European stock markets and U.S. stock index futures rose slightly, following the volatility seen in Asian markets earlier in the day. The decline in oil prices improved market sentiment. At the same time, investors are awaiting the key U.S. inflation data to be released this week, as well as the upcoming season of corporate earnings reports.
As of press time, the Dow Jones futures rose by 0.15%, and the S&P 500 index futures rose by 0.08%. The S&P 500 index was just one step away from a record high at the close last week. Nasdaq futures fell by 0.13%.
The decline in crude oil prices has boosted sentiment in the European market. The Euro Stoxx 600 index rose by 0.6%. The strength in automotive stocks also provided support.
The financial reporting season is about to arrive.
Due to holidays in the Japanese market, and also because of Columbus Day holidays, the U.S. Treasury market was closed as well, resulting in relatively light market trading activity. Investors are awaiting the upcoming earnings season.
Major banks such as JPMorgan Chase and Citigroup will unofficially kick off the earnings season on Tuesday, while Bank of America will release its results on Wednesday. The stock trading business revenue of Wall Street's major banks in the third quarter is expected to total up to $19 billion. Later this week, important companies in the field of artificial intelligence will also become the focus of the market, including ASML from Europe and TSMC, both of which will announce their financial results.
Bloomberg strategist David Savage stated in a macro market analysis: "As the financial sector takes the lead in kicking off the third-quarter earnings season, the U.S. stock market is expected to reach new highs this week. Rising interest rates are raising the threshold that stocks need to overcome in order to rise, and most stocks have not yet met this requirement. However, the strong performance of technology companies is expected to continue to support the main stock indices in maintaining their upward momentum."
According to data from the London Stock Exchange Group ( LSEG IBES ), earnings of companies comprising the S&P 500 index are expected to grow by more than 30% year-on-year in the third quarter, with most of this growth coming from the technology sector. Earnings of companies comprising the EuroStoxx index are expected to increase by 21%, and if the energy sector is excluded, the growth rate would be 9.7%.
Strategists from Goldman Sachs Group, including those identified as Christian Mueller to Glissmann, stated that given the strong prospects for corporate earnings growth and the recent decline in stock valuations, the team has raised their stock allocation recommendations for the next three months to an overweight position.
Vincent Juvyns, the chief investment strategist of Dutch International Group in Brussels, stated: "So far, double-digit corporate profit growth has helped offset the negative impact of rising interest rates. The upcoming earnings season will be an important basis for determining whether there is further room for upside in this bull market."
U.S. bond market closes for the day
U.S. Treasury bond futures fell slightly, and due to Columbus Day holiday, the U.S. Treasury bond spot market was closed. This month, the yield on U.S. Treasury bonds rose to its highest level in 24 years. High energy costs have exacerbated market concerns about persistent high inflation, which may prompt central banks to maintain a hawkish stance and put pressure on stock valuations.
On the French side, a political deadlock surrounding fiscal policy has sparked new concerns, leading to another rise in French government bond yields. The yield on Germany's benchmark government bonds in the eurozone has fallen slightly, and the risk premiums on French and Italian government bonds have also narrowed slightly.
The outlook for oil prices is full of uncertainties.
Due to market concerns over the ongoing attacks by Yemen's Houthi rebels on neighboring Saudi Arabia, the price of Brent crude oil has been fluctuating repeatedly between increases and decreases. At the same time, traders are also assessing the news reported by U.S. President Donald Trump that Russia and Ukraine have reached an "energy ceasefire agreement."
Deutsche Bank strategist Jim Reid stated that the outlook for oil prices remains full of uncertainties. He said, "Even though the ceasefire agreement between Russia and Ukraine and the relaxation of restrictions on Russian diesel exports can alleviate supply pressures in the refined oil market, the attack on Riyadh, conflicts around the Strait of Mandeb, and the ongoing disruptions to the Strait of Hormuz still mean that there is a tail risk of further increases in oil prices and shipping costs."
After oil prices have remained high for several weeks in a row and global bond yields have risen to their highest levels in decades, traders are hoping that corporate earnings reports will bring new momentum to the stock market. At the same time, U.S. inflation data and the upcoming speech by Federal Reserve Chairman Kevin Warsh ( Kevin Warsh ) will also provide clues about the future interest rate path. Currently, the money market expects the Federal Reserve to raise interest rates again before December.
The US CPI may see accelerated growth.
Affected by rising gasoline prices, the U.S. Consumer Price Index ( CPI ) is expected to rise more rapidly. According to the median forecast of the survey, the U.S. CPI in September is expected to rise by 0.6% month-on-month, higher than the 0.4% in August. If this forecast comes true, it will mark the largest monthly increase in five months. The core CPI excluding energy and food prices is expected to rise by 0.2% month-on-month, a slowdown from August.
J.P. Morgan's head of global economic research, Bruce Kasman, stated: "Oil prices are still higher than our previous assumptions, as shipping costs have soared significantly, and the increase in refined oil prices is even greater."
He stated, "Current inflation signals indicate that overall inflation may rebound significantly, thereby squeezing consumers' purchasing power; at the same time, core inflation may also strengthen further, prompting central banks around the world to continue to focus on short-term interest rate hikes."
Currently, market pricing indicates that the probability of the Federal Reserve raising interest rates this month is only 18%, but the probability of a rate hike in December has risen to 85%. Investors are also betting that the European Union, Japan, and the United Kingdom will further raise interest rates before the end of this year.
Jim Reid, the head of global macro research at Deutsche Bank, pointed out: "Energy prices are driving up overall inflation, but potential core inflation has slowed down. This contrast will clearly have an important impact on the Federal Reserve's policy decisions. Especially considering the signals recently released by the Fed, which suggest that it may still be necessary to further tighten monetary policy, but there is no urgency to do so."
The euro continues to fall, and gold struggles to hold above 4200.
In the foreign exchange market, the euro remains under pressure, trading around $1.1205. Due to market concerns regarding the fiscal deficits of European governments, the euro has been declining for five consecutive weeks.
The US Dollar Index remains near a 17-month high of 102.21. However, the upward trend of the US dollar against the Japanese yen at around 158.44 has been temporarily halted, as the risk of Japanese government intervention in the foreign exchange market keeps speculative traders cautious.
After three consecutive trading days of rebound, Bitcoin largely maintained its gains, while stocks related to cryptocurrencies outperformed in early trading in the United States.
In the commodities market, gold, which does not generate interest income, rose by 0.1% to $4,198, but still struggles to hold above $4,200. Previously, gold prices rebounded by more than 1% last week.
Global bond markets sell off as "central banks raise interest rates on their behalf": Yields hit their highest level in 2,000 years.
Expectations for interest rate hikes in the eight major economies have plummeted by nearly 200 basis points.
The global bond market is inadvertently driving up financing costs, taking on some of the tightening responsibilities for central banks. This could reduce the number of times central banks need to raise benchmark interest rates to curb inflation. After weeks of selling off, bond yields have soared to multi-year highs. Even if policymakers do not take further action, the financial environment has already tightened significantly, resulting in a certain economic slowdown—precisely the effect that central banks hope to achieve by raising policy rates.
Assembly data shows that traders have subsequently lowered their expectations for interest rate hikes; since mid-September, the interest rate hike margins priced in the interest rate swap contracts of the eight major economies have fallen by nearly 200 basis points in total.
"Big bear" Berry turns to the NASDAQ index and semiconductor ETF put options, warning of a peak within 9 months.
Michael Berry, an investor who predicted the 2008 financial crisis by accurately identifying major flaws in the U.S. subprime mortgage market, has focused most of his bearish bets on put options related to the NASDAQ 100 index ( NDX ) and VanEck semiconductor ETF ( SMH ). He expects the market to peak within the next nine months.
In his latest Substack blog post published last Sunday, Berry stated that he had converted most of his previous short positions into options. Currently, put options on the Nasdaq 100 and VanEck semiconductor ETF constitute almost all of his short exposures.
He said, "I think we are within 0 to 9 months before a major peak appears." He added that as the main stock indices break through to new highs, the last few months of the bull market could be quite volatile.
Focus on Individual Stocks
Bank of America raised its rating on SAP from “underperforming the market” to “buy” in two steps, and the stock price rose by 4%. The bank believes that artificial intelligence will not impact this software company; instead, it will further deepen the market’s dependence on its products.
Truist has upgraded its rating on First Solar from "Hold" to "Buy," causing the stock price to rise by 2.4%. The firm is optimistic about the growth and strong demand in the solar market over the next few years, as well as First Solar's pricing power within the industry.
JPMorgan analysts upgraded the rating of biotech company Biogen, and its stock price rose by 2%. Institutions stated that the results of multiple clinical trials in 2027 will be catalysts for Biogen's stock price.
Australian company Iren, which operates fully renewable energy computing facilities, has quietly signed a multi-year cloud computing agreement with Anthropic. Influenced by this news, the stock price of Iren soared by 5.3% on Monday.
Morgan Stanley raised its rating on the education loan service provider SLM from “Equal Weight” to “Overweight”, and the stock price rose by 2%. The bank stated that the stock has fallen by 15% so far this year, and its current valuation is attractive, presenting an opportunity to buy.
Seaport Analysts upgraded Metai's rating from "neutral" to "buy," with the stock price rising by over 1%. The research firm stated: "There are rumors in the market that the company may be acquired. We believe investors are re-evaluating the toy sector and have discovered that there is undervalued value in this sector."
Quantum computing company IonQ will spend up to $1.3 billion to acquire cybersecurity firm Elisity. After the announcement, its stock price fell by more than 2%.
Affected by the announcement from China's ChangXin Memory Technologies ( CXMT ) that it will mass-produce a new generation of memory chips and compete for market share with American and Korean companies, Micron Technology's stock price fell by 2%.
Responsible Editor: Guo Mingyu
