Intraday Chart Updates at the New CBB Website

More confirmation this week that deleveraging has gained important momentum.  Check out the Timely Charts on the home page and Financial Conditions charts on the Charts page - that are updated early in the session and throughout the day. New CBB site link

Saturday's News Links

[Reuters] Wall St Week Ahead: Midterm US elections, earnings, jobs data loom for AI-wary stock market

[AP] Iranian leader threatens response to potential attack as fears of war mount, and other Mideast news

[Axios] Iran's supreme leader orders "maximum" response to any U.S. attack

[Axios] The AI trade's trick-or-treat earnings season

[Yahoo/Reuters] China's factory activity shrinks in October, third contraction in four months

[Bloomberg] AI Enthusiasm Is Collapsing and Tech Earnings Just Made It Worse

[Bloomberg] Inflation, Inequality and Debt: The Charts Scaring Wall Street

[Bloomberg] Over Sleepless Nights, Binance War Room Fought to Contain Hack

[Bloomberg] El Niño Storms Bring Flooding and Golf-Ball Hail to US Southwest

[WSJ] Why Did All the Fiscal Hawks Go Extinct?

[WSJ] Wall Street Is Starting to Call the Shots in America’s AI Build-Out

[WSJ] OpenAI Raises Less Than Half of $30 Billion Target in Latest Round

[WSJ] How Iran Battered U.S. Bases and Caused Billions in Damage

[WSJ] Chinese Executive Close to Nvidia CEO Suspected of Giving China Information

[WSJ] Fitch Cuts France’s Outlook to Negative on Weaker Growth, Widening Deficit

[FT] Iran warns it will retaliate without ‘geographical limitations’ if attacked

[FT] Investors trim growth bets over fears of US economy’s AI exposure

Weekly Commentary: Cycle Transition

Global markets have become a minefield, an especially precarious circumstance considering the unprecedented scope of leverage and speculative excess.

It was supposed to be a positive recovery week leading up to the midterms. The excitement of an Anthropic IPO announcement. Big tech, with key earnings reports and investor days, would surely bolster confidence in the sustainability of the AI investment boom. And little to fear from a Federal Reserve poised to hold rate policy steady.

The earthquake election results out of Brazil provided the first speed bump.

Bouncing off intraday lows, Brazil’s Ibovespa ended Monday’s session down 13.9%. The Brazilian real sank 8.06%. Local currency 10-year yields spiked 230 bps to an 18-month high of 15.12%, as dollar-denominated yields rose 22 bps to 6.50%.

October 30 – Bloomberg (Barbara Nascimento, Leda Alvim and Vinícius Andrade): “In the span of three weeks, Brazilian hedge-fund managers went from celebrating some of their biggest gains in years to nursing steep losses and issuing mea culpas to their clients. The bullish bets that delivered windfall profits after Flávio Bolsonaro’s surprisingly strong first-round showing on Oct. 4 blew up spectacularly after leftist incumbent Luiz Inácio Lula da Silva’s victory in the presidential runoff on Sunday… Local macro hedge funds lost as much as 24% on Monday, the worst day of the rout... For the industry broadly, it was the worst day in about nine years.”

Bolstered by Anthropic’s IPO filing and an announced $63 billion Broadcom financing, Brazil’s market accident was largely dismissed. The Semiconductor Index jumped 2.8% in Monday trading, with the Nasdaq100 advancing 1.1%. Bullish sentiment was supported by the 12 bps drop in French bond yields (“France Spared Moody’s Ratings Downgrade as it Struggles with Unrest”). The France to Germany yield spread narrowed a notable 14 bps (to 154bps) – the biggest one-day narrowing since 2020.

Bullish tech sentiment intensified Tuesday. The initial tranche of Meta’s massive $98 billion equity raise was said to be five times oversubscribed. The company sold $25 billion of common shares, along with $12.5 billion of preferred stock. In South Korea, SK Hynix reported a seven-fold jump in earnings, with the KOSPI Index jumping 3.1%.

The Semiconductor Index surged 3.6% Tuesday, with the Nasdaq100 rising 1.3%. “Neocloud” Nebius and CoreWeave stocks jumped 11.2% and 7.9%. Intel rose 3.6%.

High yield spreads (to Treasuries) narrowed a notable 15 bps Tuesday, with a two-session narrowing of 24 bps.

Wednesday was Federal Reserve and Oracle Day. I’ll return to the Fed. Tech sentiment was boosted by the KOSPI’s 6.6% Wednesday advance. Oracle surged 11% on renewed enthusiasm following company forecasts of longer-term earnings and cash flow growth. Oracle (’36) yields sank 19 bps to 7.47%, while its CDS dropped 22 bps to a two-week low of 274 bps.

Stocks edged higher following Warsh’s press conference. The Semiconductors rose another 1.8%, boosting w-t-d gains to a chunky 8.4%. The Nasdaq100 closed Wednesday’s session with a 3.0% w-t-d advance. The VIX ended Wednesday below 17. But things began to sour only minutes after the close.

“Alphabet Sinks 10% [after hours] as it Holds 2026 Capex Unchanged, Expects Significant Increase in 2027.” “Google Shares Tumble 10% After $51bn AI Outlay Deepens Cash Burn.” “Alphabet Sheds Half a Trillion in Market Value in Stock’s Worst Ever.” “Alphabet Plunges by Record with AI Exposure Topping $1 TN.”

The fragile tech rally began to falter Thursday. Google ended the session down 13%. For the most part, however, the tech sector maintained its composure. The MAG7 fell 1.8%, with the Nasdaq100 and Semiconductors down only 1.4%. Microsoft enjoyed huge demand for its $25 billion bond offering.

Things headed south after Thursday’s close. Amazon slumped as much as 7%, while Intel plunged 25%. Further darkening the mood were revelations of the alarming scope of a hack at crypto heavyweight Binance. Bitcoin ended the day down $2,500, or 3%, to $79,000.

Friday got off to a rocky start in Asia. South Korea’s KOSPI dropped 3.5%, with Taiwan’s TAIEX down 2.5%, and Japan’s Nikkei 225 Index losing 2.1%.

China’s CSI 300 fell 1.4% to a 15-month low – down 2.9% for the week and 8.5% for October. China's growth-oriented ChiNext Index sank 4.1%, pushing losses for the week and month to 10% and 23%.

With Intel down about 30%, the Semiconductor index opened the session 5% lower. Things turned panicky. At intraday lows, the Semis were down over 9%, with the Nasdaq100 sinking 4.4%. The VIX spiked to 24, the high since early April. High yield CDS popped 12 to 364 bps, near the high since April’s market instability. A rally in the session’s final hour cut Semiconductor and Nasdaq100 losses to 7.2% and 3.5%. The VIX backtracked to 19.4, while high yield CDS retreated to 356 bps (down 7 on the week).

A headline not read every day: “Crypto Industry Suffers ‘Largest Bank Heist in Human History’ as Billions Stolen in Binance Hack.”

After trading up to $81,870 in Thursday evening trading, bitcoin slumped 6.9% Friday afternoon to a six-week low of $76,189.

Friday was surely another brutal day for the hedge fund community. Tech stocks were hammered, along with crypto and the precious metals. Gold dropped 3.7% Friday, with Silver slammed 5.9%. It’s worth noting Friday’s unstable European bond market. French 10-year yields rose six bps to 4.97%, while German bund yields declined three bps to 3.32%. The France to Germany spread widened a notable nine bps (165bps), with spreads also widening four for Italy (119bps) and Greece (97bps). It was also interesting to see that Friday’s risk off session was worth less than a basis point reduction for “safe haven” 10-year Treasury yields.

October 30 – Bloomberg (Zahra Tayeb): “Bonds of US technology firms are trading at their weakest in more than two decades relative to the broader corporate debt market, after companies… flooded investors with hundreds of billion of borrowings to fund artificial intelligence investments. The average risk premium, or spread, on investment-grade technology bonds stood at about 1.02 percentage points as of Thursday’s close, about 0.15 percentage point higher than the average spread for the market at large. That’s near the widest gap between the two since the aftermath of the internet bust in the early 2000s…”

Tech stocks are certainly interesting, but the critical action is within technology Credit. The market can either fund the Trillions required for the AI buildout - or it can’t. With de-risking/deleveraging gaining momentum, prospects are not good.

October 28 – Bloomberg (Giulia Morpurgo, Nishant Kumar, Reshmi Basu, and Irene Garcia Perez): “For as long as Hamza Lemssouguer has traded high-yield debt, he’s been on the offensive, placing bets at a scale few in the cutthroat market dare to match. These days, though, the 36-year-old founder of Arini Capital Management is in the uncomfortable — and unprecedented — position of licking his wounds as the riskiest corner of the European junk-debt market that he’s dominated for years is slumping around him. Arini’s flagship fund, which had $7.5 billion in assets under management at the end of July, was down 12% for the month through Oct. 23 and around 26% so far this year…, on track for the first annual loss since Lemssouguer started trading for his fund in 2022… The withdrawal of buying power from Arini — one of Europe’s fastest-growing hedge funds — has intensified investor fears about a junk-debt market that was already facing an array of challenges.”

October 30 – Bloomberg (Laura Benitez, Reshmi Basu, Irene García Pérez, Giulia Morpurgo and Nishant Kumar): “Arini Capital Management, which has been beset with losses this month, has gotten bids on some of its high-yield debt holdings from asset managers including Pacific Investment Management Co. and Oaktree Capital Management… It’s been a remarkable turn for Lemssouguer, 36, who was a star trader at Credit Suisse and continued to produce stellar returns at Arini by purchasing the relatively illiquid debt of large firms with lower credit ratings. For years it has been one of the fastest-growing hedge funds in Europe, becoming a $21.7 billion credit-trading giant after starting out at $1 billion in 2022.”

From a billion to almost $22 billion since 2022, phenomenal growth during a historic period of hedge fund speculative leveraging and liquidity abundance. Hamza Lemssouguer was an 18-year-old teenager during the 2008 crisis. Enough years have passed since the “GFC” to ensure that Wall Street and global market trading are dominated by aggressive young traders who have accumulated incredible wealth (and assets under management) playing loose with risk and leverage. Bubbles don't work in reverse.

And so long as strong performance (“alpha”) and fund inflows were ongoing, a steady stream of new money was available to build only bigger positions (at higher prices). Liquidity mattered little. Rather quickly, it today matters a lot – for Arini Capital Management, the leveraged speculating community, and markets more generally. Losses, outflows, deleveraging, and liquidity issues mark the onset of a major cycle transition.

In the context of a major Credit cycle transitioning period, the Credit default swap (CDS) marketplace is receiving some newfound attention.

“Credit Swaps For Tech Companies Reach Records Amid Supply Fears.”

Importantly, AI financing kingpin Nvidia’s CDS surged 16 bps Friday to a record 144 bps – with an alarming 48 bps two-week spike. Nvidia CDS traded below 40 in early-June, and was as low as 81 earlier this month.

SpaceX CDS jumped 13 Friday to a record 283 bps – with an equally alarming 33 bps two-week spike. SpaceX CDS traded at 150 on September 18th and 110 in June. SpaceX (’36) bond yields rose another two bps this week to a record 7.62% (2-wk surge 42bps).

Amazon CDS surged nine Friday to a record 96 bps, with a two-week gain of 20 bps. This CDS traded at 54 in mid-August.

Google/Alphabet CDS jumped 10 Tuesday to a record 88 bps (closed week at 76) – after trading at 47 bps in June. Closing the previous Friday at a record 127 bps, Meta CDS had pulled back to 113 by Thursday – only to surge back to 125 by Friday’s close (traded below 70 in June).

October 30 – Bloomberg (Davide Barbuscia and Riley Griffin): “S&P Global Ratings lowered the outlook on Meta Platforms Inc.’s AA- credit rating to negative on Friday, citing growing pressure on the tech company’s balance sheet stemming from elevated spending tied to artificial intelligence. ‘Meta’s ability to monetize its AI investments is more limited than that of its peers,’ the credit rating company said…”

Oracle CDS spiked 25 bps Friday, while ending the week down 20 from the previous week’s record close.

When Credit and liquidity conditions are loose, selling Credit protection is like writing flood insurance during a drought. Easy (and alluring) “money.” And as the crowd rushes to participate, the surge in CDS selling is accommodated by market makers that take the other side of the trade (long CDS) and hedge such exposures by holding the underlying bonds – with leverage, of course. This buying creates demand for corporate Credit, while generally bolstering marketplace liquidity.

But when the Credit cycle turns, supply and demand dynamics flip. Losses on corporate bonds trigger demand for CDS protection and rising CDS prices. Faced with mounting losses, the speculators who had written “flood insurance” move to unwind their positions, with the dealers on the other side of the trade reversing their hedge (sell bond holdings). Meanwhile, an upsurge in market demand for CDS protection finds the accommodating dealer community selling CDS and, this time, simultaneously shorting bonds as their hedge. The shift in Credit, market, and CDS dynamics has major ramifications for marketplace liquidity.

The big AI players have huge amounts of outstanding debt and, supposedly, hundreds of billions in the pipeline. The CDS marketplace faces its greatest test yet.

“Fed Officials Make Case for Rate Hikes Amid Ongoing Inflation Concerns.” “Fed Needs at Least Two More Rate Hikes, Logan Says.” “Fed’s Musalem Says a Rate Hike is Needed ‘Soon’.” “Fed’s Barkin Says US Central Bank’s Direction ‘Straightforward,’ the Question is Pace.”

There would be nothing noteworthy from the above headlines, except that Fed officials Friday publicly called for rate hikes just as de-risking/deleveraging gained important momentum in the markets. And as much as I respect Richmond Fed President Thomas Barkin, things will be anything but “straightforward.”

The Fed is ill-prepared for what is unfolding in global markets. Federal Reserve reform is long overdue. I appreciate the direction Chair Warsh is moving, with financial conditions at the forefront. “We have started to see some changes in financial and credit conditions.” “And while overall financial conditions are tighter, I’m unwilling and unable to call them tight.” “The Committee had a good discussion of the changes in the economic and financial landscape.” “You’ve seen credit spreads for certain assets widen out, gap out. For others you’ve seen some tightening in financial conditions, but not significantly.” “I would say the effects on financial markets, on financial market conditions broadly were consistent with my expectations.”

Warsh’s analytical framework would have been beneficial over recent years of extremely loose conditions. Today, at a super cycle inflection point, I suspect the financial conditions focus will justify an early end to rate hikes.

There’s a big caveat here. A major short squeeze and unwind of hedges could materialize at any time. Financial conditions might turn incredibly unstable – from deleveraging and illiquidity to abrupt short squeeze-induced market rallies and bouts of loose conditions. With economic overheating and elevated inflation, surging market prices and resurgent inflation would beckon for higher interest rates.

At this point, however, I posit that there is greater likelihood of deleveraging and tighter conditions. Chair Warsh is clearly focused on AI and market dynamics, and I doubt his committee would raise rates into stock market and technology debt issues. After beginning the week at 91%, the market ended the week pricing a 73% probability of a rate hike at the December 9th meeting.

Chair Warsh: “The dominant means in which this policy is going to be put into practice is we are tightening financial conditions. They’ve tightened a bit since we met last time. That isn’t something that we’re uncomfortable with. That tells me that policy is working…”

In a different backdrop, I would applaud the Fed’s focus. Warsh is signaling to market participants to key off financial conditions. If speculation and leveraging foster loose conditions, be prepared for tighter policy. The old “lean against the wind” approach, which would have been so valuable during years of excessively loose conditions. But it’s so late in the game. A problematic tightening of market conditions will surely trigger the traditional response of easier monetary policy.

Warsh: “At this point, the balance sheet is solely within the four walls of the Balance Sheet Task Force. Now I have checked in with them… and I think the conclusions they come to, the recommendations they come to, will be fed into the FOMC probably early in the first quarter… And if we decide to make changes in the balance sheet, it’ll be after a serious consideration of their proposals and their recommendations.”

Such comments are not “Fed put” confidence inspiring. I doubt the Fed will enjoy the luxury of waiting for Q1 2027 direction from the Balance Sheet Task Force. And this gets back to the critical issue of the speed and scope of the Fed QE response when speculative deleveraging turns highly destabilizing.

It seems the world changes next Tuesday. Markets assumed the “Trump put” would be in full force, at least through midterms. Now we’re only days away from a possible “blue wave” and unpredictable Trump administration backlash. The world might be days away from the resumption of hot war with Iran – one the Iranians have had months to prepare for.

It’s been an interesting close to midterm campaigning. Faced with intense questioning at the February House Judiciary Committee oversight hearing, Attorney General Pam Bondi strangely kept commenting on stock prices. Of late, not even President Trump seems keen to mention the stock market.

It’s as if inflating stock prices have finally reached the point where they’re no longer the most coveted political asset. This protracted cycle of historic asset inflation and rising inequality has turned precarious. Going forward, it seems stabilizing bond markets – Treasuries, AI and corporate debt, MBS, and munis – will dominate Washington policymaking. This cycle transition will be destabilizing and intensely challenging. For now, it’s become such a minefield out there.

For the Week:

The S&P500 slipped 0.6% (up 10.7% y-t-d), and the Dow declined 0.9% (up 7.7%). The Utilities rose 2.1% (up 4.1%). The Banks gained 0.9% (up 4.8%), while the Broker/Dealers were slammed 5.2% (up 6.7%). The Transports added 1.4% (up 17.1%). The S&P 400 Midcaps gained 1.3% (up 10.8%), and the small cap Russell 2000 rose 1.3% (up 13.3%). The Nasdaq100 dropped 2.0% (up 12.2%). The Semiconductors declined 0.8% (up 50.9%). The Biotechs surged 3.5% (up 35.7%). With bullion down $121, the HUI gold index fell 3.9% (down 7.4%).

Three-month Treasury bill rates ended the week at 3.9825%. Two-year government yields fell nine bps to 4.59% (up 111bps y-t-d). Five-year T-note yields dropped nine bps to 4.72% (up 99bps). Ten-year Treasury yields declined seven bps to 4.93% (up 76bps). Long bond yields slipped a basis point to 5.31% (up 47bps). Benchmark Fannie Mae MBS yields dropped 10 bps to 6.06% (up 101bps).

Italian 10-year yields declined six bps to 4.51% (up 96bps y-t-d). Greek 10-year yields fell nine bps to 4.29% (up 85bps). Spain's 10-year yields dropped nine bps to 3.95% (up 66bps). German bund yields slipped two bps to 3.32% (up 47bps). French yields declined five bps to 4.97% (up 141bps). The French to German 10-year bond spread narrowed about three to 165 bps. U.K. 10-year gilt yields declined seven bps to 5.28% (up 81bps). U.K.’s FTSE equities index increased 0.4% (up 7.9% y-t-d).

Japan’s Nikkei 225 Equities Index increased 1.0% (up 25.7% y-t-d). Japan’s 10-year “JGB” yields slipped two bps to 2.78% (up 72bps y-t-d). France’s CAC40 rallied 2.4% (down 2.2%). The German DAX equities index recovered 2.5% (up 5.4%). Spain’s IBEX 35 equities index fell 1.8% (up 7.8%). Italy’s FTSE MIB index rallied 1.9% (up 10.1%). EM equities were mixed. Brazil’s Bovespa sank 18.4% (up 4.2%), while Mexico’s Bolsa index slipped 0.2% (up 8.4%). South Korea’s Kospi rallied 3.3% (up 36.0%). India’s Sensex equities index recovered 1.8% (down 12.6%). China’s Shanghai Exchange Index dropped 2.5% (down 9.3%). Turkey’s Borsa Istanbul National 100 index fell 3.2% (down 4.5%).

Federal Reserve Credit last week slipped $1.1 billion to $6.706 TN, with a 46-week expansion of $215 billion. Fed Credit was down $2.184 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.979 TN, or 80%. Fed Credit inflated $3.895 TN, or 139%, since November 7, 2012 (729 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt increased $3.1 billion last week to $2.842 TN - off the low back to August 2010. “Custody holdings” were down $243 billion y-o-y, or 7.9%.

Total money market fund assets (MMFA) dropped $43.3 billion to $7.901 TN. MMFA were up $483 billion, or 6.5%, y-o-y - having ballooned a historic $3.269 TN, or 71%, since October 26, 2022.

Total Commercial Paper slipped $3.6 billion to $1.499 TN - just below the high back to 2009. CP increased $171 billion, or 12.8%, y-o-y.

Freddie Mac 30-year fixed mortgage rates dropped eight bps to 7.24% (up 107bps y-o-y). Fifteen-year rates fell eight bps to 6.60% (up 119bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down 10 bps to 7.43% (up 99bps).

Currency Watch:

October 26 – Financial Times (Michael Pooler and Joseph Cotterill): “Brazil’s currency plunged the most since 1999 on Monday after President Luiz Inácio Lula da Silva’s surprise re-election victory ignited concerns over public debt and spending in Latin America’s largest economy. The Brazilian real tumbled 8% against the US dollar to R$5.41 in a chaotic trading session… São Paulo’s benchmark Bovespa equity index shed 13.9% after briefly triggering an emergency trading halt, while bets on future long-term interest rates rose sharply and yields on some domestic bonds surged past 15%. It was the worst day for the Bovespa since the market ructions in 2020 prompted by the coronavirus pandemic.”

October 27 – Reuters (Karen Brettell): “Investors have long treated the US dollar as a refuge when markets fall, but foreign money chasing returns from the AI boom could weaken that safe-haven role if the trade unwinds. Foreign capital has poured into US mega-cap equities, hyperscaler corporate bonds and power-grid infrastructure. That has made the dollar an increasingly crowded bet on American exceptionalism, backed by faster growth, higher yields and persistent foreign demand for US assets.”

For the week, the U.S. Dollar Index added 0.2% to 101.964 (up 3.7% y-t-d). On the upside, the Norwegian krone increased 1.3%, the Swedish krona 1.0%, the Canadian dollar 0.2%, and the British pound 0.1%. On the downside, the Brazilian real declined 8.4%, the New Zealand dollar 1.2%, the South African rand 0.7%, the Mexican peso 0.7%, the South Korean won 0.7%, the Japanese yen 0.4%, the euro 0.4%, and the Australian dollar 0.1%. China's (onshore) renminbi gained 0.23% versus the dollar (up 5.01% y-t-d).

Commodities Watch:

October 28 – Reuters (Andrea Shalal): “Global commodity prices are set to surge 23% in 2026, the World Bank said…, citing rising energy prices and disruptions to cargo shipping during the Middle East war, grain shipment problems in the Black Sea and high demand for safe-haven assets such as gold. Oil, natural gas, food and metals prices all rose sharply this year as global shocks mounted, the World Bank said in its latest Commodity Markets Outlook. It said the situation could worsen if the conflict in the Middle East ratcheted up and damage to Russian oil infrastructure continued.”

October 26 – Bloomberg (Yihui Xie, Jack Ryan and Heng Xie): “Chinese households’ appetite for gold has grown over the past two months as prices soften and onshore equities lose their shine… One popular contract on the Shanghai Gold Exchange, Au99.99, saw volumes jump to 43 million lots last week, or around 430 tons, the highest level since April.”

The Bloomberg Commodities Index fell 1.7% (up 28.7% y-t-d). Spot Gold lost 3.0% to $3,875 (down 10.3%). Silver sank 8.9% to $49.1001 (down 31.5%). WTI Crude added 85 cents, or 0.8%, to $104.12 (up 81%). Gasoline declined 1.7% (up 84%), and Natural Gas dropped 5.0% to $2.898 (down 21%). Copper slipped 0.4% (up 14%). Wheat dropped 3.4% (up 19%), and Corn fell 1.8% (up 2%). Bitcoin sank $4.080, or 5.0%, to $76,780 (down 12.4%).

Market Instability Watch:

October 29 – Wall Street Journal (Hannah Erin Lang, Erin Woo and Suzanne Vranica): “Google’s stock suffered its worst day on record Thursday as investors confronted the reality that a company that has long been a dynamo of growth and profits faces painful trade-offs from the artificial-intelligence transition. The slide erased roughly $500 billion from Alphabet’s market value. Google’s 13% decline also weighed on major U.S. stock indexes…”

October 29 – Bloomberg (Matt Day): “Amazon.com Inc. shares dropped after the company reported greater capital spending than anticipated and the slowest growth in the core e-commerce business in three years. Amazon said it spent more than $77 billion on property and equipment in the third quarter, far more than analysts’ estimates, while pursuing its effort to build data centers and fulfill demand for artificial intelligence services. Third-quarter sales were lower than anticipated, rising 12% to $201.9 billion… Even at Amazon, the world’s largest company by sales and a relatively diversified conglomerate, spending led to a free cash outflow of $42.4 billion over the trailing 12 months…”

October 27 – Bloomberg (Claudia Cohen): “French lenders will face heightened scrutiny over turmoil in the country when they present third-quarter earnings this week, with investors focused on their sovereign bond holdings and risks from a potential slowdown in the economy… BNP Paribas SA, Societe Generale SA and Credit Agricole SA together hold about $60 billion in French sovereign debt…”

October 26 – Bloomberg (Georgia Hall and Alice Gledhill): “France’s heavy reliance on foreign investors in its debt market is raising concern that it could become another driver of volatility. The country has one of the highest levels of overseas ownership among major European nations, with non-residents holding about 60% of its debt, near the highest level in a decade… The comparable figure for the US and UK is roughly 30%. While foreign investors take their time building up positions in a nation’s debt, they can jettison those bonds in haste when markets are stressed, research conducted by the Bank for International Settlements shows.”

October 26 – Bloomberg (Ye Xie): “Markets have become so invested in the artificial intelligence trade that there is very little room for error if the massive spending doesn’t pay off, according to Citadel Securities. The selloff in technology stocks suggests investors are becoming more demanding about whether massive AI spending will ultimately generate sufficient profits, Nohshad Shah, Citadel’s head of EMEA fixed-income sales, wrote... ‘With so much of the economy and stock market now levered to the AI trade, there is precious little margin for error just as the other risks threaten to bite,’ Shah wrote.”

U.S. Credit Trouble Watch:

October 28 – Bloomberg (Erik Hertzberg): “Bank of Canada Governor Tiff Macklem warned that US borrowing is on an unsustainable trajectory as he offered an unusually blunt assessment of American tax and spending policy, which is putting pressure on global bond yields. ‘Sustainability of fiscal policy in the United States is a worry. The economy is growing strongly, and deficits are large,’ Macklem said… ‘It’s not on a sustainable track. It needs to get on a sustainable track.’”

October 27 – Bloomberg (Ruth Carson and Masaki Kondo): “Being one of Washington’s closest partners no longer means reliably funding the US deficit. Countries and regions most aligned with the US bought a net $174.3 billion of Treasuries, excluding bills, in the first eight months of 2026... That was the lowest for the period since 2021 and down more than 60% from a year earlier. The shift is noteworthy in Asia, where economies running large surpluses are putting less of that money into US debt. Japan, the biggest foreign holder of Treasuries, bought just $389 million in the first eight months — down 99% from a year earlier. South Korea sold $23.8 billion, the most for the period in records going back to 1977. Taiwan was also a net seller… ‘The Treasury market isn’t losing foreign buyers — it’s losing automatic buyers,’ said Masahiko Loo, a senior fixed-income strategist at State Street… ‘An increasingly unpredictable US makes large structural overweights and the automatic recycling of capital into Treasuries harder to justify.’”

October 26 – Reuters (Johann M Cherian, Purvi Agarwal and Vidya Ranganathan): “Shares of neocloud companies declined on Monday after SpaceX CEO Elon Musk said the sector could face consolidation and failures… CoreWeave, which has become a poster child for mounting concerns over heavy AI spending, declined 1.6%, while Nebius Group fell 4% and IREN lost 1.5%. In a social media post on Sunday, Musk said that neocloud companies would face significant consolidation and failures, adding that SpaceX would not buy any neocloud companies, calling it ‘pointless’. ‘200+ neoclouds are going to see guppy-level death ⁠and consolidation. Some will make it through, but not many,’ he said.”

October 28 – Bloomberg (Neil Callanan, Caleb Mutua and Paula Doenecke): “A new anxiety is gripping Wall Street as it bankrolls the vast network of data centers and chips behind the artificial intelligence boom: Early signs suggest that the credit market is approaching the limits of how much more debt it can absorb. One after another, yields are soaring into the double digits on bonds and loans funding the AI infrastructure buildout. Bankers are finding it more difficult to offload risk to insurers and other investors… With those jitters growing louder each week — and spurring, in turn, angst about the potential economic fallout — Citadel Securities is cautioning clients that even the biggest names in tech could get ensnared as they put their balance sheets behind scores of projects critical to their AI ambitions.”

October 28 – Axios (Matt Phillips): “Even as AI borrowing roars on, the bond market is becoming more selective about which companies, projects and structures to finance… And since the AI boom increasingly relies on debt, borrowing costs have become a key constraint. On the surface, things have calmed down in the corporate bond market since earlier this month… That calm — plus the excitement over Anthropic and Meta — has helped rebuild confidence in the AI trade that is supporting the stock market. Yes, but: A CoreWeave-shaped dent remains in the bond market. Prices show that investors are increasingly cognizant of the complex web of loans, ownership stakes, lease commitments and contractual obligations linking various players in the boom.”

October 26 – Bloomberg (Josie Reich): “A big swath of the riskiest borrowers have few options other than defaulting on their piling debt as it’s getting increasingly expensive to refinance, CVC Marathon Chief Executive Officer Bruce Richards warned. Default probabilities for CCC rated borrowers assigned by rating agencies have grown to 50%-60% in the next three to five years, as rates on junk-rated debt have surged and credit spreads have widened to levels signaling distress, Richards said… ‘You’re going to see a big step function higher in default rates in the coming year as the markets have tightened financial conditions for companies that are less creditworthy… There is no way out, other than for a lot of these restructurings, and it’s going to be a painful period for a lot of these companies.’”

October 27 – Financial Times (Lee Harris): “US insurance regulators have scaled back demands for information about the credit rating providers that analyse billions of dollars in private loans held by insurers after industry pushback. The National Association of Insurance Commissioners, a co-ordinating group for state regulators, earlier this year said it would require credit rating firms to ‘confidentially’ share assessments of their work issued by the Securities and Exchange Commission and other regulators, as part of a push for more insight into ratings… But rating agencies protested the requests, accusing the group of over-reaching and asserting it could interfere with their independence. Months later, the association has issued an updated proposal walking back these demands, and deleting a reference to ‘potential inappropriateness’ of ratings.”

Global Credit Bubble Watch:

October 29 – Bloomberg (Gerson Freitas Jr. and Ronan Martin): “Global bond sales have soared to an all-time high, catapulted by breakneck borrowing from the tech juggernauts at the forefront of the AI boom. Financial firms, companies and governments have raised a combined of around $6.61 trillion through broadly syndicated investment-grade and junk-bond sales so far this year, up 15% from the same period a year earlier and eclipsing 2025’s record with two months still to go… Cloud-computing giants and data-center developers alone sold almost $368 billion in debt, more than six times as much as a year ago… The group has accounted for about a third of the increase in borrowing so far this year, outpacing every other non-financial sector and adding twice as much incremental debt as governments.”

October 26 – Bloomberg (Kevin Kingsbury and Zahra Tayeb): “US investment-grade bond sales set an annual record…, as a surge in artificial intelligence spending drives companies to borrow hundreds of billions of dollars. Issuance reached $1.76 trillion for the year…, surpassing the prior record of $1.75 trillion from the pandemic-fueled borrowing boom of 2020… More than $300 billion of AI-related funding has been raised in global high-grade markets so far in 2026, approaching three times the amount for all of 2025. Nine separate US offerings have totaled at least $25 billion each this year, with all but Skydance Corp.’s acquisition-related funding coming from technology companies.”

October 26 – Bloomberg (Todd Gillespie): “A trio of mega artificial intelligence financing deals announced Monday morning had one name in common: Goldman Sachs… The Wall Street bank co-led Meta Platforms Inc.’s $95 billion share offering, was the sole structuring agent on a $40 billion SpaceX chip financing deal and was named lead-left bookrunner on Anthropic PBC’s blockbuster initial public offering — which is expected to be at least as big as SpaceX’s listing in June. Those big deals, totaling at least $210 billion, are a boon for Goldman, which is likely to see a windfall worth at least tens — if not hundreds — of millions of dollars for its work.”

October 27 – Bloomberg (Davide Barbuscia): “Banks are planning to sell as much as about $21 billion of high-grade bonds as soon as early next year as part of a $63 billion funding package that Broadcom Inc. has pulled together to help finance chips for AI developer Anthropic PBC. Bank of America Corp., Citigroup Inc., and Morgan Stanley helped to arrange the $63 billion deal and other banks are expected to submit commitments to join the group in the coming days…”

October 26 – Bloomberg (Carmen Arroyo): “SpaceX signed a roughly $40 billion equipment-finance lease with Apollo Global Management Inc. to pay for the chips needed to fuel its artificial intelligence ambitions. The fixed-rate that the company will pay will be determined at pricing, which hasn't yet occurred, SpaceX said in a filing... The deal is expected to close before year-end, and the leases are expected to start in the first half of next year.”

October 30 – Bloomberg (Selcuk Gokoluk): “Bond sales by emerging-market governments fell by almost half in October as the cost of borrowing jumped and a debt binge by tech firms intensified competition for capital. Sovereign bond sales in the US dollar and euros in the international market fell 49% compared with the same period last year, to less than $12 billion… That would be the lowest issuance volume for the month since 2023.”

Global Credit and Crisis Watch:

October 24 – Reuters (Leigh Thomas and Dhara Ranasinghe): “Moody’s spared France a credit rating downgrade…, easing pressure on a government struggling to contain social unrest and shore up its strained finances. Moody’s said it had concluded a periodic review of its rating, leaving it at Aa3, which has carried a negative outlook since last October.”

October 29 – Bloomberg (Eleanor Duncan, Claire Ruckin and Ronan Martin): “Not since the global financial crisis of 2009 has the junk bond market been this divided in Europe. With the region’s companies coming under strain — whether from AI, interest rates or energy costs — the weak are quickly getting weaker. As a result, the gap between the best- and worst-rated junk bonds in Europe has blown out in recent weeks and now stands at the widest in more than 17 years.”

October 28 – Bloomberg (Takahiko Hyuga): “A deterioration in global credit markets is showing up in Japan, where corporate credit risk has worsened by the most since September 2022, adding pressure to a bond market already absorbing record issuance. SoftBank Group Corp. and Nissan Motor Co. led the widening as five-year credit-default swaps on all 40 major Japanese companies tracked by Bloomberg rose from Oct. 1 through Oct. 28. The median increase was 12 bps.”

October 29 – Bloomberg (Finbarr Flynn and Jackie Cai): “China’s high-yield dollar bonds are heading for their worst week in more than a year as signs of liquidity strains at state-owned conglomerate Zhuhai Huafa Group Co. sapped sentiment. The average price of Chinese high-yield dollar bonds dropped about 1.9 cents this week through Thursday, setting it up for the biggest one-week decline since April 2025…”

Leveraged Speculation Watch:

October 28 – Reuters (Gertrude Chavez-Dreyfuss and Anirban Sen): “The slowdown in one of the US Treasury market’s most scrutinized trades has driven investors to other corners of the rates market. The basis trade, a strategy in which hedge funds buy cash Treasuries using borrowed money from the repurchase or repo market while selling futures against them, has plateaued after several years of rapid growth, analysts said… But market participants said some money once deployed in basis trades has moved into other relative-value strategies, including swap-spread arbitrage, a wager on the gap between Treasury yields and swap rates linked to the Secured Overnight Financing Rate (SOFR). Investors often use swaps to hedge interest-rate risk or Treasury exposure. ‘Speculative activity has extended into other strategies that load on liquidity, volatility and credit risk, particularly sovereign asset swaps, including outside the US,’ said Matthew Franklin-Lyons, global head of rates trading at JP Morgan.”

October 29 – Bloomberg (Simon White): “Hedge funds have switched from hedging their long AI exposure principally via shorting single stocks to shorting the index. This is boosting stock correlation, leading to a greater risk of a disorderly move higher in the VIX and an abrupt decline in prices. October will be a month many funds will want to forget. Massive crowding in stocks and an 8% drawdown in the tech sector led to a significant unwinding of AI positions.”

October 27 – CNBC (Deena Zaidi): “The pace at which investors are borrowing money to invest in stocks has cooled substantially, raising concern that the stock market may be due for a fall. Recent FINRA data shows the annual growth in margin debt fell to 31.4% in September from 53.7% in May, Bank of America technical strategist Paul Ciana pointed out... Ciana warned that slowing borrowing momentum from extreme levels has been associated with previous market peaks. May’s growth rate in 2026 was the fourth highest since 1998, according to a BofA analysis. The three higher extremes took place in 2000, 2007 and 2021 — all of which preceded stock market declines.”

October 26 – Wall Street Journal (Margot Patrick): “Buy, borrow and die is a mantra of the rich. They love to take out loans against stock they own, so they don’t have to sell it when they want to buy other things such as mansions, yachts and movie studios. Lend-and-thrive appears to be the approach of banks and others supplying the loans. The arrangement lets them book almost all their fees as pure profit because losses on collateral are rare and most of it can be sold quickly… Deloitte estimates that around $5.4 trillion is extended in securities-based lending, mostly against stock and bond portfolios but also funds and crypto. The figure has risen sharply as more global wealth pours into markets and asset prices rise.”

Iran War Watch:

October 28 – Wall Street Journal (Summer Said, Shelby Holliday, Benoit Faucon and Anat Peled): “The U.S. has told several Gulf Arab countries to be prepared for a short, intense military campaign after the U.S. midterm elections, people briefed… said. The communications through diplomatic and military channels are among a growing number of indications that the U.S. and Israel are readying to launch a new round of heavy combat operations against Iran, risking a major escalation in hopes of degrading Tehran’s strength and pushing it toward negotiations. The U.S. military is sending an additional Patriot system to Israel from Texas to beef up its missile defenses in the country… The U.S. has also moved troops off bases in the Middle East where they were vulnerable…”

October 28 – Bloomberg (Weilun Soon): “The US military said vessels that have no need to move between ports in the Gulf of Oman and the Strait of Hormuz should stay away, as tensions ratchet up in the region. ‘Due to the current geopolitical situation, vessels which do not need to transit the area are advised to remain well clear to avoid unnecessary delays to their voyage,’ the US Naval Forces Central Command said in an advisory… issued via the Joint Maritime Information Center.”

October 28 – Axios (Barak Ravid): “Regional mediators led by Qatar are trying to reach a diplomatic deal to restart negotiations between the U.S. and Iran and prevent the resumption of war after the midterm elections, three… sources say. The Qataris are working to convince Iran to allow UN inspectors to visit its bombed nuclear sites in return for some sanctions relief from the U.S.”

October 30 – Financial Times (Alice Hancock): “Iranians in a small speedboat have attacked a tanker in the Strait of Hormuz by attaching limpet mines to the hull for the first time since 2019, suggesting a change in tactics by Tehran as it confronts the threat of fresh US and Israeli military strikes. The Louise 1, a Dubai-owned tanker, was transiting the contested waterway when it was approached by a small craft… People on the boat attached ‘two explosive devices’ to the hull above the waterline, which detonated and caused a fire in the engine room, UKMTO said… The renewed use of the explosive devices is part of an intensified campaign by Iran to disrupt shipping.”

October 29 – Reuters (Gavin Finch, Maggie Michael, Allison Martell and Marine Delrue): “Iran has created a secret network of military agencies with global reach to import at least $2 billion in hardware, explosives and heavy-duty trucks since January 2025, evading both the US naval blockade and Western sanctions, a Reuters investigation has found. Hidden behind names starting with the letters MOD, for the Ministry of Defense, are more than 5,000 agencies that form a formidable financial and military machine. Their financial footprints are on bills of lading and other shipping data dating back to 2016. Some are tied to the Islamic Revolutionary Guard Corps and to business conglomerates known as bonyads that are controlled by Iran’s elite. The findings offer a window into one of the war’s great mysteries: How is the IRGC replenishing its missile and drone arsenals while firing them in their thousands?”

October 27 – Financial Times (Alice Hancock): “Iran has threatened South Korean shipping company Sinokor with ‘legal action’ for repeatedly violating rules imposed by Tehran to exert control over the Strait of Hormuz. The warning is the first direct threat to a specific shipowner for shuttling oil out from the Gulf via the contested waterway… The Persian Gulf Strait Authority, a body set up by Iran in May to manage transits through the strait, said… that Sinokor ships had undertaken the ‘highest number of crossing violations over the past three months’, and that Iran had taken ‘enforcement action’ against seven ships.”

Iran War Ramifications Watch:

October 27 – Bloomberg (Javier Blas): “The oil market sees the future of the Iran war as binary. Either Tehran and Washington reach a deal — in days rather than months — or they head into an extended and worsening conflict. With few signs of peace, the market is anticipating another round of hostilities, perhaps as soon as next week after the US midterm elections. There is, however, a third potential path: The current deadlock becomes the new normal, creating a forever stalemate. With the on-off conflict already approaching 250 days and the price of oil hovering above $100 a barrel, the prospect of months of continued standstill sounds bewildering. Yet, I have increasingly heard — in private — that some executives in the top echelons of the global energy industry are starting to prepare for such an outcome.”

October 30 – New York Times (Rebecca F. Elliott and Keith Collins): “The war with Iran has been very lucrative for American oil companies, which have earned more than $130 billion in profit as people pay much higher prices for gasoline, diesel and other fuel. That is a conservative estimate based on the performance of more than 50 large U.S. oil and gas companies, most of them producers or refiners, in the six months from April through September.”

October 28 – Reuters (Joanna Plucinska, Gianluca Lo Nostro and Julie Zhu): “With jet fuel prices at roughly double their levels before the Iran war, airlines are growing increasingly reluctant to lock in future fuel costs through new hedges, warning instead of steep fare increases to offset higher fuel bills. Hedging allows airlines to lock in future fuel prices… But some programmes require premiums, collateral or other costs, while airlines that hedge at current elevated prices risk being locked into expensive fuel if geopolitical tensions ease and prices retreat. As the conflict in the Middle East enters its ninth month, the strategy shift means fliers globally will likely pay far higher air fares as carriers lose their hedging protection, testing consumer willingness to shell out more for travel.”

October 28 – Bloomberg (Will Kubzansky): “Gasoline stockpiles in the Midwest have fallen to an all-time low, raising the threat of persistently high pump prices in the region just days away from a handful of crucial Senate elections. Commercial gasoline supplies declined to 41 million barrels — the lowest on record — after falling by 1.2 million barrels last week…”

Trump Administration Watch:

October 27 – CNBC (Lim Hui Jie): “U.S. President Donald Trump has reiterated his claim that the Iran war will end ‘whenever I want it to,’ but insists that Tehran cannot have a nuclear weapon. Speaking at a rally in Lubbock, Texas, Trump said ‘Somebody asked me before, ‘When will the war in Iran end?’ I said, ‘Whenever I want it to end.’ Trump said it ‘would be very quick, but we have to have an end properly,’ with a ‘total statement’ that Iran would never have a nuclear weapon.”

October 25 – Bloomberg (María Paula Mijares Torres and Hadriana Lowenkron): “President Donald Trump said it’s ‘getting to be decision time’ on whether he will make a deal with Tehran or resume attacks as Iranian and Houthi threats against Americans in the Middle East continue to grow. ‘I have a decision to make: Do I finish it off, which would be very easy to do, or do I make a deal? That’s all,’ Trump said… ‘We don’t play games.’ Trump has suggested that US strikes on Iran could resume after the Nov. 3 midterm elections and he has sent additional forces, including a third aircraft carrier group, toward the Persian Gulf.”

October 29 – Wall Street Journal (Michael R. Gordon, Lara Seligman and Shelby Holliday): “The top U.S. commander in the Middle East briefed President Trump on Thursday on military options for Iran, a rare in-person visit to the White House as the U.S. weighs resuming major combat operations, according to U.S. officials… Joining Adm. Brad Cooper was Defense Secretary Pete Hegseth and Joint Chiefs Chairman Gen. Dan Caine. The meeting included other cabinet members and covered other topics including the continuing U.S. blockade… The top-level gathering followed a Wednesday session at the White House in which the military officers met with Vice President JD Vance…”

October 24 – New York Times (David E. Sanger, Julian E. Barnes, Jonathan Swan, Maggie Haberman, Farnaz Fassihi and Eric Schmitt): “Inside the Trump administration, officials are expressing fears that Iran is in the ‘advanced stages’ of planning attacks against U.S. officials. More than 6,000 miles away, the Iranians appear convinced that Israel and the United States are preparing to unleash their third major attack in 16 months, a final push to force Iran to surrender to U.S. demands. The conflict in the Middle East has entered a new phase in which a maelstrom of factors, from the political calendars in the United States and Israel to the potential for all sides to be seeking pretexts for action, are creating heightened levels of tension and risk. This is how countries can escalate into full-scale war, several diplomats and outside experts noted.”

October 25 – Wall Street Journal (Alexander Ward, Shelby Holliday and Vera Bergengruen): “U.S. intelligence suggests Iranian preparations to attack Americans throughout the Middle East have reached ‘advanced stages,’ prompting a sudden exodus of personnel from embassies and military bases throughout the region, officials said. Jay Clayton, the director of national intelligence, summarized that finding in a brief memo… ‘Iran has substantially increased efforts to target U.S. personnel. The lethal plotting efforts by the Iranians against U.S. citizens have reached advanced stages in both the Middle East and certain other countries,’ he wrote.”

October 28 – Bloomberg (Yash Roy): “Treasury Secretary Scott Bessent said he and his team are keeping tabs on the state of financing for the artificial intelligence build-out, and played down recent signs of concern. ‘We monitor all of this,’ Bessent said… when asked about yields on some AI-related debt starting to pop up into double digits. ‘I don’t think it’s problematic at all because we’re seeing that the neoclouds are a small component of the overall ecosystem.’”

October 28 – Bloomberg: “President Vladimir Putin said Russia is coordinating on low-Earth-orbit satellite networks with billionaire SpaceX chief Elon Musk and other US partners despite political tensions between Moscow and Washington. Musk is ‘a real genius,’ Putin said… ‘We are in close contact with our American partners, including Mr. Musk, because in orbit it is very important not to interfere with each other and to observe certain discipline and order.’ Russia values the cooperation ‘despite all the political issues’…”

October 28 – Financial Times (Michael Pooler and Geoff Dyer): “Flávio Bolsonaro arrived in the US on Wednesday following a day of uncertainty over his whereabouts, after the losing Brazilian presidential candidate fled his home country, where he is under investigation for corruption and money laundering… It ended a frenzy of international speculation surrounding the 45-year-old, who suffered a surprise defeat in Sunday’s election to incumbent leftwing President Luiz Inácio Lula da Silva. Bolsonaro’s departure from Brazil defied a travel ban imposed by a Supreme Court judge following the tight run-off ballot, which Lula won by 51.8 to 48.2%. The judicial order was linked to ongoing criminal investigations and declared him a flight risk.”

October 28 – New York Times (Ana Ionova, Edward Wong, Alice Maciel and Lucía Cholakian Herrera): “Flávio Bolsonaro, the candidate defeated in Brazil’s elections, landed in Miami on Wednesday, declaring himself the legitimate leader of the nation he fled after Brazilian authorities asked him to surrender his passports as part of a money-laundering investigation. Mr. Bolsonaro arrived in the United States after apparently vanishing for a whirlwind 24 hours during which it was largely unclear where he was… Mr. Bolsonaro, in a lengthy statement on social media…, said he had left Brazil because he faced political persecution and thanked President Trump and President Javier Milei of Argentina. After initially declaring himself the ‘legitimate president-elect’ of Brazil, Mr. Bolsonaro deleted his statement and reposted it using the word ‘leader’ instead.”

October 28 – Bloomberg (Eric Martin): “The US decision to allow the defeated right-wing Brazilian presidential candidate Flavio Bolsonaro to seek refuge in the US poses a fresh irritant to a bilateral relationship that has been marked by finger-pointing and accusations between the two countries’ leaders. The US issued visas for Bolsonaro and his family as President Donald Trump continued to criticize the election that President Luiz Inacio Lula da Silva won last weekend. Asked on Thursday whether he recognized Lula as Brazil’s president and whether he’d speak to him, Trump told reporters: ‘I’ll talk to him. I think the election was a disgrace in Brazil.’”

October 27 – Reuters (Bhargav Acharya and Daphne Psaledakis): “US President Donald Trump said he would ban the term artificial intelligence in documents and everything else, as he questioned why the Wall Street Journal was not ⁠using his preferred term, super intelligence. ‘When will The Wall Street Journal start calling Artificial Intelligence (AI), a very bad and inaccurate name, SI (Super Intelligence), the name which virtually ⁠everyone else is using, or soon will be,’ Trump said… ‘In short order, we will be officially BANNING the term, ‘AI/Artificial ⁠Intelligence,’ in all relevant documents, and everything else, ⁠due to its inaccuracy.’”

Trade War Watch:

October 28 – Reuters (Claire Fu, Eduardo Baptista and Laurie Chen): “China’s proposed artificial intelligence export curbs will push a business model favoured by Beijing and the industry’s biggest players: keeping valuable technology at home while selling access to it abroad as rivalry with the US intensifies… ‘The structure the leadership prefers, with IP and R&D kept onshore and operations and access sold abroad, is the one the market was already converging on,’ said Alfredo Montufar-Helu, Beijing-based managing director at consultancy Ankura.”

October 29 – Reuters (David Shepardson): “The United States plans to soon ban Chinese telecom firms from direct access to US phone numbers on national security grounds — a measure designed to prevent scam-related robocalls. The US Federal Communications Commission said… it will vote on November 19 on a proposal to ban China Mobile, China Telecom, and China Unicom and other IP-enabled service providers from direct access.”
Constitution Watch:

October 28 – Reuters (Nate Raymond): “CNN, MS NOW and Politico… expanded their lawsuit challenging President Donald Trump's efforts to ban them from the White House, saying even after a judge ordered their access restored they have continued to face retaliation for their news coverage. The media outlets in an amended ⁠complaint, asked a federal judge… to prevent the White House from barring them from serving in a press pool for other reporters in the close quarters of the Oval Office and Air Force One.”

Budget Watch:

October 27 – Reuters (Lucia Mutikani): “The US military has spent over $47 billion so far to prosecute the war in Iran, more than 25% higher than the Defense Department’s estimate in July… The Pentagon’s latest estimate was tied to the operational costs of carrying out the war, with a projected cost of more than $29 billion to replace expended munitions used in the conflict. More than $6 billion would be needed to replace military equipment and so-called ‘platform losses,’ which include the loss of aircraft including many drones lost during the war.”

October 29 – Wall Street Journal (Richard Rubin): “The U.S. national debt reached 100% of gross domestic product for the fiscal year that ended Sept. 30, hitting the triple-digit mark for the first time since 1946. The federal government had previously reported that the publicly held debt as of Sept. 30 was $32.2 trillion. With the release of economic output for third quarter…, that figure equaled 100%, of gross domestic product over the fiscal year… The U.S. is moving steadily closer to breaking the 1946 record of 106%, an increase that reflected the heavy borrowing needed to win World War II.”

October 30 – Bloomberg (Elizabeth Stanton): “The US government borrowed a record $839 billion this week via its sales of Treasury bills and notes — both to repay holders of maturing debt and to raise the additional capital needed to finance the federal deficit. This week’s auctions of bills, floating-rate notes and Treasuries due in two, five and seven years eclipsed the previous record of $834 billion, set in the same period a year ago.”

U.S./Russia/China/Europe/Iran Watch:

October 28 – Associated Press: “Three maritime drones struck a container ship sailing in the Black Sea off the coast of Bulgaria on Wednesday, the country’s defense minister said, the latest in a string of such incidents on NATO’s eastern flank.”

October 26 – Politico (Tim Ross): “Europe is living through an ‘era of darkness’ as multiple wars and competition between the U.S. and China trample the rules-based global order, Finnish President Alexander Stubb said… Stubb said the post-Cold War age has ended and the world now faces a pivotal moment, like those at the end of World War II in 1945 and the fall of communism in 1989. While he tends towards optimism, there are now ‘unfortunately, plenty of reasons to be pessimistic,’ he told an audience of students… ‘In a sense, I began my studies during an era of light and you begin your studies in an era of darkness… We used to be able to say that the three biggest killers of mankind, disease, famine and wars, have been defeated. That is not true anymore. The light has given way to darkness.’”

October 29 – New York Times (Jonathan Swan, Maggie Haberman, Ana Swanson, Paul Mozur, Tripp Mickle and Julian E. Barnes): “American spy agencies had gathered striking intelligence. A top executive at a Singapore-based data center company was under scrutiny for possibly steering advanced Nvidia A.I. chips to China. And now American officials had concluded that she was a Chinese intelligence asset, funneling information to Beijing. But what came next was even more alarming. Surveillance of the executive, Alice Huang or Huang Le, a Chinese citizen, revealed that she had developed a close relationship with Jensen Huang, Nvidia’s chief executive.”

Ukraine War Watch:

October 24 – Bloomberg (Anastasiia Malenko): “The lights in Ukraine’s capital city are failing as Russian missiles pound its power plants. The mood is darkening too. Power cuts are becoming common. Even the water supply falters at times. The three million residents of Kyiv are bracing for the worst winter of the nearly five-year-old war. Some are thinking of leaving the city. Since a stillborn energy ceasefire announced by President Trump on Oct. 11, Russia has carried out over 170 attacks on Ukraine’s energy infrastructure, President Volodymyr Zelensky said…”

New World (Dis)Order Watch:

October 24 – Financial Times (Alice Hancock, Susannah Savage, Nassos Stylianou and Steven Bernard): “One region in the world has become more deadly than any other for merchant sailors, and it is not the Strait of Hormuz. More sailors died in the Black Sea than in any other body of water this year, outstripping fatalities in the Gulf… A critical corridor for global grain supplies and Russian oil, the Black Sea is riskier for vessels than the Middle East, shipowners and seafaring groups said. Crew in oil tankers, cargo ships and grain carriers entering the sea close to the EU and Nato must run a gauntlet of attacks by drones, missiles or explosive-laden boats as Russia and Ukraine step up their battle for the vital route. Some estimates put the number of attacks in the Black Sea as more than six times higher than in the Gulf.”

October 25 – Bloomberg (Tom Fevrier and Hayley Warren): “Over the summer, Russians… queued at gas stations for fuel and swapped tips on Telegram about where to find it. The shortage eased only after Russia, one of the world’s energy superpowers, started importing some fuel and repaired some of its refineries. Russian farmers are now struggling to sell their bumper crop at the expected prices as grain exports through the Black Sea that usually account for 80% of the nation’s total have been practically halted. A thousand kilometers away, farmers in Ukraine are loading grains onto trucks for the long and expensive journey west overland, as their normal sea routes become too dangerous to use. Russia and Ukraine have stepped up assaults on each others’ export industries over the past year. The Kremlin is targeting ports, elevators, warehouses, ships and other infrastructure critical to Ukrainian agriculture. Kyiv is striking refineries, oil terminals and tankers as well as Russian grain hubs on the Black Sea and ships. The attacks on vital exports of food and fuel have shown how quickly a regional conflict can become a global one, with the impacts reverberating through markets.”

AI Bubble/Arms Race Watch:

October 26 – Axios (Madison Mills): “Anthropic’s IPO filing includes an extensive list of extreme warnings — including the chance its own technology could put humanity at risk. These are the wildest IPO risk factors in history, a jarring collision of Wall Street legalese and what some see as Silicon Valley sci-fi, including catastrophic threats to humanity, blackmailing AI models, and $750 billion in computing commitments. Anthropic’s prospectus includes over 90 pages of risk factors… Among the most eye-popping… : AI could pose ‘catastrophic or existential risks to humanity,’ and could try to manipulate humans; Models are becoming harder to monitor as they're getting better at circumventing oversight, and the pace of autonomous work alone could exceed the ability of human reviewers to monitor actions; AI models generally, including its own, have exhibited behavior resembling blackmail, including attempts to resist being shut down.”

October 26 – Bloomberg (Shirin Ghaffary): “Anthropic PBC’s initial public offering is laying bare the extremes of the multi-trillion-dollar AI boom business model: extraordinary growth paired with uncertainty about demand and the spending required to continue developing the technology. The startup… is poised to be the first major US firm focused solely on building AI software to make its market debut. The filing offers proof of the billions of dollars in sales per year that Anthropic’s products generate, but also puts forth hard questions about its extreme losses, government intervention and the potential for catastrophic harms that are specific to cutting-edge AI developers. Just five years into its existence, Anthropic is expected to raise more money in its IPO than any firm in history and overtake Berkshire Hathaway Inc. in market value.”

October 28 – Bloomberg (Davide Barbuscia, Michelle Cheng and Gowri Gurumurthy): “Banks are delaying plans to offload part of a $15 billion loan to fund a data center tied to Anthropic PBC in Texas, after the state put a hold on new projects while assessing risks to its power grid. The bond offering delay… would leave the banks holding the debt on their balance sheet longer than they originally planned.”

October 26 – Financial Times (Tim Bradshaw): “Meta is planning to raise $95bn in one of the largest-ever stock offerings to fuel its massive AI infrastructure spending, backed by chipmakers Nvidia, AMD and Broadcom, who will act as cornerstone investors. The deal is the latest example of Big Tech companies turning to the capital markets to fund their AI ambitions, with Google, SpaceX and soon Anthropic all issuing a flood of new shares. The equity raises come alongside extensive borrowing by the so-called hyperscalers, which are projected to spend as much as $700bn on AI data centres this year.”

October 29 – New York Times (Karen Weise): “Four of the tech industry’s biggest companies set a new spending record in the last quarter as they raced to build artificial intelligence, leading to a worrisome new milestone: most of them are spending more cash on data centers than they get from running their businesses. Over the past two weeks, Amazon, Microsoft, Google and Meta said they were on track to spend more than $720 billion this year on data centers and other capital expenses — roughly triple what they spent just two years ago. And all are expected to spend even more next year… Investors have increasingly kept an eye on a metric known as free cash flow… For every company but Microsoft, free cash flow has turned negative, a sign of just how much they are banking that their A.I. bets will pan out.”

October 28 – Financial Times (Rafe Rosner-Uddin): “Microsoft invested less than expected in new data centres during the last quarter as the cloud computing giant experienced delays in construction of the new facilities it needs to serve booming demand for AI infrastructure. The company… said its capital expenditures in the three months to September 30 came to $45.2bn, considerably less than the $51.7bn Wall Street expected. Amy Hood, Microsoft’s CFO, told investors that the shortfall was ‘due to some third-party capacity deliveries’ being delayed.”

October 28 – Financial Times (Song Jung-a): “Samsung Electronics shares fell on Thursday amid investor disappointment over a lack of detail about returns to shareholders even as the world’s largest memory-chip maker delivered a bullish outlook. The South Korean company said it expected AI-related investment spending to reach a ‘historic level’ in 2027, with AI-driven demand far exceeding industry supply compared with this year. Despite the upbeat outlook, Samsung shares fell as much as 6% in Seoul, bringing the decline over the past month to about 15%.”

October 28 – Wall Street Journal (Telis Demos): “At the end of a previous lending boom, back in 2007, then-Citigroup CEO Charles Prince famously said: ‘As long as the music is playing, you’ve got to get up and dance.’ This time around, with artificial intelligence now a driving force, banks are definitely up and dancing. But they are also eyeing possible seats and listening more keenly for a pause in the music. In the third quarter, both big banks and midsize regionals reported sharp jumps in their traditional business-loan books, known in the industry as commercial-and-industrial lending. The AI data-center build-out was often cited as a driving force. The biggest banks are where giant ‘hyperscaler’ tech companies and big developers are going to get loans or bond offerings... But regional lenders are also active supporting construction companies and others benefiting from the boom. At the 25 largest banks in the country, ‘C&I’ loans grew almost 10% year-over-year in the third quarter…”

October 29 – CNBC (Jordan Novet): “The past few quarters of hyperscaler earnings have been marked by ever-increasing capital expenditure forecasts as tech giants race to build out artificial intelligence infrastructure to meet what they describe as insatiable demand. At least for the moment, Microsoft and Alphabet are telling a slightly different story. In their earnings reports Wednesday, both companies shared capex figures that came up shy of analysts’ estimates. Microsoft reduced its capex forecast for the year to $170 billion from $175 billion, and Alphabet held its guidance at $195 billion to $205 billion. The numbers suggest a slowdown is nowhere in sight, but they do represent another potential point of concern for the AI buildout.”

October 24 – CNBC (Kif Leswing and Isabel O’Brien): “Nvidia’s emergence as financier for the global AI buildout is facing its first major stress test as credit markets tighten for key partners. After creating the chips that powered the early stages of the generative artificial intelligence era, Nvidia turned to using its financial prowess to fund AI model developers, data center companies and a host of so-called neoclouds… That’s meant taking full advantage of Nvidia’s investment grade credit rating and providing backstop guarantees on mega-projects for OpenAI so that buildouts can get funded at lower interest rates. As of its last quarterly… filing…, Nvidia had $36 billion in off-balance-sheet AI cloud agreements, or backstops, for neoclouds, in addition to its guarantee on up to $105 billion for chips, land and power at a proposed 10 gigawatt OpenAI data center in Ohio. The company signed as a tenant for $20 billion in future data center leases, which will later be assigned to third parties.”

October 29 – Bloomberg (Amanda Cantrell and Laura Benitez): “Ares Management Corp. is avoiding financing deals to back the high-powered processing units that run sophisticated AI models, opting to invest in the data centers that house them instead. The asset manager has concerns that if it backs graphics processing units, it could get stuck holding assets that may be obsolete not long after they’re released, said a person close to the firm…”

October 25 – Bloomberg (Rebecca Smith): “Despite the significant investments ploughed into artificial intelligence it has provided ‘zero payoff’ to corporate America outside of technology, according to Apollo Global Management Inc. Chief Economist Torsten Slok. ‘Revenue per worker is rising for the Mag 7 but is flat for the S&P 493,’ he wrote... The same is the case for profit margins, while there are no signs yet of AI boosting productivity growth. ‘Mainstream corporate America is pulling back and starting to view token spending not as a source of growth but as a cost center that weighs on margins,’ Slok said.”

Global Bubble Watch:

October 26 – Axios (Bradley Olson): “A tidal wave of litigation is catching up to Meta, leading to $42 billion in recent penalties and settlements, a powerful reminder to AI companies that they could face a court reckoning even when regulation lags. AI companies are racing to build better models and autonomous agents, but they don’t enjoy the same legal protections that shielded web platforms for decades. The scale of the penalties Meta is facing offers a preview of potential legal exposure. For years, Facebook’s parent company navigated a seemingly endless string of scandals — weathering allegations of election interference, privacy lapses and platform harms — and was largely protected from severe litigation penalties due to Section 230.”

October 26 – CNBC (Jordan Novet): “Microsoft said… it’s offering buyouts to a wide swath of employees as it strives to balance a costly artificial intelligence infrastructure build-out with capital efficiency. The software maker announced a new voluntary exit offer for certain workers in the U.S., Canada, India and the United Kingdom at its experience level of 70 or below. Around 60,000 people are eligible, according to a person familiar with the matter, who asked not to be named while discussing an internal matter. The effort affects about 27% of Microsoft’s total workforce…”

October 26 – Reuters (Cynthia Kim): “South Korea’s semiconductor exports could fall by $50 billion to $100 billion compared with earlier forecasts if capital spending on artificial intelligence by major US technology firms slows next year, according to central bank data… The Bank of Korea (BOK) modelled a ‘pessimistic scenario’ to assess the economic fallout ⁠if US tech giants curb their aggressive infrastructure outlays.”

October 27 – Wall Street Journal (Matt Wirz and Mark Maurer): “Private-equity firms are scrambling to avoid big losses from a potential wave of defaults by the companies they own. Fund managers are racing to negotiate loan extensions on much of a $300 billion wall of debt that is coming due starting in 2028. It is a pressing need that is intensifying because rising interest rates have made refinancing more expensive... Buyout fund managers that fail to get loan extensions risk having the companies they own taken over by creditors and their investments wiped out. ‘There are going to be businesses that get the keys tossed back to the bank and don’t make it,’ said Hugh MacArthur, chairman of Bain & Co.’s global private-equity practice.”

October 28 – Financial Times (Robert Armstrong): “Private equity is going through a rough patch. Over the past five years, US PE fund returns trail the S&P 500 by more than three percentage points a year; over 10 and 15 years, the industry has barely managed to match that index. Fund hold times have lengthened to seven years from five a decade and a half ago. Some $1.3tn of unvested ‘dry powder’ waits as the industry searches for good targets; over 40% of it has been sitting idle for more than two years. Fundraising is set to decline for the third year in a row. Fees are under pressure too, as big institutional investors demand no-fee co-investment opportunities alongside participation in funds.”

Inflation Watch:

October 29 – Associated Press (Christopher Rugaber): “An inflation gauge closely monitored by the Federal Reserve accelerated last month, showing that prices remain elevated less than a week before midterm elections in which the uncomfortably high cost of living for millions of Americans has become a central issue. Consumer prices rose 3.6% in September from a year earlier…, up from 3.4% in August. On a monthly basis, prices climbed 0.5%, up from 0.3% in August and the highest figure since May… Core inflation also picked up last month. It increased 3.1% from a year ago in September, up from 3% in August…”

October 28 – Financial Times (Brooke Masters): “The US economy these days has distinct haves and have-nots. Homeowners are supposed to be among the lucky ones. Median home prices have risen steadily in recent years… And those who bought homes before 2022 had the chance to lock in 30-year mortgages with annual rates well below 4%, a far cry from today’s levels of above 7%. Yet many Americans still feel squeezed, with almost half of homeowners telling a recent CNBC poll that they lack financial breathing room, or worse. That is because mortgage rates do not tell the whole story. The other costs of property ownership have shot up in recent years… Take property taxes. In many communities, they are rolled into homeowners’ monthly mortgage payments. Though based on assessed value, these taxes have outpaced rising home prices in almost half of big US metro areas… Nationally, the median charge jumped 25% between 2019 and 2024… Insurance is another problem. The average premium for homes with a mortgage rose 62% between 2019 and 2024 to $2,300, with increases topping 70% in Texas, Florida and Utah.”

October 27 – Wall Street Journal (James Glynn): “Australia’s consumer inflation remained elevated in September, backing the case for the central bank to tighten policy further next week. The latest reading affirms the Reserve Bank of Australia’s fear that price pressures have become materially worse and clears the path for it to deliver a fifth interest rate increase this year. Consumer prices rose 4.3% on year, up from 4.0% in August…”

Federal Reserve Watch:

October 28 – Associated Press (Christopher Rugaber): “The Federal Reserve kept its key rate unchanged… at about 3.9% despite stubbornly high inflation, as Chairman Kevin Warsh suggested its policies are already showing signs of having an impact. The Fed said ‘inflation remains elevated’ … and added that holding off on a rate increase allows ‘the accumulation of more information’ that will inform the Fed’s next steps… Warsh underscored the Fed’s determination to bring inflation back to its target. ‘Energy and related prices have moved higher again in recent weeks,’ he said. ‘And our job is to ensure that relative price changes in some sectors do not broaden out across the economy.’”

October 28 – Axios (Neil Irwin): “The Fed held its benchmark interest rate at 3.75% to 4%, with Cook and Cleveland Fed President Beth Hammack dissenting in favor of a quarter-point hike. The Fed said it needs more information to determine the appropriate policy stance and described economic activity as expanding at a ‘strong’ pace, up from ‘solid’ in September. It was Cook’s first dissent as a Fed official, coming ahead of a White House hearing on her potential removal over alleged mortgage fraud.”

October 28 – Reuters (Michael S. Derby): “Federal Reserve Chairman Kevin Warsh said… the central bank will begin setting aside one of its eight regularly scheduled policy meetings next year and two in 2028 to weigh major issues facing the institution and will not use them to consider changes in monetary policy. ‘We believe eight meetings per year is the right number for the (Federal Open Market Committee), but in 2027, one meeting will focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated,’ Warsh said…”

October 28 – Reuters (Michael S. Derby): “Federal Reserve Chairman Kevin Warsh… said US central bank policymakers will start to weigh the recommendations of a task force studying balance sheet issues sometime in the new year. Members of the panel looking at how the central bank uses its holdings of bonds, cash and other assets to achieve its policy goals ‘are working away and comparing their best thoughts,’ Warsh said…”

October 27 – Wall Street Journal (Nick Timiraos): “Federal Reserve officials are having two debates at once this fall. The first, over how much higher interest rates need to go, gets settled at policy meetings. The second, over how much to tell the public about where rates could be headed, is playing out in the open. Chairman Kevin Warsh has made a point of saying less. Most of his colleagues haven’t followed his lead. The 16 Fed officials who have been in their posts at least a year gave no less than 59 speeches, interviews and other public comments between last month’s meeting and the quiet period ahead of this week’s gathering…”

October 28 – CNBC (Davis Giangiulio): “DoubleLine founder Jeff Gundlach told CNBC… it’s unclear why the Federal Reserve is waiting to hike rates further. ‘What are you waiting for? You just upgraded the economy right here,’ he said, referring to Fed Chairman Kevin Warsh’s comments about a strong macroeconomic environment… ‘We’re headed to 4% handle headline CPI. The commodity index is rising in a bull market, and I don’t understand why the Fed is so reluctant to move.’”

U.S. Economic Bubble Watch:

October 28 – Reuters (Lucia Mutikani): “The US trade deficit in goods unexpectedly widened in September as imports surged to a record high, driven by strong demand for capital goods linked to the AI infrastructure buildout… The goods trade shortfall increased 2.1%, or $2.8 billion, to $134.9 billion last month, the largest since March 2025… Economists… had forecast the goods deficit at $130.2 billion. The goods trade gap widened through the third quarter. Goods imports rose 2.4%, or $8.1 billion, to $344.1 billion last month. They were boosted by a ⁠7.5% jump in capital goods. Imports of capital goods soared 77.2% year-on-year in September.”

October 29 – Bloomberg (Mark Niquette): “The US economy expanded in the third quarter at the fastest pace in a year, supercharged by feverish business investment and a resilient American consumer. Inflation-adjusted gross domestic product increased an annualized 3.4% in the three months through September after growing 2.2% in the second quarter… Household spending was similarly robust, increasing an annualized 3.8% for a second straight quarter, even as rising prices erode paychecks and keep consumer sentiment depressed.”

October 29 – Associated Press (Paul Wiseman): “The number of Americans applying for unemployment claims dipped last week to 194,000 — the lowest since mid-July — as layoffs remain low and most Americans enjoy job security… So far this year, claims have remained at historically low levels, never topping 230,000 in a single week. They’ve come in at or below 200,000 for seven straight weeks.”

October 27 – Reuters (Lucia Mutikani): “New orders for key US-manufactured capital goods increased in September and shipments of these products surged, suggesting business spending on equipment maintained a robust growth pace in the third quarter… Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.5% last month after an unrevised 1.6% jump in August…”

October 27 – Associated Press (Matt Ott): “American confidence in the economy rebounded somewhat in October as gas prices fell modestly… The Conference Board said… its consumer confidence index rose 7.5 points to 91.7 in October from 84.2 last month. September’s reading was the lowest in the board’s survey since April 2014 and below the lowest level reached during the pandemic… Respondents’ views of their present situation rose by 6.9 points to 72.6 while their short-term outlook climbed 8.6 points to 120.4… The percentage of respondents that said jobs were ‘plentiful’ rose from 24.3% in September, to 26.7% this month. The percentage of those saying jobs were ‘hard to get’ remained at 21.4%.”

October 28 – Wall Street Journal (Nicholas G. Miller): “Andrew Hecker never believed taking out an adjustable-rate mortgage in 2019 would be much of a risk. His lender offered him an initial rate about 1.25 percentage points below the 4% rate for a traditional 30-year mortgage at the time. He figured he would move from his home in the Minneapolis area before his rate readjusted in seven years. Now, he is staring at a mortgage rate jumping from 2.75% to as much as 7.75% in January. That will increase his minimum payments every month from $6,800 to $9,300. ‘That basically means every single penny I’ve been making in extra payments is going to go toward interest,’ he said… Tens of thousands of homeowners have adjustable rate mortgages from years ago that are now resetting, increasing their monthly payments by hundreds or even thousands of dollars, with mortgage rates at their highest point in three years.”

October 27 – Reuters (Lucia Mutikani): “Sales of new US single-family homes fell in September, partially reversing the prior month’s jump… New home sales slipped 0.6% to a seasonally adjusted annualized rate of 676,000 units last month… Data for August was revised lower to show sales rising to a rate of 680,000 units instead of the previously reported 684,000 units… They dropped in the Midwest and South regions, but soared in the Northeast and West. Sales ⁠declined 5.3% on a year-over-year basis in September.”

October 28 – CNBC (Diana Olick): “Mortgage rates fell for the second straight week, and that finally brought consumers back to their brokers… Applications to refinance a home loan climbed 3% for the week but were 61% lower than the same week one year ago… A growing share, however, applied for riskier loans at even lower rates… Applications for a mortgage to purchase a home rose 4% for the week but were still 18% lower than the same week one year ago… As borrowers search for savings, more are opting for adjustable-rate mortgages. The ARM share of applications increased to 11.3% last week, the highest level in more than a year…”

October 27 – Wall Street Journal (Paul Berger): “Port employers in Southern California are warning of a possible strike at the nation’s busiest container-port complex as soon as Nov. 1. The Pacific Maritime Association said… a union local that represents 250 watchmen across the ports of Los Angeles and Long Beach voted to authorize a strike. The walkout could begin at 5 p.m. PT Sunday if a deal isn’t reached. ‘None of the employers’ proposals have been resolved, and significant differences remain,’ the association said. ‘A timely agreement matters not only to the parties at the table, but to the entire Southern California supply chain and to the local, state and national economies that depend on it.’”

October 27 – Bloomberg (Robb Mandelbaum): “It was a brutal nine months for the admissions offices at US MBA programs. Applications for the class of 2028, entering this fall, took a nosedive, according to the Graduate Management Admission Council… US business schools reported that applications for full-time MBAs plummeted 27% from the previous cycle. Applications fell across all types of US MBA programs and, indeed, all types of graduate business programs. Even online MBA programs attracted less interest.”

China Watch:

October 26 – Reuters: “While global tech stocks teeter, in China they have already crashed as lofty valuations collapse under worries about AI demand and curbs on Chinese exports. The meltdown, tanking the mainland STAR50 index of AI and semiconductor leaders by 40% in less than four months and vaporising some $480 billion in market value, is an ill omen for wobbly world markets… ‘The stock market later evolved into a speculative crazy bull,’ said Beijing-based fund manager Dong Baozhen. ‘And now we see the bubble bursting.’”

October 27 – Financial Times (Arjun Neil Alim and Thomas Hale): “Beijing is rushing to shore up its struggling stock markets as China’s AI trade goes into reverse amid slowing economic momentum and a lack of large-scale fiscal stimulus. The CSI 300 index… has entered a technical bear market, down 10% year to date and about 20% from a June peak. The contagion has spread to Hong Kong, where mainland Chinese investors — a crucial source of demand for the city’s equities — have sold HK$20bn ($2.5bn) of stocks so far this month, putting October on track for the largest month of mainland outflows since July 2021…”

October 27 – Bloomberg (Iris Ouyang and Shulun Huang): “China’s central and local governments will probably raise at least a net 2.2 trillion yuan ($330bn) in bond sales in the final two months of the year, the second-highest amount on record for the period, as the authorities step up efforts to support growth. The amount… will only be behind the stimulus splurge in 2024.”

October 26 – Bloomberg: “China’s five-year government bond yield dropped after the central bank increased its cash injection into the banking system. The yield on 5-year sovereign notes briefly touched 1.34% to head for the lowest closing level on record, based on Chinabond data going back to 2002.”

October 29 – Wall Street Journal (Chun Han Wong): “Chinese leader Xi Jinping is tightening his grip on the Communist Party with relentless purges and new strictures on discipline, as Beijing gears up for a key personnel shuffle next year that seems set to extend his rule. Xi’s crackdown on corruption and disloyalty has pruned the party elite so much that the governing Central Committee was reduced this week to its lowest attendance at a policy-setting meeting since the Mao Zedong era. About a quarter of the 376 officials that were on the Central Committee when its current term started four years ago didn’t attend the elite body’s four-day plenum... Many of the absentees have been felled in Xi’s campaign to cleanse the party.”

Central Bank Watch:

October 29 – CNBC (Jenni Reid): “The European Central Bank voted to hold interest rates steady…, meeting market expectations, despite euro zone inflation rising to a three-year high. It keeps the central bank’s key rate, the deposit facility, at 2.5% following a 25 bps hike in September… The institution’s Governing Council said rising energy prices posed upside risks to the inflation outlook and downside risks to growth, but that underlying inflation and wages were so far broadly stable.”

Europe/UK Watch:

October 27 – Reuters (Balazs Koranyi): “Lending in the euro zone continued to grow at a healthy pace in September even as banks tightened access to credit on the back of higher interest rates and geopolitical turmoil, European Central Bank data showed… The central bank’s own data painted a picture of relative resilience: lending to firms and households grew ⁠by 4.2% and 3.1% respectively last month, a stable pace when compared to August.”

October 26 – Reuters (Francesco Canepa): “Euro zone firms are having a harder time getting credit from their banks just as their finances are squeezed by more expensive fuel and higher costs, a European Central Bank survey showed… Its quarterly Survey on the Access to Finance of Enterprises in the euro area showed some strains ⁠were becoming visible, with firms reporting higher interest rates and a decrease in the availability of bank loans. Firms said they needed ⁠more credit lines just as these were becoming harder to get.”

October 28 – Financial Times (Jason Ma and Julie Steinberg): “European office deals slumped to their lowest level since the depths of the financial crisis during the third quarter, as soaring bond yields and the start of a new cycle of central bank rate rises choked off hopes for a recovery in valuations. The value of office transactions fell by a third compared with a year earlier to €8.8bn… That was the lowest figure since the third quarter of 2009, when property valuations were at their post-crisis nadir.”

October 29 – Financial Times (Antoine Gara, Alexandra Heal and Mercedes Ruehl): “Investors in Partners Group’s flagship US retail fund more than doubled the amount they sought to pull out during the third quarter, adding to the pressures on one of Europe’s largest private equity firms. The Swiss group’s US private equity master fund disclosed $2.2bn of third-quarter redemption requests…, amounting to 15% of the fund’s net assets and well above the level at which it can cap withdrawals.”

Japan Watch:

October 26 – Reuters (Leika Kihara and Takahiko Wada): “Japan’s core consumer price index, which strips out one-off factors, rose in September at the fastest annual pace in three years…, a sign of broadening price pressures that cement the case for further interest rate hikes… The index… jumped 3.2% in September from a year earlier…, accelerating from a rise of 2.6% in August. The index rise is the biggest year-on-year since October 2023.”

Emerging Markets Watch:

October 26 – Bloomberg (Marcelo Rochabrun): “Brazil’s richest bankers lost about $9 billion on Monday after a surprise victory by the left triggered a rout in local markets, forcing the stock exchange to temporarily suspend trading during the morning… In total, the 10 Brazilians among the world’s 500 richest people lost a combined $14 billion, according to the Bloomberg Billionaires Index, the biggest one-day rout since the list began in 2012.”

October 26 – Bloomberg (Rachel Gamarski, Cristiane Lucchesi, and Leda Alvim): “Brazilian companies had some $6 billion in equity sales lined up for the weeks after the vote that they expected would crown conservative Flávio Bolsonaro as the next president of Latin America’s largest economy. Now, after a stunning upset by the left-wing incumbent Luiz Inácio Lula da Silva, those plans are in disarray… Brazilian markets are crashing in the wake of the vote, with stocks down the most in almost 30 years and the real falling the most in two decades.”

Social, Political, Environmental, Cybersecurity Instability Watch:

October 28 – Bloomberg (Eric Roston and Olivia Raimonde): “The surge in construction of fossil-fueled power plants to run AI data centers is set to undo 15 years’ worth of greenhouse gas reductions from US electricity generation, according to an internal analysis by the Sierra Club. The US power sector would emit 2.1 billion metric tons of carbon dioxide by 2030, after factoring in planned AI projects. That’s 618 million tons more than 2025 levels…, or about a 42% increase. A year and a half ago, researchers at the nonprofit environmental group would have estimated that the buildout and its impact would have been a quarter or half of current projections, said Jeremy Fisher, the Sierra Club’s principal advisor for climate and energy. ‘The numbers continue to sort of boggle our minds,’ he said.”

October 27 – Wall Street Journal (Benoît Morenne): “The Trump administration is moving to dismantle Biden-era rules that sought to limit emissions of methane, a potent greenhouse gas, meeting a key demand of some of its oil-and-gas allies. President Trump announced the measures at a rally in Lubbock, Texas... ‘Democrats crushed the small oil and gas operators,’ Trump said. ‘We’re back so strong, and nobody has more energy.’ The Environmental Protection Agency is preparing to propose easing regulations for wells that emit large amounts of methane, scrapping a program to identify large methane leaks and allowing fossil-fuel producers to flare more natural gas, among other changes.”

October 30 – Financial Times (Max Seddon): “Novaya Gazeta, Russia’s last major independent newspaper, said on Friday it would shut down under pressure from what it described as a systematic campaign by the security services. The newspaper plans to cease operations in November after learning it would be evicted from its headquarters of the past 30 years and its platform for collecting donations from readers had been shut down. ‘They killed us… The newspaper no longer exists. The Russian authorities and the Russian security services have forced our editorial team to cease its operations,’ Sergei Sokolov, Novaya Gazeta’s editor, said…”

October 27 – Financial Times (Heba Saleh): “A court in Cairo ordered the closure of Mada Masr, one of the last remaining independent news organisations in Egypt, and convicted its founder and editor-in-chief Lina Atallah in what civil society groups decried as an escalating crackdown against the press. Atallah, an award-winning journalist, was referred to trial last week by the Supreme State Security Prosecutor on charges of establishing and operating a website without a licence.”