highs. As of 8:00am ET, S&P 500 futures and Nasdaq 100 futures were higher by 0.2%. In premarket trading, Nvidia shares fell as much as 2.9% after China said it violated antitrust regulations after its acquisition of Mellanox. The surprise announcement came as US and Chinese officials headed into a second day of wide-ranging negotiations in Madrid over tariffs. Mag7 names are mixed with AAPL, AMZN, and GOOG up 90bp-108bp; TSLA soared 8% after Musk purchased $1bn of stock, his first open market purchase since February 2020. European stocks advanced in a rally led by luxury shares. US / China trade talks enter a second day today. Commodities are mixed with Energy up and Ags / Metals down. Today’s macro data focus is Empire Mfg ahead of tomorrow's Retail Sales and Weds' Fed meeting.
In premarket trading, Mag 7 stocks are higher: Tesla (TSLA) surges 7% after Elon Musk purchased about $1 billion worth of Tesla shares on Sept. 12, according to a filing with the US Securities & Exchange Commission. Nvidia (NVDA) slips 1.6% after China ruled that the company violated anti-monopoly laws with its 2020 deal to acquire Mellanox. Other peers are all green (Alphabet +1.2%, Microsoft unch, Apple +1%, Amazon +1.3%, Meta Platforms +0.2%).
Nvidia slipped 2.1% in premarket trading after Chinese regulators said that the chipmaker had violated anti-monopoly laws. Tesla rose nearly 6%. The Nvidia announcement landed as US and Chinese officials entered a second day of trade talks in Madrid, ratcheting up the pressure on Washington during sensitive negotiations.
“At this moment of the cycle, bad news just doesn’t stick,” said David Kruk, head of trading at La Financiere de l’Echiquier. “We’re about to enter a cycle of rate cuts with strong EPS growth, that’s a really great cocktail.”
The Fed won’t be the only major central bank in focus. Policy decisions from the Bank of Canada on Wednesday, the Bank of England on Thursday, and the Bank of Japan at week’s end will round out a packed calendar for half of the world’s 10 most-traded currencies. The key question this week is whether the Fed will push back against market wagers on a string of cuts extending into next year when officials gather on Wednesday. Traders are almost fully pricing reductions at each of the next three meetings, betting the Fed will lean toward supporting a softening job market even as inflation remains above target.
Meanwhile, options traders aren’t betting on volatility to resurface this week, even with Friday’s $5 trillion triple-witching expiration looming as well. Instead, the spotlight will also rest on upcoming employment data for hints on how fast and deep the Fed will have to cut. Options markets are pricing in a 0.78% move for the US nonfarm payrolls report Oct. 3 and 0.72% for Wednesday’s Fed rate decision.
“The week ahead for risk could be a bumpy ride, especially if the Fed deliver a message that lands hawkish,” said Michael Brown, research strategist at Pepperstone Group Ltd. “I still see the path of least resistance as leading higher, with economic and earnings growth solid, calmer tones prevailing on trade, and a looser monetary stance helping to juice things along.”
Tesla shares jumped as much as 7.3% in premarket trading. If the gains carry over into the regular trading session, the stock will return to positive territory for 2025, having recovered from a 45% decline as of early April. Musk, 54, last bought Tesla stock in the open market in February 2020, according to data compiled by Bloomberg. He offloaded more than $20 billion of the company’s shares in 2022, the year he acquired Twitter.
Europe's Stoxx 600 is up 0.4% with most sub-indexes in the green. Luxury names LVMH and Kering lift the CAC 40, up 0.9%, with French and Italian stocks outperforming peers. Sainsbury shares gained as much as 6.3% after terminating talks to sell its Argos unit, while AstraZeneca shares fell after Handelsbanken cut the stock to hold from buy. Turkish stocks, bonds and lira climb after a key court decision on the opposition party was adjourned. Here are the biggest movers Monday:
Earlier in the session, Asian equities extend September’s impressive performance as Chinese tech stocks continue pushing higher. The ChiNext index rallies more than 2% on CATL surge and Hang Seng Tech Index jumps more than 1%. Mainland indexes are in the green despite softer Chinese data. Kospi ekes out a modest gain after South Korea scraps capital gains tax plans on stocks. Taiex and ASX 200 indexes nurse small losses.
In rates, treasuries are mixed as US session gets under way after plying small ranges during Asia session and European morning, keeping yields within a basis point of Friday’s closing levels. Bunds and gilts outperform, with French bonds in focus after Friday’s downgrade by Fitch. US session has few calendar events Monday, ahead of Tuesday’s 20-year bond auction and Wednesday’s Federal Reserve policy announcement. US 10-year near 4.07% is less than 1bp higher on the day with bunds and gilts in the sector outperforming by 2bp and 2.5bp; French bonds also outperform, unwinding losses that followed the Fitch downgrade. French bonds rise broadly in line with European peers despite Fitch downgrading the country’s credit rating.
In FX, the Bloomberg Dollar Spot Index edges lower, trading in a narrow range, while sterling outperforms, trading at the highest since July. The pound led major currencies higher against the dollar. The yen strengthens to around 147.40/USD
In commodities, oil prices nudge higher with Brent trading above $67.40 barrel. Gold steady at around $3,641/oz.
The US economic data slate includes September Empire manufacturing at 8:30am New York time. Ahead this week are August retail sales, industrial production and housing starts.
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APAC stocks traded mixed with the region somewhat cautious ahead of this week's flurry of central bank updates and as participants digested disappointing Chinese activity data, while Japanese participants were away for a holiday. ASX 200 marginally declined amid weakness in the healthcare, mining and financial sectors, in which the latter was pressured by losses in Big 4 bank ANZ after it admitted to widespread misconduct related to incorrectly reporting bond trading data and agreed to pay AUD 240mln in penalties. Hang Seng and Shanghai Comp were kept afloat with the Hong Kong benchmark lifted by tech strength after China announced an antidumping investigation into certain US analogue chips and began an anti-discrimination investigation into US measures against China in the integrated circuit sector, while US and Chinese officials also began talks on TikTok and trade in Madrid on Sunday. Nonetheless, the gains were limited as participants also digested disappointing activity data.
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European bourses (STOXX 600 +0.5%) are broadly firmer across the board, in contrast to an overall mixed session in APAC trade. Price action this morning was initially only upward, however, while benchmarks are still firmly in the green, they waned from best in tandem to the general pullback seen on the China-NVIDIA update. European sectors hold a strong positive bias, with only a couple of sectors residing in negative territory. Consumer Products takes the top spot, largely boosted by gains in Luxury names following the disappointing Chinese Activity Data, which has increased calls for the country to implement further fiscal stimulus. Financial Services is found in second spot; UBS (+1.3%) gains following reports via the NY Post which reported that the Co. could move to the US as it seeks to avoid new capital requirements in Switzerland.
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US event calendar
DB's Jim Reid concludes the overnight wrap
Clearly this week is all about the FOMC conclusion on Wednesday and the likely continuation of the US rate cutting cycle that started exactly a year ago and got as far as one 50bps and two 25bps cuts, with the last being 9 months ago now. We'll preview the meeting below but it's not the only big central bank meeting this week with the Bank of Canada also meeting on Wednesday with the BoE (preview here) and Norges Bank on Thursday, and the BoJ (preview here) on Friday being the other main ones deciding on rates. Markets are pricing in an 85% probability of a Canadian cut, a 61% of a Norwegian one but minuscule probabilities of a change in Japan or the UK. By my count there are 16 global central banks deciding on rates this week with Brazil and Indonesia on Wednesday the largest of the rest, with markets expecting both to stay on hold.
Other highlights through the week are speeches from the likes of Lagarde and Schnabel from the ECB today; US retail sales, industrial production, and the NAHB index, alongside the UK employment data, Canadian CPI, the German ZEW survey and a 20yr UST auction tomorrow; US housing starts and permits, and UK inflation (preview here) on Wednesday; the US Phili Fed, jobless claims and a 10yr TIPS auction on Thursday; and Japanese CPI (preview here), German PPI and UK, French and Canadian retail sales on Friday. See the full day by day calendar of events at the end as usual.
Previewing the Fed now and markets are pricing in 26bps worth of cuts and haven't ever gone beyond 29bps (just after payrolls 10 days ago) for this meeting. So, assuming no big surprises, this FOMC is all about the signalling via the statement, Powell's press conference, and the SEP. In their preview note on Friday (“Fed Notes: September FOMC preview: Back (to back?) to risk management school “), our economists changed their view to 75bps worth of cuts this year, 25bps at each of the remaining meetings. This path would leave the fed funds rate at 3.5-3.75% by year end, consistent with their view of neutral. The weaker labour market data and slightly lower inflation than they anticipated has led them to this view, but they don't expect further cuts in 2026 although the risks are on the downside, and much might depend on how the Fed leadership and board composition evolves. Markets are pricing in 141bps of cuts by next December, so significantly above our forecasts.
Our economists believe that the median dot of the updated SEP will likely show 75bps of total reductions for 2025, 25bps more than in June. However, there is likely to be differing views within the committee. On the dovish side there could be three calling for a 50bp cut and possibly one or two voting for no change. It has the potential to be the first meeting where three governors dissent since 1988, and the first with dissents on both sides since September 2019.
Powell’s discussion of the labour market is likely to sound materially different compared to the July meeting and closer to his communications at Jackson Hole, but he could still allude to some of the slowdown in job gains reflecting supply-side dynamics driven by immigration policies. His tone on inflation will likely be more dovish as although August CPI was somewhat hotter than expected the details from PPI and CPI point to a more subdued reading on core PCE later this month, likely in the 20-24bps range, according to our economists. Overall the meeting's most important theme will be what it signals going forward.
Asian markets are starting the week mostly higher with a weak monthly data dump from China, encouraging hopes of further policy stimulus. As I check my screens, the KOSPI (+0.41%) is edging higher trading at a record high while marking its 10th straight session of gains after South Korea’s Finance Minister Koo Yun-cheol indicated that the government will scrap its previous plan to raise taxes on stock investments. Meanwhile, the Hang Seng (+0.29%), the CSI (+0.82%) and the Shanghai Composite (+0.22%) are hoping for fresh stimulus. The S&P/ASX 200 (-0.21%) is bucking the regional trend while Japanese markets are closed for a holiday which also means US Treasuries aren't trading yet. US equities futures are up less than a tenth of a percentage point.
Coming back to China, retail sales expanded by a modest +3.4% y/y, falling short of analysts' +3.8% forecast and declining from July's +3.7% increase, signaling persistent weakness in domestic demand. Similarly, industrial output growth softened to +5.2% in August, down from +5.7% in July and reaching its lowest point since August 2024. Year-to-date fixed-asset investment saw a significant slowdown, growing by just +0.5% compared to +1.6% in the January-July period, and missing economists' +1.5% projection. See our economists' view of the numbers here and the implications for policy.
Recapping last week now, and equities continued to advance, largely driven by optimism surrounding interest rate cuts and strong performances from tech stocks. The S&P 500 rose +1.59% (-0.05% Friday) while the NASDAQ achieved new record highs on each of the five trading days, ending the week up +2.03% (+0.44% Friday). This performance was bolstered by Mag 7 stocks advancing +3.20% (+1.67% Friday) and a standout performance from Oracle (+25.51%; -5.09% on Friday) amidst news of a $300bn deal with OpenAI and a strong outlook for its cloud business. European equities also saw gains, with the Stoxx 600 up +1.03% (-0.09% Friday), the DAX up +0.43% (-0.02% Friday), while the CAC 40 advanced +1.96% (+0.02% Friday) as Sébastien Lecornu took over as the new prime minster and will now seek to pass a budget through a fractious parliament. Fitch downgraded France late on Friday from AA- to A+ with a stable outlook. At the same time, they upgraded Portugal to A from A-, while S&P upgraded Spain from A to A+, all with a stable outlook. The rating moves are in line with our strategists long held convergence view, but the upgrade of Spain was a welcome surprise. especially as it's now three notches ahead of where Moody's rate it. They are likely to be forced to play catch up soon.
On the data side, significant downward revisions of -911k to US payroll data and softer weekly initial jobless claims reinforced the view of a softer labour market, strengthening the narrative for Fed easing. On the inflation side, a softer US PPI at -0.1% mom (vs. +0.3% expected) provided reassurance regarding inflation trends which was then followed by a stronger August CPI print of +0.4% (vs. +0.3% expected), though its details pointed to a moderating impact of tariffs and the read through to PCE of the week's data was softer than expected. On Friday, the University of Michigan 5-10yr inflation expectations came in at 3.9% (vs. 3.4% expected), but this data has long been questioned because of the extreme partisan responses, while consumer sentiment fell to 55.4 (vs. 58.0 expected). All that left curve flattening as the main theme for US Treasuries. The 2yr yield rose +4.8bps (+1.4bps Friday), after briefly hitting its lowest level in 3 years on Monday, while 10yr yields were down -0.9bps (+4.5bps Friday) to 4.07% and 30yr yields fell by -7.8bps (+2.7bps Friday).
In Europe, the ECB kept its deposit rates on hold at 2% for a second meeting in a row, with President Lagarde’s signal that policy was "in a good place" suggesting a higher bar for another rate cut. That left markets pricing only 10bps of further easing by mid-2026 (-9.0bps on the week) and contributed to a sell-off in government bonds, with 2yr bund yields +8.9bps higher (+3.2bps Friday) and 10yr yields up +5.3bps to 2.71% (+5.9bps Friday).
Oil prices experienced sizeable volatility, with Brent crude up +2.27% over the week (+0.93% Friday) amid increasing concerns over potential new Western measures targeting Russian oil as well as Israel’s strike against Hamas’ leadership in Qatar. Gold prices also surged by +1.57% (+0.25% on Friday) to a new record high of $3,643/oz, benefiting from the increasing likelihood of Fed rate cuts and its traditional role as a safe-haven asset.