By Mike Dolan
-What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
As U.S. stock indexes hit new records on Monday ahead of a likely Federal Reserve interest rate cut and megacap earnings later this week, gold’s retreat deepened – extending back below $4,000 per ounce and now down more than 10% from this month’s peak.
I’ll get into all the market-moving news below.
In today’s column, I discuss the possible end to the Fed’s balance sheet rundown at this week’s policy meeting and whether it matters more broadly beyond the runes of money market plumbing.
Today’s Market Minute
Gold sold, stocks stall
Although stock market optimism was aided by hopes for a breakthrough in U.S.-China trade talks at Thursday’s planned summit in South Korea, the latest runup in U.S. stocks was once again driven by AI chip excitement and another upbeat series of business surveys home and abroad.
Qualcomm led the charge with a 13% surge after it unveiled two AI chips for data centers that will rival Nvidia’s. Five of the “Magnificent Seven” tech megacaps report this week – with a combined market cap that’s a quarter of the S&P 500.
U.S. futures and global benchmarks dialed back a bit today from Monday’s heady highs, however, as the week’s big events lined up.
Beyond trade and tech, attention was squarely on the Fed’s likely rate cut on Wednesday and a possible end to its balance sheet runoff, or ‘quantitative tightening’ policy. A Bank of Canada rate cut is due the same day, with policy moves less likely at the European Central Bank and Bank of Japan meetings.
But even after mixed results from two big Treasury note auctions on Monday, yields have resumed their declines – aided by the glow of slightly below-forecast U.S. inflation readings last Friday.
Even though there are doubts about when the October inflation update will now be released, amid the general outage of government data due to the ongoing Washington shutdown, short-run inflation expectations ebbed somewhat and bond market volatility plunged. The MOVE index of implied Treasury vol dropped on Monday to its lowest in almost four years, with the VIX equity market equivalent subsiding to its lowest in a month.
That provided the backdrop to gold’s retreat.
Overseas, the Chinese yuan hit its strongest in more than a month ahead of Thursday’s summit and Japan’s yen climbed sharply too – with U.S. President Donald Trump touring the region all week and the BOJ meeting on the radar.
As Trump met Japan’s new Prime Minister Sanae Takaichi in Tokyo, Treasury Secretary Scott Bessent helped lift the yen as he called for “sound monetary policy” during his meeting with Japanese counterpart Satsuki Katayama, comments seen as a swipe at the slow pace of BOJ rate hikes.
Chart of the day
As Spain’s economic growth outstrips all its euro zone peers, its blue-chip index IBEX 35 hit a new record high on Tuesday, surpassing its previous peak from November 2007 and closing a year in which it’s outperformed every major European market. The bank-heavy IBEX 35 has been buoyed by a remarkable performance by domestic lenders so far this year. Shares in Santander, the euro zone’s biggest bank by market value, have risen around 90% this year, while its competitors in the index have risen between 67% and 82%.
Today’s events to watch
* October consumer confidence (10:00 AM EDT) Richmond Federal Reserve Oct business survey (3:00 PM EDT) Dallas Fed Oct service sector business survey (3:30 PM EDT) US August house prices (9:00 AM EDT)
* U.S. Federal Reserve’s Federal Open Market Committee starts two-day meeting on interest rates – decision Wednesday
* U.S. corporate earnings: Visa, UPS, UnitedHealth, NextEra Energy, PayPal, Invesco, MSCI, Sysco, Booking, Regeneron, CoStar, Edison, Ecolab, American Tower, Royal Caribbean Cruises, PPG, Advantest, Sherwin-Williams, Mondelez, Corning, DR Horton, Hubbell, Electronic Arts, Regency, Teradyne, Seagate Technology, Expand Energy, Equity Residential, Veralto, AO Smith, BXP, ONEOK, Labcorp, Incyte, Xylem, Zebra
* U.S. Treasury sells $44 billion of 7-year notes
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Hugh Lawson)
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