October 10 – Financial Times (Ryan McMorrow and Demetri Sevastopulo): “China has unveiled sweeping export controls on rare earths and related technologies, as it boosts its leverage over critical minerals ahead of an expected meeting this month between Presidents Donald Trump and Xi Jinping. Under the new commerce ministry rules, foreign companies will need Beijing’s approval to export magnets that contain even trace amounts of China-sourced rare earth materials, or that were produced using the country’s extraction methods, refining or magnet-making technology. The restrictions will for the first time create a Chinese version of the US foreign direct product rule, a measure Washington has used to block semiconductor-related exports to China from third countries. A White House official said… Beijing’s move appeared to be an ‘effort to exert control over the entire world’s technology supply chains’.”
“Some very strange things are happening in China! They are becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it’s not manufactured in China. Nobody has ever seen anything like this but, essentially, it would ‘clog’ the Markets, and make life difficult for virtually every Country in the World, especially for China. We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere. Our relationship with China over the past six months has been a very good one, thereby making this move on Trade an even more surprising one. I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right! There is no way that China should be allowed to hold the World ‘captive,’ but that seems to have been their plan for quite some time, starting with the ‘Magnets’ and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least. But the U.S. has Monopoly positions also, much stronger and more far reaching than China’s. I have just not chosen to use them, there was never a reason for me to do so — UNTIL NOW! The letter they sent is many pages long, and details, with great specificity, each and every Element that they want to withhold from other Nations. Things that were routine are no longer routine at all. I have not spoken to President Xi because there was no reason to do so. This was a real surprise, not only to me, but to all the Leaders of the Free World. I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so. The Chinese letters were especially inappropriate in that this was the Day that, after three thousand years of bedlam and fighting, there is PEACE IN THE MIDDLE EAST. I wonder if that timing was coincidental? Dependent on what China says about the hostile ‘order’ that they have just put out, I will be forced, as President of the United States of America, to financially counter their move. For every Element that they have been able to monopolize, we have two. I never thought it would come to this but perhaps, as with all things, the time has come. Ultimately, though potentially painful, it will be a very good thing, in the end, for the U.S.A. One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America. There are many other countermeasures that are, likewise, under serious consideration. Thank you for your attention to this matter!” President Trump, Truth Social, October 10, 2025
What are we to make of that? More of the same, numbing Trump bluster that predictably ends with a delightful TACO market feast? The President announced additional 100% tariffs on Chinese goods, along with tighter export controls, after Friday’s market close. Will the President’s measures force Beijing into hasty retreat? I argued earlier this year - during U.S./China trade war hostilities - that the Chinese would not bow to administration pressure. Perhaps the Chinese are playing their own game of hardball, again using their near monopoly positions in rare earths and magnets to extract U.S. trade concessions.
This latest game of chicken seems more perilous. The two sides have had six months to sort things out. On its face, it appears Beijing has concluded that consummating an acceptable trade deal is unlikely. They are now moving forward with their carefully calculated maximum pressure strategy. To extract concessions ahead of a Trump/Xi meeting, or might Beijing’s gambit be more strategic?
It has been a consequential six months since “liberation day” U.S.-China tensions. The Ukraine/Russia war has only intensified. After the February Zelensky Oval Office berating, it appeared the end of U.S. support would force Ukrainian concessions to end Russian aggression. But there was no weakening in Ukraine’s incredible resolve, as Europe stepped up. The failure of the Trump/Putin Alaska summit signaled unrelenting war and related complexities, including U.S. reengagement with sophisticated longer-range U.S. missiles, intelligence sharing, and likely trade sanctions. Europe’s hybrid war with Russia dangerously escalated.
I posited earlier in the year that a strategic Beijing might consider exploiting the vulnerabilities of its global rival. China has taken full advantage of the void created by the administration's global bully tactics over the past six months. Regrettably, it’s difficult not to view China and Russia’s New World Order ambitions as so far ominously successful. China’s aggressive nurturing of global trade relationships has been rewarded with record trade surpluses despite slowing U.S. purchases. Confidence must be overflowing behind those Forbidden City walls.
If China has been hard at work bolstering its position, it’s a stretch to claim something similar here at home. From my perspective, the key dynamic has been a six-month extension of “Terminal Phase Excess:” More late-cycle risky debt, more manic speculation, and more destabilizing speculative leverage. The AI mania and arms race went completely off the rails. The “basis trade” and market leverage more generally went to further perilous extremes. High risk borrowers took on only more debt, fraudsters did more of their dirty work, and, importantly, cracks began to emerge in the midst of the boom. Such extreme market exuberance and excess can turn problematic in an instant.
Moreover, it has been six months of alarming political dysfunction and societal tension, epitomized by the government shutdown and myriad highly divisive activities (i.e., military deployments to blue cities). Beijing has surely been paying close attention. Has President Trump indeed “been proven right” – “they’ve been lying in wait”? To that end, when was the U.S. as systematically vulnerable – markets, financially, economically, socially, geopolitically?
KKR was down another 7.7% this week, with Apollo falling 6.1%, Blackstone 8.7%, and Areas Management 7.6%. This boosted respective one-month losses to 15.4%, 11.5%, 13.2%, and 20.8%.
There have of late been two contrasting points of view: The consensus perspective remains one of incredibly robust markets and economic resilience, with loose conditions, a Fed easing cycle, intense FOMO, and the miracle of AI ensuring any tangential Credit snafus will swiftly dissipate. The system is fundamentally sound.
I espouse divergent analysis, suggesting that serious Credit issues at the “periphery” likely mark an important cycle juncture. Revelations of improprieties and deficient Credit analysis, notably at First Brands and Tricolor, mark a turning point. This will spur contagious lender caution at Credit’s fringe, which will gravitate toward the “core.” Trouble at the “periphery” - now increasing the likelihood of de-risking/deleveraging - lifts latent fragilities closer to the surface. Historic late-cycle excess ensures myriad acute fragilities and vulnerabilities.
It's reasonable to assume the administration views markets and the U.S. economy as robust. The markets’ reaction to President Trump’s China post was illuminating. Trading to $792 pre-announcement, Goldman Sachs’ stock was down 3.4% to $765 minutes after the post. The Broker/Dealer Index opened solidly higher, only to reverse 3.7% lower. The Bank (KBW) Index reversed 4.0%, with the Regional Banks reversing 5.5%. The “private Credit” stocks were notably sensitive to the news. KKR was higher in early trading, only to then sink 5.5%. Apollo reversed 4.2% lower, Blackstone 5.0%, and Ares Management 5.2%.
“First Brands Blindsides Wall Street in ‘Black Box’ Loan Fiasco.” “First Brands Creditor Says Up to $2.3 Billion “Simply Vanished.” “First Brands Debacle Leaves Creditors, Suppliers Hanging.” “Federal Prosecutors Are Looking Into First Brands Collapse.” “Jefferies Fund Has $715 Million in First Brands’ Trade Debt.” “Regulators Are Investigating MassMutual’s Accounting Practices.” “Blackrock Seeks Cash From Jefferies Fund Exposed to First Brands.” “Morgan Stanley Asks to Pull Cash From Jefferies’ Point Bonita.” “First Brands Group Lenders Provide Lifeline to ‘A Black Box.’” “First Brands Collapse Drags Nochu Into Another Debt Mess.” “Insurers Prepare for Wave of First Brands Claims.”
First Brands is messy, messy. And this mess has a notably broad reach. A missing $2.3 billion. A “lifeline to a black box.” Creditors and suppliers “hanging.” Insurance companies on the hook. Jefferies Financial Group’s stock is down 25% in three weeks, as concerns grow for reputational and financial losses.
October 8 – Financial Times (Robert Smith, Ortenca Aliaj and Eric Platt): “Jefferies has said that one of its credit funds has about $715mn of exposure linked to First Brands Group, making it one of the largest-known creditors to the bankrupt auto parts company… Jefferies… said that a specialist invoice-finance fund it manages, Point Bonita Capital, has approximately $715mn invested in ‘receivables’ — customer invoices — from retailers that bought First Brands products. Point Bonita held a total of about $3bn in ‘trade-finance assets’, Jefferies said. While the fund’s investments are not held on Jefferies’ balance sheet, the bank does have some exposure to First Brands’ debt… Point Bonita fund documents… show that… it carried a ‘leverage ratio’ of more than 160%, having borrowed against its assets to boost returns for investors… Jefferies also warned that another of its investment vehicles had been drawn into the First Brands debacle. The company said that Apex Credit Partners, a structured finance joint venture with insurance and investment group MassMutual, held $48mn worth of loans to First Brands… While those CLOs are ultimately held primarily by other investors, Apex itself invested in the riskiest portion of the structured investment vehicles. These riskier slices of debt would bear the brunt of any losses if loans held by the CLOs defaulted.”
October 8 – Bloomberg (Irene Garcia Perez and Dorothy Ma): “US regional lender Western Alliance Bancorp faces exposure to the collapse of auto-parts supplier First Brands Group through a leveraged facility with a fund linked to Jefferies Financial Group Inc. Point Bonita Capital, a division of Jefferies’ Leucadia Asset Management that manages trade-finance assets on behalf of third-party institutional investors and others, has about $715 million invested in receivables owed to First Brands… That’s nearly a quarter of its $3 billion trade-finance portfolio. The fund has part of that exposure pledged into a leveraged facility with Phoenix-based Western Alliance, meaning Western Alliance would be on the hook if those assets went bad.”
Some of everything. Jefferies has exposure to First Brands through their Point Bonita fund, which operates at 160% leverage (financing provided by Western Alliance Bancorp) for its portfolio holdings of high yielding First Brands and other companies’ invoice receivables. Jefferies also has a joint venture with insurer MassMutual, which reportedly held the high-risk Collateralized Loan Obligations (CLO) tranches – that hold First Brands liabilities. “Allianz, Coface and AIG are among the groups to have written policies shielding trading partners or investors from losses… (FT)”
It’s all reminiscent of the subprime mortgage boom and bust: A boom-time carefree market for high yielding “equity” CLO tranches, operating as a key risk transferring/masking structure integral to the Wall Street alchemy transforming (seemingly endless) risky subprime mortgages into mostly perceived low risk securities. The blowup of subprime CLOs and derivatives proved a decisive blow for high-risk mortgages and a critical inflection point for housing and mortgage finance Bubbles.
“Billions of Dollars ‘Vanished’: Low-Profile Bankruptcy Rings Alarms on Wall Street.” “Tricolor’s Busted Money Machine Has Wall Street Rethinking Risks.” “Auto Stocks in a Spin as First Brands, Tricolor Worry Investors.” “Leveraged Loans Are Sending Signals of Credit Stress.”
Leveraged Loan (Morningstar Index) prices dropped 20 cents in Friday trading to 96.53, the largest single-session loss since April 9th (39 cents) – the day President Trump’s 104% China tariffs took effect, along with China’s retaliatory 84% tariffs (Trump’s “pause” came later in the day). This week’s 44 cent leveraged loan decline was the largest since the “liberation day” first week of April. Prices ended the week at a five-month low.
High yield spreads to Treasuries widened a notable 36 bps this week (widest since June 12th), the biggest jump since “liberation day” (87bps). The 25 bps surge in high yield CDS prices was the largest since the first week of April (62bps) – with the highest close since June 18th. The iShares High Yield Corporate Bond ETF’s (HYG) 1.1% weekly loss was the steepest since the first week of April.
The week’s six bps widening of investment-grade spreads was the largest since “liberation day” (16bps). Friday’s four bps rise in investment-grade CDS prices was the largest since September 22nd.
The S&P500 suffered its worst one-day drop since April 10th. The VIX index ended the week at 21.66, the highest close since June 19th.
Ominously reminiscent of early-April, the big tech stocks appeared hypersensitive to escalating Credit fears. The MAG7 Index was slammed 3.8% in Friday trading (down 2.7% for the week), the largest decline since April 16th. Tesla was hit 5.1%, Amazon.com 5.0%, Nvidia 4.9%, Meta 3.9%, Apple 3.5%, Microsoft 2.2%, and Alphabet 2.1%. Nvidia’s loss was the largest since April 16th. Advanced Micro Devices’ 30.5% surge masked intense pain in the semiconductor space. The week’s losses included KLA 10.8%, NXP Semiconductors 10.3%, Lam Research 9.9%, ASML 9.3%, Qualcomm 9.2%, and Microchip Technology 9.2%.
October 7 – Bloomberg (Caleb Mutua): “The amount of debt tied to artificial intelligence has ballooned to $1.2 trillion, making it the largest segment in the investment-grade market, according to JPMorgan... AI companies now make up 14% of the high-grade market from 11.5% in 2020, surpassing US banks, the largest sector on the JPMorgan US Liquid Index (JULI) index at 11.7%, JPMorgan analysts including Nathaniel Rosenbaum and Erica Spear wrote… The analysts identified 75 companies across tech, utilities and capital goods sectors that are closely tied to AI, including Oracle Corp., Apple Inc. and Duke Energy Corp. Many of these firms are prolific debt issuers and in the case of tech, they are cash rich with very low net debt. The cohort trades at 74 bps, 10 bps tighter than the broader JULI index, they said.”
October 7 – Bloomberg (Victor Swezey): “Issuance boomed across credit markets last month, while a key fear gauge in the investment-grade market closed at its lowest level the year on Monday. But beneath the surface, UBS Group AG strategists see cracks forming. A number of factors, including a frothy investment-grade market, strained consumers, and a hot loan market, risk a reversal in the future, strategists led by Matthew Mish warned. ‘Credit fundamentals at both macro and sector levels are displaying classic late-cycle trends, with increasing vulnerabilities observed in investment-grade corporates and private credit markets,’ Mish wrote…”
Markets are increasingly vulnerable to de-risking/deleveraging. The historic AI Bubble will be fixed to Credit and market liquidity developments. The system was at the cusp of a very destabilizing deleveraging back in April. It is more acutely vulnerable after an additional six months of crazy.
“Treasuries Soar After Trump Threatens China With Bigger Tariffs.” The 11 bps drop in 10-year yields (to 4.03%) was the largest decline since August 1st (weak July Non-Farm Payrolls). The pop in risk premiums was anything but confined to the U.S. Emerging Market (EM) CDS surged 10 bps Friday (to 158bps), the biggest daily increase since April 10th (22bps). Friday’s 14 bps (to 157bps) and the week’s 22 bps jumps in Brazil sovereign CDS were the largest back to December 2024. Mexico’s daily (8bps) and weekly (9bps) rises were the biggest back to “liberation day.”
Interestingly, Bitcoin’s Friday $6,834 drubbing was the largest since March 3rd ($8,983). For Friday and the week, the precious metals continue to distinguish themselves. Gold added $41, or 1.0%, in Friday trading to a $4,018 – boosting the week’s gain to 3.4% and 2025’s surge to 53.1%. Silver’s 1.8% Friday advance to $50.15 put week and y-t-d advances at 4.5% and 73.5%.
In this crazy environment, the precious metals could get caught up in hedge fund liquidations and deleveraging dynamics. But a week where Gold surpassed $4,000 and Silver attained $50 deserves at least brief comments. There is a long list of precious metals’ attributes that have fueled this year’s power moves.
Global markets turned only more over-liquefied, fueled by unprecedented liquidity-creating leveraged speculation. Way too much destabilizing liquidity is sloshing around. From the U.S. to China to Europe, Asia and EM – reckless debt growth is systemic and unrelenting. As already historic Bubbles have inflated further (especially over the past six months), the view that central bankers are trapped has crystallized. Another round of massive QE is a matter of when and not if a problematic deleveraging takes hold. Furthermore, the Trump administration’s attack on U.S. norms, including Fed independence and the Constitution, does not inspire confidence in the dollar as a reliable store of value.
The so-called “debasement trade” is all the talk of late on Wall Street. I have no issue with this narrative. I do, however, see is another momentous risk supportive of precious metals discussed only behind closed doors: The risk of global markets “seizing up” is not remote. The potential for financial meltdown should not be dismissed. This historic global Bubble will not work in reverse. At this point, a major unwind of speculative leverage would trigger illiquidity, dislocation, and panic. That speculative excess and leverage took root across global markets over this most protracted cycle creates unprecedented systemic risk.
Sitting here at my desk late into Friday evening, two questions are top of mind. First, is the system robust as most, including the administration, believe – or might it instead be as fragile as I suspect? Second, were China’s aggressive moves on rare earths, magnets and related technologies meant to boost leverage ahead of the Trump/Xi meeting – as most assume, or a more calculated strategic decision to escalate a “new world order” confrontation with what they view as a weakened adversary? So much depends on how answers to these Two Questions play out.
October 10 – Bloomberg (Jeannine Amodeo and Aaron Weinman): “The US leveraged loan market is coming under further pressure with its second pulled deal in a week and a slew of investor-friendly changes made on other transactions to help get them over the line. The latest casualty is drugmaker Mallinckrodt, which shelved a $1.49 billion offering on Friday… It follows a pulled deal from specialty chemicals producer Nouryon earlier this week, marking the eighth deal to be yanked from the market since August…”
October 9 – Bloomberg (Amedeo Goria): “Bloomberg’s European leveraged loan index has fallen almost half a point in the past week, the steepest drop since President Donald Trump’s tariff announcements upended global markets in April.”
For the Week:
The S&P500 dropped 2.4% (up 11.4% y-t-d), and the Dow fell 2.7% (up 6.9%). The Utilities rose 2.0% (up 19.5%). The Banks sank 5.0% (up 12.4%), and the Broker/Dealers slumped 3.7% (up 25.6%). The Transports dropped 4.9% (down 5.2%). The S&P 400 Midcaps fell 3.9% (up 1.3%), and the small cap Russell 2000 lost 3.3% (up 7.4%). The Nasdaq100 declined 2.3% (up 15.3%). The Semiconductors slumped 2.7% (up 28.7%). The Biotechs lost 3.4% (up 10.4%). While bullion surged $131, the HUI gold index slipped 1.1% (up 122.5%).
Three-month Treasury bill rates ended the week at 3.8525%. Two-year government yields fell seven bps to 3.50% (down 74bps y-t-d). Five-year T-note yields dropped nine bps to 3.62% (down 76bps). Ten-year Treasury yields fell nine bps to 4.03% (down 54bps). Long bond yields declined nine bps to 4.62% (down 16bps). Benchmark Fannie Mae MBS yields slipped a basis point to 5.12% (down 72bps).
Italian 10-year yields declined five bps to 3.46% (down 6bps y-t-d). Greek 10-year yields dipped two bps to 3.33% (up 12bps). Spain's 10-year yields declined four bps to 3.20% (up 14bps). German bund yields fell five bps to 2.64% (up 28bps). French yields slipped three bps to 3.48% (up 28bps). The French to German 10-year bond spread widened three to 84 bps. U.K. 10-year gilt yields dipped two bps to 4.68% (up 11bps). U.K.'s FTSE equities index declined 0.7% (up 15.3% y-t-d).
Japan's Nikkei 225 Equities Index surged 5.1% (up 20.5% y-t-d). Japan's 10-year "JGB" yield rose three bps to 1.69% (up 59bps y-t-d). France's CAC40 fell 2.0% (up 7.3%). The German DAX equities index slipped 0.6% (up 21.8%). Spain's IBEX 35 equities index declined 0.7% (up 33.5%). Italy's FTSE MIB index dropped 2.8% (up 23.0%). EM equities were mixed. Brazil's Bovespa index fell 2.4% (up 17.0%), and Mexico's Bolsa index dropped 2.2% (up 22.3%). South Korea's Kospi added 1.7% (up 50.5%). India's Sensex equities index gained 1.6% (up 5.1%). China's Shanghai Exchange Index increased 0.4% (up 16.3%). Turkey's Borsa Istanbul National 100 index retreated 1.3% (up 9.1%).
Federal Reserve Credit declined $3.5 billion last week to $6.540 TN. Fed Credit was down $2.349 TN from the June 22, 2022, peak. Over the past 317 weeks, Fed Credit expanded $2.814 TN, or 76%. Fed Credit inflated $3.729 TN, or 133%, over 674 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped another $10.1 billion last week to $3.106 TN - the low back to May 2012. "Custody holdings" were down $214 billion y-o-y, or 6.4%.
Total money market fund assets (MMFA) jumped another $20 billion to a record $7.385 TN (6-wk gain $178bn). MMFA were up $911 billion, or 14.1%, y-o-y - and ballooned a historic $2.801 TN, or 61%, since October 26, 2022.
Total Commercial Paper was little changed at $1.347 TN. CP has expanded $259 billion y-t-d and $154 billion, or 12.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined four bps to 6.30% (down 2bps y-o-y). Fifteen-year rates slipped two bps to 5.53% (up 12bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up four bps to 6.53% (down 54bps).
Currency Watch:
October 9 – Bloomberg (Toru Fujioka and Masahiro Hidaka): “Japan’s likely next prime minister, Sanae Takaichi, risks unintentionally prompting a Bank of Japan rate hike as early as this month. By giving markets the impression she doesn’t want the BOJ to move, she has helped drive down the yen. The currency hit 153.22 against the dollar on Thursday in Tokyo, its weakest in almost eight months. A weak yen ramps up inflationary pressure by pushing up import costs, an outcome that would raise upside price risks for the central bank while potentially complicating Takaichi’s plans to reduce the impact of the cost-of-living crunch.”
October 8 – Bloomberg (Layan Odeh and Lu Wang): “US Treasury bonds are at risk of losing their haven status should US fiscal stress continue to build, according to Canada Pension Plan Investment Board. ‘We worry that if the fiscal scenario continues for a period of time’ the Treasury market could stop being a haven, Manroop Jhooty, the pension plan’s head of total fund management, said… The pension plan, which manages C$731.7 billion ($524bn), invests across several asset classes globally…”
October 7 – Reuters (Stefania Spezzati and Elisa Martinuzzi): “Financial institutions that dominate the $9.6 trillion currency market should hold the necessary liquidity and capital buffers and run enhanced stress tests to prevent disruptions to the financial system, according to an International Monetary Fund report… ‘Although stress testing and systemic risk monitoring have advanced, the role of FX markets as a conduit for risk transmission and cross-border spillovers remains underappreciated,’ the IMF said… ‘Enhancing FX liquidity stress tests is essential to assess the sectoral resilience to funding shocks,’ according to the IMF.”
For the week, the U.S. Dollar Index rallied 1.3% to 98.978 (down 8.8% y-t-d). On the downside, the Brazilian real declined 3.3%, the Japanese yen 2.5%, the Australian dollar 2.0%, the New Zealand dollar 1.9%, the Norwegian krone 1.5%, the South African rand 1.5%, the Swedish krona 1.4%, the South Korean won 1.3%, the euro 1.1%, the Mexican peso 1.0%, the British pound 0.9%, the Singapore dollar 0.6%, the Swiss franc 0.5%, and the Canadian dollar 0.4%. The Chinese (onshore) renminbi declined 0.18% versus the dollar (up 2.30% y-t-d).
Commodities Watch:
October 8 – Wall Street Journal (Greg Ip): “On Saturday, Japan got a new prime minister. On Tuesday, gold topped $4,000 for the first time. It wasn’t a coincidence. Sanae Takaichi, the surprise nominee to lead Japan’s ruling Liberal Democratic Party, is a fiscal and monetary dove. She wants more economic stimulus, and the Bank of Japan to help by not raising rates too much. News of her selection sent the yen down and Japanese stocks and bond yields up. The news also added to gold’s epic run this year, with a further 2.6% jump Monday and Tuesday. It turns out the U.S. isn’t the only country where massive debts and populist politics threaten the value of ‘fiat’ currencies… Last month, Nigel Farage, leader of the populist Reform UK party, now ahead in polls in Britain, criticized the Bank of England for selling bonds, because the resulting losses and upward pressure on interest rates were costing taxpayers.”
October 9 – Bloomberg (Jack Ryan and Yvonne Yue Li): “Spot silver prices jumped to the highest level in decades as surging demand for safe-haven assets exacerbated supply constraints in the London bullion market. The precious metal climbed as much as 4% past $50.85 an ounce on Thursday, the highest since a notorious squeeze orchestrated by the billionaire Hunt brothers in 1980. Silver is extending a surge that has lifted prices more than 70% this year… It’s part of a growing search for haven assets sparked by fears of fiscal risks in the US, an overheating equities market and threats to the Federal Reserve’s independence.”
The Bloomberg Commodities Index declined 1.2% (up 5.4% y-t-d). Spot Gold jumped another 3.4% to a record $4,018 (up 53.1%). Silver surged 4.5% to $50.1479 (up 73.5%). WTI crude dropped $1.98, or 3.3%, to $58.90 (down 18%). Gasoline fell 2.2% (down 10%), and Natural Gas sank 6.6% to $3.106 (down 14%). Copper sank 4.2% (up 22%). Wheat lost 3.3% (down 10%), and Corn lost 1.4% (down 10%). Bitcoin sank $9,000, or 7.4%, to $113,260 (up 20.9%).
Market Instability Watch:
October 8 – Reuters (David Milliken and Phoebe Seers): “Global financial markets could tumble if investors’ mood sours on the prospects for artificial intelligence or the independence of the U.S. Federal Reserve, the Bank of England warned… The BoE said share price valuations on U.S. stock markets were similar to those seen near the peak of the dotcom bubble on some measures and noted that U.S. government bonds were vulnerable to any weakening in the Fed's credibility. ‘The risk of a sharp market correction has increased,’ the BoE’s Financial Policy Committee said in a quarterly update, in its sharpest warning to date of the dangers of an AI-triggered market slump…”
October 8 – Associated Press (Fatima Hussein): “The global economy is holding up better than expected despite major shocks such as President Donald Trump’s tariffs, but the head of the International Monetary Fund says that resilience may not last. ‘Buckle up,’ Managing Director Kristalina Georgieva said… ‘Uncertainty is the new normal and it is here to stay’.”
October 9 – Financial Times (Ciara Nugent, Kate Duguid and Michael Stott): “The US Treasury has intervened in Argentina’s currency market for the first time, as the Trump administration tries to help its ally President Javier Milei contain a run on the peso… The highly unusual US intervention comes as Milei, President Donald Trump’s most important ideological partner in Latin America, battles a crisis of confidence ahead of midterm elections on October 26… ‘Argentina faces a moment of acute illiquidity,’ Bessent said. ‘The US Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets’.”
October 9 – Associated Press (Fatima Hussein and Isabel Debre): “The United States directly purchased Argentine pesos on Thursday and finalized a $20 billion currency swap line with Argentina’s central bank, Treasury Secretary Scott Bessent said…, a rare move aimed at stabilizing turbulent financial markets in the cash-strapped Latin American ally. ‘U.S. Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,’ Bessent said… Argentina’s libertarian President Javier Milei, a fervent admirer of U.S. President Donald Trump, thanked Bessent for his “strong support” and Trump for his ‘powerful leadership.’ ‘Together, as the closest of allies, we will make a hemisphere of economic freedom and prosperity,’ Milei said…”
October 6 – Bloomberg (Ruth Carson and John Cheng): “Volatility in Japan’s longer-dated government bonds is on the rise following Sanae Takaichi’s election win, and the moves are likely to spill over to markets as far away as the US and UK, according to Goldman Sachs… The ascent of Takaichi risks pushing up long-end Japanese yields… For every 10 bps ‘idiosyncratic JGB shock,’ investors can expect around two to three bps of upward pressure on US, German and UK yields, the strategists wrote. Yields on Japan’s 40-year debt soared as much as 17 bps on Monday as traders wagered that Takaichi’s pro-stimulus stance may prompt authorities to sell more government bonds. It added to pressure on long-dated debt around the world, with yields on UK and US 30-year bonds up as much as seven bps to 5.57% and six bps to 4.77% respectively.”
October 6 – Bloomberg (Junko Fujita and Rocky Swift): “Japan’s Nikkei share gauge surged past the 47,000 level for the first time on Monday, while the nation's currency and long-term bonds slumped after a party vote positioned fiscal dove Sanae Takaichi to become the next prime minister. The Nikkei 225 Index soared 4.6% to 47,852.29, after earlier passing the 46,000 for the first time ever… The 30-year Japanese government bond (JGB) plunged, sending the yield to the brink of a record high…The yen depreciated more than 1% against the dollar and traded at an all-time low versus the euro.”
October 7 – Bloomberg (Alex Harris): “Prolonged funding pressures in US money markets, just as bank reserves held at the Federal Reserve are dwindling, suggest the central bank may be getting closer to ending the unwinding of its massive portfolio of securities. Overnight funding markets, where banks and asset managers borrow and lend to each other on a day-to-day basis, have been volatile since the beginning of September. Ultra-short-term interest rates, which have been steadily rising as the Treasury is rebuilding its cash pile, remain stubbornly elevated even after a benign quarter end.”
October 6 – Bloomberg (Ye Xie): “Expected volatility in the Treasuries market has sunk to the lowest in almost four years as the US government shutdown delays key economic data releases and deprives traders of catalysts for large price swings. The ICE BofA MOVE Index, a closely watched measure of implied fluctuations in the US bond market over the next month, tumbled to the lowest since December 2021 on Friday, two days after the first government closure since 2018 kicked in.”
October 8 – Bloomberg (Natalia Kniazhevich): “The Black Swan author Nassim Taleb said investors should insure against a stock-market crash as structural issues such as the US debt burden threaten to derail an otherwise unstoppable rally. Even with US stocks making multiple record highs and corporate profits surging, Taleb, a distinguished scientist for hedge fund Universa Investments, warns that the real danger now comes from visible risks — which he termed ‘white swans’ — that most people ignore until it’s too late. The US is already facing an obvious, predictable crisis — a white swan of mounting debt — and only an unexpected event of extraordinary magnitude could reverse it, according to Taleb.”
First Brands Watch:
October 9 – Bloomberg (Eliza Ronalds-Hannon, Irene García Pérez, Davide Scigliuzzo, Reshmi Basu and Anders Melin): “In hindsight, the telltale signs of trouble were piling up: the Zoom calls where the owner kept his camera off; the angry pushback from his brother when investors asked for invoices to back up their loans; the frequent late payments to suppliers; and the whispers of large off-the-books financing arrangements. That so few outside of First Brands had a full view of all the red flags around the auto-parts supplier before it imploded spectacularly late last month, stands as a stark example of the growing risks of money flooding into the opaque world of private financing. How it operated, where it got its money and even the people running it were largely a mystery.”
The S&P500 dropped 2.4% (up 11.4% y-t-d), and the Dow fell 2.7% (up 6.9%). The Utilities rose 2.0% (up 19.5%). The Banks sank 5.0% (up 12.4%), and the Broker/Dealers slumped 3.7% (up 25.6%). The Transports dropped 4.9% (down 5.2%). The S&P 400 Midcaps fell 3.9% (up 1.3%), and the small cap Russell 2000 lost 3.3% (up 7.4%). The Nasdaq100 declined 2.3% (up 15.3%). The Semiconductors slumped 2.7% (up 28.7%). The Biotechs lost 3.4% (up 10.4%). While bullion surged $131, the HUI gold index slipped 1.1% (up 122.5%).
Three-month Treasury bill rates ended the week at 3.8525%. Two-year government yields fell seven bps to 3.50% (down 74bps y-t-d). Five-year T-note yields dropped nine bps to 3.62% (down 76bps). Ten-year Treasury yields fell nine bps to 4.03% (down 54bps). Long bond yields declined nine bps to 4.62% (down 16bps). Benchmark Fannie Mae MBS yields slipped a basis point to 5.12% (down 72bps).
Italian 10-year yields declined five bps to 3.46% (down 6bps y-t-d). Greek 10-year yields dipped two bps to 3.33% (up 12bps). Spain's 10-year yields declined four bps to 3.20% (up 14bps). German bund yields fell five bps to 2.64% (up 28bps). French yields slipped three bps to 3.48% (up 28bps). The French to German 10-year bond spread widened three to 84 bps. U.K. 10-year gilt yields dipped two bps to 4.68% (up 11bps). U.K.'s FTSE equities index declined 0.7% (up 15.3% y-t-d).
Japan's Nikkei 225 Equities Index surged 5.1% (up 20.5% y-t-d). Japan's 10-year "JGB" yield rose three bps to 1.69% (up 59bps y-t-d). France's CAC40 fell 2.0% (up 7.3%). The German DAX equities index slipped 0.6% (up 21.8%). Spain's IBEX 35 equities index declined 0.7% (up 33.5%). Italy's FTSE MIB index dropped 2.8% (up 23.0%). EM equities were mixed. Brazil's Bovespa index fell 2.4% (up 17.0%), and Mexico's Bolsa index dropped 2.2% (up 22.3%). South Korea's Kospi added 1.7% (up 50.5%). India's Sensex equities index gained 1.6% (up 5.1%). China's Shanghai Exchange Index increased 0.4% (up 16.3%). Turkey's Borsa Istanbul National 100 index retreated 1.3% (up 9.1%).
Federal Reserve Credit declined $3.5 billion last week to $6.540 TN. Fed Credit was down $2.349 TN from the June 22, 2022, peak. Over the past 317 weeks, Fed Credit expanded $2.814 TN, or 76%. Fed Credit inflated $3.729 TN, or 133%, over 674 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped another $10.1 billion last week to $3.106 TN - the low back to May 2012. "Custody holdings" were down $214 billion y-o-y, or 6.4%.
Total money market fund assets (MMFA) jumped another $20 billion to a record $7.385 TN (6-wk gain $178bn). MMFA were up $911 billion, or 14.1%, y-o-y - and ballooned a historic $2.801 TN, or 61%, since October 26, 2022.
Total Commercial Paper was little changed at $1.347 TN. CP has expanded $259 billion y-t-d and $154 billion, or 12.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined four bps to 6.30% (down 2bps y-o-y). Fifteen-year rates slipped two bps to 5.53% (up 12bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up four bps to 6.53% (down 54bps).
Currency Watch:
October 9 – Bloomberg (Toru Fujioka and Masahiro Hidaka): “Japan’s likely next prime minister, Sanae Takaichi, risks unintentionally prompting a Bank of Japan rate hike as early as this month. By giving markets the impression she doesn’t want the BOJ to move, she has helped drive down the yen. The currency hit 153.22 against the dollar on Thursday in Tokyo, its weakest in almost eight months. A weak yen ramps up inflationary pressure by pushing up import costs, an outcome that would raise upside price risks for the central bank while potentially complicating Takaichi’s plans to reduce the impact of the cost-of-living crunch.”
October 8 – Bloomberg (Layan Odeh and Lu Wang): “US Treasury bonds are at risk of losing their haven status should US fiscal stress continue to build, according to Canada Pension Plan Investment Board. ‘We worry that if the fiscal scenario continues for a period of time’ the Treasury market could stop being a haven, Manroop Jhooty, the pension plan’s head of total fund management, said… The pension plan, which manages C$731.7 billion ($524bn), invests across several asset classes globally…”
October 7 – Reuters (Stefania Spezzati and Elisa Martinuzzi): “Financial institutions that dominate the $9.6 trillion currency market should hold the necessary liquidity and capital buffers and run enhanced stress tests to prevent disruptions to the financial system, according to an International Monetary Fund report… ‘Although stress testing and systemic risk monitoring have advanced, the role of FX markets as a conduit for risk transmission and cross-border spillovers remains underappreciated,’ the IMF said… ‘Enhancing FX liquidity stress tests is essential to assess the sectoral resilience to funding shocks,’ according to the IMF.”
For the week, the U.S. Dollar Index rallied 1.3% to 98.978 (down 8.8% y-t-d). On the downside, the Brazilian real declined 3.3%, the Japanese yen 2.5%, the Australian dollar 2.0%, the New Zealand dollar 1.9%, the Norwegian krone 1.5%, the South African rand 1.5%, the Swedish krona 1.4%, the South Korean won 1.3%, the euro 1.1%, the Mexican peso 1.0%, the British pound 0.9%, the Singapore dollar 0.6%, the Swiss franc 0.5%, and the Canadian dollar 0.4%. The Chinese (onshore) renminbi declined 0.18% versus the dollar (up 2.30% y-t-d).
Commodities Watch:
October 8 – Wall Street Journal (Greg Ip): “On Saturday, Japan got a new prime minister. On Tuesday, gold topped $4,000 for the first time. It wasn’t a coincidence. Sanae Takaichi, the surprise nominee to lead Japan’s ruling Liberal Democratic Party, is a fiscal and monetary dove. She wants more economic stimulus, and the Bank of Japan to help by not raising rates too much. News of her selection sent the yen down and Japanese stocks and bond yields up. The news also added to gold’s epic run this year, with a further 2.6% jump Monday and Tuesday. It turns out the U.S. isn’t the only country where massive debts and populist politics threaten the value of ‘fiat’ currencies… Last month, Nigel Farage, leader of the populist Reform UK party, now ahead in polls in Britain, criticized the Bank of England for selling bonds, because the resulting losses and upward pressure on interest rates were costing taxpayers.”
October 9 – Bloomberg (Jack Ryan and Yvonne Yue Li): “Spot silver prices jumped to the highest level in decades as surging demand for safe-haven assets exacerbated supply constraints in the London bullion market. The precious metal climbed as much as 4% past $50.85 an ounce on Thursday, the highest since a notorious squeeze orchestrated by the billionaire Hunt brothers in 1980. Silver is extending a surge that has lifted prices more than 70% this year… It’s part of a growing search for haven assets sparked by fears of fiscal risks in the US, an overheating equities market and threats to the Federal Reserve’s independence.”
The Bloomberg Commodities Index declined 1.2% (up 5.4% y-t-d). Spot Gold jumped another 3.4% to a record $4,018 (up 53.1%). Silver surged 4.5% to $50.1479 (up 73.5%). WTI crude dropped $1.98, or 3.3%, to $58.90 (down 18%). Gasoline fell 2.2% (down 10%), and Natural Gas sank 6.6% to $3.106 (down 14%). Copper sank 4.2% (up 22%). Wheat lost 3.3% (down 10%), and Corn lost 1.4% (down 10%). Bitcoin sank $9,000, or 7.4%, to $113,260 (up 20.9%).
Market Instability Watch:
October 8 – Reuters (David Milliken and Phoebe Seers): “Global financial markets could tumble if investors’ mood sours on the prospects for artificial intelligence or the independence of the U.S. Federal Reserve, the Bank of England warned… The BoE said share price valuations on U.S. stock markets were similar to those seen near the peak of the dotcom bubble on some measures and noted that U.S. government bonds were vulnerable to any weakening in the Fed's credibility. ‘The risk of a sharp market correction has increased,’ the BoE’s Financial Policy Committee said in a quarterly update, in its sharpest warning to date of the dangers of an AI-triggered market slump…”
October 8 – Associated Press (Fatima Hussein): “The global economy is holding up better than expected despite major shocks such as President Donald Trump’s tariffs, but the head of the International Monetary Fund says that resilience may not last. ‘Buckle up,’ Managing Director Kristalina Georgieva said… ‘Uncertainty is the new normal and it is here to stay’.”
October 9 – Financial Times (Ciara Nugent, Kate Duguid and Michael Stott): “The US Treasury has intervened in Argentina’s currency market for the first time, as the Trump administration tries to help its ally President Javier Milei contain a run on the peso… The highly unusual US intervention comes as Milei, President Donald Trump’s most important ideological partner in Latin America, battles a crisis of confidence ahead of midterm elections on October 26… ‘Argentina faces a moment of acute illiquidity,’ Bessent said. ‘The US Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets’.”
October 9 – Associated Press (Fatima Hussein and Isabel Debre): “The United States directly purchased Argentine pesos on Thursday and finalized a $20 billion currency swap line with Argentina’s central bank, Treasury Secretary Scott Bessent said…, a rare move aimed at stabilizing turbulent financial markets in the cash-strapped Latin American ally. ‘U.S. Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,’ Bessent said… Argentina’s libertarian President Javier Milei, a fervent admirer of U.S. President Donald Trump, thanked Bessent for his “strong support” and Trump for his ‘powerful leadership.’ ‘Together, as the closest of allies, we will make a hemisphere of economic freedom and prosperity,’ Milei said…”
October 6 – Bloomberg (Ruth Carson and John Cheng): “Volatility in Japan’s longer-dated government bonds is on the rise following Sanae Takaichi’s election win, and the moves are likely to spill over to markets as far away as the US and UK, according to Goldman Sachs… The ascent of Takaichi risks pushing up long-end Japanese yields… For every 10 bps ‘idiosyncratic JGB shock,’ investors can expect around two to three bps of upward pressure on US, German and UK yields, the strategists wrote. Yields on Japan’s 40-year debt soared as much as 17 bps on Monday as traders wagered that Takaichi’s pro-stimulus stance may prompt authorities to sell more government bonds. It added to pressure on long-dated debt around the world, with yields on UK and US 30-year bonds up as much as seven bps to 5.57% and six bps to 4.77% respectively.”
October 6 – Bloomberg (Junko Fujita and Rocky Swift): “Japan’s Nikkei share gauge surged past the 47,000 level for the first time on Monday, while the nation's currency and long-term bonds slumped after a party vote positioned fiscal dove Sanae Takaichi to become the next prime minister. The Nikkei 225 Index soared 4.6% to 47,852.29, after earlier passing the 46,000 for the first time ever… The 30-year Japanese government bond (JGB) plunged, sending the yield to the brink of a record high…The yen depreciated more than 1% against the dollar and traded at an all-time low versus the euro.”
October 7 – Bloomberg (Alex Harris): “Prolonged funding pressures in US money markets, just as bank reserves held at the Federal Reserve are dwindling, suggest the central bank may be getting closer to ending the unwinding of its massive portfolio of securities. Overnight funding markets, where banks and asset managers borrow and lend to each other on a day-to-day basis, have been volatile since the beginning of September. Ultra-short-term interest rates, which have been steadily rising as the Treasury is rebuilding its cash pile, remain stubbornly elevated even after a benign quarter end.”
October 6 – Bloomberg (Ye Xie): “Expected volatility in the Treasuries market has sunk to the lowest in almost four years as the US government shutdown delays key economic data releases and deprives traders of catalysts for large price swings. The ICE BofA MOVE Index, a closely watched measure of implied fluctuations in the US bond market over the next month, tumbled to the lowest since December 2021 on Friday, two days after the first government closure since 2018 kicked in.”
October 8 – Bloomberg (Natalia Kniazhevich): “The Black Swan author Nassim Taleb said investors should insure against a stock-market crash as structural issues such as the US debt burden threaten to derail an otherwise unstoppable rally. Even with US stocks making multiple record highs and corporate profits surging, Taleb, a distinguished scientist for hedge fund Universa Investments, warns that the real danger now comes from visible risks — which he termed ‘white swans’ — that most people ignore until it’s too late. The US is already facing an obvious, predictable crisis — a white swan of mounting debt — and only an unexpected event of extraordinary magnitude could reverse it, according to Taleb.”
First Brands Watch:
October 9 – Bloomberg (Eliza Ronalds-Hannon, Irene García Pérez, Davide Scigliuzzo, Reshmi Basu and Anders Melin): “In hindsight, the telltale signs of trouble were piling up: the Zoom calls where the owner kept his camera off; the angry pushback from his brother when investors asked for invoices to back up their loans; the frequent late payments to suppliers; and the whispers of large off-the-books financing arrangements. That so few outside of First Brands had a full view of all the red flags around the auto-parts supplier before it imploded spectacularly late last month, stands as a stark example of the growing risks of money flooding into the opaque world of private financing. How it operated, where it got its money and even the people running it were largely a mystery.”
October 9 – Financial Times (Eric Platt, Kaye Wiggins and Ortenca Aliaj): “The US Department of Justice has opened an inquiry into the collapse of bankrupt auto supplier First Brands Group, as federal prosecutors look to untangle how investors and creditors have been left with billions of dollars in potential losses… Late on Wednesday one of the largest creditors to First Brands alleged that as much as $2.3bn had ‘simply vanished’ as part of the company’s abrupt failure. That lender, one of several who had provided off-balance sheet financing relying on that collateral, is now pushing for an external investigation into the company’s actions leading up to the bankruptcy.”
October 8 – Bloomberg (Katherine Doherty and Irene García Pérez): “An asset manager controlled by a unit of Jefferies Financial Group Inc. sank nearly a quarter of its $3 billion trade finance portfolio into receivables tied to auto parts supplier First Brands Group Inc., the bank disclosed… Point Bonita Capital’s portfolio has about $715 million invested in receivables due by First Brands’ customers including Walmart Inc. and AutoZone Inc., with the auto-parts supplier responsible for directing payments to Point Bonita… Additionally, Jefferies has a 50% stake in Apex Credit Partners, which held about $48 million of loans to First Brands through collateralized loan obligations…”
October 8 – Bloomberg (Irene Garcia Perez, Luca Casiraghi, and Katherine Doherty): “BlackRock Inc. has requested to pull some money it invested in a Jefferies Financial Group Inc. fund with large exposure to the trade debt of bankrupt auto-parts supplier First Brands… BlackRock and other investors including Texas Treasury Safekeeping Trust Co. have been in talks to partially redeem funds invested with Point Bonita Capital… Point Bonita, a unit of Jefferies’ Leucadia Asset Management, has a $3 billion trade-finance portfolio.”
October 9 – Financial Times (Lee Harris and Robert Smith): “Insurers are preparing for a wave of potential claims relating to First Brands Group’s bankruptcy, as one of Wall Street's biggest debacles in years ripples through the financial system. Allianz, Coface and AIG are among the groups to have written policies shielding trading partners or investors from losses through their trade credit businesses…, leaving them exposed to the auto parts maker’s supply chain.”
October 9 – Bloomberg (Irene García Pérez, Jonathan Randles, Taiga Uranaka and Yusuke Maekawa): “A joint venture between Norinchukin Bank and Japanese trading house Mitsui & Co. faces $1.75 billion of exposure to bankrupt auto-parts supplier First Brands Group, court documents show. A lawyer for Katsumi Global told a Texas bankruptcy judge… the venture extended trade financing for that amount to First Brands…”
October 8 – Bloomberg (Katherine Doherty and Irene García Pérez): “An asset manager controlled by a unit of Jefferies Financial Group Inc. sank nearly a quarter of its $3 billion trade finance portfolio into receivables tied to auto parts supplier First Brands Group Inc., the bank disclosed… Point Bonita Capital’s portfolio has about $715 million invested in receivables due by First Brands’ customers including Walmart Inc. and AutoZone Inc., with the auto-parts supplier responsible for directing payments to Point Bonita… Additionally, Jefferies has a 50% stake in Apex Credit Partners, which held about $48 million of loans to First Brands through collateralized loan obligations…”
October 8 – Bloomberg (Irene Garcia Perez, Luca Casiraghi, and Katherine Doherty): “BlackRock Inc. has requested to pull some money it invested in a Jefferies Financial Group Inc. fund with large exposure to the trade debt of bankrupt auto-parts supplier First Brands… BlackRock and other investors including Texas Treasury Safekeeping Trust Co. have been in talks to partially redeem funds invested with Point Bonita Capital… Point Bonita, a unit of Jefferies’ Leucadia Asset Management, has a $3 billion trade-finance portfolio.”
October 9 – Financial Times (Lee Harris and Robert Smith): “Insurers are preparing for a wave of potential claims relating to First Brands Group’s bankruptcy, as one of Wall Street's biggest debacles in years ripples through the financial system. Allianz, Coface and AIG are among the groups to have written policies shielding trading partners or investors from losses through their trade credit businesses…, leaving them exposed to the auto parts maker’s supply chain.”
October 9 – Bloomberg (Irene García Pérez, Jonathan Randles, Taiga Uranaka and Yusuke Maekawa): “A joint venture between Norinchukin Bank and Japanese trading house Mitsui & Co. faces $1.75 billion of exposure to bankrupt auto-parts supplier First Brands Group, court documents show. A lawyer for Katsumi Global told a Texas bankruptcy judge… the venture extended trade financing for that amount to First Brands…”
Global Credit and Financial Bubble Watch:
October 9 – Bloomberg (Olivia Fishlow): “Business development companies are generally seen as a proxy for the $1.7 trillion private credit market. Now, their struggles are indicating a weakening industry. Investors are losing interest in BDCs, which hold private debt investments, in light of growing concern around credit quality and the Federal Reserve’s rate cut last month. Because most direct loans are floating-rate, the rate cut has led some managers to scale back distributions as their borrowers will pay less on their debt. Competition from banks is also leading firms to tighten pricing to win borrowers, bringing yields down further. Shares of many publicly-traded BDC funds have dropped since the start of the year. Blackstone Secured Lending Fund is down around 21% year-to-date with Blue Owl Capital Corp. dropping 19% and Ares Capital Corp. dipping roughly 12%...”
October 6 – Wall Street Journal (Jean Eaglesham and Miriam Gottfried): “The Cayman Islands are home to palm-fringed beaches, endangered iguanas—and $75 billion owed to U.S. life insurance customers. American savers have poured money into life insurance policies and annuities in recent years, making it one of the fastest-growing categories of investments. The companies that manage the money are increasingly storing it offshore, in jurisdictions like the Caymans that don’t require them to hold as much extra capital in case their investments turn sour. They also don’t necessarily have to say who is watching over the money, a lack of transparency that has caught the eye of industry regulators and rating firms and some insurers’ executives themselves. ‘The dramatic increase in offshore transactions needs tougher oversight by regulators, to ensure the risk to policyholders is kept as low as possible,’ said Jeremy Levitt, chief executive of actuarial firm Graeme Group.”
October 9 – Wall Street Journal (Telis Demos): “Leverage combined with dramatic policymaking is proving to be a volatile mix. Earlier this year, investors held their breath as the extent of President Trump’s tariff policies were laid out… And some companies that are more vulnerable to policy changes, either by the narrower nature of their business, or because they had more fragile financial underpinnings, are feeling it. That, in turn, is creating headaches for the Wall Street ecosystem that has extended credit to these companies. Many of these businesses aren’t publicly listed or well known. But they are important cogs in the markets they serve, and employ large numbers of people.”
October 7 – Bloomberg (Amanda Albright): “Stanford University increased a commercial paper program by $500 million to $1 billion, marking the latest institution in US higher education to do so as colleges contend with federal funding pressures. The university’s board approved the increase in authorization, according to… Moody’s Ratings, who said the funding will ‘provide capacity for working capital and various capital items’.”
October 7 – Bloomberg (James Hirai): “An offering of German 5-year debt was oversubscribed by the least in more than four years. Bid-to-cover of 1.1x was the lowest since July 2021; €4.5b sale was technically uncovered after receiving €3.777b of bids.”
Trump Administration Watch:
October 8 – Wall Street Journal (Natalie Andrews, Meridith McGraw and Lindsay Wise): “Senate Majority Leader John Thune and other senior GOP lawmakers have quietly advised the White House not to move forward with mass layoffs and sharp cuts to government assistance programs as the shutdown enters its second week, according to people familiar with the matter. In recent conversations, Thune (R., S.D.) has counseled the president to attempt to limit the fallout from the shutdown for as long as possible, according to one of the people. Far-reaching government cuts and firings could backfire with the public, lawmakers have told the president’s aides…”
October 8 – Bloomberg (Gregory Korte): “More than a quarter million federal employees didn’t receive their scheduled paychecks this week as the US government shutdown enters its second week. Another two million will go without pay if the impasse extends into a third week. The missed payrolls mark a tangible pain point in the partisan standoff, adding to the pressure for Congress to pass a spending bill to reopen the government.”
October 7 – Axios (Rebecca Falconer): “Airport staffing shortages saw thousands of flights delayed across the U.S. on Tuesday night as overstretched air traffic controllers continued to work with no pay during the government shutdown. Seven days into the shutdown, the Federal Aviation Administration reported staffing issues at airports in Chicago, Las Vegas, Nashville and Philadelphia, and at air traffic control centers in the Atlanta, Boston, Dallas and Houston areas.”
October 9 – Wall Street Journal (Joseph De Avila, Mariah Timms and Bob Tita): “President Trump said Chicago Mayor Brandon Johnson and Illinois Gov. JB Pritzker should be imprisoned for failing to protect immigration agents—without specifying what laws the Democratic leaders allegedly broke. Trump made the statement… as Illinois leaders condemned the president’s ramp up in immigration raids and recent federalization of National Guard troops in the state. Trump’s threat didn’t quiet their criticism.”
October 6 – Bloomberg (Enda Curran): “When recent data showed the US economy grew by the fastest pace in nearly two years, the White House released a statement hailing the ‘Trump economy’s explosive growth,’ which proved ‘so called ‘experts’ wrong. The numbers showed gross domestic product increased at a revised 3.8% annualized pace during the second quarter which, the White House said, was just the beginning of a new economic resurgence. Yet that bullish tone was in stark contrast to a message delivered only hours earlier… by President Donald Trump’s most recent appointee to the Federal Reserve’s Board of Governors, Stephen Miran. He used two television interviews to call for rapid and steep interest-rate cuts in order to cushion a vulnerable economy.”
October 7 – Reuters (Michael S. Derby): “Federal Reserve Governor Stephen Miran… said that the U.S. bond market’s current relative calm supports a swift push to lower interest rates. Given that market signals in reaction to Fed policy changes can carry valuable feedback in the wake of a policy change, Miran said ‘I would actually argue that the bond market behavior last year bore out my argument’ that rates needed to be higher, ‘and this year, thus far, it is again bearing out my argument’ for a swift pace of easing.”
October 7 – Reuters (Valerie Volcovici, David Shepardson and Nichola Groom): “The U.S. government is considering cancelling billions of dollars in funding for clean energy programs, including awards for auto manufacturing and carbon capture… Projects on the list include two major direct air capture hubs that received billion-dollar awards from former President Joe Biden's administration, including one that involves oil company Occidental. Semafor reported the list earlier and said it could impact $12 billion in projects.”
October 5 – Wall Street Journal (Editorial Board): “You knew it was coming. As President Trump’s tariffs damage farmers and businesses across the U.S., the victims are besieging the Administration for relief. The long lines at the Commerce and Agriculture departments are the latest proof of self-destructive tariff folly. Soybean farmers appear to be next in line, as their main export market in China has shrunk as Beijing has retaliated against the Trump tariffs.”
October 8 – Wall Street Journal (Editorial Board): “President Trump has heard that home builders are struggling amid his tariff blitz, immigration crackdown and weak sales. His solution? Get government-sponsored enterprises Fannie Mae and Freddie Mac to subsidize them. Here we go again. Mr. Trump pitched this idea in a Truth Social post... ‘Before I became President, ‘OPEC’ kept Oil prices high. It wasn’t right for them to do that but, in a different form, is being done again—This time by the Big Homebuilders of our Nation,’ he wrote… He added: ‘They’re my friends, and they’re very important to the SUCCESS of our Country, but now, they can get Financing, and they have to start building Homes. They’re sitting on 2 Million empty lots, A RECORD. I’m asking Fannie Mae and Freddie Mac to get Big Homebuilders going and, by so doing, help restore the American Dream!’”
October 9 – Bloomberg (Felice Maranz): “President Donald Trump and Federal Housing Finance Agency Director Bill Pulte are fueling a deeper selloff in already struggling homebuilder stocks. A series of social media posts, from the US president over the weekend and then from the FHFA director and real estate scion Pulte on Wednesday, contributed to a four-day losing streak for an S&P gauge of builders. The group has tumbled 9.6%, losing more than $19.5 billion in market value over the period, the worst such selloff since Trump’s tariff announcement in early April.”
China Trade War Watch:
October 10 – Bloomberg (Jennifer A. Dlouhy): “US President Donald Trump said he would impose an additional 100% tariff on China as well as export controls on ‘any and all critical software’ beginning Nov. 1, hours after threatening to cancel an upcoming meeting with the country’s leader, Xi Jinping.”
October 9 – Axios (Courtenay Brown): “Chinese officials unleashed new plans to restrict access to minerals critical for America's most economically important industries. The expanded export controls are a fresh threat to an already fragile U.S.-China trade truce. The measures are widely seen as a way to gain leverage ahead of an expected meeting between President Trump and President Xi Jinping of China later this month. But it also points to the new tension likely to define U.S.-China relations in the years ahead: access to inputs as the world’s economic superpowers battle for dominance in key industries, especially AI. U.S. export controls strengthened under Trump limit China's access to high-tech chips. Beijing tightened its grip on rare earths on Thursday, with intentions to slap export controls on more key elements and any products that contain them.”
October 8 – Financial Times (Ryan McMorrow and Demetri Sevastopulo): “China has unveiled sweeping export controls on rare earths and related technologies, as it boosts its leverage over critical minerals ahead of an expected meeting this month between President Donald Trump and Xi Jinping. Under the new rules, foreign companies will need Beijing’s approval to export magnets that contain even trace amounts of Chinese-sourced rare earth materials, or that were produced using the country’s extraction methods, refining or magnet-making technology. The restrictions… will for the first time create a Chinese version of the US foreign direct product rule, a measure Washington has used to block semiconductor-related exports to China from third countries. A White House official said the US government was ‘closely assessing any impact from the new rules’. He said the Chinese move appeared to be an ‘effort to exert control over the entire world’s technology supply chains’.”
October 7 – Wall Street Journal (Patrick Thomas): “American soybean farmers are in panic mode as they harvest what is expected to be a bumper crop without their biggest customer: China. ‘We’ll see the bottom drop out if we don’t get a deal with China soon,’ said Ron Kindred, who farms 1,700 acres of corn and soybeans in central Illinois. ‘There doesn’t seem to be any urgency on China’s side, and more urgency coming from the farm community in the U.S.’ Kindred is about halfway through harvesting this year’s soybean crop. He has a contract to sell about 40% of his harvest, but the other 60% is a gamble. Prices in his area are already dropping, he said.”
Trade War Watch:
October 8 – Reuters (Alberto Nardelli and Jorge Valero): “European Union officials see new US demands for concessions as well as other measures as potentially undercutting a recent agreement that brought the allies back from the brink of a trade war. Earlier this month, US President Donald Trump’s administration sent the EU a fresh proposal for implementing ‘reciprocal, fair and balanced’ trade, according to people familiar… EU officials view the requests as maximalist and the concessions as significant…”
October 7 – New York Times (Jeanna Smialek): “The European Union’s executive arm… proposed a sharp increase in steel tariffs as it raced to protect the bloc’s steel industry from Chinese competition… The European Commission’s proposal would slash the amount of steel that can be imported without incurring tariffs to 18.3 million tons per year, a nearly 50% reduction from the 2024 quota. At the same time, it would double the tariff on steel imported above that quota, pushing it to 50%.”
October 7 – Associated Press (Rob Gillies): “President Donald Trump predicted that Canadians will travel to the United States once again after a trade deal is reached. Trump told reporters… while meeting with Prime Minister Mark Carney… he understands why many Canadians are refusing to visit. Trump’s talk of making Canada the 51st state to avoid tariffs has infuriated Canadians… There’s been a 23% drop in Canadian visits to the U.S. in the first seven months of the year… ‘I understand that. Look, I understand that,’ Trump said… ‘It’s something that will get worked out. There’s still great love between the two countries but you know American people want product here, they want to make it here… We are competing for the same business. That’s the problem. That’s why I keep mentioning one way to solve that problem. There’s a very easy way.’”
October 9 – Bloomberg (Ilena Peng): “President Donald Trump unveiled sweeping tariffs on imported lumber and wood products that his administration says are needed to protect the US economy and boost domestic manufacturing. Starting Oct. 14, softwood lumber will face 10% duties, while kitchen cabinets, bathroom vanities, and other finished wood goods will be hit with 25% tariffs that rise further in January. The biggest blow will fall on Canada, the US’s top lumber supplier, whose lumber exports are already subject to separate duties totaling 35.19%.”
Constitution Watch:
October 5 – Bloomberg (Noah Feldman): “The Supreme Court term that begins on Monday is shaping up to be one of the most consequential in modern history — not because of the cases that are on its docket, but because the court will be entering a decisive phase in its ongoing struggle with President Donald Trump’s assault on constitutional norms and his bid to consolidate power in the executive branch. Having mostly avoided direct conflict with Trump during his first nine months in office, the court now faces some hard decisions about taking him on. Some of the cases in which the court will have to choose whether to take a stand will come through its regular merits docket, but many others will arrive on the panel’s emergency docket, which has become increasingly important for establishing the court’s capacity to protect basic legal principles.”
October 5 – Financial Times (Joe Miller): “Donald Trump has made no secret of his plan to go after George Soros. Last month he escalated his rhetoric against the billionaire philanthropist, signing a memo that encouraged the US justice department, the Treasury and the Internal Revenue Service to investigate funders of ‘domestic terrorism’, and naming Soros as a potential target. His administration has also suggested it could revoke the tax exemption enjoyed by non-profit groups that administer gender-affirming care to children or assist ‘illegal immigration’. Soros’s Open Society Foundations, now run by his son Alex, sits on $25bn in assets and funds hundreds of non-governmental organisations in the US and around the world. It strongly refutes all allegations… But the White House’s threats were having a chilling effect on the hundreds of thousands of smaller charities and organisations that receive funding from the likes of OSF but lack the resources to take on the Trump administration on their own…”
Budget Watch:
October 9 – Wall Street Journal (Richard Rubin and Anthony DeBarros): “Control of the White House changed in fiscal year 2025, but the U.S. budget picture didn’t. It remains grim. Despite a historic rise in tariff revenue, the deficit was the same in the year ended Sept. 30, 2025, as the previous year. That is largely because the main drivers of spending kept rising: social programs, including Social Security and Medicare, and interest on the public debt, which topped $1 trillion by one measure for the first time… The U.S. collected $195 billion in customs duties… By one CBO metric, net interest on the public debt topped $1 trillion for the first time—more than the country spent on Medicare or defense. For every $5 the government collected in taxes, about $1 went to pay interest. Net interest of $1.029 trillion was up roughly $80 billion, or 8%, from a year earlier… As the Trump administration started, Elon Musk claimed his Department of Government Efficiency, or DOGE, could achieve $2 trillion in savings—equal to more than a quarter of total spending in fiscal 2024.”
October 8 – Bloomberg (Daniel Flatley): “The federal government logged a $1.8 trillion budget deficit for the 2025 fiscal year, little changed from 2024 despite a surge in tariff revenues... The shortfall for the year that ended Sept. 30 was just $8 billion less than 2024, the nonpartisan Congressional Budget Office said…”
U.S./Russia/China/Europe/Iran Watch:
October 6 – Financial Times (Gideon Rachman): “The warnings are coming thick and fast. Over the past week, Friedrich Merz, the German chancellor, has said that, when it comes to Russia, ‘we are not at war, but we are no longer at peace either’. Danish Prime Minister Mette Frederiksen told the FT: ‘We are now in the most difficult situation in Europe since the end of the second world war.’ She warned ‘we are running out of time’. And Eliza Manningham-Buller, a former British intelligence head, mused that it ‘may be right [in saying] we’re already at war with Russia’. All three were responding to a wave of Russian ‘hybrid warfare’— aggressive acts that stop short of actually killing people. As Frederiksen explained, it is ‘drones one day, cyber attacks the next day, sabotage on the third day’.”
October 9 – CNBC (Holly Ellyatt): “Europe has to confront the reality of the ‘hybrid warfare’ being waged against it, according to European Commission President Ursula von der Leyen… Recent drone and airspace incursions, cyberattacks and election interference were just a few incidents that von der Leyen cited as instances of hybrid warfare against Europe. ‘In just the past two weeks, MiG fighters have violated Estonia’s airspace, and drones have flown over critical sites in Belgium, Poland, Romania, Denmark and Germany. Flights have been grounded, jets scrambled, and countermeasures deployed to ensure the safety of our citizens,’ von der Leyen said… ‘Make no mistake. This is part of a worrying pattern of growing threats. Across our Union, undersea cables have been cut, airports and logistics hubs paralysed by cyberattacks, and elections targeted by malign influence campaigns,’ von der Leyen said, adding emphatically: ‘This is hybrid warfare, and we have to take it very seriously.’”
Ukraine War Watch:
October 8 – Financial Times (Christopher Miller and Ben Hall): “A series of massive Russian air strikes in the past week has disabled nearly 60% of Ukraine’s gas production, raising fears of winter shortages, according to two Ukrainian officials with knowledge... The attacks prompted Ukrainian officials this week to call meetings with western partners to inform them of the situation…”
October 6 – Associated Press (Illia Novikov): “Long-range Ukrainian drones and missiles hit a major Russian ammunition plant, a key oil terminal and an important weapons depot behind the front line, Ukraine’s president and military said…, as Kyiv cranked up pressure on Moscow’s military logistics. The Sverdlov ammunition plant in the Nizhny Novgorod region of western Russia was struck overnight, causing multiple explosions and a fire… The plant supplies Russian forces with aviation and artillery ordnance, aviation bombs and anti-aircraft and anti-tank munitions, it said. Ukraine also hit an oil terminal on the Russia-annexed Crimean Peninsula…”
October 4 – Bloomberg: “Ukraine said it attacked the Kirishi oil refinery, known as Kinef, in Russia’s Leningrad region overnight, the second time in a month as Kyiv continues pressure on Russian energy facilities. ‘The Defense Forces of Ukraine delivered a strike at’ the refinery leading to explosions and fire, Ukraine’s General Staff said…”
Middle East Watch:
October 10 – New York Times (Liam Stack, Aaron Boxerman and Bilal Shbair): “Thousands of people began the long walk from the south to the north of the Gaza Strip on Friday after the Israeli military announced a cease-fire that mediators hoped would lead to the end of the two-year war. Men carried bags, women carried young children, and older children held hands as they made their way up the dusty seaside road toward the ruins of Gaza City, which they were ordered to flee weeks ago. Some said they were heading north for the first time since the war began. Though the surroundings were bleak, the mood was jubilant. ‘The crowds are unbelievable,’ said Shamekh al-Dibs, who fled south with his family last month. ‘People are so happy, even if what they’re going back to is destruction.’”
Taiwan Watch:
October 7 – Wall Street Journal (James T. Areddy, Joyu Wang and Roque Ruiz): “Chinese military exercises around Taiwan have sparked an urgent effort in Taipei and Washington to address a critical vulnerability on the island: It is almost entirely dependent on imported fuel. Recent Chinese drills showed how China would encircle and strangle Taiwan by blocking its life-sustaining shipping lanes, a strategy with potentially less risk than staging a full-scale invasion… The challenge of steeling Taiwan against a blockade starts with energy, in particular the liquefied natural gas used to generate nearly half of Taiwan’s electricity. Some 97% of Taiwan’s energy is imported by sea. If completely cut off, its LNG inventory would be fully depleted within days, crippling the island’s ability to produce electricity.”
AI Bubble/Arms Race Watch:
October 6 – Financial Times (Tabby Kinder and George Hammond): “OpenAI has signed about $1tn in deals this year for computing power to run its artificial intelligence models, commitments that dwarf its revenue and raise questions about how it can fund them. Monday’s deal with chipmaker AMD follows similar agreements with Nvidia, Oracle and CoreWeave, as OpenAI races to find the computing power it thinks it will need to run services such as ChatGPT. The deals would give OpenAI access to more than 20 gigawatts of computing capacity, roughly equivalent to the power from 20 nuclear reactors, over the next decade. Each 1GW of AI computing capacity costs about $50bn to deploy in today’s prices, according to estimates by OpenAI executives, making the total cost about $1tn.”
October 7 – Bloomberg (Emily Forgash and Agnee Ghosh): “Two weeks ago, Nvidia Corp. agreed to invest as much as $100 billion in OpenAI to help the leading AI startup fund a data-center buildout so massive it could power a major city. OpenAI in turn committed to filling those sites with millions of Nvidia chips. The arrangement was promptly criticized for its ‘circular’ nature. This week, undeterred, OpenAI struck a similar deal. The ChatGPT maker… inked a partnership with Nvidia rival Advanced Micro Devices Inc. to deploy tens of billions of dollars worth of its chips. As part of the tie-up, OpenAI is poised to become one of AMD’s largest shareholders. Never before has so much money been spent so rapidly on a technology that… remains largely unproven as an avenue for profit-making. And often, these investments can be traced back to two leading firms: Nvidia and OpenAI. The recent wave of deals and partnerships involving the two are escalating concerns that an increasingly complex and interconnected web of business transactions is artificially propping up the trillion-dollar AI boom.”
October 4 – Wall Street Journal (Raffaele Huang and Berber Jin): “OpenAI Chief Executive Sam Altman has embarked on a global fundraising and supply-chain campaign, seeking financing and manufacturing partners that can help meet the startup’s insatiable demand for computing capacity. In a bid to secure long-term, low-cost supplies for OpenAI’s staggering, multitrillion-dollar infrastructure plan, Altman has been exploring financing alternatives with supply-chain partners... Since late September, the head of the ChatGPT maker has traveled to Taiwan, South Korea and Japan to accelerate the world’s artificial intelligence chip-building capacity.”
October 7 – Bloomberg (Meg Short): “The flood of capital pouring into AI infrastructure is raising the risks of overcapacity as the world’s biggest investors look to cash in on the artificial intelligence boom, according to Ares Management Corp. Co-President Kipp deVeer. ‘If you look historically in areas like this over the past 20 or 30 years, typically when this much capacity comes online, some of it at the end of the day has to be marginal,’ deVeer said…’These trends tend to lead to overbuilds in certain places, so us being selective and measured in what we build is important.’ Alternative asset management giants including Blackstone Inc., Brookfield, Apollo Global Management Inc. and Ares have poured into data center projects as a way to cash in on booming demand for processing power that’s been unleashed by the advent of artificial intelligence. Many have pitched their investments as a more reliable way to play the AI boom while avoiding the risks of a gold rush into AI stocks…”
October 6 – Bloomberg (Shashwat Chauhan): “As the rush towards AI-related companies continues on Wall Street, data from Crunchbase showed… the sector enjoyed a bulk of venture funding in the third quarter, with names including Anthropic raking in billions. Global venture funding in the third quarter increased 38% year-over-year to $97 billion, increasing slightly from $92 billion in the second quarter. About 46% of global venture funding for the third quarter went towards funding AI companies, with 29% invested in solely Anthropic. The three largest venture rounds in the quarter ended September were raised by foundation model companies: $13 billion by Anthropic, $5.3 billion by xAI and $2 billion from Mistral AI.”
October 4 – Bloomberg (Seth Fiegerman and Carmen Reinicke): “For almost as long as the artificial intelligence boom has been in full swing, there have been warnings of a speculative bubble that could rival the dot-com craze of the late 1990s that ended in a spectacular crash and a wave of bankruptcies. Tech firms are spending hundreds of billions of dollars on advanced chips and data centers, not just to keep pace with a surge in the use of chatbots such as ChatGPT, Gemini and Claude, but to make sure they’re ready to handle a more fundamental and disruptive shift of economic activity from humans to machines. The final bill may run into the trillions. The financing is coming from venture capital, debt and, lately, some more unconventional arrangements that have raised eyebrows on Wall Street… Never before has so much money been spent so rapidly on a technology that, for all its potential, remains somewhat unproven as a profit-making business model.”
October 8 – Axios (Scott Rosenberg): “The edges of companies that make AI and those that make AI infrastructure are blurring as the industry coalesces into a handful of corporate mega-blobs linked by investments, partnerships and shared supply chains. The AI world is moving into a new era of corporate entanglement with OpenAI’s latest megadeal, a ‘tens of billions of dollars’ agreement with AMD that has OpenAI buying mountains of AMD's GPU chips and taking up to a 10% stake in the firm. How it works: AI’s leading companies still compete — sorta. They also work together at a large scale in increasingly esoteric ways. You could call that an ecosystem. You could also call it, as AI critics have, a shell game. Either way, the AI business is beginning to function like one giant dollar-eating, energy-sucking entity that makes chips, trains models and sketches utopias to justify its runaway costs.”
October 8 – New York Times (Andrew Ross Sorkin, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Niko Gallogly and Ian Mount): “Shares in Oracle fell as much as 7% on Tueday after The Information reported… that the tech giant’s cloud computing business was generating lower profit margins than what Wall Street had been expecting. From The Information: In the three months that ended in August, Oracle generated around $900 million from rentals of servers powered by Nvidia chips and recorded a gross profit of $125 million—equal to 14 cents for every $1 of sales… That’s lower than the gross margins of many nontech retail businesses. As sales from the business nearly tripled in the past year, the gross profit margin from those sales ranged between less than 10% and slightly over 20%, averaging around 16%, the documents show.”
Bubble and Mania Watch:
October 9 – Bloomberg (David Pan, Muyao Shen and Ryan Weeks): “Crypto market traders have been hit by record liquidations just days after Bitcoin hit a fresh all-time high, volatility triggered in large part by the latest round of tariffs from US President Donald Trump. Cryptocurrency prices tumbled on Friday after Trump said he would impose an additional 100% tariff on China and export controls on software. The declines precipitated — and then were made worse by — what data tracker Coinglass described as ‘the largest liquidation event in crypto history.’ While market weakness had already been present coming into Friday, Trump’s post sparked a more than 12% decline in Bitcoin.”
October 9 – Reuters (Saqib Iqbal Ahmed): “At a time when investors could worry about tariffs, growth, and shifting Federal Reserve policy, their biggest fear looks to be missing out on further stock market gains, options data showed. With stocks hitting new highs, traders in the options market are lapping up call options with near-record fervor. For individual stocks, trading in call options, typically bought to express a bullish view, exceeds volume in puts, options that express bearish views, by the largest margin in about four years… ‘It’s all upside exuberance at this point,’ Greg Boutle, head of U.S. equity & derivative strategy at BNP Paribas, said… For single stocks, measures of skew, a gauge of demand for downside protection versus upside speculation, have been turned on their head, as typical worries about drops in stock prices have been overtaken by concerns of missing out on further gains.”
October 7 – CNBC (Lee Ying Shan): “Mergers-and-acquisitions activity globally is roaring back to life, with several megadeals in the third quarter building on momentum from earlier this year… According to data provided by financial markets platform Dealogic, the third-quarter saw a surge in M&A activity this year with collective deal value at $1.29 trillion, compared to $1.06 trillion in the second quarter and $1.1 trillion in the first quarter.”
October 9 – Wall Street Journal (Aimee Look): “Initial public offerings made a comeback in the third quarter fueled by short-term clarity about tariffs and interest rates, with momentum expected to continue into the next year, a new EY report said. The U.S. led the acceleration in IPOs in terms of proceeds, with the best quarter since 2021… Companies going public raised $48.2 billion in proceeds for the third quarter globally, according to Dealogic data compiled by EY.”
October 6 – Wall Street Journal (Jonathan Weil): “Nasdaq is known as the market’s home for tech stocks, in particular giants like Nvidia, Apple and Microsoft. But, in another corner of the exchange, new penny-stock listings for tiny overseas companies with dubious financial prospects proliferate.n Last month’s initial public offerings included a Cayman Islands-incorporated provider of shrimp-farm maintenance services in Malaysia with only four employees. The IPO by Megan Holdings priced at $4 a share and raised $5 million. There has been a flood of similar microcap IPOs over the past two years, another sign of the speculative fever gripping many parts of the investing world… Some have produced remarkable gains following announcements related to a name change, cryptocurrencies or artificial intelligence.”
October 5 – Yahoo Finance (Claire Boston): “The brightest part of the moribund US housing market is the country’s most expensive homes. Although home sales in August mostly underwhelmed, dropping 0.2% from July and increasing a modest 1.8% from a year earlier, sales at $1 million or above were up 8.4% from a year ago… High-priced homes generally move swiftly: The median home selling for at least $1 million in August spent 27 days on the market, just three days longer than homes in the $250,000 to $500,000 range — the price point that makes up the bulk of the nation’s sales. The success of higher-end properties is yet another reflection of the country’s growing wealth gap.”
Inflation Watch:
October 7 – Bloomberg (Maria Eloisa Capurro): “Consumers see higher inflation in the year ahead, with signs that lower and middle-income households are feeling most of the burden of rising price pressures, according to a monthly survey from the Federal Reserve Bank of New York. Expectations for consumer price increases one year ahead jumped to 3.4% in September from 3.2% in the prior month. The increase was most significant for households earning less than $50,000… Estimates for annualized inflation five years ahead also ticked up to 3% from 2.9%, while measures for three years ahead were unchanged at 3%.”
October 4 – Financial Times (Gregory Meyer): “The costs of tariffs are starting to drive higher prices for US consumer goods from cans of soup to car parts, even as overall US inflation rises at a moderate pace. Official data and statements from companies are pointing to accelerating price rises for an assortment of trade-dependent products after companies sold off inventories and moved to shift the cost burden of tariffs on to consumers. Data from the Bureau of Labor Statistics showed that in the six months to August, prices for audio equipment rose by 14%, dresses were up by 8% and tools, hardware and supplies had risen by 5%... ‘Over the past two years, goods inflation has been about zero. We are beginning to see goods inflation creep up,’ said Mark Mathews, chief economist at the National Retail Federation.”
October 4 – Los Angeles Times (Laurence Darmiento): “The California FAIR Plan, the state’s home insurer of last resort, is seeking an average 35.8% rate hike, its largest in years, following billions of dollars of losses incurred in the January firestorms. The… insurance pool, operated and backed by the state’s licensed home insurers, filed this week for the dwelling policy rate hike, which must be reviewed and could be reduced by the state insurance commissioner. ‘By statute, FAIR Plan rates must be sufficient to pay anticipated claims and expenses,’ FAIR Plan spokesperson Hilary McLean said…”
Federal Reserve Watch:
October 8 – Financial Times (Claire Jones): “Some of the Federal Reserve’s top officials would have preferred to keep borrowing costs on hold last month, highlighting concerns among policymakers that elevated inflation still poses a threat to the US economy. The rate-setting Federal Open Market Committee cut borrowing costs… by a quarter-point to 4-4.25% amid signs of a weakening jobs market. However, the minutes of the mid-September vote showed that ‘a few’ of the FOMC would have supported a decision to keep borrowing costs unchanged as inflation was in danger of remaining above the central bank’s goal. Progress towards the 2% goal ‘had stalled this year as inflation readings increased’, the minutes said, adding that a few members had ‘expressed concern that longer-term inflation expectations may rise if inflation does not return to its objective in a timely manner’.”
October 9 – New York Times (Colby Smith): “John C. Williams, president of the Federal Reserve Bank of New York, says he supports further interest rates cuts this year, even though inflation has moved away from the central bank’s 2% target in recent months. His rationale revolves around the labor market, where cracks have emerged. What Mr. Williams wants is to protect those cracks from deepening further… Mr. Williams said he did not believe the economy was on the verge of a recession. But the slowdown in monthly jobs growth, coupled with other signs that companies are more hesitant to hire, warrants attention, he said.”
October 9 – Bloomberg (Amara Omeokwe): “Federal Reserve Governor Michael Barr called for a cautious approach toward further interest-rate cuts, emphasizing the possibility that tariffs will create persistent inflation. ‘Common sense would indicate that when there is a lot of uncertainty, one should move cautiously,’ Barr said… Fed officials ‘should be cautious about adjusting policy so that we can gather further data, update our forecasts, and better assess the balance of risks,’ he said.”
October 7 – Bloomberg (Enda Curran): “Federal Reserve Bank of Minneapolis President Neel Kashkari… cautioned that any drastic cuts to interest rates would risk stoking inflation. ‘You would expect to see the economy have a burst of high inflation,’ Kashkari said... ‘Basically, if you try to drive the economy faster than its potential to grow and its potential to produce prices, you end up just going up across the economy.’ The Minneapolis Fed chief… cautioned that current economic data is showing some signs of stagflation given growth is slowing and inflation remains persistent.”
October 7 – Bloomberg (Low De Wei): “The US Federal Reserve is likely to resort to quantitative easing if there is a crash in risk assets such as equities, said the former investment chief of Singapore’s wealth fund. The potential for a return to such monetary easing policy is helping to drive a surge in gold prices, former GIC Pte Group Chief Investment Officer Jeffrey Jaensubhakij said… ‘If they are in a bubble and they burst — is the Fed actually going to do QE to the power of X again?,’ Jaensubhakij asked. ‘I think there’s a strong likelihood of that happening,’ which would provide a cushion for the commodity, he said.”
U.S. Economic Bubble Watch:
October 5 – Financial Times (Ruchir Sharma): “Despite mounting threats to the US economy — from high tariffs to collapsing immigration, eroding institutions, rising debt and sticky inflation — large companies and investors seem unfazed. They are increasingly confident that artificial intelligence is such a big force, it can counter all the challenges. Lately, this optimism has become a self-fulfilling prophecy. The hundreds of billions of dollars companies are investing in AI now account for an astonishing 40% share of US GDP growth this year. And some analysts believe that estimate doesn’t fully capture the AI spend… AI companies have accounted for 80% of the gains in US stocks so far in 2025. That is helping to fund and drive US growth, as the AI-driven stock market draws in money from all over the world, and feeds a boom in consumer spending by the rich.”
October 6 – Bloomberg (Spencer Soper): “US shoppers will spend $253.4 billion online in November and December, up 5.3% from 2024, according to Adobe Inc., with ‘buy now pay later’ checkout options fueling growth. The forecast represents a slowdown from last year, when online spending rose 8.7%... Checkout options that let shoppers purchase items and pay for them over time will drive $20.2 billion in holiday spending, up 11% from a year earlier and more than twice the pace of overall spending growth…”
October 7 – Bloomberg (Mark Niquette): “US consumer borrowing rose in August at the slowest pace in six months, restrained by a pullback in credit-card balances. Total credit outstanding climbed $363 million after a revised $18.1 billion gain in July… Credit-card and other revolving debt outstanding fell roughly $6 billion, partially unwinding a surge in July. Non-revolving credit, such as loans for vehicle purchases and school tuition, increased $6.3 billion.”
October 8 – Axios (Molly Smith): “Applications for mortgages to buy a home or refinance both fell for a second week, marking a swift reversal of what had been a hopeful sign of a revival in the US housing market. The Mortgage Bankers Association’s index of home-purchase applications declined 1.2%..., while a gauge of refinancing fell 7.7%. Both dropped back to levels seen in early September…”
October 8 – CNBC (Diana Olick): “Mortgage demand overall weakened again last week, even as interest rates fell slightly. For those still in the market, though, they are looking increasingly to adjustable-rate loans to get the lowest interest rate possible… For those who are buying or refinancing, somewhat riskier adjustable-rate mortgages are gaining in popularity, as they offer lower interest rates.”
October 8 – Wall Street Journal (Carol Ryan): “Blink and you will have missed the recent refinancing boom. The rush to lock in a cheaper mortgage was still a hopeful sign for lenders. A minor move in mortgage rates triggered a strong reaction from borrowers. The cost of a 30-year home loan fell 0.3 percentage point to 6.26% over the three weeks through Sept. 17, which was the lowest rate in 11 months. Refinancing activity jumped 80% over the period… Borrowers are moving faster to lock in even small reductions in their housing costs.”
October 9 – Bloomberg (Andre Tartar, Ben Steverman, and Stephanie Davidson): “At the height of the Gilded Age, there were 4,047 millionaires in the US, according to an 18-month investigation by the long-gone New-York Tribune, which listed each by name in a special edition published in 1892. Today the number of millionaire households is more than 24 million, or almost one in five US households, according to a Bloomberg analysis of government survey data through 2023. Fully a third of those modern millionaires have been minted since 2017, as home values and the stock market surged. That doesn’t mean they’re walking around flush with cash. Instead, more and more of millionaires’ wealth is locked up in assets that can't be accessed quickly or easily, like home equity or, increasingly, age-restricted retirement assets like 401(k) and IRA accounts.”
China Watch:
October 10 – Bloomberg: “High-flying Chinese chipmaker stocks tumbled Friday as mounting concerns over lofty valuations and reported margin cuts soured investor sentiment. Shares of Semiconductor Manufacturing International Corp. fell as much as 8.2% in Hong Kong, while peer Hua Hong Semiconductor Ltd. slid 6.6%... The sector was among worst drags on the onshore benchmark CSI 300 Index, which closed down 2%... The chip stock slide intensified after local media reported that brokers cut SMIC’s margin financing ratio to zero.”
Central Bank Watch:
October 7 – CNBC (Lim Hui Jie): “New Zealand’s central bank… cut benchmark interest rates by 50 bps to 2.5%, bringing the policy rate to its lowest level since July 2022 as growth worries loom. The cut to the overnight cash rate was larger than the 25 bps expected…”
France/Europe Watch:
October 6 – Bloomberg (Julien Ponthus, James Hirai and Claudia Cohen): “French markets tumbled after the resignation of Prime Minister Sebastien Lecornu threw the country into another political crisis, raising the prospect of snap elections to break the deadlock. French bonds fell, with 10-year yields jumping as much as 11 bps to 3.61%, pushing the premium that investors demanded to hold French debt over Germany to the highest level this year. The CAC 40 Index lost 1.4%, the most in six weeks, as banks took the biggest hit.”
October 6 – Financial Times (Editorial Board): “The resignation of Sébastien Lecornu after less than four weeks as French prime minister plunges the country into its worst political crisis for almost 70 years. It is terrible for France and bad for Europe, which needs decisive leadership now more than ever. France is not only ungovernable, its public finances are in a mess, the economy is weak, social tensions are rising and the markets are jittery. The country may not be on the brink of civil war as it was in 1958, but then it had a way out of the mire in the form of Charles de Gaulle. There is no saviour on the horizon now… The left and centrist parties worked together to prevent the far-right Rassemblement National from winning a majority in last summer’s snap parliamentary election, but have done much since then to propel it closer to power.”
October 6 – Financial Times (Ian Johnston, Adrienne Klasa, Ian Smith and Emily Herbert): “France’s Prime Minister Sébastien Lecornu has resigned less than a month after his appointment, prompting a market sell-off amid concerns about dysfunction in the Eurozone’s second-biggest economy. Lecornu, a long-serving ally of President Emmanuel Macron, submitted his resignation on Monday morning…, making him the shortest-serving prime minister since the Fifth Republic was established in 1958 and heaping pressure on the president. ‘One cannot be prime minister when the conditions are not met,’ Lecornu said in a televised address, accusing other parties in France’s fractured parliament of failing to compromise.”
October 9 – Politico (Marion Solletty and Tim Ross): “Don’t freak out just yet, but maybe start packing emergency supplies. Brussels’ fear of a founding member of the European Union swinging to the far right was abruptly reactivated this week as France’s snowballing political crisis gathered more momentum… The French president is under extraordinary pressure after his prime minister’s latest attempt at forming a functioning government collapsed in just 14 hours and with new elections in the coming months, if not weeks, looking more and more likely. At both the presidential and parliamentary levels, victory for Marine Le Pen’s National Rally is now distinctly possible, meaning a Euroskeptic, far-right figure might soon speak for France in the EU’s core institutions, adding to a growing chorus of populist, right-wing voices.”
October 7 – Financial Times (Ian Johnston, Sarah White and Adrienne Klasa and Ian Smith): “The resignation of Sébastien Lecornu as French prime minister has thrown plans for a 2026 budget into turmoil, rattled debt investors and weakened the prospects of repairing France’s dire public finances… Concerns about the deepening crisis are such that on Tuesday, former prime minister Edouard Philippe, one of the president’s closest allies, called on him to bring forward 2027’s presidential elections after next year’s budget is adopted.”
Japan Watch:
October 9 – Bloomberg (Sakura Murakami and Yoshiaki Nohara): “Japan’s governing coalition abruptly collapsed in a major blow to new ruling party leader Sanae Takaichi, plunging the country into one of its biggest political crises in decades and jolting markets. Talks between Liberal Democratic Party chief Takaichi and junior partner Komeito leader Tetsuo Saito fell apart on Friday, weakening the new LDP leader before she has even secured the role of prime minister. Whether she can still become Japan’s first female premier is now shrouded in doubt as the dramatic implosion of the ruling coalition may encourage the opposition to coalesce around another candidate in a parliamentary vote in the coming days.”
October 9 – Reuters (Leika Kihara): “A pledge by Japan’s next likely prime minister to reassert government sway over the central bank has fanned worries about political interference in monetary policy, however, a weak yen and politics could limit any such push… ‘The government must be responsible for fiscal and monetary policy. The BOJ will then consider the most appropriate means,’ Takaichi told a news briefing upon her victory in the weekend race, stressing the need to focus on reflating growth.”
October 8 – Bloomberg (Sakura Murakami): “Japan’s new ruling party leader, Sanae Takaichi, has yet to reach an agreement with long-time coalition partner Komeito about continuing their alliance, a delay that highlights the challenges she faces in building a stable administration. Even with Komeito on board, the Liberal Democratic Party lacks a majority in both houses of parliament. That makes it imperative for Takaichi to extract a promise of continued support before she cuts deals with other parties to obtain the numbers needed to pass budgets and push ahead with policy.”
October 7 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda will likely face a tougher political environment in the second half of his five-year term starting Thursday after the ruling party leadership victory of Sanae Takaichi, a critic of interest rate increases. Ueda already faces a dilemma. The central bank appeared to be laying the groundwork for its first interest rate hike since January later this month. Now, following Takaichi’s win, if Ueda goes ahead with an increase he risks antagonizing a premier who might then seek more sway over the BOJ’s decisions going forward. If he stands pat, as suggested by one of Takaichi’s economic advisers, analysts may conclude that he is already pushing back a hike in response to Takaichi’s victory. That might cause the yen to weaken further…”
October 6 – Bloomberg (Toru Fujioka): “A move by the Bank of Japan to raise interest rates this month would likely come too soon after the formation of Sanae Takaichi’s administration and would be better timed in December, according to one of her closest economic advisers. ‘A rate hike in October is probably difficult in my view,’ said Etsuro Honda, who advises Takaichi on economic policies…”
October 6 – Bloomberg (Yoshiaki Nohara): “Japan’s household spending rose for a fourth month, showing resilience amid persistent inflation as the central bank continues to mull the timing of its next interest rate hike. Outlays by households adjusted for inflation gained 2.3% from a year ago in August, led by spending on transport and entertainment…”
Emerging Market Watch:
October 8 – Reuters (Walter Bianchi and Rodrigo Campos): “Persistent exchange rate pressures continued to weigh on Argentina's financial markets on Wednesday, straining the Treasury as proceeds from a special liquidation deal with agricultural exporters dwindle. Traders estimate the Treasury, under the Ministry of Economy, has sold more than $1.6 billion in the past six trading sessions to support the weakening peso… Midterm elections on October. 26 are seen as a key test for President Javier Milei, who is navigating the second half of his term with limited congressional support.”
October 8 – Bloomberg (Ignacio Olivera Doll): “Having burned through billions of dollars in reserves, Argentina’s government is getting creative as it looks to defend the peso ahead of crucial midterm elections later this month. The central bank spent $1.1 billion in the spot market last month when the currency breached its trading band and is now coming up to a limit imposed by the Argentina’s main exchange in the derivatives market. It raised its short position in dollar futures to around $8 billion at the end of September…”
October 6 – Financial Times (Joseph Cotterill): “Investors are snapping up assets across the developing world as a sliding dollar and bargain valuations fuel the biggest rally in emerging market stocks in more than 15 years. An MSCI benchmark index of emerging-market stocks has risen 28% so far this year, its biggest gain over the same period since 2009, while a JPMorgan index of government bonds sold by developing countries in their own currencies is up 16%, in a growing comeback from a ‘lost decade’ in the shadow of US markets.”
October 7 – Reuters (Libby George and Rodrigo Campos): “An intricate series of pipes off Angola’s Atlantic coast snakes toward a new fuel refinery that signals the country’s push for energy independence — and its use of private creditors, instead of banks, to fund a big-ticket project. ‘We’re not the lender of last resort,’ said Felipe Berliner, co-founder of emerging markets asset manager Gemcorp, which invested in the project and led the syndicate that provided the bulk of funding for the refinery, using private capital. ‘Sometimes we are the only lender.’ Private credit for emerging markets — driven by investors' hunt for yields and saturation in developed Western markets — could grow exponentially, veteran investors told Reuters… ‘This is a paradigm shift,’ said Pramol Dhawan, head of emerging markets… at PIMCO. ‘The need to globally reallocate is not a hedge — it’s a secular thesis.’”
Levered Speculation Watch:
October 7 – Bloomberg (Ruth Carson, John Cheng and Naomi Tajitsu): “A once-popular currency trade betting against the yen looks set to make a comeback, as Sanae Takaichi’s near-certain elevation to Japan’s premiership raises the prospect of slower interest-rate hikes. Japan’s currency has dropped around 2% against its G-10 peers so far this week, as investors wagered that Takaichi’s pro-stimulus stance would result in a slower timeline for the Bank of Japan’s policy tightening. Delayed hikes could well tempt traders back into a strategy known as the carry trade, where they borrow the low-yielding yen and buy currencies such as the Brazilian real or Australian dollar that offer higher returns.”
October 8 – Reuters (Nell Mackenzie and Anirban Sen): “Hedge funds returned 1.3% in September, with managers in Europe, Asia and the Middle East outperforming their North American rivals, according… JPMorgan… The JPMorgan note, which tracks hedge fund trading, said positioning in U.S. stocks was only ‘somewhat bullish,’ indicating an expectation for equities to rise. Crowding in the biggest ‘Magnificent Seven’ tech stocks, which include Apple, Amazon.com and Nvidia, remained near historical highs, the note said.”
October 7 – Bloomberg (Francine Lacqua and Daniel Cancel): “Citadel’s planned office tower in Miami’s Brickell neighborhood — long expected to cost more than $1 billion — will probably be closer to $2.5 billion with construction likely to begin mid-to-late next year, founder and Chief Executive Officer Ken Griffin said. ‘I wish it were a billion dollars,’ Griffin said… ‘Due to inflation in the cost of construction, that’s going to be about a $2.5 billion tower’.”
Social, Political, Environmental, Cybersecurity Instability Watch:
October 7 – Axios (Sam Sabin): “Foreign adversaries are increasingly using multiple AI tools to power hacking and influence operations, according to a new OpenAI report… In the cases OpenAI discovered, the adversaries typically turned to ChatGPT to help plan their schemes, then used other models to carry them out — reflecting the range of applications for AI tools in such operations… A Russian-based actor that was generating content for a covert influence operation used ChatGPT to write prompts seemingly for another AI video model. A cluster of Chinese-language accounts used ChatGPT to research and refine phishing automation they wanted to run on China-based model DeepSeek.”
Geopolitical Watch:
October 8 – Bloomberg (Sara Sjolin): “Greenland’s prime minister called on the European Union to deepen cooperation on connectivity in the Arctic territory to prevent ‘unauthorized parties’ from disrupting its digital infrastructure. The plea comes amid intensifying geopolitical interest in the Arctic, where Russia is asserting military presence and US President Donald Trump is pushing to take control of Greenland. The island… has also become a focal point of global competition as melting ice opens new shipping lanes and access to critical minerals.”
October 9 – Bloomberg (Olivia Fishlow): “Business development companies are generally seen as a proxy for the $1.7 trillion private credit market. Now, their struggles are indicating a weakening industry. Investors are losing interest in BDCs, which hold private debt investments, in light of growing concern around credit quality and the Federal Reserve’s rate cut last month. Because most direct loans are floating-rate, the rate cut has led some managers to scale back distributions as their borrowers will pay less on their debt. Competition from banks is also leading firms to tighten pricing to win borrowers, bringing yields down further. Shares of many publicly-traded BDC funds have dropped since the start of the year. Blackstone Secured Lending Fund is down around 21% year-to-date with Blue Owl Capital Corp. dropping 19% and Ares Capital Corp. dipping roughly 12%...”
October 6 – Wall Street Journal (Jean Eaglesham and Miriam Gottfried): “The Cayman Islands are home to palm-fringed beaches, endangered iguanas—and $75 billion owed to U.S. life insurance customers. American savers have poured money into life insurance policies and annuities in recent years, making it one of the fastest-growing categories of investments. The companies that manage the money are increasingly storing it offshore, in jurisdictions like the Caymans that don’t require them to hold as much extra capital in case their investments turn sour. They also don’t necessarily have to say who is watching over the money, a lack of transparency that has caught the eye of industry regulators and rating firms and some insurers’ executives themselves. ‘The dramatic increase in offshore transactions needs tougher oversight by regulators, to ensure the risk to policyholders is kept as low as possible,’ said Jeremy Levitt, chief executive of actuarial firm Graeme Group.”
October 9 – Wall Street Journal (Telis Demos): “Leverage combined with dramatic policymaking is proving to be a volatile mix. Earlier this year, investors held their breath as the extent of President Trump’s tariff policies were laid out… And some companies that are more vulnerable to policy changes, either by the narrower nature of their business, or because they had more fragile financial underpinnings, are feeling it. That, in turn, is creating headaches for the Wall Street ecosystem that has extended credit to these companies. Many of these businesses aren’t publicly listed or well known. But they are important cogs in the markets they serve, and employ large numbers of people.”
October 7 – Bloomberg (Amanda Albright): “Stanford University increased a commercial paper program by $500 million to $1 billion, marking the latest institution in US higher education to do so as colleges contend with federal funding pressures. The university’s board approved the increase in authorization, according to… Moody’s Ratings, who said the funding will ‘provide capacity for working capital and various capital items’.”
October 7 – Bloomberg (James Hirai): “An offering of German 5-year debt was oversubscribed by the least in more than four years. Bid-to-cover of 1.1x was the lowest since July 2021; €4.5b sale was technically uncovered after receiving €3.777b of bids.”
Trump Administration Watch:
October 8 – Wall Street Journal (Natalie Andrews, Meridith McGraw and Lindsay Wise): “Senate Majority Leader John Thune and other senior GOP lawmakers have quietly advised the White House not to move forward with mass layoffs and sharp cuts to government assistance programs as the shutdown enters its second week, according to people familiar with the matter. In recent conversations, Thune (R., S.D.) has counseled the president to attempt to limit the fallout from the shutdown for as long as possible, according to one of the people. Far-reaching government cuts and firings could backfire with the public, lawmakers have told the president’s aides…”
October 8 – Bloomberg (Gregory Korte): “More than a quarter million federal employees didn’t receive their scheduled paychecks this week as the US government shutdown enters its second week. Another two million will go without pay if the impasse extends into a third week. The missed payrolls mark a tangible pain point in the partisan standoff, adding to the pressure for Congress to pass a spending bill to reopen the government.”
October 7 – Axios (Rebecca Falconer): “Airport staffing shortages saw thousands of flights delayed across the U.S. on Tuesday night as overstretched air traffic controllers continued to work with no pay during the government shutdown. Seven days into the shutdown, the Federal Aviation Administration reported staffing issues at airports in Chicago, Las Vegas, Nashville and Philadelphia, and at air traffic control centers in the Atlanta, Boston, Dallas and Houston areas.”
October 9 – Wall Street Journal (Joseph De Avila, Mariah Timms and Bob Tita): “President Trump said Chicago Mayor Brandon Johnson and Illinois Gov. JB Pritzker should be imprisoned for failing to protect immigration agents—without specifying what laws the Democratic leaders allegedly broke. Trump made the statement… as Illinois leaders condemned the president’s ramp up in immigration raids and recent federalization of National Guard troops in the state. Trump’s threat didn’t quiet their criticism.”
October 6 – Bloomberg (Enda Curran): “When recent data showed the US economy grew by the fastest pace in nearly two years, the White House released a statement hailing the ‘Trump economy’s explosive growth,’ which proved ‘so called ‘experts’ wrong. The numbers showed gross domestic product increased at a revised 3.8% annualized pace during the second quarter which, the White House said, was just the beginning of a new economic resurgence. Yet that bullish tone was in stark contrast to a message delivered only hours earlier… by President Donald Trump’s most recent appointee to the Federal Reserve’s Board of Governors, Stephen Miran. He used two television interviews to call for rapid and steep interest-rate cuts in order to cushion a vulnerable economy.”
October 7 – Reuters (Michael S. Derby): “Federal Reserve Governor Stephen Miran… said that the U.S. bond market’s current relative calm supports a swift push to lower interest rates. Given that market signals in reaction to Fed policy changes can carry valuable feedback in the wake of a policy change, Miran said ‘I would actually argue that the bond market behavior last year bore out my argument’ that rates needed to be higher, ‘and this year, thus far, it is again bearing out my argument’ for a swift pace of easing.”
October 7 – Reuters (Valerie Volcovici, David Shepardson and Nichola Groom): “The U.S. government is considering cancelling billions of dollars in funding for clean energy programs, including awards for auto manufacturing and carbon capture… Projects on the list include two major direct air capture hubs that received billion-dollar awards from former President Joe Biden's administration, including one that involves oil company Occidental. Semafor reported the list earlier and said it could impact $12 billion in projects.”
October 5 – Wall Street Journal (Editorial Board): “You knew it was coming. As President Trump’s tariffs damage farmers and businesses across the U.S., the victims are besieging the Administration for relief. The long lines at the Commerce and Agriculture departments are the latest proof of self-destructive tariff folly. Soybean farmers appear to be next in line, as their main export market in China has shrunk as Beijing has retaliated against the Trump tariffs.”
October 8 – Wall Street Journal (Editorial Board): “President Trump has heard that home builders are struggling amid his tariff blitz, immigration crackdown and weak sales. His solution? Get government-sponsored enterprises Fannie Mae and Freddie Mac to subsidize them. Here we go again. Mr. Trump pitched this idea in a Truth Social post... ‘Before I became President, ‘OPEC’ kept Oil prices high. It wasn’t right for them to do that but, in a different form, is being done again—This time by the Big Homebuilders of our Nation,’ he wrote… He added: ‘They’re my friends, and they’re very important to the SUCCESS of our Country, but now, they can get Financing, and they have to start building Homes. They’re sitting on 2 Million empty lots, A RECORD. I’m asking Fannie Mae and Freddie Mac to get Big Homebuilders going and, by so doing, help restore the American Dream!’”
October 9 – Bloomberg (Felice Maranz): “President Donald Trump and Federal Housing Finance Agency Director Bill Pulte are fueling a deeper selloff in already struggling homebuilder stocks. A series of social media posts, from the US president over the weekend and then from the FHFA director and real estate scion Pulte on Wednesday, contributed to a four-day losing streak for an S&P gauge of builders. The group has tumbled 9.6%, losing more than $19.5 billion in market value over the period, the worst such selloff since Trump’s tariff announcement in early April.”
China Trade War Watch:
October 10 – Bloomberg (Jennifer A. Dlouhy): “US President Donald Trump said he would impose an additional 100% tariff on China as well as export controls on ‘any and all critical software’ beginning Nov. 1, hours after threatening to cancel an upcoming meeting with the country’s leader, Xi Jinping.”
October 9 – Axios (Courtenay Brown): “Chinese officials unleashed new plans to restrict access to minerals critical for America's most economically important industries. The expanded export controls are a fresh threat to an already fragile U.S.-China trade truce. The measures are widely seen as a way to gain leverage ahead of an expected meeting between President Trump and President Xi Jinping of China later this month. But it also points to the new tension likely to define U.S.-China relations in the years ahead: access to inputs as the world’s economic superpowers battle for dominance in key industries, especially AI. U.S. export controls strengthened under Trump limit China's access to high-tech chips. Beijing tightened its grip on rare earths on Thursday, with intentions to slap export controls on more key elements and any products that contain them.”
October 8 – Financial Times (Ryan McMorrow and Demetri Sevastopulo): “China has unveiled sweeping export controls on rare earths and related technologies, as it boosts its leverage over critical minerals ahead of an expected meeting this month between President Donald Trump and Xi Jinping. Under the new rules, foreign companies will need Beijing’s approval to export magnets that contain even trace amounts of Chinese-sourced rare earth materials, or that were produced using the country’s extraction methods, refining or magnet-making technology. The restrictions… will for the first time create a Chinese version of the US foreign direct product rule, a measure Washington has used to block semiconductor-related exports to China from third countries. A White House official said the US government was ‘closely assessing any impact from the new rules’. He said the Chinese move appeared to be an ‘effort to exert control over the entire world’s technology supply chains’.”
October 7 – Wall Street Journal (Patrick Thomas): “American soybean farmers are in panic mode as they harvest what is expected to be a bumper crop without their biggest customer: China. ‘We’ll see the bottom drop out if we don’t get a deal with China soon,’ said Ron Kindred, who farms 1,700 acres of corn and soybeans in central Illinois. ‘There doesn’t seem to be any urgency on China’s side, and more urgency coming from the farm community in the U.S.’ Kindred is about halfway through harvesting this year’s soybean crop. He has a contract to sell about 40% of his harvest, but the other 60% is a gamble. Prices in his area are already dropping, he said.”
Trade War Watch:
October 8 – Reuters (Alberto Nardelli and Jorge Valero): “European Union officials see new US demands for concessions as well as other measures as potentially undercutting a recent agreement that brought the allies back from the brink of a trade war. Earlier this month, US President Donald Trump’s administration sent the EU a fresh proposal for implementing ‘reciprocal, fair and balanced’ trade, according to people familiar… EU officials view the requests as maximalist and the concessions as significant…”
October 7 – New York Times (Jeanna Smialek): “The European Union’s executive arm… proposed a sharp increase in steel tariffs as it raced to protect the bloc’s steel industry from Chinese competition… The European Commission’s proposal would slash the amount of steel that can be imported without incurring tariffs to 18.3 million tons per year, a nearly 50% reduction from the 2024 quota. At the same time, it would double the tariff on steel imported above that quota, pushing it to 50%.”
October 7 – Associated Press (Rob Gillies): “President Donald Trump predicted that Canadians will travel to the United States once again after a trade deal is reached. Trump told reporters… while meeting with Prime Minister Mark Carney… he understands why many Canadians are refusing to visit. Trump’s talk of making Canada the 51st state to avoid tariffs has infuriated Canadians… There’s been a 23% drop in Canadian visits to the U.S. in the first seven months of the year… ‘I understand that. Look, I understand that,’ Trump said… ‘It’s something that will get worked out. There’s still great love between the two countries but you know American people want product here, they want to make it here… We are competing for the same business. That’s the problem. That’s why I keep mentioning one way to solve that problem. There’s a very easy way.’”
October 9 – Bloomberg (Ilena Peng): “President Donald Trump unveiled sweeping tariffs on imported lumber and wood products that his administration says are needed to protect the US economy and boost domestic manufacturing. Starting Oct. 14, softwood lumber will face 10% duties, while kitchen cabinets, bathroom vanities, and other finished wood goods will be hit with 25% tariffs that rise further in January. The biggest blow will fall on Canada, the US’s top lumber supplier, whose lumber exports are already subject to separate duties totaling 35.19%.”
Constitution Watch:
October 5 – Bloomberg (Noah Feldman): “The Supreme Court term that begins on Monday is shaping up to be one of the most consequential in modern history — not because of the cases that are on its docket, but because the court will be entering a decisive phase in its ongoing struggle with President Donald Trump’s assault on constitutional norms and his bid to consolidate power in the executive branch. Having mostly avoided direct conflict with Trump during his first nine months in office, the court now faces some hard decisions about taking him on. Some of the cases in which the court will have to choose whether to take a stand will come through its regular merits docket, but many others will arrive on the panel’s emergency docket, which has become increasingly important for establishing the court’s capacity to protect basic legal principles.”
October 5 – Financial Times (Joe Miller): “Donald Trump has made no secret of his plan to go after George Soros. Last month he escalated his rhetoric against the billionaire philanthropist, signing a memo that encouraged the US justice department, the Treasury and the Internal Revenue Service to investigate funders of ‘domestic terrorism’, and naming Soros as a potential target. His administration has also suggested it could revoke the tax exemption enjoyed by non-profit groups that administer gender-affirming care to children or assist ‘illegal immigration’. Soros’s Open Society Foundations, now run by his son Alex, sits on $25bn in assets and funds hundreds of non-governmental organisations in the US and around the world. It strongly refutes all allegations… But the White House’s threats were having a chilling effect on the hundreds of thousands of smaller charities and organisations that receive funding from the likes of OSF but lack the resources to take on the Trump administration on their own…”
Budget Watch:
October 9 – Wall Street Journal (Richard Rubin and Anthony DeBarros): “Control of the White House changed in fiscal year 2025, but the U.S. budget picture didn’t. It remains grim. Despite a historic rise in tariff revenue, the deficit was the same in the year ended Sept. 30, 2025, as the previous year. That is largely because the main drivers of spending kept rising: social programs, including Social Security and Medicare, and interest on the public debt, which topped $1 trillion by one measure for the first time… The U.S. collected $195 billion in customs duties… By one CBO metric, net interest on the public debt topped $1 trillion for the first time—more than the country spent on Medicare or defense. For every $5 the government collected in taxes, about $1 went to pay interest. Net interest of $1.029 trillion was up roughly $80 billion, or 8%, from a year earlier… As the Trump administration started, Elon Musk claimed his Department of Government Efficiency, or DOGE, could achieve $2 trillion in savings—equal to more than a quarter of total spending in fiscal 2024.”
October 8 – Bloomberg (Daniel Flatley): “The federal government logged a $1.8 trillion budget deficit for the 2025 fiscal year, little changed from 2024 despite a surge in tariff revenues... The shortfall for the year that ended Sept. 30 was just $8 billion less than 2024, the nonpartisan Congressional Budget Office said…”
U.S./Russia/China/Europe/Iran Watch:
October 6 – Financial Times (Gideon Rachman): “The warnings are coming thick and fast. Over the past week, Friedrich Merz, the German chancellor, has said that, when it comes to Russia, ‘we are not at war, but we are no longer at peace either’. Danish Prime Minister Mette Frederiksen told the FT: ‘We are now in the most difficult situation in Europe since the end of the second world war.’ She warned ‘we are running out of time’. And Eliza Manningham-Buller, a former British intelligence head, mused that it ‘may be right [in saying] we’re already at war with Russia’. All three were responding to a wave of Russian ‘hybrid warfare’— aggressive acts that stop short of actually killing people. As Frederiksen explained, it is ‘drones one day, cyber attacks the next day, sabotage on the third day’.”
October 9 – CNBC (Holly Ellyatt): “Europe has to confront the reality of the ‘hybrid warfare’ being waged against it, according to European Commission President Ursula von der Leyen… Recent drone and airspace incursions, cyberattacks and election interference were just a few incidents that von der Leyen cited as instances of hybrid warfare against Europe. ‘In just the past two weeks, MiG fighters have violated Estonia’s airspace, and drones have flown over critical sites in Belgium, Poland, Romania, Denmark and Germany. Flights have been grounded, jets scrambled, and countermeasures deployed to ensure the safety of our citizens,’ von der Leyen said… ‘Make no mistake. This is part of a worrying pattern of growing threats. Across our Union, undersea cables have been cut, airports and logistics hubs paralysed by cyberattacks, and elections targeted by malign influence campaigns,’ von der Leyen said, adding emphatically: ‘This is hybrid warfare, and we have to take it very seriously.’”
Ukraine War Watch:
October 8 – Financial Times (Christopher Miller and Ben Hall): “A series of massive Russian air strikes in the past week has disabled nearly 60% of Ukraine’s gas production, raising fears of winter shortages, according to two Ukrainian officials with knowledge... The attacks prompted Ukrainian officials this week to call meetings with western partners to inform them of the situation…”
October 6 – Associated Press (Illia Novikov): “Long-range Ukrainian drones and missiles hit a major Russian ammunition plant, a key oil terminal and an important weapons depot behind the front line, Ukraine’s president and military said…, as Kyiv cranked up pressure on Moscow’s military logistics. The Sverdlov ammunition plant in the Nizhny Novgorod region of western Russia was struck overnight, causing multiple explosions and a fire… The plant supplies Russian forces with aviation and artillery ordnance, aviation bombs and anti-aircraft and anti-tank munitions, it said. Ukraine also hit an oil terminal on the Russia-annexed Crimean Peninsula…”
October 4 – Bloomberg: “Ukraine said it attacked the Kirishi oil refinery, known as Kinef, in Russia’s Leningrad region overnight, the second time in a month as Kyiv continues pressure on Russian energy facilities. ‘The Defense Forces of Ukraine delivered a strike at’ the refinery leading to explosions and fire, Ukraine’s General Staff said…”
Middle East Watch:
October 10 – New York Times (Liam Stack, Aaron Boxerman and Bilal Shbair): “Thousands of people began the long walk from the south to the north of the Gaza Strip on Friday after the Israeli military announced a cease-fire that mediators hoped would lead to the end of the two-year war. Men carried bags, women carried young children, and older children held hands as they made their way up the dusty seaside road toward the ruins of Gaza City, which they were ordered to flee weeks ago. Some said they were heading north for the first time since the war began. Though the surroundings were bleak, the mood was jubilant. ‘The crowds are unbelievable,’ said Shamekh al-Dibs, who fled south with his family last month. ‘People are so happy, even if what they’re going back to is destruction.’”
Taiwan Watch:
October 7 – Wall Street Journal (James T. Areddy, Joyu Wang and Roque Ruiz): “Chinese military exercises around Taiwan have sparked an urgent effort in Taipei and Washington to address a critical vulnerability on the island: It is almost entirely dependent on imported fuel. Recent Chinese drills showed how China would encircle and strangle Taiwan by blocking its life-sustaining shipping lanes, a strategy with potentially less risk than staging a full-scale invasion… The challenge of steeling Taiwan against a blockade starts with energy, in particular the liquefied natural gas used to generate nearly half of Taiwan’s electricity. Some 97% of Taiwan’s energy is imported by sea. If completely cut off, its LNG inventory would be fully depleted within days, crippling the island’s ability to produce electricity.”
AI Bubble/Arms Race Watch:
October 6 – Financial Times (Tabby Kinder and George Hammond): “OpenAI has signed about $1tn in deals this year for computing power to run its artificial intelligence models, commitments that dwarf its revenue and raise questions about how it can fund them. Monday’s deal with chipmaker AMD follows similar agreements with Nvidia, Oracle and CoreWeave, as OpenAI races to find the computing power it thinks it will need to run services such as ChatGPT. The deals would give OpenAI access to more than 20 gigawatts of computing capacity, roughly equivalent to the power from 20 nuclear reactors, over the next decade. Each 1GW of AI computing capacity costs about $50bn to deploy in today’s prices, according to estimates by OpenAI executives, making the total cost about $1tn.”
October 7 – Bloomberg (Emily Forgash and Agnee Ghosh): “Two weeks ago, Nvidia Corp. agreed to invest as much as $100 billion in OpenAI to help the leading AI startup fund a data-center buildout so massive it could power a major city. OpenAI in turn committed to filling those sites with millions of Nvidia chips. The arrangement was promptly criticized for its ‘circular’ nature. This week, undeterred, OpenAI struck a similar deal. The ChatGPT maker… inked a partnership with Nvidia rival Advanced Micro Devices Inc. to deploy tens of billions of dollars worth of its chips. As part of the tie-up, OpenAI is poised to become one of AMD’s largest shareholders. Never before has so much money been spent so rapidly on a technology that… remains largely unproven as an avenue for profit-making. And often, these investments can be traced back to two leading firms: Nvidia and OpenAI. The recent wave of deals and partnerships involving the two are escalating concerns that an increasingly complex and interconnected web of business transactions is artificially propping up the trillion-dollar AI boom.”
October 4 – Wall Street Journal (Raffaele Huang and Berber Jin): “OpenAI Chief Executive Sam Altman has embarked on a global fundraising and supply-chain campaign, seeking financing and manufacturing partners that can help meet the startup’s insatiable demand for computing capacity. In a bid to secure long-term, low-cost supplies for OpenAI’s staggering, multitrillion-dollar infrastructure plan, Altman has been exploring financing alternatives with supply-chain partners... Since late September, the head of the ChatGPT maker has traveled to Taiwan, South Korea and Japan to accelerate the world’s artificial intelligence chip-building capacity.”
October 7 – Bloomberg (Meg Short): “The flood of capital pouring into AI infrastructure is raising the risks of overcapacity as the world’s biggest investors look to cash in on the artificial intelligence boom, according to Ares Management Corp. Co-President Kipp deVeer. ‘If you look historically in areas like this over the past 20 or 30 years, typically when this much capacity comes online, some of it at the end of the day has to be marginal,’ deVeer said…’These trends tend to lead to overbuilds in certain places, so us being selective and measured in what we build is important.’ Alternative asset management giants including Blackstone Inc., Brookfield, Apollo Global Management Inc. and Ares have poured into data center projects as a way to cash in on booming demand for processing power that’s been unleashed by the advent of artificial intelligence. Many have pitched their investments as a more reliable way to play the AI boom while avoiding the risks of a gold rush into AI stocks…”
October 6 – Bloomberg (Shashwat Chauhan): “As the rush towards AI-related companies continues on Wall Street, data from Crunchbase showed… the sector enjoyed a bulk of venture funding in the third quarter, with names including Anthropic raking in billions. Global venture funding in the third quarter increased 38% year-over-year to $97 billion, increasing slightly from $92 billion in the second quarter. About 46% of global venture funding for the third quarter went towards funding AI companies, with 29% invested in solely Anthropic. The three largest venture rounds in the quarter ended September were raised by foundation model companies: $13 billion by Anthropic, $5.3 billion by xAI and $2 billion from Mistral AI.”
October 4 – Bloomberg (Seth Fiegerman and Carmen Reinicke): “For almost as long as the artificial intelligence boom has been in full swing, there have been warnings of a speculative bubble that could rival the dot-com craze of the late 1990s that ended in a spectacular crash and a wave of bankruptcies. Tech firms are spending hundreds of billions of dollars on advanced chips and data centers, not just to keep pace with a surge in the use of chatbots such as ChatGPT, Gemini and Claude, but to make sure they’re ready to handle a more fundamental and disruptive shift of economic activity from humans to machines. The final bill may run into the trillions. The financing is coming from venture capital, debt and, lately, some more unconventional arrangements that have raised eyebrows on Wall Street… Never before has so much money been spent so rapidly on a technology that, for all its potential, remains somewhat unproven as a profit-making business model.”
October 8 – Axios (Scott Rosenberg): “The edges of companies that make AI and those that make AI infrastructure are blurring as the industry coalesces into a handful of corporate mega-blobs linked by investments, partnerships and shared supply chains. The AI world is moving into a new era of corporate entanglement with OpenAI’s latest megadeal, a ‘tens of billions of dollars’ agreement with AMD that has OpenAI buying mountains of AMD's GPU chips and taking up to a 10% stake in the firm. How it works: AI’s leading companies still compete — sorta. They also work together at a large scale in increasingly esoteric ways. You could call that an ecosystem. You could also call it, as AI critics have, a shell game. Either way, the AI business is beginning to function like one giant dollar-eating, energy-sucking entity that makes chips, trains models and sketches utopias to justify its runaway costs.”
October 8 – New York Times (Andrew Ross Sorkin, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Niko Gallogly and Ian Mount): “Shares in Oracle fell as much as 7% on Tueday after The Information reported… that the tech giant’s cloud computing business was generating lower profit margins than what Wall Street had been expecting. From The Information: In the three months that ended in August, Oracle generated around $900 million from rentals of servers powered by Nvidia chips and recorded a gross profit of $125 million—equal to 14 cents for every $1 of sales… That’s lower than the gross margins of many nontech retail businesses. As sales from the business nearly tripled in the past year, the gross profit margin from those sales ranged between less than 10% and slightly over 20%, averaging around 16%, the documents show.”
Bubble and Mania Watch:
October 9 – Bloomberg (David Pan, Muyao Shen and Ryan Weeks): “Crypto market traders have been hit by record liquidations just days after Bitcoin hit a fresh all-time high, volatility triggered in large part by the latest round of tariffs from US President Donald Trump. Cryptocurrency prices tumbled on Friday after Trump said he would impose an additional 100% tariff on China and export controls on software. The declines precipitated — and then were made worse by — what data tracker Coinglass described as ‘the largest liquidation event in crypto history.’ While market weakness had already been present coming into Friday, Trump’s post sparked a more than 12% decline in Bitcoin.”
October 9 – Reuters (Saqib Iqbal Ahmed): “At a time when investors could worry about tariffs, growth, and shifting Federal Reserve policy, their biggest fear looks to be missing out on further stock market gains, options data showed. With stocks hitting new highs, traders in the options market are lapping up call options with near-record fervor. For individual stocks, trading in call options, typically bought to express a bullish view, exceeds volume in puts, options that express bearish views, by the largest margin in about four years… ‘It’s all upside exuberance at this point,’ Greg Boutle, head of U.S. equity & derivative strategy at BNP Paribas, said… For single stocks, measures of skew, a gauge of demand for downside protection versus upside speculation, have been turned on their head, as typical worries about drops in stock prices have been overtaken by concerns of missing out on further gains.”
October 7 – CNBC (Lee Ying Shan): “Mergers-and-acquisitions activity globally is roaring back to life, with several megadeals in the third quarter building on momentum from earlier this year… According to data provided by financial markets platform Dealogic, the third-quarter saw a surge in M&A activity this year with collective deal value at $1.29 trillion, compared to $1.06 trillion in the second quarter and $1.1 trillion in the first quarter.”
October 9 – Wall Street Journal (Aimee Look): “Initial public offerings made a comeback in the third quarter fueled by short-term clarity about tariffs and interest rates, with momentum expected to continue into the next year, a new EY report said. The U.S. led the acceleration in IPOs in terms of proceeds, with the best quarter since 2021… Companies going public raised $48.2 billion in proceeds for the third quarter globally, according to Dealogic data compiled by EY.”
October 6 – Wall Street Journal (Jonathan Weil): “Nasdaq is known as the market’s home for tech stocks, in particular giants like Nvidia, Apple and Microsoft. But, in another corner of the exchange, new penny-stock listings for tiny overseas companies with dubious financial prospects proliferate.n Last month’s initial public offerings included a Cayman Islands-incorporated provider of shrimp-farm maintenance services in Malaysia with only four employees. The IPO by Megan Holdings priced at $4 a share and raised $5 million. There has been a flood of similar microcap IPOs over the past two years, another sign of the speculative fever gripping many parts of the investing world… Some have produced remarkable gains following announcements related to a name change, cryptocurrencies or artificial intelligence.”
October 5 – Yahoo Finance (Claire Boston): “The brightest part of the moribund US housing market is the country’s most expensive homes. Although home sales in August mostly underwhelmed, dropping 0.2% from July and increasing a modest 1.8% from a year earlier, sales at $1 million or above were up 8.4% from a year ago… High-priced homes generally move swiftly: The median home selling for at least $1 million in August spent 27 days on the market, just three days longer than homes in the $250,000 to $500,000 range — the price point that makes up the bulk of the nation’s sales. The success of higher-end properties is yet another reflection of the country’s growing wealth gap.”
Inflation Watch:
October 7 – Bloomberg (Maria Eloisa Capurro): “Consumers see higher inflation in the year ahead, with signs that lower and middle-income households are feeling most of the burden of rising price pressures, according to a monthly survey from the Federal Reserve Bank of New York. Expectations for consumer price increases one year ahead jumped to 3.4% in September from 3.2% in the prior month. The increase was most significant for households earning less than $50,000… Estimates for annualized inflation five years ahead also ticked up to 3% from 2.9%, while measures for three years ahead were unchanged at 3%.”
October 4 – Financial Times (Gregory Meyer): “The costs of tariffs are starting to drive higher prices for US consumer goods from cans of soup to car parts, even as overall US inflation rises at a moderate pace. Official data and statements from companies are pointing to accelerating price rises for an assortment of trade-dependent products after companies sold off inventories and moved to shift the cost burden of tariffs on to consumers. Data from the Bureau of Labor Statistics showed that in the six months to August, prices for audio equipment rose by 14%, dresses were up by 8% and tools, hardware and supplies had risen by 5%... ‘Over the past two years, goods inflation has been about zero. We are beginning to see goods inflation creep up,’ said Mark Mathews, chief economist at the National Retail Federation.”
October 4 – Los Angeles Times (Laurence Darmiento): “The California FAIR Plan, the state’s home insurer of last resort, is seeking an average 35.8% rate hike, its largest in years, following billions of dollars of losses incurred in the January firestorms. The… insurance pool, operated and backed by the state’s licensed home insurers, filed this week for the dwelling policy rate hike, which must be reviewed and could be reduced by the state insurance commissioner. ‘By statute, FAIR Plan rates must be sufficient to pay anticipated claims and expenses,’ FAIR Plan spokesperson Hilary McLean said…”
Federal Reserve Watch:
October 8 – Financial Times (Claire Jones): “Some of the Federal Reserve’s top officials would have preferred to keep borrowing costs on hold last month, highlighting concerns among policymakers that elevated inflation still poses a threat to the US economy. The rate-setting Federal Open Market Committee cut borrowing costs… by a quarter-point to 4-4.25% amid signs of a weakening jobs market. However, the minutes of the mid-September vote showed that ‘a few’ of the FOMC would have supported a decision to keep borrowing costs unchanged as inflation was in danger of remaining above the central bank’s goal. Progress towards the 2% goal ‘had stalled this year as inflation readings increased’, the minutes said, adding that a few members had ‘expressed concern that longer-term inflation expectations may rise if inflation does not return to its objective in a timely manner’.”
October 9 – New York Times (Colby Smith): “John C. Williams, president of the Federal Reserve Bank of New York, says he supports further interest rates cuts this year, even though inflation has moved away from the central bank’s 2% target in recent months. His rationale revolves around the labor market, where cracks have emerged. What Mr. Williams wants is to protect those cracks from deepening further… Mr. Williams said he did not believe the economy was on the verge of a recession. But the slowdown in monthly jobs growth, coupled with other signs that companies are more hesitant to hire, warrants attention, he said.”
October 9 – Bloomberg (Amara Omeokwe): “Federal Reserve Governor Michael Barr called for a cautious approach toward further interest-rate cuts, emphasizing the possibility that tariffs will create persistent inflation. ‘Common sense would indicate that when there is a lot of uncertainty, one should move cautiously,’ Barr said… Fed officials ‘should be cautious about adjusting policy so that we can gather further data, update our forecasts, and better assess the balance of risks,’ he said.”
October 7 – Bloomberg (Enda Curran): “Federal Reserve Bank of Minneapolis President Neel Kashkari… cautioned that any drastic cuts to interest rates would risk stoking inflation. ‘You would expect to see the economy have a burst of high inflation,’ Kashkari said... ‘Basically, if you try to drive the economy faster than its potential to grow and its potential to produce prices, you end up just going up across the economy.’ The Minneapolis Fed chief… cautioned that current economic data is showing some signs of stagflation given growth is slowing and inflation remains persistent.”
October 7 – Bloomberg (Low De Wei): “The US Federal Reserve is likely to resort to quantitative easing if there is a crash in risk assets such as equities, said the former investment chief of Singapore’s wealth fund. The potential for a return to such monetary easing policy is helping to drive a surge in gold prices, former GIC Pte Group Chief Investment Officer Jeffrey Jaensubhakij said… ‘If they are in a bubble and they burst — is the Fed actually going to do QE to the power of X again?,’ Jaensubhakij asked. ‘I think there’s a strong likelihood of that happening,’ which would provide a cushion for the commodity, he said.”
U.S. Economic Bubble Watch:
October 5 – Financial Times (Ruchir Sharma): “Despite mounting threats to the US economy — from high tariffs to collapsing immigration, eroding institutions, rising debt and sticky inflation — large companies and investors seem unfazed. They are increasingly confident that artificial intelligence is such a big force, it can counter all the challenges. Lately, this optimism has become a self-fulfilling prophecy. The hundreds of billions of dollars companies are investing in AI now account for an astonishing 40% share of US GDP growth this year. And some analysts believe that estimate doesn’t fully capture the AI spend… AI companies have accounted for 80% of the gains in US stocks so far in 2025. That is helping to fund and drive US growth, as the AI-driven stock market draws in money from all over the world, and feeds a boom in consumer spending by the rich.”
October 6 – Bloomberg (Spencer Soper): “US shoppers will spend $253.4 billion online in November and December, up 5.3% from 2024, according to Adobe Inc., with ‘buy now pay later’ checkout options fueling growth. The forecast represents a slowdown from last year, when online spending rose 8.7%... Checkout options that let shoppers purchase items and pay for them over time will drive $20.2 billion in holiday spending, up 11% from a year earlier and more than twice the pace of overall spending growth…”
October 7 – Bloomberg (Mark Niquette): “US consumer borrowing rose in August at the slowest pace in six months, restrained by a pullback in credit-card balances. Total credit outstanding climbed $363 million after a revised $18.1 billion gain in July… Credit-card and other revolving debt outstanding fell roughly $6 billion, partially unwinding a surge in July. Non-revolving credit, such as loans for vehicle purchases and school tuition, increased $6.3 billion.”
October 8 – Axios (Molly Smith): “Applications for mortgages to buy a home or refinance both fell for a second week, marking a swift reversal of what had been a hopeful sign of a revival in the US housing market. The Mortgage Bankers Association’s index of home-purchase applications declined 1.2%..., while a gauge of refinancing fell 7.7%. Both dropped back to levels seen in early September…”
October 8 – CNBC (Diana Olick): “Mortgage demand overall weakened again last week, even as interest rates fell slightly. For those still in the market, though, they are looking increasingly to adjustable-rate loans to get the lowest interest rate possible… For those who are buying or refinancing, somewhat riskier adjustable-rate mortgages are gaining in popularity, as they offer lower interest rates.”
October 8 – Wall Street Journal (Carol Ryan): “Blink and you will have missed the recent refinancing boom. The rush to lock in a cheaper mortgage was still a hopeful sign for lenders. A minor move in mortgage rates triggered a strong reaction from borrowers. The cost of a 30-year home loan fell 0.3 percentage point to 6.26% over the three weeks through Sept. 17, which was the lowest rate in 11 months. Refinancing activity jumped 80% over the period… Borrowers are moving faster to lock in even small reductions in their housing costs.”
October 9 – Bloomberg (Andre Tartar, Ben Steverman, and Stephanie Davidson): “At the height of the Gilded Age, there were 4,047 millionaires in the US, according to an 18-month investigation by the long-gone New-York Tribune, which listed each by name in a special edition published in 1892. Today the number of millionaire households is more than 24 million, or almost one in five US households, according to a Bloomberg analysis of government survey data through 2023. Fully a third of those modern millionaires have been minted since 2017, as home values and the stock market surged. That doesn’t mean they’re walking around flush with cash. Instead, more and more of millionaires’ wealth is locked up in assets that can't be accessed quickly or easily, like home equity or, increasingly, age-restricted retirement assets like 401(k) and IRA accounts.”
China Watch:
October 10 – Bloomberg: “High-flying Chinese chipmaker stocks tumbled Friday as mounting concerns over lofty valuations and reported margin cuts soured investor sentiment. Shares of Semiconductor Manufacturing International Corp. fell as much as 8.2% in Hong Kong, while peer Hua Hong Semiconductor Ltd. slid 6.6%... The sector was among worst drags on the onshore benchmark CSI 300 Index, which closed down 2%... The chip stock slide intensified after local media reported that brokers cut SMIC’s margin financing ratio to zero.”
Central Bank Watch:
October 7 – CNBC (Lim Hui Jie): “New Zealand’s central bank… cut benchmark interest rates by 50 bps to 2.5%, bringing the policy rate to its lowest level since July 2022 as growth worries loom. The cut to the overnight cash rate was larger than the 25 bps expected…”
France/Europe Watch:
October 6 – Bloomberg (Julien Ponthus, James Hirai and Claudia Cohen): “French markets tumbled after the resignation of Prime Minister Sebastien Lecornu threw the country into another political crisis, raising the prospect of snap elections to break the deadlock. French bonds fell, with 10-year yields jumping as much as 11 bps to 3.61%, pushing the premium that investors demanded to hold French debt over Germany to the highest level this year. The CAC 40 Index lost 1.4%, the most in six weeks, as banks took the biggest hit.”
October 6 – Financial Times (Editorial Board): “The resignation of Sébastien Lecornu after less than four weeks as French prime minister plunges the country into its worst political crisis for almost 70 years. It is terrible for France and bad for Europe, which needs decisive leadership now more than ever. France is not only ungovernable, its public finances are in a mess, the economy is weak, social tensions are rising and the markets are jittery. The country may not be on the brink of civil war as it was in 1958, but then it had a way out of the mire in the form of Charles de Gaulle. There is no saviour on the horizon now… The left and centrist parties worked together to prevent the far-right Rassemblement National from winning a majority in last summer’s snap parliamentary election, but have done much since then to propel it closer to power.”
October 6 – Financial Times (Ian Johnston, Adrienne Klasa, Ian Smith and Emily Herbert): “France’s Prime Minister Sébastien Lecornu has resigned less than a month after his appointment, prompting a market sell-off amid concerns about dysfunction in the Eurozone’s second-biggest economy. Lecornu, a long-serving ally of President Emmanuel Macron, submitted his resignation on Monday morning…, making him the shortest-serving prime minister since the Fifth Republic was established in 1958 and heaping pressure on the president. ‘One cannot be prime minister when the conditions are not met,’ Lecornu said in a televised address, accusing other parties in France’s fractured parliament of failing to compromise.”
October 9 – Politico (Marion Solletty and Tim Ross): “Don’t freak out just yet, but maybe start packing emergency supplies. Brussels’ fear of a founding member of the European Union swinging to the far right was abruptly reactivated this week as France’s snowballing political crisis gathered more momentum… The French president is under extraordinary pressure after his prime minister’s latest attempt at forming a functioning government collapsed in just 14 hours and with new elections in the coming months, if not weeks, looking more and more likely. At both the presidential and parliamentary levels, victory for Marine Le Pen’s National Rally is now distinctly possible, meaning a Euroskeptic, far-right figure might soon speak for France in the EU’s core institutions, adding to a growing chorus of populist, right-wing voices.”
October 7 – Financial Times (Ian Johnston, Sarah White and Adrienne Klasa and Ian Smith): “The resignation of Sébastien Lecornu as French prime minister has thrown plans for a 2026 budget into turmoil, rattled debt investors and weakened the prospects of repairing France’s dire public finances… Concerns about the deepening crisis are such that on Tuesday, former prime minister Edouard Philippe, one of the president’s closest allies, called on him to bring forward 2027’s presidential elections after next year’s budget is adopted.”
Japan Watch:
October 9 – Bloomberg (Sakura Murakami and Yoshiaki Nohara): “Japan’s governing coalition abruptly collapsed in a major blow to new ruling party leader Sanae Takaichi, plunging the country into one of its biggest political crises in decades and jolting markets. Talks between Liberal Democratic Party chief Takaichi and junior partner Komeito leader Tetsuo Saito fell apart on Friday, weakening the new LDP leader before she has even secured the role of prime minister. Whether she can still become Japan’s first female premier is now shrouded in doubt as the dramatic implosion of the ruling coalition may encourage the opposition to coalesce around another candidate in a parliamentary vote in the coming days.”
October 9 – Reuters (Leika Kihara): “A pledge by Japan’s next likely prime minister to reassert government sway over the central bank has fanned worries about political interference in monetary policy, however, a weak yen and politics could limit any such push… ‘The government must be responsible for fiscal and monetary policy. The BOJ will then consider the most appropriate means,’ Takaichi told a news briefing upon her victory in the weekend race, stressing the need to focus on reflating growth.”
October 8 – Bloomberg (Sakura Murakami): “Japan’s new ruling party leader, Sanae Takaichi, has yet to reach an agreement with long-time coalition partner Komeito about continuing their alliance, a delay that highlights the challenges she faces in building a stable administration. Even with Komeito on board, the Liberal Democratic Party lacks a majority in both houses of parliament. That makes it imperative for Takaichi to extract a promise of continued support before she cuts deals with other parties to obtain the numbers needed to pass budgets and push ahead with policy.”
October 7 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda will likely face a tougher political environment in the second half of his five-year term starting Thursday after the ruling party leadership victory of Sanae Takaichi, a critic of interest rate increases. Ueda already faces a dilemma. The central bank appeared to be laying the groundwork for its first interest rate hike since January later this month. Now, following Takaichi’s win, if Ueda goes ahead with an increase he risks antagonizing a premier who might then seek more sway over the BOJ’s decisions going forward. If he stands pat, as suggested by one of Takaichi’s economic advisers, analysts may conclude that he is already pushing back a hike in response to Takaichi’s victory. That might cause the yen to weaken further…”
October 6 – Bloomberg (Toru Fujioka): “A move by the Bank of Japan to raise interest rates this month would likely come too soon after the formation of Sanae Takaichi’s administration and would be better timed in December, according to one of her closest economic advisers. ‘A rate hike in October is probably difficult in my view,’ said Etsuro Honda, who advises Takaichi on economic policies…”
October 6 – Bloomberg (Yoshiaki Nohara): “Japan’s household spending rose for a fourth month, showing resilience amid persistent inflation as the central bank continues to mull the timing of its next interest rate hike. Outlays by households adjusted for inflation gained 2.3% from a year ago in August, led by spending on transport and entertainment…”
Emerging Market Watch:
October 8 – Reuters (Walter Bianchi and Rodrigo Campos): “Persistent exchange rate pressures continued to weigh on Argentina's financial markets on Wednesday, straining the Treasury as proceeds from a special liquidation deal with agricultural exporters dwindle. Traders estimate the Treasury, under the Ministry of Economy, has sold more than $1.6 billion in the past six trading sessions to support the weakening peso… Midterm elections on October. 26 are seen as a key test for President Javier Milei, who is navigating the second half of his term with limited congressional support.”
October 8 – Bloomberg (Ignacio Olivera Doll): “Having burned through billions of dollars in reserves, Argentina’s government is getting creative as it looks to defend the peso ahead of crucial midterm elections later this month. The central bank spent $1.1 billion in the spot market last month when the currency breached its trading band and is now coming up to a limit imposed by the Argentina’s main exchange in the derivatives market. It raised its short position in dollar futures to around $8 billion at the end of September…”
October 6 – Financial Times (Joseph Cotterill): “Investors are snapping up assets across the developing world as a sliding dollar and bargain valuations fuel the biggest rally in emerging market stocks in more than 15 years. An MSCI benchmark index of emerging-market stocks has risen 28% so far this year, its biggest gain over the same period since 2009, while a JPMorgan index of government bonds sold by developing countries in their own currencies is up 16%, in a growing comeback from a ‘lost decade’ in the shadow of US markets.”
October 7 – Reuters (Libby George and Rodrigo Campos): “An intricate series of pipes off Angola’s Atlantic coast snakes toward a new fuel refinery that signals the country’s push for energy independence — and its use of private creditors, instead of banks, to fund a big-ticket project. ‘We’re not the lender of last resort,’ said Felipe Berliner, co-founder of emerging markets asset manager Gemcorp, which invested in the project and led the syndicate that provided the bulk of funding for the refinery, using private capital. ‘Sometimes we are the only lender.’ Private credit for emerging markets — driven by investors' hunt for yields and saturation in developed Western markets — could grow exponentially, veteran investors told Reuters… ‘This is a paradigm shift,’ said Pramol Dhawan, head of emerging markets… at PIMCO. ‘The need to globally reallocate is not a hedge — it’s a secular thesis.’”
Levered Speculation Watch:
October 7 – Bloomberg (Ruth Carson, John Cheng and Naomi Tajitsu): “A once-popular currency trade betting against the yen looks set to make a comeback, as Sanae Takaichi’s near-certain elevation to Japan’s premiership raises the prospect of slower interest-rate hikes. Japan’s currency has dropped around 2% against its G-10 peers so far this week, as investors wagered that Takaichi’s pro-stimulus stance would result in a slower timeline for the Bank of Japan’s policy tightening. Delayed hikes could well tempt traders back into a strategy known as the carry trade, where they borrow the low-yielding yen and buy currencies such as the Brazilian real or Australian dollar that offer higher returns.”
October 8 – Reuters (Nell Mackenzie and Anirban Sen): “Hedge funds returned 1.3% in September, with managers in Europe, Asia and the Middle East outperforming their North American rivals, according… JPMorgan… The JPMorgan note, which tracks hedge fund trading, said positioning in U.S. stocks was only ‘somewhat bullish,’ indicating an expectation for equities to rise. Crowding in the biggest ‘Magnificent Seven’ tech stocks, which include Apple, Amazon.com and Nvidia, remained near historical highs, the note said.”
October 7 – Bloomberg (Francine Lacqua and Daniel Cancel): “Citadel’s planned office tower in Miami’s Brickell neighborhood — long expected to cost more than $1 billion — will probably be closer to $2.5 billion with construction likely to begin mid-to-late next year, founder and Chief Executive Officer Ken Griffin said. ‘I wish it were a billion dollars,’ Griffin said… ‘Due to inflation in the cost of construction, that’s going to be about a $2.5 billion tower’.”
Social, Political, Environmental, Cybersecurity Instability Watch:
October 7 – Axios (Sam Sabin): “Foreign adversaries are increasingly using multiple AI tools to power hacking and influence operations, according to a new OpenAI report… In the cases OpenAI discovered, the adversaries typically turned to ChatGPT to help plan their schemes, then used other models to carry them out — reflecting the range of applications for AI tools in such operations… A Russian-based actor that was generating content for a covert influence operation used ChatGPT to write prompts seemingly for another AI video model. A cluster of Chinese-language accounts used ChatGPT to research and refine phishing automation they wanted to run on China-based model DeepSeek.”
Geopolitical Watch:
October 8 – Bloomberg (Sara Sjolin): “Greenland’s prime minister called on the European Union to deepen cooperation on connectivity in the Arctic territory to prevent ‘unauthorized parties’ from disrupting its digital infrastructure. The plea comes amid intensifying geopolitical interest in the Arctic, where Russia is asserting military presence and US President Donald Trump is pushing to take control of Greenland. The island… has also become a focal point of global competition as melting ice opens new shipping lanes and access to critical minerals.”
