This has been so long in the making. Gradually… then suddenly… Repeating a comment I’ve stated over the years: I hope my analysis is wrong. I fear the greatest Bubble in human history has finally begun to falter. An especially disconcerting period has commenced.
I posited last week that the unfolding crisis was systemic, with the U.S. and the AI arms race at the epicenter of an unprecedented global Bubble.
The Semiconductor (SOX) Index was hammered 11.4% this week, the largest weekly loss since “liberation day.” Supporting the bursting Bubble thesis, the semi equipment stocks were under notable pressure. Applied Materials lost 19.3%, Lam Research 17.2%, and KLA 15.3%. Coherent dropped 25.5%, Lattice Semiconductor 17.8%, and Marvell Technology 17.2%. Nvidia slumped 6.1%, down a quick 12% in eight sessions. Broadcom fell 9.1% to a six-month low. Micron sank 14.6%, Intel 14.2%, and AMD 13.1%.
South Korea’s KOSPI Index was hammered 14.5% this week, with a seven-session drop of 18.3%. The index ended the week down almost 40% from its June 19th all-time high. Samsung sank 17.7% this week, with SK Hynix down 24.3%. From June highs, Samsung has slumped 43% and SK Hynix 57%.
Trading this week to a one-year low, the Shanghai Composite fell 2.6%. China’s growth-oriented ChiNext Index sank 8.9%, with losses from June highs at 37%.
Japan’s Nikkei Index fell 5.4%. AI heavyweight SoftBank sank 18.2%, with losses from June highs now at 45%. Taiwan’s TAIEX Index dropped 4.5% this week, with Taiwan Semiconductor losing 5.1% (down 6% from October 6th record high).
It has become a bad habit. Another week and yet more “holy crap” moments.
Ten-year Treasury yields surged 12 bps to 5.33% on Wednesday’s disappointing CPI report – a level that would have been the highest close since 2007. Importantly, inflation and Treasury yields were not at the top of market concerns.
October 15 – Financial Times (Ramsay Hodgson, Michelle Chan, Euan Healy and Ian Smith): “Investors are losing confidence that revenues from the AI boom will be sufficient to support the vast debt piles financing data centres, pushing bonds backing some of the largest US infrastructure projects into increasingly stressed territory. Prices of bonds issued to fund prominent data centres where Meta, Nvidia, Oracle and others will become tenants — such as ‘Hyperion’ and ‘Project Excalibur’ — have fallen well below par in recent weeks. Investors are also dumping debt issued by so-called neocloud companies — of which the best known is Nvidia-backed CoreWeave — which have been the most aggressive in how they finance their AI build-out.”CoreWeave bond yields surged 135 bps intraday to a Wednesday high of 15.82% (up 220bps from Monday’s close and 450 bps over two months). Oracle (’36) yields jumped 18 bps to a record 7.78%, while Meta (’36) yields spiked 15 bps to a record 6.35% (Oracle yields ended June 29th at 6.04% and Meta yields at 5.27%). High yield corporate bond CDS spiked 10 bps intraday Wednesday, trading above 350 bps for the first time since April. Markets for key AI-related debt were dislocating.
Curiously, Treasury bonds rallied sharply post-CPI spike, with yields reversing 14 bps lower to end the session at 5.19%. Safe haven buying gained momentum Thursday, with 10-year yields dropping 13 bps to 5.06%. Surging Treasury prices are a problem for key levered strategies, such as “carry trades,” where Treasuries are the funding source for higher-yielding corporate and other debt securities. At Wednesday’s close, the high yield spread to Treasuries had widened 16 bps in three sessions to 3.24 percentage points – the widest spread since the March war spike. Deleveraging.
October 16 – Axios (Madison Mills): “Wall Street appears to be hitting its limit on AI, and financiers are starting to say the quiet part out loud: All of this AI spending doesn’t look like it can pay off, at least not for everyone. The gap between what it costs to build AI infrastructure and what companies are actually paying to use it is widening. Wall Street’s anxiety is surging as the debt piling up to fund data centers and chips looks increasingly disconnected from economic reality. A massive gap is opening up between AI infrastructure spending and expected returns. While AI providers are projected to spend $7 trillion on infrastructure through 2030, research from Gartner forecasts they will generate no more than $3.6 trillion in related revenue over that same period. More than $4 trillion in AI infrastructure spending could be at risk of write-downs by the end of 2032… Gartner also predicts that more than 80% of specialized AI cloud providers, known as neoclouds, will cease operating independently by 2030.”At Thursday morning’s lows, CoreWeave’s stock was down 27% w-t-d. A 17% intraday rally saw the stock end Thursday’s session with a 6% gain.
October 15 – Reuters (Aditya Soni, Anhata Rooprai and Laura Matthews): “Shares of Nvidia-backed CoreWeave steadied on Thursday after a sharp slump, as investors worried about the debt financing behind the artificial intelligence build-out. The loss-making cloud company has about $50 billion in debt and has become a focus of concerns that the data-center boom is being fueled by credit, straining newer players and pressuring cash flows even at giants such as Alphabet and Meta Platforms… Nvidia CEO Jensen Huang, whose company is CoreWeave’s second-largest investor with about a 10% stake, played down the fears. ‘CoreWeave’s financial strength is improving every day,’ Huang told reporters…, adding that he does not see a need for Nvidia to backstop the company. ‘I’m optimistic. Their cost of capital is actually decreasing.’”“Decreasing” “cost of capital” is an interesting take. CoreWeave’s bond yields, 9.625% at June 18th issuance, ended the week at 15%, while the stock closed Friday down 14% y-t-d.
Jensen Huang’s steadfast optimism was widely shared. Despite intensifying debt market problems, the VIX (equities) Index closed Thursday’s trading at a relatively serene 16.46. That susceptible dam gave way Friday.
“CoreWeave’s Big Dream Crashes Into Reality as Yields Top 15%.” “Why CoreWeave’s Woes Matter to the Market.” “CoreWeave Bond Rout Tests Market’s Math on AI Buildout.” “AI Investors Have Woken up to the Bond Market’s Warning Signs.” “CoreWeave AI Selloff Reveals Fault Lines Across High Yield Tech.” “Nvidia Partner GMI Cloud Calls CoreWeave’s 15% Yield ‘Insane.’”
CoreWeave’s stock was slammed 12% in ominous Friday trading. Fellow “neocloud” company Nebius saw its stock sink 12.2%. Palo Alto Networks dropped 7.6% and Palantir fell 7.2%. After trading to a record high on Tuesday, the MAG7 Index reversed 5% lower, with the index down 1.9% in Friday trading. Friday losses included Meta 3.7%, Alphabet 2.5%, Tesla 2.1%, Microsoft 1.9%, and Amazon 1.9%. Market dynamics are reminiscent of the final speculative run (in the face of deteriorating industry fundamentals) for the big tech stocks that reversed sharply from all-time highs in late-March 2000.
The unfolding debt crisis gathered momentum Friday. CoreWeave CDS surged another 42 bps to a record 1,128, spiking an alarming 226 bps this week. High yield CDS jumped 10 bps Friday to 357 bps – the highest close since April 7th. Spreads for technology bonds within the Bloomberg US Corporate High Yield Index widened a notable 19 bps Friday. Investment-grade CDS gained two to 62.2 bps – the high since March 31st. Nvidia CDS gained another two (10 for the week) to a record 96 bps, with SoftBank CDS trading to a record 428 bps Thursday (closed the week up 22 to 421 bps).
October 13 – Reuters (Anton Bridge): “SoftBank’s promise to pay its highest-ever yields in a record $11 billion junk-bond offering highlights the pressure on CEO Masayoshi Son to secure returns on his all-in bet on AI amid concerns about possible overheating in the market. The SoftBank debt issuance last month added to a sharp surge in corporate borrowing this year, including major bond sales from Amazon.com, Alphabet and Tencent. The scale of Son’s investments, which include backing totalling $64.6 billion for ChatGPT maker OpenAI, in particular, has made the technology-and-investing conglomerate a bellwether for AI sentiment. Those fresh investments are now coming under sharper scrutiny by analysts and investors amid worries about the degree of concentration in SoftBank’s portfolio and whether a payoff from the expenditures by AI companies will come soon enough.”SoftBank (’34) yields surged a notable 33 bps in Friday trading to a record 9.95%, with yields spiking 49 bps on the week. Skydance’s high-yield (’36) bond yields jumped another 42 bps this week to 10.58% (77bps in two weeks). Some large and levered companies are experiencing alarming bond yield spikes.
I’ll take special note of widening high yield spreads (to Treasuries). Spreads surged another 10 bps Friday to 331 bps, boosting the week’s gain to 23 bps, and the four-week spike to a noteworthy 64 bps. High yield spreads closed the week within four bps of the war-induced March spike high.
Over the years, I’ve posited analysis of a particularly problematic market dynamic for the leveraged speculating community: this would be the combination of rising market yields, widening spreads, and surging CDS (market “insurance”) prices. This dynamic took decisive hold this week, portending accelerating de-risking/deleveraging, waning market liquidity, and worsening debt issues.
Leveraged Loan (LSTA index) prices dropped 24 cents this week to 94.73 – the low since April 13th. Indicative of the rapidly deteriorating backdrop for leveraged finance, this index is down almost a full point in a month – to within 14 cents of the low back to July 2023.
It’s also worth noting this week’s 10.3% slump in the Goldman Sachs Most Short Index – the steepest weekly decline since “liberation day.”
I closely monitor this index’s performance as a valuable financial conditions indicator. The index is typically comprised of levered companies of questionable underlying fundamentals (the reason behind outsized, chiefly hedge fund short positions). This index will generally outperform in rising markets, where loose conditions mask fundamental company issues, while supporting short squeezes and general risk-taking.
But this index invariably suffers when risk aversion and deleveraging begin to take hold. Hedge funds often move quickly to build short exposure in suspect companies as a market hedging mechanism. Meanwhile, a tightening of market liquidity and Credit conditions poses major risk to companies with excessive debt, negative cash flows, and over-ambitious/suspect business models (not to mention fraud and chicanery).
This week’s short index bludgeoning corroborated the thesis of an unfolding consequential tightening of market liquidity and Credit conditions. The 3% slump in the small cap Russell 2000 provided additional confirmation, as did the 3% drop in the Broker/Dealer Index.
Reality seemed to take hold as Friday’s session unfolded. The VIX Index traded below 16 in early trading, only to spike above 22 (four-month high) later in the session (closed the week at 19.98).
I infer a low VIX in the face of mounting debt market issues as stock market confidence that a big sell-off will be avoided ahead of the midterms. We’re down to 18 days, and by Friday afternoon market sentiment had shifted to fear of various risks that might erupt at any point.
October 16 – Reuters (Summer Zhen and Anirban Sen): “Global hedge funds suffered steep losses this week, battered by a sharp unwind of a swathe of AI bets, with Asia-focused funds hit the hardest… Global fundamental long-short funds, or stock pickers, lost money every single day this week, the Goldman Sachs prime brokerage unit said…, with losses for the week to October 15 coming to 2.9%. For the year to date, they have gains of 14.3%... On Thursday, hedge funds across strategies retreated sharply… ‘What we saw was less a fundamental rejection of AI and more a classic, high-velocity unwind of a crowded trade meeting a macro reality check,’ said Bruno Schneller, managing partner at Erlen Capital Management, which invests in hedge funds… ‘The interesting thing about this selloff is that it exposes just how much of the hedge fund industry has effectively been trading the same underlying theme, even when portfolios look very different on paper,’ said Schneller.”Especially after several years of historic global speculation, liquidity overabundance, and loose financial conditions, the proliferation of crowded trades and leverage becomes a serious issue. Hedge funds “retreated sharply” Thursday. Friday was much worse, which sets the stage for heightened de-risking/deleveraging next week. The crowding problem goes much beyond the leveraged speculating community.
October 13 – Bloomberg (Julien Ponthus): “Global investors chasing the AI-powered equity rally are the most exposed to technology stocks since the rebound from the Covid pandemic six years ago, according to a poll by Bank of America Corp. The proportion of fund managers who are overweight the tech sector has risen to 37% from 30% last month, the highest since August 2020... About 45% of respondents agreed that there will be an AI bubble in 2027, with 42% saying no.” Fragility has reached the point where the administration will surely seek to reverse market sentiment. And, of course, forceful short squeezes and the unwind of bearish hedges could materialize anytime. The President's claim that Iran is ready for a deal would be skeptically received in the marketplace.
Friday’s $3.44 surge in WTI crude pushed the week’s advance to 10.4% - with Friday’s $101.41 close the highest since May. Iran expanded tanker attacks this week, while the Houthis continued missile strikes on Saudi infrastructure. There is also the possibility that energy markets are bracing for a return to major military conflict. The possibility of the nightmare scenario, with major additional damage to Gulf energy infrastructure in a backdrop of severely depleted global crude and refined product inventories, supports elevated prices.
“Wall Street Anxiety Spreads as AI Rout Meets $110 Oil Shock.” “AI and Chip Stocks Shed Over $1 trillion in a Week.” “New Cracks in AI Trade Push Wall Street to Worst Week Since June.” “The Debt-Fueled AI Boom is Cracking.”
October 16 – Bloomberg (Ian King): “Nvidia Corp. CEO Jensen Huang took a sanguine view toward the latest AI stock-market rout, saying the benefits of the technology will soon outweigh the concerns of investors. ‘All of this is going to pass, and the reason for that is very simple,’ Huang told Bloomberg’s Emily Chang… ‘It’s going to be transformative. It’s going to impact in a very positive way every single industry and every single country. There’s no question it will continue, and we’re at the beginning of that.”The analytical backdrop is anything but “very simple.” AI is “transformative” and will undoubtedly continue. But this unfolding debt crisis will not pass before inflicting tremendous damage. When it comes to AI debt, the bloom is off the rose.
October 16 – Financial Times (Michelle Chan and George Hammond): “Anthropic is offering Blackstone a high yield of more than 10% to finance its latest chip deal, highlighting the start-up’s willingness to stomach steep borrowing costs to finance expensive AI infrastructure. The $60bn debt package, dubbed ‘Project North Star’, would help fund Anthropic’s procurement of about 1.5 gigawatts of custom semiconductors developed by Google… The private capital giant was offered a coupon of 10% and an even higher total return after accounting for new-issue discounts and other fees, the people said. A borrower with a similar credit profile typically pays a yield of about 7% in the public bond market… Just four months ago Anthropic sold about $4.4bn of debt in a similar deal known as ‘Project Big Sky’ at an interest rate of 8.5%...”I don’t see how Trillions of data center and AI investment work at double-digit market yields. This has been historic late-cycle crazy excess that is now quickly returning to haunt system stability. The bottom line is that debt to fund a historic global AI arms race is extraordinarily risky. Costs have skyrocketed, with revenue prospects turning murkier by the week. Previously unappreciated costs and risks are moving into focus. The system will now be burdened with hundreds of billions of additional “junk” Credit, while hundreds of billions of additional debt will transform the investment-grade Credit universe. I wouldn’t count on market risk aversion and instability “passing” anytime soon.
October 15 – Wall Street Journal (Jean Eaglesham): “A string of artificial-intelligence safety incidents is exposing a gaping hole for the fast-growing industry: the lack of available insurance. Rogue agents have hacked into websites. AI chatbots have been accused of encouraging suicides and murders. An agent submitted fake unsolved murder tips. The latest episodes add to existing lawsuits AI companies face alleging chatbot harm and copyright violations when models are trained. The seemingly limitless possibilities of AI to change the world also include a wide-ranging capacity for harm that could leave companies that produce or use AI legally vulnerable. The biggest AI companies are racking up potential legal liabilities running into the tens—if not hundreds—of billions of dollars…”WSJ: “AI Runs Into Its Next Big Obstacle: Insurance.” One is hard pressed to view AI-related risks as even insurable losses. The astronomical costs involved if something really runs amok are impossible to quantify. How would insurance actuaries quantify and price for such risks? And on the subject of insurance companies…
October 13 – Financial Times (Ryan McMorrow): “CoreWeave is chasing insurers’ ‘unlimited’ pools of capital as the Nvidia-backed AI cloud provider seeks cheaper ways to fund the tens of billions of dollars it is spending on chips and other AI infrastructure. The push comes as the AI boom increasingly leans on debt deals to build data centres and buy the Nvidia chips needed to power AI models. That has made life insurers — and the trillions of dollars they manage — the biggest prize for borrowers seeking cheaper funding. Brannin McBee, a co-founder who leads CoreWeave’s financing efforts, said winning investment-grade ratings for more of its chip-backed debt, and eventually the company itself, would allow it to borrow from insurers whose capital ‘is unlimited. Like, that’s all the money in the world that sits in the insurance tranche.’”The quiet part out loud: “borrow from insurers whose capital ‘is unlimited. Like, that’s all the money in the world…” It sure appears the hundreds of billions worth of unsuspecting annuity buyers have been this cycle’s “dumb money.” If private Credit problems haven’t already awoken the insurance industry, I’ll assume AI debt problems now sound the alarms.
The market still prices one Fed rate increase by yearend – and a second by the March 17th FOMC meeting. I wouldn’t be surprised by one and done – with the one being last month’s rate increase.
If de-risking/deleveraging unfolds as I expect, market attention will shift to the Fed’s balance sheet and need for central bank liquidity support. This is problematic subject matter. Especially after this week’s 3.7% y-o-y September CPI reading, the last thing the Fed is contemplating right now is a big surge in assets (liquidity injections). But if the levered players are turning nervous, they don’t want to ponder a Federal Reserve reacting slowly and conservatively to market liquidity issues.
And if we jump forward and war-game crisis dynamics, there are some uncomfortable aspects to the current backdrop. For one, the world has so much more debt than 2008. The amount of global speculative leverage has skyrocketed. Internationally, economies are much more imbalanced and structurally maladjusted. And it’s not reasonable to assume that a concerted crisis response from the world’s leading governments and central banks would not be forthcoming in a timely manner.
Today’s vulnerabilities are indeed frightening, including two wars, both with the potential to spiral out of control. Meanwhile, President Trump is more erratic and volatile than ever. The odds don’t seem good, but we could enjoy $5,000 post-midterm checks. Or we might be 18 days from mayhem. I don’t discount the possibility of a “scorched earth” turn in the event of a big blue wave. And Tehran, transfixed by tottering global markets, must feel more emboldened by the week. Global market fragilities surely inspire an even harder line.
If their goal is to punish the Trump administration and the U.S. to ward off future military hostilities, the Iranian hardliners have an opening. To find ourselves today with myriad serious vulnerabilities is incredibly frustrating. And we have reason to worry about how our mercurial President will operate in an environment increasingly disorienting and combative on multiple fronts.
October 16 – Wall Street Journal (Peter Landers): “Higher interest rates and persistent inflation in the U.S. and elsewhere have upturned the way Moody’s assesses risk, according to the ratings company’s chief credit officer. ‘We believe we are in a new macro regime,’ said Atsi Sheth, who leads the development of Moody’s global credit views. Leverage—the extent of a borrower’s debts relative to assets—matters more now because interest costs are rising, Sheth said... ‘The more leveraged you are, the more higher rates will likely hurt you,’ Sheth said. That contrasts with what she described as a ‘fairly benign environment’ in the 2010s, when inflation and interest rates were generally low.”
For the Week:
The S&P500 slumped 1.9% (up 11.9% y-t-d), while the Dow added 0.7% (up 8.2%). The Utilities rose 2.3% (up 0.5%). The Nasdaq100 dropped 5.5% (up 15.6%). The Semiconductors sank 11.4% (up 57.2%). The Banks declined 0.9% (up 3.0%), and the Broker/Dealers dropped 3.0% (up 13.7%). The Transports added 0.4% (up 14.5%). The S&P 400 Midcaps fell 1.5% (up 9.4%), and the small cap Russell 2000 lost 3.0% (up 9.6%). The Biotechs dipped 0.6% (up 28.4%). With bullion down $29, the HUI gold index fell 1.8% (up 5.1%).
Three-month Treasury bill rates ended the week at 4.0637%. Two-year government yields fell eight bps to 4.71% (up 124bps y-t-d). Five-year T-note yields dropped 15 bps to 4.87% (up 114bps). Ten-year Treasury yields sank 17 bps to 5.07% (up 91bps). Long bond yields fell eight bps to 5.42% (up 58bps). Benchmark Fannie Mae MBS yields declined 13 bps to 6.24% (up 120bps).
Italian 10-year yields retreated eight bps to 4.49% (up 94bps y-t-d). Greek 10-year yields dropped nine bps to 4.32% (up 88bps). Spain's 10-year yields declined six bps to 4.03% (up 74bps). German bund yields fell five bps to 3.43% (up 57bps). French yields declined five bps to 4.81% (up 124bps). The French to German 10-year bond spread was little changed at 138 bps. U.K. 10-year gilt yields declined seven bps to 5.37% (up 89bps). U.K.’s FTSE equities index jumped 3.1% (up 9.5% y-t-d).
Japan’s Nikkei 225 Equities Index sank 5.4% (up 29.8% y-t-d). Japan’s 10-year “JGB” yields dropped nine bps to 2.93% (up 86bps y-t-d). France’s CAC40 rallied 2.0% (down 2.4%). The German DAX equities index recovered 2.1% (up 4.6%). Spain’s IBEX 35 equities index gained 1.5% (up 11.7%). Italy’s FTSE MIB index added 0.2% (up 10.9%). EM equities were mixed. Brazil’s Bovespa index fell 1.7% (up 27.5%), while Mexico’s Bolsa index rallied 4.4% (up 7.2%). South Korea’s Kospi sank 14.5% (up 34.5%). India’s Sensex equities index rallied 3.1% (down 12.3%). China’s Shanghai Exchange Index slumped 2.6% (down 6.4%). Turkey’s Borsa Istanbul National 100 index slumped 4.4% (up 4.1%).
Federal Reserve Credit increased $11.7 billion last week to $6.708 TN, with a 44-week expansion of $217 billion. Fed Credit was down $2.182 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.981 TN, or 80%. Fed Credit inflated $3.897 TN, or 139%, since November 7, 2012 (727 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt sank another $30.4 billion last week to $2.821 TN - the low back to August 2010. “Custody holdings” were down $249 billion y-o-y, or 8.1%.
Total money market fund assets (MMFA) dropped $40.5 billion to $7.923 TN. MMFA were up $556 billion, or 7.5%, y-o-y - having ballooned a historic $3.291 TN, or 71%, since October 26, 2022.
Total Commercial Paper slipped $5.7 billion to $1.480 TN - just below the high back to 2009. CP increased $169 billion, or 12.8%, y-o-y.
Freddie Mac 30-year fixed mortgage rates were unchanged at 7.40% (up 113bps y-o-y) - matching the high back to November 2023. Fifteen-year rates slipped two bps to 6.71% (up 119bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up seven bps to a two-year high of 7.54% (up 100bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 0.4% to 101.837 (up 3.6% y-t-d). On the upside, the Norwegian krone increased 1.4%, the Swedish krona 1.0%, the Canadian dollar 0.8%, the Swiss franc 0.7%, the South Korean won 0.7%, the British pound 0.7%, the New Zealand dollar 0.7%, the euro 0.4%, the Japanese yen 0.2%, the South African rand 0.2%, and the Singapore dollar 0.1%. On the downside, the Brazilian real declined 1.5%, the Australian dollar 0.5%, and the Mexican peso 0.4%. China's (onshore) renminbi increased 0.09% versus the dollar (up 4.51% y-t-d).
Commodities Watch:
October 11 – CNBC (Anniek Bao): “China’s central bank has bought gold for 23 straight months, and the country is importing more of the precious metal than ever. That buying spree reflects Beijing’s push to cut its dependence on the dollar, and Chinese households’ lack of safe alternatives… The People’s Bank of China added about 23 tonnes in September, its biggest monthly purchase in almost three years…, extending the longest purchasing streak since at least 2015. Chinese households and companies are turning to gold as a safe haven. The country spent a record $158.8 billion, importing more than 1,000 tonnes in the first eight months of 2026... That exceeds the $96.5 billion and 886 tonnes imported in all of 2025.”
The Bloomberg Commodities Index added 0.3% (up 31.7% y-t-d). Spot Gold declined 0.7% to $4,166 (down 3.6%). Silver sank 6.3% to $56.9884 (down 20.5%). WTI Crude surged $9.56, or 10.4%, to $101.41 (up 77%). Gasoline declined 1.8% (up 89%), and Natural Gas fell 3.2% to $3.116 (down 16%). Copper declined 1.8% (up 16%). Wheat fell 1.6% (up 30%), and Corn dipped 1.1% (up 8%). Bitcoin declined $1,100, or 1.3%, to $81,500 (down 7%).
Market Instability Watch:
October 12 – Wall Street Journal (Krystal Hur and Hannah Erin Lang): “Individual investors aren’t letting anything get them down these days. Their fervor is showing up in frenzied trading of options, or contracts that allow holders to buy or sell a stock at a set price, by a certain date. Volumes in options tied to individual stocks have recently reached levels seen during the meme-stock mania of 2021, about $700 billion of notional volume a day, according to Carrick Lane, an investment manager specializing in options strategies. The prices of call options, which give the right to buy, have eclipsed levels seen during that time. A new generation of individual investors discovered the markets during the post-Covid rally, and by early 2021 many amateur traders were pushing into more complicated, and often riskier, bets. A boom in stock options and other derivatives was under way.”
October 15 – Bloomberg (Emma Haidar): “As chip stocks shed $1 trillion in market value, ETF investors are pouring billions into the selloff, putting a fund that triples their daily exposure to the sector on pace for record weekly inflows. The $72 billion VanEck Semiconductor fund has absorbed more than $430 million in inflows over the past three sessions, which puts it on track for its best week since the start of September… Some investors have been even bolder, putting roughly $3.8 billion into the triple-levered Direxion Daily Semiconductor Bull 3X ETF, even as it lost nearly 21% of its value this week. That haul is big enough to place the $19 billion fund on pace for its best ever week of inflows.”
October 12 – CNBC (Anniek Bao): “The International Monetary Fund warned… government bond yields could rise in a disorderly fashion, as rising inflation, mounting debt and AI-related borrowings pressure sovereign bond markets. Government bond yields in several advanced economies have climbed to multidecade highs… In its latest Global Financial Stability Report, the fund warned that sovereign bond risk could deteriorate, warning of ‘a sharp rise in sovereign bond yields.’”
October 13 – Bloomberg (Mpho Hlakudi and Selcuk Gokoluk): “The debt binge to finance artificial intelligence infrastructure is pitting governments against technology giants in a competition for capital. That’s driving up borrowing costs for developing nations, with yields already under pressure due to geopolitical concerns, elevated oil prices and higher policy rates, according to Bank of America Corp. strategists. The average yield on emerging-market dollar bonds has soared almost a percentage point this half to the highest since April last year. Governments seeking to refinance maturing debt may find that a challenge, according to Merveille Paja, a sovereign credit strategist… at BofA.”
October 12 – Bloomberg (Zahra Tayeb): “Investors fled US mortgage bond funds at historic levels over the past three weeks, with outflows ranking among the seven worst since the start of 2021… The Bloomberg US Mortgage Backed Securities Index marked its second worst performance on record in September… ‘Fed policy tightening and a flatter curve may reduce demand from banks, a key source of MBS demand,’ Erica Adelberg, senior MBS strategist at Bloomberg Intelligence, wrote.”
October 13 – Bloomberg (Georgia Hall): “Brokers increased their share of Europe’s repo market to the highest since 2012 as automated trading lost ground to more discreet ways of raising cash during turbulence sparked by the Iran war. Intermediaries accounted for 16.2% of repurchase agreements outstanding in June, up about 2.5 percentage points over the previous six months… Activity in European repo markets continued to expand in the first half of 2026. The total value of repos and reverse repos on the books of the survey’s 60 respondents stood at a record €14.92 trillion ($16.7 TN) on June 10, up 9.3% since December.”
October 13 – Financial Times (Elettra Ardissino, Leo Lewis and David Keohane): “Japan’s largest banks and insurance companies have been buying domestic government bonds and selling foreign debt in recent months, in moves that investors say could be early signs of a wider repatriation of capital by the country’s institutions. According to FT calculation…, large banks and insurers have together bought a net ¥5.4tn ($34bn) of Japanese government bonds with a maturity of two years or more in the five months to August.”
U.S. Credit Trouble Watch:
October 13 – Bloomberg (Zahra Tayeb): “Skydance Corp. bonds weakened further on Tuesday, and the cost of protecting the company's debt against default jumped, as investors fretted about the profitability of the company after its $110 billion acquisition of Warner Bros. Discovery Inc. The company’s 9.125% junk bonds due 2036 dropped about 2.5 cents on the dollar to 91 cents on Tuesday… The notes were sold at 100 cents on the dollar on Sept. 30.”
October 14 – Reuters (Mumbi Gitau and Rene Ismail): “Borrowers in the US private debt market are using delayed interest payments and maturity extensions to avoid default, potentially masking the overall extent of credit stress, according to Moody’s… The default rate among 607 private credit borrowers assessed by Moody’s stood at 4% in the 12 months to June. That figure rose to 5.8% when payment-in-kind amendments and maturity extensions among distressed issuers were taken into account, the firm wrote... The rating agency views such tools as distressed exchanges and therefore equivalent to defaults.”
October 15 – Bloomberg (Olivia Fishlow and Dani Burger): “Monroe Capital’s Ted Koenig isn’t buying that private credit investments can be accurately valued every day. ‘Daily marks in illiquid private assets,’ he said, ‘is an illusion of precision, not accuracy.’ The comments come two weeks after Apollo Global Management Inc. began rolling out daily valuations across its roughly $850 billion credit business, a move that is fueling debate at the CAIS Alternative Investment Summit in Beverly Hills this week.”
October 13 – Wall Street Journal (Paulo Trevisani): “Bond investors are increasingly struggling to measure the credit risk of municipal issuers due to the rising costs and frequency of natural disasters. Disasters costing at least $1 billion totaled more than $115 billion of damages in 2025, nearly four times the annual average in the 1990s, according to a Ceres study. The increased costs force investors, already battered by the recent turbulence in global bond markets, to be more careful with one of the safest asset classes available.”
Global Credit and Crisis Watch:
October 12 – Financial Times (Sam Fleming, Leo Lewis and Claire Jones): “The world’s leading economies need to take ‘urgent’ action to rebuild public finances, the IMF has warned, as it published forecasts showing they are heading for their biggest budget deficits since the Covid-19 collapse. In its World Economic Outlook, the IMF predicted… net borrowing by advanced economies would reach 5.2% of GDP this year, the highest since 2021… Deficits in China and the US will hit or exceed 8% of GDP in 2026, according to IMF forecasts… The forecasts represent a deterioration since the IMF’s report in April and follow months of turmoil in global debt markets.”
October 13 – Reuters (Marc Jones): “Rising government bond yields are making it much harder for major developed economies to stabilise debt burdens, with countries including France, the US and Britain facing growing fiscal challenges, credit rating agency Fitch said… Fitch said benchmark 10-year government bond yields in the world’s 10 largest developed economies had risen by an average of 81 bps so far this year. That would contribute to a nearly $4 trillion increase in overall developed-market government debt, taking it above $75 trillion, or $68.5 trillion across the top 10 economies… The US is expected to run the largest general government budget deficit this year, at 7.5% of GDP, or $2.4 trillion, followed by France (5.4%), the UK (4.8%) and Germany (3.7%). Deficits are expected to widen the most this year in Germany, by 1.1 percentage points, followed by the US and Canada, both by 0.7pp…”
October 13 – Wall Street Journal (Paul Hannon): “Governments in advanced economies such as the U.S. should be wary of relying too heavily on short-term debt, since it exposes them more immediately to higher borrowing costs when inflation surges, the International Monetary Fund said… Yields on longer-term borrowing have risen over recent years… In an effort to lower borrowing costs, some governments have switched to selling more short-term debt, which typically pays lower interest rates. However, the Fund warned that at a time when inflation shocks have become frequent, that shift may have the opposite effect to the one intended.”
October 16 – Reuters (Gaurav Dogra): “Asian bonds faced in September their heaviest foreign selling pressure in more than six years… Foreigners sold a net $8.21 billion of regional bonds in India, Indonesia, Malaysia, South Korea and Thailand, for their largest monthly net withdrawal since the $17.28 billion sold in March 2020… The overseas capital outflow from regional bonds came in addition to an outgo of about $23.49 billion from regional equities.”
October 12 – Wall Street Journal (Paul Hannon): “The U.K. government presents its annual budget later this month, but may find it difficult to reassure bond investors that it can lower its debts even if an independent watchdog judges that it remains on track to stick to its self-imposed rules. The path to bringing borrowing down already requires tight limits on spending toward the end of this decade. But the jump in energy prices since the start of the war between the U.S. and Iran has increased the cost of providing public services, so the current spending allocations won’t do as much as intended. That has already blown the government off course.”
October 9 – Bloomberg (Jana Randow): “Europe’s most recent bond selloff is a ‘clear warning sign’ that investors are getting nervous about governments’ efforts to rein in debt, according to one of Germany’s top central bankers. ‘Current developments — you mentioned France, but we’re also looking at the US — show that fiscal and political uncertainty can affect government bond markets,’ Bundesbank Executive Board member Michael Theurer said… ‘There is currently no systemic sovereign debt crisis, but the risks have increased significantly.’”
October 13 – Bloomberg (Ye Xie): “Billionaire investor Ray Dalio is warning that the US bond selloff is far from over as surging government and corporate borrowing collides with weakening demand from some of the world’s biggest traditional buyers… The Bridgewater Associates founder said the US is entering a phase where an expanding supply of bonds drives up yields, raising borrowing costs and increasing the debt level even further. That spiral is unlikely to end until higher rates weaken the economy and financial markets enough to bring supply and demand back into balance, he said. ‘The bond bear market probably has a long way to go’, Dalio wrote.”
October 14 – Bloomberg (Yizhu Wang): “Paper losses on Bank of America Corp.’s bond portfolio rose past $100 billion, bringing the spotlight back on a pain point that was at the heart of the 2023 regional-banking crisis. Yields on 7-year and 10-year Treasuries are now above 5%, pushing down the market value of those bonds. That drove its unrealized losses on its total debt securities to more than $109 billion in the third quarter, up 28% from the end of June...”
Global Boom Watch:
October 13 – Financial Times (Joshua Franklin and Akila Quinio): “Bank bosses played down investor fears that Wall Street’s trading boom is faltering, posting another strong quarter for profits boosted by buoyant equities businesses even as fixed income divisions showed signs of weakness. Four of the biggest Wall Street banks — JPMorgan…, Citigroup, Goldman Sachs and Wells Fargo — on Tuesday reported higher third-quarter net income than a year ago, with Goldman topping the pack after adjusting for one-off items with a 30% increase. ‘So far so good, and hopefully we’ll enjoy a good environment for a while,’ JPMorgan CEO Jamie Dimon told analysts. ‘We just don’t know when it’s going to stop’… ‘I know everybody wants to call the peak. It’s hard to call the peak,” Goldman Sachs CEO David Solomon said. ‘I still think for capital markets activity, it’s a top quartile environment.’”
October 13 – Bloomberg (Yizhu Wang): “Three of the biggest US banks set a fresh record in the third quarter for how much they earned from lending, with customers continuing to borrow even as interest rates increased. JPMorgan..., Citigroup Inc. and Wells Fargo & Co… reported a combined $56.5 billion of net interest income in the period, setting a new high-water mark for a fifth straight quarter. JPMorgan predicted that NII will be even higher in 2027. That outlook represents a significant shift from earlier this year, when banks expected interest rates to drop and blockbuster trading hauls grabbed most of investors’ attention.”
October 14 – Financial Times (Harriet Clarfelt): “BlackRock’s total assets climbed to a record $15.5tn in the third quarter, as the world’s biggest money manager drew in better than expected net inflows of $205bn. That influx of new money for the three months to September topped Wall Street forecasts, helped by what the group described as ‘broad-based strength’ across its iShares ETFs business, systematic active equities, private markets and cash.”
October 15 – Wall Street Journal (Gabriele Steinhauser and Katrina Northrop): “Economic damage from high energy prices and rising borrowing costs is mounting globally, splitting the world into a new set of winners and losers as countries with limited exposure to the artificial-intelligence boom fall behind. In the U.S. and a few other countries, surging investments in AI are helping mask the financial pain of higher costs, triggered in part by the Iran war and its widening fallout. But elsewhere, popular discontent is boiling over as governments get caught between spending more to help their citizens and servicing their spiraling debts.”
October 13 – New York Times (Patricia Cohen): “Stubborn conflicts, high energy prices and rapid technological disruptions are deepening the divide between economic winners and losers across the globe, the International Monetary Fund warned… Overall growth is lackluster but stable — 3.1% this year and 3.4% in 2027, the fund forecasts. But the average, it pointed out, ‘masks a reallocation of growth across economies.’ Countries, particularly low-income ones, that are dependent on oil imports and lack competitive tech-related sectors face an increased risk ‘that recent shocks will widen income gaps across and within countries.’”
Leveraged Speculation Watch:
October 12 – Bloomberg (Felice Maranz and Georgie McKay): “The surge in US mortgage rates is making it increasingly unlikely that the Trump administration will move to release Fannie Mae and Freddie Mac from government control, according to Mizuho Securities Co Ltd. Dan Dolev…, cut his rating on the shares of Fannie and Freddie to neutral from outperform because he sees less likelihood that the Trump administration will privatize the home-loan finance companies by 2028.”
Iran War Watch:
October 13 – Axios (Barak Ravid and Marc Caputo): “Israeli Prime Minister Benjamin Netanyahu and President Trump last week discussed the possibility of launching a major new operation against Iran before the Israeli and U.S. elections, according to two U.S. officials, one Israeli official… Netanyahu said during the call that he was concerned about Israeli intelligence indicating Iran was taking troubling steps to reconstitute its nuclear program… The Israeli leader’s call with Trump about the possible attack took place before Trump said he would not strike Iran ahead of the midterms. Resuming major combat operations in Iran would inject a volatile new issue into the Oct. 27 Israeli elections and the U.S. midterms a week later.”
October 14 – Reuters (Jonathan Saul and Renee Maltezou): “A Singapore-flagged container ship has sunk near the Strait of Hormuz after being hit by a projectile, while a dry bulk carrier damaged in an earlier attack is also reported to be sinking, maritime security sources said… Attacks around the waterway have surged over the past 10 days. The Singapore-flagged GFS Pride, a small container vessel with capacity for 2,824 twenty-foot equivalent units (TEU), sank while sailing through the strait, the sources said.”
October 13 – Reuters (Parisa Hafezi, Jonathan Saul and Phil Stewart): “Iran is deploying new tactics to target ships sailing through the Strait of Hormuz as it seeks to keep oil prices high and influence the US midterm elections, two senior Iranian officials told Reuters. Tehran has tried to exert control over the Strait of Hormuz since the US and Israel launched strikes against Iran on February 28. It has restricted passage through the waterway, which carried about a fifth of global oil and liquefied natural gas trade before the war, in an effort to gain leverage over Washington.”
October 13 – Wall Street Journal (Benoit Faucon): “Iran is fortifying its defenses, rallying loyalists and threatening a wider, harsher response against the U.S. and its Gulf allies as it prepares for potential American attacks after the midterms and seeks to deter them. Iranian officials have warned publicly and in private conversations with regional officials that the Islamic Republic will respond with further escalation across the Middle East if the U.S. launches new strikes. Satellite images show Iran is strengthening sensitive locations, including nuclear sites and border areas, to make them more resilient to attacks. The government is also preparing Iranians for renewed war…”
October 14 – CNBC (Chloe Taylor): “Iran Revolutionary Guard chief Ali Ozmaei said… that Tehran is ‘counting the moments’ until it can sink American warships, according to Iranian state-affiliated media. ‘If the Americans think the Strait of Hormuz is open, let them come closer. We are impatient to sink American warships,’ Ozmaei reportedly said in a televised interview. ‘We are waiting for U.S. warships to approach the entrance to the Strait of Hormuz so we can sink them. We are counting down every moment until this happens.’”
October 15 – Reuters (M.B. Pell, Ruam McNeill and Kaylee Kang): “Iran’s missiles and drones have hit Gulf infrastructure sites at least 135 times, causing cascading failures that Gulf states have often concealed. Despite repeated official statements that the damage came from debris, Reuters found the equipment struck was, time and again, exactly what mattered most.”
October 14 – Reuters (Jonathan Saul and Renee Maltezou): “A container ship and a dry bulk carrier have both sunk near the Strait of Hormuz in the past 24 hours after being hit by projectiles in separate incidents, maritime officials said… Attacks around the waterway have surged over the past 10 days, with Iran saying it is stepping up strikes in response to the US blockade of its ports and tougher sanctions introduced last month.”
October 10 – Associated Press (Samy Magdy and Cara Anna): “The latest attack on the international airport in Saudi Arabia’s capital of Riyadh killed 12 people and injured over 300 others, civil aviation authorities said… It was the deadliest attack in any Gulf Arab country since the start of the Iran war, whose fronts have expanded to include the recent surge in fighting between the Houthis and Saudi-backed Yemeni government forces. A missile struck a King Khalid International Airport complex…”
October 14 – Associated Press (Sam Metz): “Yemen’s Iran-backed Houthi rebels are attempting to build a new advanced medium-range ballistic missile system with the help of Chinese parts, according to a new report… The report by the U.K.-based Conflict Armament Research group came as the Houthis, in their ongoing war with Saudi Arabia, are demonstrating remarkable ability to wreak havoc on one of the Middle East’s best equipped militaries. The weaponry under development could help the group more precisely target the Saudis and Israel. By turning to China, it also appears to be a sign of increasing independence.”
October 13 – Wall Street Journal (Laurence Norman and Benoit Faucon): “Houthi militants are attempting to produce their own advanced medium-range ballistic missiles using Chinese-delivered parts, a new report shows… The Houthis shipped in from a Chinese supplier a range of components needed to make a version of one of Iran’s most powerful weapons, the Kheibar Shekan Iranian precision-guided missile, said the report by Conflict Armament Research… The Houthi missile would have a range up to about 1,200 miles, putting all of Saudi Arabia and Israel within reach. Iran used the Kheibar Shekan—a cheap, mobile, precision weapon first displayed in Tehran in 2022—against American bases with some success during the war with the U.S. last spring…”
October 15 – Reuters (Samia Nakhoul): “The Houthi attacks on Saudi Arabia are about more than Yemen. By targeting infrastructure and disrupting investment events central to Saudi Arabia's economic ambitions, they aim to pressure Saudi Crown Prince Mohammed bin Salman to both meet Houthi demands in Yemen and persuade US President Donald Trump to ease the US blockade choking Iran's economy, according to Saudi, Iranian and regional sources.”
October 14 – Reuters (Disha Mishra): “The US military has developed strike plans that could include using the GBU-43/B Massive Ordnance Air Blast Bomb, also known as the ‘mother of all bombs’, against Iranian energy infrastructure and nuclear sites if President Donald Trump orders renewed combat operations, CNN reported on Thursday citing US officials familiar... The potential deployment of the largest non-nuclear bomb in the US arsenal would mark a significant escalation in the conflict…”
Iran War Ramifications Watch:
October 14 – Wall Street Journal (Giulia Petroni): “Global diesel supplies are expected to remain tight well into next year as Middle East fuel exports struggle to recover despite a recent rebound in crude shipments, the International Energy Agency said. Supply fell by 1.7 million barrels a day in the third quarter, as the Iran war curtailed flows through the Strait of Hormuz… while Russia, one of the world’s largest exporters of refined fuels, had to cut output due to Ukrainian attacks on its refineries.”
October 12 – Wall Street Journal (Summer Said and Georgi Kantchev): “Saudi Crown Prince Mohammed bin Salman started the year on a high note. He had just visited the White House where he was embraced by President Trump. Even after the war with Iran kicked off, Saudi Arabia looked relatively well positioned. It could export oil through a pipeline that bypassed the blocked Strait of Hormuz. But the Saudis’ escalating fight with Iran-backed Houthi militants in neighboring Yemen now poses new challenges to the kingdom’s security and the crown prince’s ambitious but already struggling plans to transform the country’s oil-dependent economy.”
Trump Administration Watch:
October 12 – Wall Street Journal (Editorial Board): “So much for that energy cease-fire between Russia and Ukraine. President Trump announced the truce Sunday on Truth Social, along with the warning ‘do not break it!’ Within hours Vladimir Putin did. On Sunday a Shahed drone hit a power plant in Kyiv, and the Russians also struck a thermal power plant in Kharkiv. ‘This happened after the statement by the President of the United States about a ceasefire in the energy sector,’ Ukrainian President Volodymyr Zelensky wrote… Ukraine refrained from striking Russian refineries overnight, Mr. Zelensky said…, and ‘we are ready to adhere to any energy truce, if Russia is willing to do the same.’ Mr. Putin has repeatedly refused.”
October 13 – Bloomberg (Jon Herskovitz and Natalie Choy): “President Donald Trump dismissed concerns that Russia and China might be helping Iran in its war with the US, adding that the two countries would have ‘too much to lose’ in aiding the Islamic Republic. ‘If they are, it’s at a very low level, but I don’t believe they are at all,’ Trump said… He added that the US would know about such assistance ‘very fast.’”
October 11 – Associated Press (Kevin Freking): “A bipartisan group of six senators… called for President Donald Trump’s administration to ‘immediately reverse course’ on a plan to purchase diesel from Russia as part of an effort to lower high fuel prices. Trump shocked lawmakers when he announced on social media Friday that he struck a deal with Russian President Vladimir Putin... He said Russia will immediately supply more than 300,000 tons of diesel to the American and global market, followed by an additional 500,000 tons in November and 1 million tons ‘immediately thereafter.’ Russia will deliver an additional 3 million tons ‘within a short period of time’ after that, he wrote. Four Republican senators and two Democratic senators signed onto the statement released Sunday in protesting the deal.”
October 11 – Reuters (Matthew Daly, Susie Blann and Elise Morton): “President Donald Trump said… it was time for Ukraine to get a new president, suggesting Volodymyr Zelenskyy has not done enough to end his country’s war with Russia and blaming him for high diesel prices in the U.S. ‘I suggest they get a new leader who can make a deal because he could have made many deals and for some reason he never does,’ Trump said.”
October 14 – Bloomberg (Jennifer A Dlouhy): “President Donald Trump called for executing individuals who leak information to the media during a campaign rally as he railed against what he cast as critical coverage of the war in Iran. ‘In my opinion, leakers should be shot. They should be shot. In the old days, we used to shoot leakers,’ Trump said at the campaign event in Bullhead City, Arizona. ‘Leakers should be dealt with very, very strongly. They’re real. To me, they’re the scum of the earth.’”
October 9 – Bloomberg (Jennifer A Dlouhy and Catherine Lucey): “President Donald Trump fumed at the Norwegian committee that awards the Nobel Peace Prize, saying that the fact it didn’t go to him ‘is just another sign of how Norway and all these others are ripping off our country.’ ‘The United States of America, represented by me as your president, should have received the Nobel Peace Prize, but didn’t,’ Trump told supporters… He called the snub an ‘indelible stain on the country of Norway and those people that made such a disgraceful and embarrassing decision.’”
October 14 – Bloomberg (Jorgelina Do Rosario and Yash Roy): “The head of the IMF said US Treasury Secretary Scott Bessent’s plan to grow the economy out of its mounting debt and fiscal deficit problems won’t work fast enough. ‘The authorities very much rely on strong growth in the US,’ Managing Director Kristalina Georgieva said... ‘Growth, of course, helps but it cannot deliver fast enough the necessary adjustments.’ ‘Some measures would be necessary,’ she added, speaking in Bangkok during the International Monetary Fund-World Bank annual meetings.”
October 15 – CNBC (Jenni Reid and Anniek Bao): “The International Monetary Fund should check its own forecasting record before criticizing U.S. fiscal policy, David Zervos, newly appointed counselor to the Treasury Secretary, said… ‘When we see pieces on the IMF, it’s good to remember how messy their forecasts have been in the past,’ Zervos said…”
Trade War Watch:
October 16 – Associated Press (Chan Ho-Him): “China… said it plans to restrict or ban exports of 40 technologies that span artificial intelligence, chips and solar power as its technology race with countries including the United States intensifies. The Ministry of Commerce and Ministry of Science and Technology jointly published a draft document with the proposed updates for China’s catalog of technologies subjected to export bans or restrictions.”
October 15 – Bloomberg (Tom Giles, Miaojung Lin and Debby Wu): “Taiwan is preparing to tighten export controls on AI chips to further align with US restrictions, according to a senior official in Taipei, joining a Trump administration clampdown on the smuggling of cutting-edge semiconductors to China… ‘Going forward, some of our measures on controlled items will correspond to American ones because we have made quite some commitments in the Agreement on Reciprocal Trade,’ Kung said…”
Constitution Watch:
October 10 – Bloomberg (Jasper Ward and Erin Banco): “The US Justice Department said… it is investigating whether television networks violated federal antitrust laws over their decision to boycott covering the White House following its decision to pull the credentials of reporters from three news organizations, including CNN. The networks under investigation are ABC, CBS, CNN, NBC and Fox News, the Justice Department said.”
October 14 – New York Times (Erik Wemple): “A federal judge… again blocked President Trump’s attempt to bar CNN, MS NOW and Politico from the White House, ensuring the outlets will have access to the complex as their legal quest to overturn the ban continues. Judge Timothy J. Kelly of the U.S. District Court for the District of Columbia concluded that the three news outlets had made strong arguments that the White House’s action had violated their First Amendment rights and their rights to due process.”
October 14 – New York Times (Tony Romm and Colby Smith): “One day after announcing a special committee to investigate a sitting governor at the Federal Reserve, President Trump offered an unvarnished glimpse into what he expected his handpicked panel might find. ‘I think she’s dishonest,’ Mr. Trump told reporters…, referring to the Fed governor, Lisa D. Cook, whom he has been trying to oust since August last year. The president barely acknowledged the stated reason for opening that inquiry: a set of year-old allegations, neither charged nor proven in court, that Ms. Cook had engaged in mortgage fraud. Instead, Mr. Trump pivoted to his longstanding complaint that Ms. Cook had not voted for the sharply lower interest rates he desires. ‘She’s an automatic no vote, and that’s not a good thing,’ he said.”
October 15 – Associated Press (Eric Tucker): “FBI employees fired for their roles in the investigation of President Donald Trump’s retention of classified documents at his Florida estate sued Thursday to get their jobs back, calling their terminations unlawful acts of ‘political retribution.’ The complaint adds to the growing list of legal challenges to the mass terminations under FBI Director Kash Patel of agents who participated in investigations of the Republican president or are seen as opposed to Trump administration interests.”
Budget Watch:
October 16 – Bloomberg (Yash Roy): “The US federal budget deficit widened to nearly $2 trillion for the 2026 fiscal year, serving a fresh reminder of the scale of government borrowing needs and leaving the nation on track for a record high debt burden in coming years. For the fiscal year through September, the deficit widened to $1.99 trillion… That marks about a 12% increase on the $1.78 trillion gap recorded for last year. Spending rose by about 6%, to $7.4 trillion, while receipts increased roughly 3%, to $5.4 trillion… Net interest climbed by $81.4 billion, to total a record $1.05 trillion. Debt-servicing costs are one of the top three expenses for the government.”
U.S./Russia/China/Europe/Iran Watch:
October 15 – Bloomberg (Andrea Palasciano, Alberto Nardelli and Ott Tammik): “European leaders know they can’t stop courting Donald Trump. But as the US president menaces Ukraine and offers Russian an economic lifeline, they are preparing for a world where he effectively sides with Moscow. In the span of a week, Trump has trashed years of energy sanctions on the Kremlin, pressured Kyiv to quit bombing Russian oil refineries and suggested Ukraine’s Volodymyr Zelenskyy was an illegitimate leader — echoing Moscow’s propaganda. At one point, Ukraine also lost full access to the Elon Musk-owned Starlink system, leaving it hobbled on the battlefield.”
October 15 – Financial Times (Marton Dunai, Alice Hancock, Henry Foy and Andy Bounds): “Two chemical tankers have been set ablaze in Romanian territorial waters, in a further escalation of what western authorities suspect are Russian drones breaching Nato territory. Eight crew were missing… as the San Marino-flagged Wine Trader and the Comoros-flagged Yara J both caught fire while being anchored in the Black Sea near the Sulina Canal — a vital waterway near the Ukrainian border and leading to inland shipping routes on the Danube.”
October 16 – Associated Press (Stephen McGrath and Veselin Toshkov): “A string of drone attacks on at least seven cargo vessels in the Black Sea this month, off the coasts of NATO members Romania and Bulgaria, has some members of the alliance wondering if Russian President Vladimir Putin is seeking escalation to test their support for Ukraine in its war against Moscow’s full-scale invasion.”
October 12 – Wall Street Journal (Michael R. Gordon, Robbie Gramer and Daniel Michaels): “NATO’s top military commander sought to steady an anxious Europe on Monday, outlining the alliance’s new military plan to thwart a potential Russian assault along its eastern flank with a mix of firepower, autonomous systems and sensors that borrows from the lessons of Ukraine. The speech by Gen. Alexus Grynkewich on the North Atlantic Treaty Organization’s ‘theory of victory’ outlined a series of steps to block an initial attack and, if aggression continues, break the adversary’s ability to control and support its forces.”
Ukraine War Watch:
October 16 – Bloomberg (Daryna Krasnolutska): “Civilian casualties in Ukraine jumped by 85% in September as Russia increased drone and missile attacks… At least 328 civilians were killed and 2,105 injured in attacks last month, UN human rights monitors said… It was the highest September total since the start of Russia’s 2022 full-scale invasion…”
October 12 – Financial Times (Henry Foy, Raphael Minder and Christopher Miller): “Ukrainian President Volodymyr Zelenskyy has blamed Russia for breaking a purported ‘energy ceasefire’ announced by Donald Trump, signalling that Kyiv will continue its strikes unless Moscow halts its attacks. The US president wrote on his Truth Social platform on Sunday that Russia and Ukraine had agreed to an ‘energy ceasefire’, in a claim that blindsided officials in Kyiv… ‘Immediately after [Trump’s] post, Russia launched a targeted strike… It was clear that Putin does not read Truth Social,’ Zelenskyy said. ‘We are ready to respect an energy ceasefire if Russia is ready to do the same,’ he added, including ‘to sign guarantees’ as proof of Ukraine’s commitment.”
October 15 – Wall Street Journal (Robbie Gramer, Lindsay Wise and Marcus Walker): “In the early hours of Wednesday morning, Denys Sienik, the top Ukrainian diplomat in Washington, D.C., sent a frantic message to U.S. lawmakers: Ukraine was suddenly facing restrictions on its military-grade Starlink terminals, and he didn’t know why. The change, Sienik warned, would give Russia an upper hand in the war and make it tougher for Kyiv to intercept strikes against Ukrainian civilians. By the time Washington’s morning rush hour was under way, other Ukrainian officials said they were already suspecting the worst: that President Trump had ordered Elon Musk… to throttle Ukraine’s access to the satellite systems. ‘Obviously, this action cannot be a coincidence and is connected to the current political situation,’ said Serhii Beskrestnov, a senior adviser to Ukrainian President Volodymyr Zelensky.”
October 15 – Associated Press (Susie Blann): “Ukraine attacked a Russian oil refinery Thursday, abandoning a brief truce involving energy-related targets that it said Moscow did not heed, as Ukrainian President Volodymyr Zelenskyy said he felt betrayed by U.S. President Donald Trump… The strike could further complicate Kyiv’s relations with Trump… Zelenskyy said he was outraged by Russia’s continuing aerial bombardment of energy infrastructure in apparent defiance of Trump’s demand on Sunday for both sides to halt those attacks.”
October 13 – Financial Times (Anastasia Stognei and Katya Arenina): “Ukrainian attacks on data centres of tech giant Yandex have thrown key facets of Russian daily life into turmoil… Ukraine has severely damaged three of Yandex’s six data centres in the past week, wreaking havoc in a country whose tech ecosystem is centred on one vast, state-aligned company. Launched as a search engine in 1997, Yandex has become Russia’s answer to Google, Uber, Amazon and OpenAI rolled into one. Thousands of businesses depend on its infrastructure…”
October 15 – New York Times (Ryan Mac and Ivan Nechepurenko): “The war between Russia and Ukraine has come for data centers. Forces from both sides have recently ramped up attacks on infrastructure that serves as the backbone to web-connected services and artificial intelligence systems. The Russian military hit a data center in Kyiv and other telecommunications sites, while Ukraine struck back by damaging three major data centers operated by the technology giant Yandex, often referred to as Russia’s Google, and a data center run by Sberbank, Russia’s largest bank. The targeting of data centers is a relatively new phenomenon in the war…”
Taiwan Watch:
October 11 – Bloomberg: “China imposed sanctions on officials from Paraguay and Belize over their support for Taiwan, the first time Beijing has used such moves against diplomatic partners of the self-ruled island… The officials ‘stubbornly supported’ their nations in maintaining official ties with Taiwan, and harmed Beijing’s core interests by ‘engaging in a series of egregious words and actions on China-related issues,’ the ministry said…”
New World Order Watch:
October 12 – Politico (Sebastian Starcevic and Chris Lunday): “European governments rebuked U.S. President Donald Trump’s plan to import hundreds of thousands of tons of Russian diesel, and vowed to keep isolating Moscow and supporting Ukraine as it heads into a brutal wartime winter. Trump said over the weekend he would import 300,000 tons of Russian diesel, weeks ahead of U.S. midterm elections in which the Republicans are polling badly and in which energy prices and cost-of-living concerns are expected to play a major role… ‘This deal doesn’t help neither the price of oil products nor the unity of the transatlantic community,’ Lithuanian Foreign Minister Kęstutis Budrys said at a gathering of the bloc’s foreign ministers…”
October 11 – Reuters (Andreas Rinke): “German Foreign Minister Johann Wadephul restated Berlin’s support for Ukrainian President Volodymyr Zelenskiy… following US President Donald Trump's call for his removal and urged more pressure to be put on Russia to resume peace talks. Wadephul said Germany remained by the side of Ukraine and its government ‘and fully support the President as he carries out his difficult duties.’”
October 12 – Reuters (Miranda Murray and Thomas Seythal): “German Interior Minister Alexander Dobrindt warned… that Germany faced a ‘shadow war’ more far-reaching than the Cold War, and said the threat underscored the need to strengthen the country's BfV domestic intelligence agency. ‘The shadow war we are witnessing today has an objective that extends far beyond anything seen during the Cold War,’ Dobrindt said… ‘Its clear aim is to destabilise us – to destabilise us fundamentally,’ Dobrindt said, without directly naming Russia.”
October 13 – Financial Times (Anastasia Stognei, Katya Arenina and Harry Dempsey): “Russia has detained a Japanese journalist on espionage charges, the first arrest of a foreign reporter in the country since the release of Wall Street Journal correspondent Evan Gershkovich in 2024. The arrest comes at a time of deteriorating relations between Moscow and Tokyo, after Vladimir Putin visited an island disputed by the two countries, drawing a rebuke from his Japanese counterpart Sanae Takaichi.”
AI Bubble/Arms Race Watch:
October 15 – Axios (Matt Phillips and Emily Peck): “CoreWeave was at the heart of the market’s volatility Wednesday. The heavily indebted, cash-burning neocloud — a data center operator that effectively rents out its AI computing capacity — is seen as something of a canary in the coal mine for the broader AI trade. The sharp sell-offs in its bonds and stocks underscored how jittery investors are getting about the AI investment binge. CoreWeave’s bonds had their second consecutive day of selling, pushing their yields above 15%. Its stock tumbled roughly 15.5%, its worst drop since February. The slump arrived amid weakness for AI-related stocks in recent days.”
October 12 – Reuters (Lynn Doan): “Roughly $750 billion. That’s how much Meta Platforms Inc., Amazon.com Inc., Microsoft Corp. and Google owner Alphabet Inc. are expected to devote to capital expenditures this year alone. That’s more than the entire gross domestic product of Ireland or Belgium. More than half of what all of the companies in the S&P 500 Index spent in total last year. Enough to cut a $5,500 check for every household in the US… The cost of construction materials such as steel and cement has skyrocketed because of trade wars, fuel expenses and geopolitical conflicts. The AI boom itself has driven up expenses for everything from chips to copper. The price of short-term memory used in data centers is more than five times what it was just a year ago… Demand for equipment that generates and carries electricity is so high because of the building frenzy that suppliers have backlogs stretching beyond 2030.”
October 14 – Bloomberg (Shuli Ren): “Anthropic PBC Chief Executive Officer Dario Amodei has called for a slowdown in the pace of artificial intelligence development and famously put a 25% probability on AI going ‘really, really badly’ for humanity. But before his technology reshapes the world, Anthropic is delivering an immediate shock to Wall Street: a dramatic revenue slowdown that threatens to deflate the trillion-dollar AI trade. Ahead of a much-anticipated initial public offering, Anthropic informed prospective investors that its third-quarter revenue hit $16.8 billion. That’s less than a 50% increase from the June quarter and a marked deceleration from triple-digit growth earlier this year, indicating that the momentum may be slowing.”
October 15 – Bloomberg (Anthony Hughes): “Anthropic PBC should pause its initial public offering until it has fully addressed risks around the safety, governance and pace of development of artificial intelligence, according to New York City’s comptroller. The Claude developer should instead focus on addressing the unprecedented risks of the technology, according to a letter from Mark Levine letter addressed to Anthropic Chief Executive Officer Dario Amodei…”
October 10 – Financial Times (Amelia Pollard, Euan Healy and Michelle Chan): “The amount of new debt that tech companies raised to help fund costly artificial intelligence developments fell sharply last month as investors reassessed the industry’s risks following months of rampant borrowing. AI-related debt issuance globally dropped to $23bn in September, less than half the amount raised in the previous month, according to… Morgan Stanley… New financing has steadily fallen since the market hit a peak in June, when companies raised a record $113bn… In the US investment-grade market, where blue-chip tech groups borrowed around $306bn between January and August, AI-related bond issuance ground to a halt last month.“
October 13 – Bloomberg (Brody Ford and Matt Day): “Microsoft Corp. reported more than $130 billion in new data center leases in the past quarter, signaling an accelerating pace of spending on artificial intelligence infrastructure. The company’s total commitments for leases that have not yet commenced were $329.1 billion as of the quarter ended June 30, Microsoft said... That’s up from $196.6 billion in the prior period.”
October 12 – Bloomberg (Claire Ruckin): “JPMorgan... and Goldman Sachs... have taken a rare move to limit their exposure on a $5 billion loan sale for AI startup Volta Infrastructure Holdings Ltd. as investors demand higher yields for risky debt tied to the artificial intelligence boom. The two banks are leading the loan offering for Volta, a new artificial intelligence cloud company. The banks have underwritten a $1.3 billion term loan for Volta, while a $3.7 billion chip loan is not underwritten by the banks — a move to protect themselves from potential risks…”
October 13 – Wall Street Journal (P.R. Venkat): “AirTrunk, a hyperscale data-center operator backed by Blackstone, has delayed plans for a Singapore listing because of market volatility and uncertainty over where U.S. interest rates are headed, people familiar with the matter said. This would make AirTrunk the latest AI-linked company to shy away from a public offering.”
October 10 – Bloomberg (Emma Haidar): “Data centers have become a defining political issue in the run-up to the US midterm elections. The giant, windowless warehouses have drawn fierce backlash across the country as people worry about how much power and water they use, as well as the noise and heat they produce. Voters squeezed by higher electricity bills have focused their ire on data centers, which can require as much power as a small city to support artificial-intelligence systems. Local opposition blocked or delayed at least 120 projects worth almost $200 billion in the first half of this year, according to research group Data Center Watch.”
October 14 – Bloomberg (Richard Henderson): “Global banks are cooling on financing Australian private credit funds, threatening to squeeze an industry that’s already grappling with a property downturn, higher borrowing costs and regulatory scrutiny. Goldman Sachs... and UBS Group AG are among lenders that are becoming more selective about extending specialized financing to private credit managers, according to people familiar…”
Global Bubble Watch:
October 13 – Reuters (Pritam Biswas and Prakhar Srivastava): “US banks reported solid loan and deposit growth in the third quarter, but lenders are paying a premium to retain customer funds in a fiercely competitive, high-interest-rate environment… Citigroup reported an 11% increase in average deposits and a 12% jump in average loans. Wells Fargo said average deposits rose 10.7%, alongside an 11% jump in average loans buoyed by its consumer banking division. JPMorgan, the largest US lender, reported a 4% rise in average deposits and a 2% increase in loans from a year ago. Bank of America’s average deposits rose 2% in the third quarter while average loans and leases grew 6% over the year-ago period.”
October 15 – Bloomberg (Dylan Sloan): “Three CoreWeave Inc. co-founders have sold $3.3 billion in company shares since last year's initial public offering, taking money off the table as rising credit risks and investor wariness around AI spending spark volatility in the stock.”
Inflation Watch:
October 14 – Associated Press (Christopher Rugaber): “U.S. inflation accelerated last month as gasoline and many other goods and services became more expensive, evidence that rising prices remain an economic challenge just a few weeks before midterm elections… The consumer price index rose 3.7% in September compared with a year ago…, up from 3.4% in August. On a monthly basis, costs jumped 0.6% from August to September, the biggest gain in five months, up from a 0.4% increase the previous month… Gas prices jumped 9.1% just from August to September, the government’s consumer price index report said… With fuel much more expensive, air fares rose 1.2% last month and have soared 22% compared with a year ago. Hotel prices rose 2% from August to September and are up 4.4% compared with a year earlier.”
October 14 – New York Times (Sydney Ember): “Higher energy prices continue to squeeze Americans at the gas pump… Overall, energy prices were up 5.2% in September from the month before, and 20.4% higher compared with a year ago, according to the Consumer Price Index Report. Consumers have felt this surge most acutely at the gas station, where the price of gasoline was 34% higher than a year ago. According to the AAA motor club, the average price of a gallon of regular gas was $4.33 on Wednesday, slightly up from a month ago, and more than 40% higher than at this point last year.”
October 15 – Axios (Courtenay Brown): “A grocery chain says it now costs more to ship a head of lettuce from California than to buy the lettuce itself. Tech companies are trying to purchase entire inventories of electrical equipment to build data centers. These anecdotes from the Fed’s latest Beige Book show how two extraordinary forces — the AI buildout and the Iran war — are changing decisions about spending, investment and hiring. The implications extend beyond individual firms, with consequences for inflation and employment, as the Fed weighs another rate hike.”
October 13 – Bloomberg (Saritha Rai and Sankalp Phartiyal): “The data center buildout is barely keeping up with AI development, with access to energy and skilled labor the two key constraints, according to executives from some of the largest companies in the sector. ‘The biggest bottleneck nobody talks about is the hidden bottleneck, the talent,’ said Abhijit Dubey Chief Executive Officer of NTT Data Inc… ‘Electricians, design, construction. An electrician’s compensation today in the US is about $200,000.’ NTT, one of the world’s biggest data center operators, is struggling to build AI capacity fast enough to keep up with demand. Sourcing the correct equipment can take as long as 42 weeks, Dubey said.”
October 15 – Associated Press (Christopher Rugaber): “Wholesale inflation rose more than expected last month on a big jump in fuel costs… The… producer price index — which captures inflation before it reaches consumers — soared 6.3% in September from a year ago, up from 5.6% in August and the biggest increase since December 2022… On a monthly basis, wholesale prices rose 1.3% from August to September, marking the largest increase since March 2022, after a 0.5% gain the previous month.”
October 16 – Reuters (Lucia Mutikani): “US import prices increased more than expected in September, boosted by higher costs for energy products and a range of other goods, further evidence of rising inflation pressures as the Middle East conflict persists… Import prices jumped 1.1% last month… Economists… had forecast import prices, which exclude tariffs, increasing 0.8% after a previously reported 0.7% advance in August. In the 12 months through September, import prices rose 8.1%, the largest gain since July 2022…”
October 13 – Financial Times (Gregory Meyer): “US consumers face a fresh period of grocery price rises as surging diesel and freight costs threaten to unleash another bout of food inflation on the nation’s supermarket shelves… PepsiCo, the maker of Doritos tortilla chips and Lay’s crisps, suggested prices would rise as it confronts ‘this new wave of inflation that is coming to every country, not only the US, given energy prices and given agricultural prices’, chief executive Ramon Laguarta told analysts…”
October 16 – Bloomberg (Jacob Lorinc and Grace Asenov): “US steel prices climbed to the highest in more than four years as President Donald Trump’s tariffs restrict foreign supplies, boosting domestic producers while raising costs for American manufacturers. Pricing for hot-rolled coil… has been on a steady upward trajectory for the past year, rising 52% to $1,255 per short ton, according to Fasmarkets. The last time prices touched that level was May 2022.”
October 14 – Reuters (Dan Burns and Susan Heavey): “Some 76 million Americans receiving Social Security and Supplemental Security Income benefits will see their monthly payments rise 3.6% in 2027, accelerating from the prior year’s increase for a second straight year.”
Federal Reserve Watch:
October 12 – Reuters (Howard Schneider): “Cleveland Fed President Beth Hammack said… the US central bank should move ‘relatively quickly’ to a restrictive monetary policy stance in order to control inflation she feels has become more broad-based and is starting to influence firms’ price-setting plans. ‘I see inflation pressures as relatively broad-based rather than concentrated in one component. Energy has been making headlines this year, with prices rising for oil, retail gasoline, and diesel, but it isn’t the whole story,’ Hammack said… ‘A restrictive monetary policy stance is appropriate to ensure a timely return to 2% inflation… When feasible, I generally think it’s preferable to make smaller adjustments, and to do so relatively quickly, rather than to wait and risk needing a larger course correction’…”
October 15 – Reuters (Michael S. Derby): “Federal Reserve Bank of Cleveland President Beth Hammack said… the Fed might need to hike interest rates more aggressively if there were to be a notable deterioration in the public's inflation expectations. ‘What I worry about is, if you get this inflationary mindset, if you get these expectations that these price pressures become more and more persistent, it makes it much harder for monetary policy to do the work that we need to do, and we might need to move even more than if you don’t have an inflationary mindset set in,’ Hammack said…”
October 13 – Reuters (Kanjyik Ghosh and Dan Burns): “Federal Reserve Bank of Chicago President Austan Goolsbee said… inflation is starting to feel like ‘aggregate overheating’ fueled by spillovers from the artificial intelligence investment boom rather than largely being a byproduct of supply shocks that will pass on its own. ‘This is starting to feel like aggregate overheating, that the AI data center cost increases are jumping out of its lane, that prices are going up in spaces that are not just components in data centers and the directly adjacent industries to data centers,’ Goolsbee said… ‘If you start to see more of this spreading into general services, that investment goods are just getting GDP growth up faster than potential and generating this kind of spillover inflation, that’s problematic because unlike supply shocks where we tend to assume they’re going to go away on their own in a relatively short period of time, nobody thinks that of overheating demand.’”
October 14 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Chicago President Austan Goolsbee said a report showing broad-based inflationary pressures last month was worrisome, and warned the buildout of infrastructure related to artificial intelligence may be overheating the economy. ‘I found it discouraging,’ Goolsbee said… ‘You must prevent the build up of overheating because if you get overheating buildup on the demand side, that tends to be very persistent and hard to get rid of,’ Goolsbee said.”
October 13 – Bloomberg (Swati Pandey and Enda Curran): “Federal Reserve Governor Christopher Waller said the surge in long-term US Treasury yields is helping to curb demand in interest-rate-sensitive sectors such as housing and automobiles, doing some of the work of tighter monetary policy. ‘When yields go up, is that going to impact interest-sensitive sectors like housing and autos and other things? Yeah, of course it is,’ Waller said… While that isn’t the Fed’s intention, higher yields are ‘doing a little bit of the work,’ he said.”
October 13 – Reuters (Michael S. Derby): “New York Federal Reserve President John Williams has reaffirmed his view that the US central bank may need to raise interest rates once more this year in its bid to lower inflation. ‘I haven’t changed my view that it may be appropriate to have one more rate hike’ in 2026, Williams told Bloomberg News… And when it comes to 2027, ‘I don't think at this time I have any reason to believe that we would need to do more,’ Williams said…”
October 14 – Wall Street Journal (Fabiana Negrin Ochoa): “There is room to assess economic developments before taking further monetary policy action, said Michelle Bowman, the Federal Reserve’s vice chair of supervision… Bowman briefly touched on her macroeconomic outlook before delving into her approach to financial regulation. ‘Inflation remains above our goal,’ she said…, but added that she doesn’t feel a sense of urgency to act in the wake of the last rate hike. ‘We have some time to wait and see how financial conditions evolve before we take more action,’ Bowman said.”
U.S. Economic Bubble Watch:
October 15 – Axios (Neil Irwin): “Data this week has all told the same story: This is a rip-roaring U.S. economy with all the inflationary pressures that might imply. It puts Warsh and the Fed in a difficult jam. Top officials have signaled patience in further interest rate hikes in recent weeks, but the latest data implies broader inflationary pressures than previously thought, testing that conviction. There is scant evidence that price pressures are receding on their own and growing reason to fear that they are becoming more entrenched, which could compel a more aggressive rate-hiking response… The U.S. growth juggernaut shows no sign of diminishing — but neither do the price pressures that have bedeviled the economy for nearly five consecutive years. If anything, the PPI and CPI data released this week suggest inflation is broadening, showing up in sectors well beyond energy.”
October 12 – CBS News (Aimee Picchi): “Rising U.S. prices are squeezing household budgets, causing more Americans to fall behind on their debt payments… The share of seriously delinquent auto loan balances has hit a record high this year, while nearly 13% of credit card balances are seriously past due — close to their 2010 peak in the aftermath of the housing crisis — according to… the Federal Reserve Bank of New York. The share of households behind on their mortgages reached a six-year high, although the measure remains far below its peak during the Great Recession. Student loan delinquencies have also jumped in the past year, with the rise tied to the end of pandemic-era protections and a Biden administration repayment plan.”
October 15 – Associated Press (Anne D’Innocenzio): “Shoppers showed their willingness to spend in September even after a better-than-expected splurge in August. But a big chunk of their purchases last month went toward paying the bills at the gas pump… Retail sales increased 0.8% last month, after a revised 1.3% gain in August… Economists were anticipating a 0.3% increase… Excluding business at gas stations, retail sales rose 0.2% in September… Business at gas stations rose 6.4%... Elsewhere, business at furniture and home furnishings stores rose 1.3%, while electronics and appliance stores saw a 0.6% increase. Business at online retailers rose 0.3%... Clothing and accessories stores saw business unchanged…”
October 12 – LA Times (Caroline Petrow-Cohen): “The Port of Los Angeles and Port of Long Beach each moved a record amount of cargo in September as lower tariffs and the upcoming holiday season drive shipments. The record-setting month comes at the end of the Los Angeles port’s busiest quarter in its history... The Port of Los Angeles moved more than 1 million 20-foot-equivalent container units last month, topping its previous record set in July of last year by 23,000 units.”
October 15 – Associated Press (Matt Ott): “U.S. applications for unemployment benefits inched up last week as layoffs remain historically low and most American workers enjoy job security. Initial jobless claims for the week ending October 10 ticked up by 1,000 to 199,000 from the week before… The total number of Americans filing for unemployment benefits for the previous week ending October 3 fell by 4,000 to 1.71 million, also a historically healthy figure.”
October 13 – Bloomberg (Julia Fanzeres): “US small-business optimism fell to a three-month low in September as economic expectations dimmed and a smaller share of firms indicated it was a good time to expand. The National Federation of Independent Business index slipped 0.8 point to 97.9… Six of the 10 components that make up the gauge declined, while three rose and one held steady. A measure of uncertainty crept higher as well. The net share of owners who expect business conditions to improve declined 4 percentage points to a four-month low of 6%.”
October 15 – Axios (Emily Peck): “CEO confidence in the U.S. economy sank into negative territory earlier this month, finds a survey… from the Conference Board. Business leaders are mind-melding with most consumers, whose opinions on the economy are now lower than during the pandemic. Such sour sentiment is shaping up as a key issue in the midterms just weeks away. The CEO Confidence Index fell to 46 in the most recent period, down from 52 just three months ago — any number below 50 connotes negative sentiment.”
October 14 – CNBC (Diana Olick): “Mortgage rates moved to the highest level in nearly three years last week… Riskier mortgages… continue to gain a growing share of what demand there is… ‘As a result, borrowers continue to rely more on ARM [adjustable-rate mortgage] loans to help lower their monthly payments,’ said Joel Kan, an MBA economist... ‘The ARM share at 10.5% was at its highest level since October 2025’… Applications to refinance a home loan have been hit hardest by higher rates, as a shrinking pool of borrowers can now find much relief. These applications declined 0.4% for the week and were 56% lower year over year… Applications for a mortgage to purchase a home fell 4% for the week and were 16% lower than the same week one year ago.”
October 13 – Reuters (Lucia Mutikani): “US existing home sales unexpectedly increased in September, but the trend stayed subdued against the backdrop of rising mortgage rates and still higher prices… Home sales advanced 1.5% last month to a seasonally adjusted annual rate of 3.99 million units. August’s sales were revised down to show a 3.2% drop instead of the previously reported 2.0%... Sales remained below the 4.0 million unit pace for a second straight month. The housing market accounts for a small share of the economy, and has been struggling since mid-2024. Sales fell 2.2% on a year-over-year basis in September.”
October 13 – Wall Street Journal (Carol Ryan): “Many of the ingredients needed to cause a fall in U.S. home prices are in place, except for the one that really matters: owners who are desperate to sell. Mortgage rates have climbed to 7.4% for the first time since November 2023. This should be bad news for home values, especially as there is much more supply on the market than there was three years ago. A wide gap has opened up between the number of sellers and buyers in the housing market. In September, 1.5 million Americans were trying to sell their homes, based on the number of active listings. Only 929,000 people were buying, according to Redfin estimates. The surplus of sellers, nearly 600,000, is the largest in Redfin’s records going back to 2013.”
October 12 – Associated Press (Paul Wiseman, Stefanie Dazio and Kostya Manenkov): “American economists Robert E. Hall and Michael Woodford won the Nobel Memorial Prize in economics… for their work on models that have helped governments and central banks manage economic shocks, such as energy crises and inflation. The Royal Swedish Academy of Sciences announced the winners…, noting that their work created the theoretical foundation to better understand how consumers decide whether to save or spend, insights that make it easier for policymakers worldwide to stabilize economies after fluctuations. ‘The laureates’ research has made it possible to manage major macroeconomic crises far more effectively than before,’ the Nobel committee wrote… ‘It has been hugely beneficial during the pandemic and the energy crises of recent years.’”
China Watch:
October 12 – Wall Street Journal (Brian Spegele): “Chinese leader Xi Jinping, intent on pouring trillions into making China a technological and military superpower, is presiding over a dangerous spiral of debt that is strangling the economy at home and damaging trade partners around the world. Rising debt loads in many countries have spooked investors of late. But few nations have seen a surge more dramatic than China. Last year, China’s credit to the nonfinancial sector… topped 300% of gross domestic product, 60 percentage points higher than at the end of 2019 and now far bigger than in the U.S…. Much of the money has been wasted, financing factories and apartment blocks for which there isn’t enough demand, sparking debilitating price wars, and hurting profits and wages.”
October 14 – Reuters (Kevin Yao and Shi Bu): “New bank lending in China rose more than expected in September, rebounding sharply from a weak August as policymakers stepped up targeted monetary support for the slowing economy. Chinese banks extended 1.08 trillion yuan ($161.37bn) in new loans in September, beating expectations and rising sharply from August’s 60 billion yuan… Household loans, including mortgages, were flat in September after a contraction of 202.9 billion yuan in August… Corporate loans surged to 1.29 trillion yuan last month from 260 billion yuan in August… Outstanding total social financing — a broad measure of credit and liquidity — rose 7.1% in September from a year earlier, down from 7.2% in August.”
October 14 – Associated Press (Chan Ho-Him): “China’s exports surged 36.3% in September from a year earlier…, putting the country on track to surpass last year’s record trade surplus even as pressure mounts from trading partners… High-tech goods including semiconductors and automobiles helped fuel its rising shipments overseas. September’s export growth pace was the fastest since February… Imports climbed 31% in September year-on-year, also accelerating from August’s 28.2% rise. Still, China recorded a $133.5 billion trade surplus last month, widening from $119.1 billion in August. For the first nine months, China’s trade surplus reached $938.1 billion…”
October 13 – CNBC (Lim Hui Jie): “China’s producer price index climbed at its fastest pace in over four years, rising 5% in September as higher fuel prices pushed up costs for businesses… Consumer prices saw a 0.9% rise, marginally missing expectations of 1%, but up from 0.8% in the month before.”
October 15 – Bloomberg: “China’s state-backed funds appear to be stepping back into the stock market, a sign that Beijing is seeking to put a floor under falling shares. One of the so-called national team’s favorite blue-chip exchange-traded funds drew record inflows on Thursday as a global tech selloff spilled into China’s domestic market.”
October 9 – Bloomberg: “China’s passenger vehicle retail sales fell 24% in September from a year earlier to 1.702 million units… Cumulative retail sales for 2026 reached 13.42 million units, down 21% from the same period a year earlier... New-energy vehicle retail sales increased 14% from the previous month, with year-to-date sales totaling 7.816 million units. They were down 12% on year.”
October 12 – Reuters: “Police in Beijing’s Chaoyang district have opened a criminal investigation into Chinese wealth manager CreditEase and imposed ‘criminal coercive measures’ on its controller and several other suspects, Beijing police said… The case marks a fresh step in Beijing’s push to tackle the complex lending hidden in the shadow banking sector, which regulators have spent years trying to unwind.”
Europe/UK Watch:
October 13 – Wall Street Journal (Giulia Petroni): “European natural-gas prices climbed to their highest level in nearly four years as escalating attacks in the Middle East threaten supplies and unusually low storage levels raise fears of a global scramble for liquefied natural gas ahead of winter… ‘The market is grappling with the idea that we’re about to go through a large part of the Northern Hemisphere winter with little Persian Gulf LNG supply,’ analysts at ING said.”
October 11 – Bloomberg (William Horobin, Alice Gledhill, and Ania Nussbaum): “With hundreds of thousands of young French people taking part in nationwide protests, violence flaring and bonds suffering a market rout, far-left lawmaker Louis Boyard offered his solution to the government’s troubles last week. ‘You are incapable of understanding what young people want,’ the 26-year-old shouted at Education Minister Edouard Geffray during an intense debate in the National Assembly. ‘To solve all of this, you are going to have to get out your checkbook.’ The problem is that France can ill afford the €10 billion ($11.2bn) the student protesters are demanding.”
October 10 – Bloomberg (Craig Stirling): “Europe’s political class is showing the first signs of bending to the will of an unforgiving bond market. Budget policies and discourse from London to Paris and Rome have taken baby steps toward prudence in the past couple of weeks as surging yields and soaring interest-rate costs drummed up memories of the euro-zone debt crisis. France’s budget aimed at shrinking its bloated deficit, and signs of pragmatism from far-right presidential challenger Marine Le Pen suggest retreats from profligacy. Prime Minister Andy Burnham’s proposal to end the UK’s totemic ‘triple-lock’ state pension regime and Italy’s pared-back defense borrowing do so too. Such concessions may fall short of deterrence against the bond vigilantes whose speculative trading once nearly broke the euro.”
Japan Watch:
October 13 – Reuters (Leika Kihara): “Japan’s wholesale prices rose 6.8% in the year to September…, slowing from the previous month but highlighting mounting inflationary pressure that keeps alive market expectations of a near-term interest rate hike. The data will be among the factors that the Bank of Japan will scrutinise when its board produces fresh quarterly growth and inflation forecasts at this month’s policy meeting.”
October 16 – Reuters (Takahiko Wada and Makiko Yamazaki): “Bank of Japan Governor Kazuo Ueda… reiterated the risks of underlying inflation overshooting the central bank’s 2% target, stressing the growing importance of keeping price pressures anchored around that level… Ueda said factors including tensions in the Middle East, AI-related demand and currency swings could affect Japan’s economy and prices, pointing to a risk that underlying inflation could exceed the BOJ's price target.”
October 15 – Bloomberg (Toru Fujioka): “Bank of Japan Board Member Junko Koeda warned against too much caution over raising interest rates, in comments that suggest the central bank is firmly on track to hike borrowing costs again in the coming months after accelerating the pace of normalization. ‘Given that there have been considerable upside risks to prices in addition to continued accommodative financial conditions, the Bank should not become overly cautious about raising the policy interest rate,’ Koeda said…”
Emerging Markets Watch:
October 12 – Financial Times (Andres Schipani and Jyotsna Singh): “As New Delhi was rocked by unrest this weekend, youth leader Saurav Das emerged from jail asking why the prime minister was so keen on ‘protecting’ the election commissioner who is the target of protesters’ ire. Does Gyanesh Kumar, the country’s top election official, ‘know something about the 2024 elections’, Das asked… The taunt made clear how difficult it will be for Prime Minister Narendra Modi to quell the turmoil, which has roiled the Indian capital over the past week.”
October 16 – Bloomberg (Manuela Tobias): “The International Monetary Fund warned that Colombia’s fiscal situation is unsustainable, sharpening its assessment of the country’s public finances as the new government seeks the lender’s help to stabilize its accounts. Colombia ran a primary deficit of about 3.5% of gross domestic product in 2025, while public debt stands at roughly 60% of GDP and is rising, IMF Western Hemisphere Department Director Nigel Chalk said… ‘This is not a sustainable, tenable situation… We do think that the country needs a concerted effort to bring down debt.’”
Social, Political, Environmental, Cybersecurity Instability Watch:
October 15 – Bloomberg (Bill Allison and Dana Hull): “Elon Musk gave $158 million to the GOP’s main super PAC backing Senate candidates in September, making the world’s richest person the biggest US political donor for the second straight election cycle, according to the latest filings from the Federal Election Commission. The donations appear to be earmarked for the Texas Senate race, normally a relatively safe seat for Republicans that’s turned into one of the most expensive in history. Musk has now given more than $330 million in the current election cycle, putting him well ahead of other major political donors…”
October 11 – New York Times (Nick Corasaniti): “In January, a caller began leaving threats in the voice mail inboxes of members of Congress: ‘I want to see their throat cut from ear to ear.’ Another caller left a blunt threat for a U.S. senator: ‘I’m going to murder you, and I’m going to start with your children.’ A state attorney general received this three-word missive: ‘Bang, bang, bang.’ Serving in public office in the United States is dangerous. From state and local government to Congress, an unending river of violent threats is washing through the mailboxes, offices, voice mail and texts of those who govern the nation. Thousands of public servants are living, working and, in the final weeks of election season, campaigning in a state of fear. And it’s getting worse, officeholders said in dozens of interviews.”
