We warned that Zuck would have to come to shareholders with his hand out. This morning, he did.

Meta announced a gargantuan financing plan of up to $95 billion in new equity on Monday, topping even Alphabet’s upsized $84.75 billion equity raise from June. Our reaction, roughly 60 seconds after the headline hit:

There it is META TO OFFER $22.5B OF CLASS A COMMON STOCK

— zerohedge (@zerohedge) October 26, 2026

“There it is” because we had flagged it a week ago: regular readers will recall that ahead of Meta’s earnings (which the company moved up a full week for no obvious reason), we highlighted a question UBS asked out loud while everyone else was asking it quietly:

“Meta reports a week earlier than normal – trying to get ahead of the (cap raise) crowd?” – UBS

— zerohedge (@zerohedge) October 18, 2026

Well, the answer was yes. And just as important as the raise itself is what Meta is not doing: selling a jumbo bond. Coming the morning after Elon Musk said that debt markets have “almost entirely shut off access to money” for anyone without substantial non-AI revenue, Meta’s decision to fund itself with stock confirms what we have been saying for weeks: the AI debt pipeline has seized up, and even the strongest borrowers in the space would rather dilute shareholders than test it.

$22.5 Billion Now, $12.5 Billion In Converts, $60 Billion Later

Here is what Meta is selling, per its free writing prospectus and the 424B5 prospectus supplement filed this morning:

• $22.5 billion of Class A common stock, sold through forward sale agreements with Morgan Stanley and Goldman (plus a $3.375 billion greenshoe). Meta gets no cash up front, and can settle any time on or before November 19, 2027, in Class A or the new non-voting Class C shares.
• $12.5 billion of mandatory convertible preferred: 250 million depositary shares, each a 1/20th interest in a $1,000 preferred share, converting into common around August 15, 2029 and listing under “METAM” (with another 37.5 million depositary shares in the greenshoe).
• A $60 billion “at-the-market” program of non-voting Class C shares, to start in Q1 2027 once the Class C stock begins trading (the new share class becomes effective January 19).

Goldman’s offering snapshot shows the common deal pricing after the close today (October 26), with MS and GS as active bookrunners:

Then there is the cherry on top: Nvidia, AMD and Broadcom, three of Meta’s biggest chip suppliers, “indicated an interest” in buying up to $5 billion of the common stock at the offering price. That indication is non-binding, as the prospectus is careful to note: any of them “may determine to purchase more, fewer, or no shares.” More on that below.

We ran the numbers. At Friday’s $642.62 close, the $22.5 billion forward alone is about 35 million new shares (the prospectus has Class A outstanding rising from 2.214 billion to 2.249 billion). Do the whole $95 billion at that price and it comes to nearly 150 million shares, or roughly 6.7% of the Class A count (approximate, before greenshoes, and the converts’ share count depends on the price in 2029). And for the company that spent well over $100 billion buying back its own stock between 2021 and 2024, the converts come with a twist: per the prospectus, unless the preferred dividends are paid in full, “no dividends may be declared or paid on our Class A Common Stock… and we may not repurchase our Class A Common Stock.” Buybacks, meet dilution.

Here is how the ask stacks up against Meta’s $82 billion of cash and securities, and the $140 billion midpoint of its 2026 capex guide:

Meta’s pitch for the deal reads like a product launch. “AI is creating significant opportunities for Meta across its core business,” the company said, and its “AI investments are already generating tangible returns through increased engagement, improved advertising performance and increased monetization.” It also says it will fund itself through “a balanced mix of operating cash flow, investment-grade debt, strategic partnerships, and equity capital,” adding that its “Aa3/AA- credit ratings allow it to raise long-term debt efficiently.”

Which is a curious thing to say, maybe, a week after Meta’s own Schedule 14C admitted the exact opposite: the special committee “recognized that debt financing alternatives of the magnitude that Company management was considering could have an adverse effect on the Company’s credit ratings.” Translation: the bond market can’t absorb what Meta needs without the ratings taking a hit, so shareholders get the bill.

The math behind it hasn’t changed since last week. As Bloomberg showed this morning, Meta’s capex is set to exceed its operating cash flow this year (for the first time in at least eight years), and hit roughly 120% of it in 2027:

Shares, incidentally, pared initial losses to trade up 1.6% at $654 in the premarket, according to Bloomberg, after tumbling last Thursday. Nothing says “relief” like 150 million new shares.

“Massive Capital Raises Incoming”

None of this should surprise anyone who read us last week. In “Please Don’t Stop The Museic” (Oct 21) we quoted JPMorgan’s TMT desk, which had found that most of the buyside was already braced for a raise:

JPM on META equity offering: “a majority of investors still believe that an Equity Raise is likely post-Q3… We all know that META is going to burn FCF next year; the only question is whether the cost of debt or the cost of equity will be lower when they need to raise capital.”

— zerohedge (@zerohedge) October 21, 2026

Then came the print. Meta tightened its 2026 capex guide to $135-145 billion, joined Amazon in the negative free cash flow club, and filed a 14C showing management had told the board it needed to raise “hundreds of billions of dollars over a period of several years beginning as early as fall 2026.” Meta’s CDS blew out to a record, as we detailed in “Meta Plunges, CDS Hits Record As Barclays Spots ‘Massive Spending’ Warning In The Fine Print.” And when the market spent the day fixating on the capex number, we pointed at the bigger one:

Also, market is forgetting that while Meta will spend $250BN in 2027 capex, it also has to spend $210-225BN in 2027 opex to fund off balance sheet liabilities. -> Massive capital raises incoming https://t.co/SlwL4VOvfd

— zerohedge (@zerohedge) October 22, 2026

Four days later, here they are.

What the sellside got wrong was the timing. The consensus last week was that nothing would happen until the Class C shares started trading: JPMorgan’s TMT trader Mark Schilsky titled his first take “C You in January,” arguing “we won’t get one until early 2027. The overhang lives on!” Barclays’ Andrew Keches, meanwhile, figured equity was “unlikely before then” and expected a bond deal before year-end, maybe the “standard” $25 billion, maybe “a $50bn-plus trade.” Instead, Meta structured around the January date with a forward sale it can settle in either share class, and skipped the jumbo bond altogether (for now).

Recall the 14C’s other key line: “timing is important to secure capital before competitors saturate various funding options.” Meta just went first.

Musk: Debt Markets Have “Almost Entirely Shut”

Why stock instead of bonds? Elon Musk, whose SpaceX just closed $40 billion of GPU debt, explained it on Sunday afternoon, replying to Chamath Palihapitiya’s thread on neoclouds and data center land:

Pretty much. As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers. SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue. That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.

— Elon Musk (@elonmusk) October 25, 2026

“Guppy-level death” is a new one, though the message will be familiar. Goldman’s TMT desk led its Monday note (available to pro subs) with exactly this: “focus continues to be on AI Capital raising (which has become a bigger and bigger talking point in recent weeks, given the well-documented capital needs of the industry + stress in bond/convert market).” CoreWeave was down 5% in the premarket on Musk’s comments.

The stress is visible across the AI credit stack. In his weekend wrap, “IG Credit Week in Review” (available to pro subs), Goldman IG trader Brad Shelofsky writes that last week was shaped by “a significant re-rating of AI risk as markets reassessed the feasibility of funding the buildout.” While the prior week’s pain was in the neoclouds, “this week the Hyperscalers shouldered a greater share of the blame”: Goldman’s IG hyperscaler basket closed 17bps wider, “its worst week on record outside of the similar moves in July,” and its 30-year hyperscaler basket hit new wides, now 85bps cheap to the IG100 ex-hyperscalers, and 90bps cheaper than when it launched in February:

The HY data center basket fell another 0.95 points on the week (chart source GS FICC), its seventh down week in the past eight:

Shelofsky also quotes Jensen Huang, who said there’s “a scarcity of capital. The demand of the capital is much greater than the availability of the capital. That’s going to get solved.” (We have a guess how.) And he admits something few traders put in writing:

“I’ll start by saying that conviction is rather low here and I don’t feel as if that is unique. I fell into the mean reversion trap too early, believing a META deal would create a runway for a Q4 bounce in a beaten-up and optically cheap space but the concerns around funding pressures only grew this week. I still believe you will see a squeeze at some point in Q4 like the move we witnessed in July, however, that can’t happen until the Meta and SpaceX Chip deals are cleared… The key headwinds remain weak sentiment and a lack of willingness from Real Money investors to take risk higher until there is greater clarity on when the rate of supply growth stops being exponential.”

In other words, the IG desk was waiting for a Meta bond deal to clear the air. It got a stock deal, which leaves the bond question open. Meanwhile, the cost of insuring AI giants’ debt has gone vertical ahead of this week’s prints (chart via Bloomberg):

“Without Debt, There Is No EPS Growth”

We have been tracking the drought for weeks. On October 13, in “‘Until The AI CapEx Debt Creation Machine Turns Back On’: Goldman Says Credit Is Calm… For About Two More Months,” we explained why credit had stayed calm (the one borrower big enough to break it had stopped borrowing), and why that wouldn’t last:

Just how full is the hyperscaler/AI IG debt pipeline: there have been zero deals since the start of September. And SPVs not doing better. As a reminder, debt becomes capex, becomes revenue, becomes EPS. Without debt, there is no EPS growth.

— zerohedge (@zerohedge) October 13, 2026

On Friday, Morgan Stanley’s credit strategists called it “The State of AI Financing: A Pause, Not a Pullback” (also available to pro subs), tallying just ~$23 billion of AI-related supply globally in September and zero in US IG. As we wrote in “Pause Or Wall?” on Saturday, we had a different word for it: a wall. Two days later, the biggest spender of them all routed around it with stock.

That matters because the entire AI capex forecast rests on a debt pipeline that has to get much bigger. Goldman’s chief credit strategist Amanda Lynam expects $420 billion of IG issuance from the hyperscalers alone in 2027 (full note available here to pro subs), versus about $230 billion in the record year to mid-September:

Lynam’s latest comments, relayed by Goldman’s TMT specialists this morning, explain why the plumbing is creaking. In the AI buildout, “the key focus is no longer just the cost of capital, but its availability and strategic value.” Off-balance sheet leases and purchase commitments across five leading hyperscalers now total $2.8 trillion, an eightfold increase since 2023 (our own count, including Nvidia, Broadcom and SpaceX, hit $3.6 trillion last week), and the rating agencies can’t agree on how to treat them: S&P adjusts leverage for off-balance sheet leases, Moody’s and Fitch don’t, so “potential methodology changes are therefore worth watching.” Most telling, she flags that “some companies are explicitly acknowledging the need to secure capital before markets become saturated – a new development that highlights the distinctive nature of the AI financing cycle.” That would be Meta’s 14C, word for word.

Put differently, when an Aa3/AA- issuer with $97 billion in operating cash flow through nine months decides equity is the better deal, the debt market has a pricing problem, a capacity problem, or both.

Vendor Financing, Now In Equity Form

Which brings us back to the cornerstone investors. Nvidia, AMD and Broadcom will (maybe) buy up to $5 billion of Meta’s stock, so that Meta can keep buying Nvidia, AMD and Broadcom chips. We have written plenty about AI circularity over the past year, from GPU-backed SPVs to chipmakers financing their own customers, but seeing three suppliers anchor a customer’s equity offering is a new rung on the ladder. And the relationships run deeper than a one-off ticket. In February, Meta signed a multiyear deal for “millions” of Nvidia Blackwell and Rubin GPUs plus Grace and Vera CPUs, and a separate pact for up to 6GW of custom AMD Instinct GPUs, under which AMD handed Meta a warrant for up to 160 million AMD shares, vesting as the chips ship. In April, Broadcom extended its custom MTIA accelerator partnership with Meta through 2029, while its CEO Hock Tan left Meta’s board to become an adviser on, naturally, its custom silicon. So AMD gives Meta equity to buy its chips, Meta (maybe) sells equity to AMD to help pay for them, and everyone books revenue. Here is who pays whom:

And it presumably helps fill a book that, at $35 billion underwritten, is no small ask on a Monday morning before Microsoft, Alphabet and Amazon report.

For balance, not everyone sees a crisis. JPMorgan’s Market Intelligence desk, relaying a FICC financing call in this morning’s briefing (available to pro subs), says “Credit markets are becoming more discriminating on AI Infra, but there’s nothing to suggest a broader funding crisis.” AI infrastructure has absorbed more than $500 billion of debt this year (over $350 billion in IG, over $60 billion in leveraged finance, plus structured and private credit, the latter $100 billion-plus by JPM’s “best guess”), and while “all-in funding costs for hyperscalers maybe have increased ~120bps,” the bank says the ecosystem “remains functional.” Fair enough. But the same note concedes that “Equity % will also need to move up as volumes get up to 20GW+,” and that banks have “become more selective about underwriting terms.” Today, Meta showed what that looks like in practice.

First Meta, Then Who?

If Meta, with an AA- rating and one of the world’s two biggest ad businesses, prefers stock to bonds, the question for everyone else is obvious. Oracle hosts its investor day on Wednesday. SpaceX still has to price its $40 billion chip deal. Microsoft and Alphabet report Wednesday, Amazon on Thursday, and Goldman’s TMT desk warns that “any signs of further equity issuance or balance-sheet pressure are unlikely to be well received.” As for the neoclouds, which have neither Starlink nor Instagram to fall back on, Musk has already written the obituary.

Good for META. Now let’s see everyone else’s equity offering https://t.co/l0ve6NNBVl

— zerohedge (@zerohedge) October 26, 2026

The bulls will say the debt drought is temporary, that the “machine” turns back on once earnings clear, and that Meta just pre-funded itself cheaply at a share price 17% below its September high. Maybe. We think the more likely read is the simpler one: the cheapest money in the AI trade has already been borrowed, the next $420 billion of bonds will cost a lot more than the last batch, and the companies that can still sell stock will sell it while they can. The 14C told us as much: Meta wanted to raise capital “before competitors saturate various funding options.” When the strongest balance sheet in the group is racing for the exit door of the capital markets, it’s worth asking what it knows that the price targets don’t.

For shareholders, the trade-off is now explicit: years of buybacks just went into reverse, and the dilution has only started. The ATM alone is $60 billion, and as the 14C made clear, that’s still nowhere near “hundreds of billions.”

Much more in the full Goldman “IG Credit Week in Review,” the Morgan Stanley “State of AI Financing“, the JPM “Market Intel” notes, all available to pro subs.

US futures are higher as oil slides on hopes that a regional delegation in Tehran can breathe some life into US-Iran peace talks, and as Meta jumps after finally unveiling how it plans to pay for its AI capex binge, offsetting a stunning comeback win by Lula in Brazil’s runoff which has sent Brazilian ADRs crashing as much as 30-50% premarket, while traders brace for a week packed with megacap earnings and central bank decisions; as a result 10Y yields are flat at 4.99% and the dollar is barely changed. As of 8:15am ET, S&P futures are 0.4% higher at 7,665.75 while Nasdaq futures are up 0.7% and Dow futures rise 0.4% (+186 points) to 52,580. On Friday the S&P slipped 0.5% to cap a second weekly drop and close below its 50DMA, as the AI funding angst which has hammered tech names spread to credit. Premarket, Mag 7 names are mostly higher led by Meta (+2.4%), which is seeking up to $95 billion in equity: a $35 billion offering ($22.5 billion of Class A common stock plus $12.5 billion of mandatory convertible preferred) launched this morning, followed by an at-the-market program to sell up to $60 billion of new non-voting Class C shares starting in 2027, with Nvidia, AMD and Broadcom indicating interest in buying up to $5 billion of the offering (some circular AI financing never hurts). That the stock is rising on a potential $95 billion equity raise tells you how much the market feared the alternative was even more debt. The day’s driver is Brazil: Lula’s 51.8%-48.2% victory over market favorite Flávio Bolsonaro, who is now calling for the vote to be annulled, has sent the Brazil ETF (EWZ) down 27% premarket, with names like XP (-48%), StoneCo (-35%), PicPay (-34%) and Nubank (-23%) all crashing. In rates, Treasuries are narrowly mixed with the long end outperforming and the curve flattening by about 2bp, while French bonds rally after Moody’s unexpectedly kept France at Aa3, narrowing the OAT-bund spread to around 158bps. The Bloomberg dollar index is up 0.1% with the yen the weakest G-10 currency, while the Brazilian real is expected to gap 5-7% lower at the open. In commodities, WTI is down about 2.1% near $101 and Brent drops toward $114 as Saudi, Turkish and Pakistani officials travel to Iran; European natgas is up 3% near a post-2022 high, while gold rises 0.5% back above $4,000 and Bitcoin hovers around $80,400. US economic data slate includes September Chicago Fed national activity index (8:30am) and October Dallas Fed manufacturing activity (10:30am); the Fed is in its blackout period ahead of Wednesday’s FOMC, and the Treasury sells $69 billion in 2-year notes at 1pm.

In premarket trading, Mag 7 stocks are mostly higher: Meta Platforms (META) up +2.4% after announcing sale of up to $95 billion in common and preferred stock; Tesla (TSLA) gains 1.8% as Barclays upgrades to overweight from equal-weight, citing M&A opportunity with SpaceX; Alphabet (GOOGL) +0.5%, Amazon (AMZN) +0.2%, Microsoft (MSFT) +0.4%, Nvidia (NVDA) +0.4%, Apple (AAPL) -1.7%. Here are some of the other notable premarket movers:

• US-listed shares of Brazilian companies, and those exposed to the country, slump after President Luiz Inácio Lula da Silva surprised the markets to come from behind to win a runoff election. Among movers: PagSeguro (PAGS) -32%, NU Holdings (NU) -25%, MercadoLibre (MELI) -14%
• ArriVent Biopharma (AVBP) is trading higher by 4.5% after early-stage data for the company’s ARR-217 product candidate was presented at ESMO, a key cancer conference.
• Booz Allen Hamilton Holding Corp. (BAH) rises 0.9% as it is being upgraded to buy from hold at TD Cowen, which writes that shares of the IT services company look attractively valued in the wake of long-term share-price weakness.
• Borr Drilling shares (BORR) drop 8.2% after the company said search and rescue operations are ongoing for five individuals who remain unaccounted for after its Prospector 5 drilling rig sank during jacking operations offshore Gabon on Oct. 24.
• Coinbase Global Inc. shares (COIN) are down 1.7% as Bernstein cut its price target on the exchange to $250 from $330 on lower expected crypto volumes.
• Equifax Inc. (EFX) falls 3.5% after it was cut to sector perform from outperform with RBC saying the the recent stock rally “off the lows has left risk/reward more balanced” given concerns on higher rates, regulatory overhand and consumer lending pressure.
• Fair Isaac Corp. (FICO) falls 9.2% after it was cut to equal-weight from overweight at Wells Fargo, citing its lower-than-expected 2027 pricing announcement.
• FirstEnergy Corp. shares (FE) rise 0.5% after BMO Capital Markets initiated coverage of the utilities company with a recommendation of outperform as it sees an attractive valuation.
• Lockheed Martin Corp. shares (LMT) are up 1.4% after Morgan Stanley upgraded the defense company to overweight from equal-weight, writing that a recent deal for F-35 fighter jets “takes significant risk out of the stock.”
• Moderna (MRNA) slumps 8.2%, set to extend their decline for a third session, after the drugmaker gave results from a trial of its experimental vaccine used in the treatment of pancreatic cancer.
• Nutanix Inc. shares (NTNX) are up 5.3% after Guggenheim Securities started coverage on the infrastructure software company with a buy rating and $100 price target, seeing an ability for it to take market share.
• Range Resources (RRC) rises 8.9% after EQT (EQT -8.1%) agreed to buy the energy firm in an all-stock transaction to create a combined natural gas company with a pro forma enterprise value over $50 billion.
• Spotify Technology SA shares (SPOT) are down 1.4% after Phillip Securities downgraded the audio-streaming company to accumulate from buy, a move that comes in the wake of its recent results.
• Xencor (XNCR) climbs 31% after the drug developer gave updated results from an early-stage trial of its experimental drug for kidney cancer that impressed Wall Street.

In other corporate news, Meta, whose 5-year CDS has roughly doubled since August to about 120bps as its capex is now seen exceeding operating cash flow, decided that if the bond market is getting nervous, shareholders can foot the bill: the company launched a roughly $35 billion offering of $22.5 billion in Class A common stock (sold via forward sale agreements) and $12.5 billion in three-year mandatory convertible preferred stock, and plans an at-the-market program of up to $60 billion of new non-voting Class C shares once they start trading, expected in Q1 2027, for a total of up to $95 billion; Nvidia, AMD and Broadcom indicated nonbinding interest in buying up to $5 billion of the shares, which are being sold to fund AI infrastructure and compute capacity. EQT agreed to buy Range Resources in an all-stock transaction, with each Range share exchanged for 0.987 EQT shares, creating a gas giant with a combined enterprise value of more than $50 billion; RRC is up 14% premarket while EQT drops 4.2%. Verizon raised its full-year adjusted EPS forecast to $5.04 to $5.06 from $4.99 to $5.04 after posting its biggest third-quarter wireless-customer additions in five years. Instacart is in talks to sell itself, the Information reported. Amex plans to cut 5% of its headcount as transaction volumes fall short. Ovintiv agreed to buy Canada’s Logan Energy in a Montney expansion. Elon Musk said SpaceX closed a $40 billion debt deal to fund chips for its AI ambitions, although people familiar said pricing talks were still underway. Challenger’s board rejected a $4.4 billion offer from Daiichi Life.

Global markets are trying to start the week on a positive note as crude retreats from a six-month high, but it’s a deceptively calm surface: a shock win for Luiz Inácio Lula da Silva in Brazil’s election will dominate today’s narrative, while the AI trade will be tested this week when tech firms worth more than $10 trillion combined, including Microsoft, Amazon and Alphabet, report earnings. As Bloomberg’s Before the Bell notes, the Nasdaq is at a key technical level after a second week in the red, hovering around 29,000 after a failed breakout sent it back toward the lower end of its six-month range; a loss of recent lows would expose the 200-DMA near 27,800, about 3.5% below current levels.

The bigger issue is how all this AI capex gets paid for. Meta’s raised capex guidance alarmed some, as consensus is now modeling about $140 billion in spending, pushing that metric above operating cash flow, and the concerns are spilling into credit, with Meta’s five-year CDS spread roughly doubling since August to around 120 basis points, confirming what we warned last week when Goldman admitted its credit bear case isn’t bearish enough as AI stress hits bonds. Today we got the answer to the funding question: Meta is seeking up to $95 billion in equity to fund its AI spending, after last week’s results showed it raised the low end of its 2026 capex guidance, turned free-cash-flow negative and flagged multi-year equity funding needs through new Class C shares (per Goldman’s TMT desk). The stock fell 7% on Thursday when the issuance plans overshadowed a revenue beat, but is up 2.4% premarket now that the size of the overhang is known and the chipmakers it pays for GPUs have offered to buy some of the paper back. Meanwhile, the stress at the bottom of the credit stack is getting worse: average yields on triple-C rated junk bonds topped 16% for the first time since 2020 on Friday, and last week’s 1.6% loss was the biggest in 18 months.

Elon Musk’s weekend comments didn’t help: he said debt markets have “almost entirely shut off access to money” for companies without substantial revenue outside AI data centers, adding that “200+ neoclouds are going to see guppy-level death and consolidation,” which is why CoreWeave (-5.5%) and Nebius (-4%) are sliding premarket even as the broader market rises. Morgan Stanley’s Mike Wilson, meanwhile, sees AI-related concerns as one of three clearing events that could help end the market correction over the next few weeks, and reckons quality can hold up even if the S&P trades toward his tactical downside zone of 7,100-7,200.

On Brazil, the street was caught leaning the wrong way.

“For today, however, expect Brazilian markets to be hit hard. USD/BRL gapping 5-7% higher at the open to the 5.20/25 area should be no surprise, while the local Bovespa equity index looks set for double-digit losses,” said Chris Turner, ING’s head of FX strategy. “Important for local financial markets will be how quickly Bolsonaro accepts the result – or at least allows the constitution to run its course.”

“As such, BRL is poised to unwind its rally following Bolsonaro’s strong first-round showing earlier this month,” said Elias Haddad, global head for markets strategy at Brown Brothers Harriman. “Lula’s greater tolerance for rising debt adds to BRL headwinds.”

Elsewhere, HSBC’s long-standing equity bull Max Kettner is dialing back risk, moving to neutral on equities from maximum overweight and to overweight developed-market government bonds from maximum underweight, saying bond underperformance “has become stretched” and that “constant narrative bingo” means the team no longer has the same level of conviction; HSBC also cut its gold overweight and raised oil to outright overweight.

JPMorgan’s Market Intel desk (Andrew Tyler) remains “Tactically Bullish”, noting the SPX has lost 2.4% over the last two weeks with a shift toward defensives, and that “we have yet to have a complete positioning washout despite sentiment being firmly in the Fear region.” On Iran, “If Trump moves back to negotiations rather than kinetics, then we expect a broad-based rally led by Tech / Cyclicals ex-Energy.” As for Brazil, JPM’s prior Monetization Menu noted that “internationally, we continue to favor Brazil and Japan” (it was a good run while it lasted). JPM’s Mike Feroli expects a hold on Wednesday with two hawkish dissents (Hammack and Logan), and says Chair Warsh will have to explain why the committee hiked after a two-tenths core PCE print in September but is now holding after an expected three-tenths outturn.

Over at Goldman, Rich Privorotsky summed up the mood: “Positioning, sentiment and performance all severely constrained…. shorts squeezing, nothing working. Usually darkest before the dawn.” According to the bank’s Giulio Esposito, Global Tech is “registering its largest 2-week net selling on record”, fundamental L/S net leverage has dropped to a one-year low of 47%, while Mag 7 net exposure is at a record high, which echoes what we noted over the weekend in “The AI Hangover: Goldman Says Buy The Dip As Hedge Fund Stop-Outs Push Nets To A One-Year Low”. Goldman’s Brian Garrett frames the dilemma: “we’re either in the 2nd inning of a repricing of the entire AI ecosystem … or we’re in the 8th inning of a significant de-gross episode (leaning in this camp right now)”. Also of note, GS calculates that CTAs are long $38.5 billion of S&P futures (91st percentile) and could sell $11.6 billion over the next week even in a flat tape. Goldman economists expect the FOMC to skip on Wednesday but deliver a second and final hike in December.

Positioning may yet provide a cushion: Deutsche Bank strategists note tech exposure has slid to the lowest level in six months and is now close to Iran war lows, even as investors poured about $30 billion into tech funds over the past two weeks, including $12 billion into leveraged ETFs; that dip-buying showed signs of cracking last Thursday, when the selloff triggered about $1.5 billion of outflows.

In geopolitics, Trump said it’s “getting to be decision time” on whether he will make a deal with Tehran or resume attacks, as Iranian and Houthi threats against Americans in the Middle East continue to grow; meanwhile, Kevin Hassett said US-Canada trade negotiations are “gathering steam.” In France, the government avoided a repeat of the looting of the prior weekend, and Moody’s surprise decision to hold France’s rating has given OATs a stay of execution (S&P is up next on Nov. 27); for more on where French and European spreads go from here, see Goldman’s latest warning on Europe’s election cycle.

In Europe, the Stoxx 600 rises 0.4% to 638.10 with 442 members up and 141 down, as cyclicals lead and defensives lag, a reversal of recent performance, ahead of a busy earnings week. France’s CAC 40 outperforms with a 0.9% gain after Moody’s held the nation’s rating, and the DAX rises 0.9% after the Ifo business climate index unexpectedly improved for a sixth month to 90.2, while Spain’s IBEX is the laggard as Telefonica slumps 7% on a JPMorgan downgrade and Santander falls 4% on its Brazil exposure. Travel & leisure and autos lead, while energy trails as crude retreats. JPM’s desk notes the top baskets are Freight Sensitives, MidEast Escalation Shorts and Power, while Diesel plays, Oil sensitives and MidEast Escalation Longs are lower, and Growth/Momentum lead. Here are the biggest European movers:

• Genmab shares surge as much as 13%, the most since March 2020, after the drugmaker said a late-stage trial of its experimental treatment for ovarian cancer, Rina-S, met its primary and key secondary endpoints. The company separately gave a positive update for petosemtamab, a drug being developed to treat colorectal as well as head and neck cancer.
• Roche shares gain as much as 1.9%, to the highest since April 2022, after the pharma producer’s experimental lung cancer drug, divarasib, fared better than rivals in a late-stage study.
• PostNL shares gain as much as 5.4%, the most since Aug. 3. The Dutch courier service upgraded its free cash flow outlook to the upper end of the range and reiterated its full-year Ebit guidance, which analysts received positively in spite of weaker-than-expected volume growth in the third quarter.
• Plus500 shares rise as much as 4.6%, the most since Sept. 30, after the trading platform said it expects its financial performance to be ahead of current market expectations for FY26.
• Man Group shares gain as much as 4.9%, the most since Sept. 17, after Meiji Yasuda Life Insurance says it plans to acquire a 5% stake in the UK asset manager.
• European stocks with exposure to Brazil fall after President Luiz Inacio Lula da Silva came from behind to win the country’s runoff election, putting fiscal policy in focus and raising concerns that Brazilian interest rates could remain higher for longer. Among decliners are telecom operator Telefonica, lender Santander, online casino supplier Evolution
• GTT shares drop as much as 15%, the biggest decline since 2020, after the engineering firm reported a decline in revenue over the first nine months of the year.
• BASF shares fall as much as 1.8% after a downgrade to hold from buy at Deutsche Bank. Uncertainty over the potential acquisition of Evonik is likely to create a “material overhang” over the stock, according to the bank’s analysts.

Asian stocks were mixed with a mostly negative bias, as weakness in technology shares in Korea and Japan persisted ahead of a slew of tech earnings. The MSCI Asia Pacific Index slipped as much as 0.2%, with Samsung Electronics among the heaviest drags. Korea’s Kospi fell 1.3% (foreigners were the only net sellers), while SK Hynix bucked the broad AI selloff on the prospect of a hefty special dividend tied to its Kioxia stake. Japan’s Nikkei 225 dropped 0.8%, with Advantest’s 3.9% slide accounting for about 55% of the decline according to Goldman, while miners and oil names rallied. Hong Kong’s Hang Seng bucked the trend, rising 0.5% led by energy names such as PetroChina (+5.8%), even as mainland investors sold for a ninth straight session via Stock Connect. China’s CSI 300 was flat (-0.04%) as China’s fifth plenum got underway, Australia’s ASX 200 edged up 0.2%, Indonesia’s JCI fell 1.5%, and Taiwan was closed for a holiday.

In FX, the Bloomberg Dollar Spot Index is up 0.1% and the yen is the weakest G-10 currency, with USD/JPY up 0.3% near 157.30 ahead of Friday’s BOJ decision. The euro holds just above 1.12 after France avoided a Moody’s downgrade, while the pound lags ahead of Wednesday’s UK budget. The Brazilian real is expected to gap sharply lower at the open, with ING seeing USD/BRL up 5-7% to the 5.20/25 area and Goldman’s desk flagging a 10% move. Elsewhere, asset managers’ short positions on the Aussie dollar surged to a record high in the week ended Oct. 20.

In rates, Treasuries are narrowly mixed with the long end outperforming, flattening the yield curve as investors set up for front-loaded auctions on Monday and Tuesday ahead of Wednesday’s FOMC decision. Front-end yields are slightly cheaper on the day, with the 2-year up 1bp at 4.69%, while the 30-year is lower by around 1bp, flattening 2s10s and 5s30s by about 2bp; the 10-year is little changed near 4.98%. This week’s auctions begin with $69 billion 2-year notes at 1pm ET, followed by $70 billion 5-year notes Tuesday and $44 billion 7-year notes Thursday; the WI 2-year yield near 4.69% is about 10bp richer than last month’s auction, which tailed by 0.2bp. Traders are pricing just a 13% chance of a hike on Wednesday while largely pricing in a 25bp hike in December (so much for a dovish Fed under Warsh). In Europe, French bonds outperform after Moody’s maintained France at Aa3 with a negative outlook, defying expectations of a downgrade, taking the OAT-bund spread to around 158bps from Friday’s 176bps peak, while bunds slip as gas prices jump and the unwind of haven flows sends money back into French debt. IG dealers expect around $30 billion of issuance this week as companies emerge from earnings blackouts.

“Risks to Treasury yields skew modestly higher over the near term, especially given that 10-year yields are once again flagging 15bp too low in our fair-value framework,” said JPMorgan’s Jay Barry.

In commodities, oil is lower with WTI down about 2.1% around $101 and Brent trading near $114, as senior officials from Saudi Arabia, Turkey and Pakistan meet Iranian counterparts in Tehran and Iran’s foreign minister proposed a 7-day plan to reopen the Strait of Hormuz, subject to conditions. Supply risks haven’t gone anywhere: UKMTO reported a tanker transiting Hormuz was struck by a projectile on Oct. 23, the Houthis claim to have targeted Saudi Arabia’s East-West crude pumping stations, crude in floating storage rose 8% in the past week according to Vortexa, and IEA chief Birol says he sees no credible pathway for energy markets to return to pre-Iran war levels in 2027. Dutch TTF gas bucks the trend, up about 3% toward €97/MWh and near the €100 mark on colder weather forecasts. Spot gold is back above $4,000/oz, up 0.5% around $4,016, silver trades around $54, and LME copper is little changed.

US economic data slate includes September Chicago Fed national activity index (8:30am) and October Dallas Fed manufacturing activity (10:30am). The Fed is in its external communications blackout ahead of Wednesday’s decision. Earnings before the open include Verizon; after the close, Cadence Design, Amkor, Rambus, Welltower, Whirlpool, Brown & Brown and Alexandria Real Estate report.

Market Snapshot

Top Overnight News

• Lula da Silva won a record fourth term as Brazil’s president in a surprise runoff defeat for Flávio Bolsonaro, who said he’ll challenge the result. Local markets are bracing for a rout, with a New York ETF tracking Brazilian equities sinking 27% premarket. BBG
• ING says the Brazilian real can slide 5-7% at the open on Lula’s victory, with the Bovespa set for double-digit losses; Brazil’s B3 changed trading range limits for rates, FX and the Bovespa. BBG
• Meta is seeking up to $95 billion in equity to fund AI spending: a $35 billion offering of $22.5 billion in Class A common stock and $12.5 billion in mandatory convertible preferred, plus an at-the-market program for up to $60 billion of non-voting Class C stock expected to start in Q1 2027; Nvidia, AMD and Broadcom are interested in buying up to $5 billion of Meta stock. Shares rise 2.4% premarket. BBG
• Saudi, Pakistani, and Turkish defense officials will travel to Tehran on Monday to discuss the region’s security challenges. Al Jazeera
• US forces in the Middle East are prepared to launch new, potentially major, military operations against Iran “within 96 hours of receiving” an order from President Donald Trump, according to two US officials. CNN
• UKMTO received a time-late report that a tanker transiting the Strait of Hormuz was struck by an unknown projectile on Oct. 23, disabling the vessel. BBG
• No end is in sight to a $3.5 trillion selloff in Chinese stocks as investors see little urgency from leaders to jump-start the economy. BBG
• The EU plans safeguards to cut imports from Chinese sectors including chemicals, furniture and machinery, people familiar said. The measures may be unveiled as soon as the first quarter. BBG
• The Dutch government aims to cut 25,000 civil servant jobs in an AI-led efficiency drive targeting annual savings of €3.5 billion. BBG
• President Donald Trump at a Sunday political rally predicted a trade dispute with Canada would be resolved “soon,” without providing specifics. RTRS
• French assets rallied after the country avoided a Moody’s downgrade and a repeat over the weekend of large-scale violence and looting. BBG
• Trump pledged more announcements on the economy after Volkswagen unveiled plans to build a new $4 billion Audi factory in Georgia. The president’s failure to bring down the cost of living is weighing on Republicans’ midterm campaigns. BBG
• EQT agreed to buy Range Resources in an all-stock transaction, with each Range share exchanged for 0.987 EQT shares; the combined company will have an enterprise value of more than $50 billion. RRC rises 14% premarket, EQT falls 4.2%. BBG
• Average yields on triple-C rated junk bonds topped 16% for the first time since 2020 on Friday, and last week’s 1.6% loss was the biggest in 18 months. BBG
• HSBC strategists moved to overweight developed-market government bonds from maximum underweight, saying underperformance “has become stretched,” and turned neutral on equities from maximum overweight. BBG
• Germany’s Ifo business climate index rose to 90.2 in October, beating the 89.9 estimate and improving for a sixth month. BBG
• The PBOC unveiled a liquidity backstop for non-bank bond investors, setting up a swap facility for large non-bank bond redemptions. BBG
• Elon Musk said SpaceX has closed a $40 billion debt deal to pay for the chips needed to fuel its AI ambitions; people familiar said pricing talks were still ongoing. BBG
• Instacart is in talks to sell itself, citing people familiar with the matter: The Information
• Amex is set to slash 5% of headcount as transaction volumes fall short. BBG
• US President Trump posted “…Libya cannot remain a corridor for illegal migration, and this must end now. The United States remains firmly committed to strengthening our bilateral relationship”. Truth Social
• Goldman expects the FOMC to skip raising rates at its October meeting but to deliver a second hike in December; JPM’s Feroli sees a hold with two hawkish dissents (Hammack and Logan). GIR / JPM

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed with a mostly negative bias following last week’s surge in oil and amid ongoing geopolitical risks, while participants await this week’s tech earnings and several major central bank rate decisions. ASX 200 mildly outperformed, with the index kept afloat as strength in the local real estate, tech and the commodity-related sectors offset the losses in defensives, telecoms and financials. Nikkei 225 was lower amid tech headwinds and with SoftBank choppy after reports that its CEO Son is discussing a USD 50bln investment plan in Malaysia focused on AI and data centres. KOSPI retreated with some indecision seen in the tech heavyweights ahead of their Q3 earnings results this week, while SK Hynix clarified it is considering various shareholder‑return options, but added that nothing was decided and it will unveil additional plans after its Q3 earnings announcement, in response to reports that it plans a KRW 16.0tln special dividend from gains on its Kioxia investment. Hang Seng and Shanghai Comp were mixed with price action range-bound amid several earnings releases, while trade frictions lingered with China firmly opposing a US Treasury proposal to expand the scope and severity of restrictions on US investment in China.

Top Asian News

• Japan’s Top Automobile Industry Union Group Chief said “we look beyond inflation-linked pay hikes for 2027 labour talks”.
• China’s fifth plenum gets underway, as scheduled, which is a closed-door convention involving officials from the Communist Party’s Central Committee, while President Xi delivers the Work Report at the plenum, according to CCTV.
• Japanese PM Takaichi said she wants results on tax cut and oil diversification bills.

European bourses (Stoxx 600 +0.4%) are broadly firmer this morning, following on from a mixed APAC handover. The CAC 40 (+0.9%) is amongst the outperformers, after Moody’s maintained France’s credit rating at Aa3 with a Negative Outlook despite recent civil unrest and rising political risks. A decision which comes despite the heightened risk of a downgrade, and hence lifted French-related assets. Over in Spain, the IBEX 35 (-0.5%) is the European underperformer, weighed on by pressure in Telefonica (-7%). The Co. was subject to a downgrade at JPMorgan (Neutral to Underweight), with the firm citing concerns related to its debt structure and its UK JV, VMO2. Moreover, Santander (-4%) shares have fallen following Brazil President Lula’s victory in the elections, with investors now worried about the fiscal situation in the region. European sectors hold a strong positive bias. The typical cyclical sectors hold towards the top of the pile, with Travel & Leisure leading, joined closely by Autos. A move facilitated by pressure in the crude complex, which in turn has pushed the Energy sector towards the foot of the pile. There has been a lot of focus on some healthcare names this morning; AstraZeneca (+1%, SAFFRON Phase III trial showed statistically significant improvement in progression-free survival vs chemotherapy), Bayer (+3.3%, Phase III DASL-HiCaP trial showed a statistically significant 58% reduction in the risk of metastasis vs the placebo), Novartis (-0.3%, Remibrutinib met its primary endpoint but fell short of analyst expectations). Other key movers: Man Group (+4.7%, Co. expands partnership with Meiji Yasuda), Computacenter (+8%, lifts profit forecast), Plus500 (+4%, raises FY26 outlook after reporting solid Q3 growth). US equity futures (ES +0.4%, NQ +0.4%, RTY +0.4%) are all trading with modest gains this morning. The complex has been gradually moving higher in early trade, benefiting from the pressure seen in oil prices throughout the morning. There was no real driver for the action, but with markets potentially focusing on a delegation meeting (including Saudi Arabia, Turkey and Pakistan) in Tehran on Monday.

Top European News

• UK Chancellor Healey will use his budget this week to protect pensioners and those saving for their retirement as he announces plans to shield nearly one million people from paying income tax, according to The Times. Healey is expected to confirm on Wednesday that the full state pension will rise by GBP 489 to GBP 13,036, and that will be equivalent to a 3.9% rise.
• UK Chancellor Healey will use the upcoming budget to give mayors in England additional funding and powers, including a GBP 1.5bln borrowing facility, as part of plans to shift economic decision-making away from Westminster.
• UK pledged GBP 100mln for an AI Biosecurity Lab supported by OpenAI, Anthropic and Google DeepMind, as part of efforts to improve the government’s ability to understand and address risks posed by the technology.
• UK PM Burnham said he is “not proposing re-joining the EU in this parliament”, Sky’s McDaid reported; but would like to re-join at some point in his lifetime.
• UK PM Burnham rules out an early election; said, “I don’t think people want another backward looking squabble. They want me to get on with the job”, The Times reported.
• UK PM Burnham opened the door to Britain readopting the EU’s free-movement rules, according to The Sunday Times. It was separately reported that Burnham called for an ‘honest discussion’ on the free movement of people, which has sparked a furious debate over Britain readopting EU free movement rules, but rejected the idea that the UK could join the euro or the passport-free Schengen travel area, according to FT.
• UK PM’s office said the UK is to spend an additional GBP 432mln to help curb homelessness.
• Protests against the war and rising living costs took place in major Italian cities on Saturday, with some incidents of violence following recent unrest across the country.
• France avoided a repeat of large-scale violence and looting during Saturday’s protests, which involved around 110K people in a largely peaceful demonstration confined to the outskirts of Paris and another 300K nationwide. The CGT union put the total at 800K. However, isolated clashes were reported in several cities, with police using tear gas and water cannons.
• France’s National Rally reelected Bardella as party president in Orléans on Saturday with 98.98% of the vote, with no opposing candidate, while National Rally’s Le Pen vowed a national ‘renewal’ in a campaign launch.
• Moody’s maintained France’s credit rating at Aa3 with a Negative Outlook despite recent civil unrest and rising political risks, while Scope reaffirmed Italy’s rating at BBB+ with a Positive Outlook.

FX

• G10s are broadly softer against a firmer USD. The JPY underperforms, joined closely by the GBP. The EUR holds up relatively well, after France avoided a ratings downgrade from Moody’s on Friday.
• DXY softened in Asia as oil prices pulled back and yields eased, but has gradually ground higher since, and currently sits at the top end of a 101.58 to 101.82 range ahead of Friday and Thursday’s peaks at 101.85 and 101.88 respectively. The US data docket is light for the day (Dallas Fed Manufacturing, Chicago Fed National Activity), so attention turns to Wednesday’s FOMC, where money markets lean heavily towards a hold, alongside a busy week of tech earnings and any US-Iran developments. In geopolitics, President Trump said he is nearing a decision on whether to strike a deal with Iran or resume military strikes. Meanwhile, Barclays’ month-end model points to weak USD buying vs most majors, with no directional bias against EUR or JPY.
• GBP was the initial laggard this morning, but now off worst levels and remains towards the bottom of the G10 pile. Cable trades at the bottom end of a 1.3344-1.3388 range after finding resistance at the 100 DMA (1.3387), with no clear driver for the weakness apart from a myriad of UK budget leaks over the weekend and relative aforementioned EUR resilience. Focus this week is on Wednesday’s Autumn Budget, where Chancellor Healey is expected to confirm a 3.9% rise in the full state pension, while it was also reported over the weekend that PM Burnham opened the door to Britain readopting the EU’s free-movement rules.
• EUR/USD trades in a tight 1.1202-1.1227 range, holding just above the 1.12 mark, where EUR 1.2bln of options roll off at today’s NY cut. Moody’s maintained France’s Aa3 rating with a negative outlook on Friday, defying some expectations of a downgrade, while France largely avoided a repeat of the looting seen during previous protests on Saturday; further protests are planned for 31st October and 5th November. The ECB policy decision is due on Thursday.
• USD/JPY is firmer and holds towards the upper end of a 156.65-157.34 range, with USD 3.1bln of options at 158.00 rolling off at today’s NY cut. The BoJ is widely expected to keep rates on hold when it concludes its two-day meeting on Friday.
• The Antipodeans are softer; NZD/USD trades towards the bottom end of a 0.5685-0.5707 range, while AUD/USD holds within a 0.7022-0.7040 band. Both are in focus this week, with the RBNZ policy decision on Wednesday and Australian CPI also due Wednesday.
• CFTC Positioning (w/e 20th Oct): USD net long; EUR net short; JPY net long; GBP net short; AUD net short; NZD net short; CAD net short; CHF net short.
• Brazil’s Electoral Authority confirmed that Brazil’s Lula was re-elected president in the runoff vote, while Bolsonaro said extending voting hours was unacceptable, and it is impossible to acknowledge election results. Furthermore, Bolsonaro said they will ask that the election be annulled.
• PBoC set USD/CNY midpoint at 6.7162 vs exp. 6.6691 (prev. 6.7180).

Central Banks

• RBA’s Brad Jones said in panel participation at AFR Super and Wealth Summit that super tailwinds will become headwinds as members deaccumulate and that unexpected super early release poses financial stability risk. AI valuations are punchy with increasing debt and vendor financing. Geopolitical fragmentation poses new financial system risks.
• PBoC is to set up bond market NBFI swap facility to maintain bond market stability.
• Swiss Weekly Sight Deposits (w/e Oct 23) Total: 434.743bln (prev. 457.01bln); Domestic 434.743bln (prev. 435.36bln).

Fixed Income

• A slightly mixed start to the week for fixed income. Initial strength was a function of the energy pullback; however, benchmarks remain at elevated levels given the punchy rhetoric, and Dutch TTF has climbed significantly this morning, bringing the EUR 100/MWh mark into view.
• USTs were firmer by around five ticks early doors, at a 106-10+ peak, shy of last week’s highs at 106-14+ and 106-16+ from Friday and Thursday respectively. This week is, of course, dominated by the Fed on Wednesday. Ahead of that, geopolitics will continue to influence, and by extension the recent growth/inflation discourse will feature, before PCE post-Fed.
• OATs opened higher by around 70 ticks, after Moody’s maintained the rating, an Aa3, Outlook Negative rating that is one notch higher than both S&P and Fitch’s assessment of France. The hold was broadly on the assumption that a deficit-reducing budget will at some point be adopted. Given the challenging political and deteriorating fiscal backdrop in France, this was perhaps a stay of execution rather than a change in the narrative; next, we have S&P on November 27th.
• Upside that has largely held for OATs, and by extension the OAT-Bund 10yr yield spread has narrowed by almost 8bps today, after narrowing a similar amount on Friday, taking it to a 158bps low, vs Friday’s 176bps recent peak. However, MTD, it remains wider by over 30bps.
• Bunds in-fitting with USTs directionally, saw a slightly larger pullback in early hours and is hit by around 30 ticks at the time of writing, a function of the mentioned gas strength and as we look to this week’s ECB, with Moody’s hold on France removing one of the arguments for a, relatively speaking, more-dovish confab. Currently, at a 121.87 low.
• Finally, Gilts opened with very modest gains, before succumbing to the regional pressure and slipping by around 10 ticks. However, Gilt action is comparably a touch more contained, as focus remains firmly on the budget, while weekend press updates on that and UK PM Burnham’s approach to the EU were unsurprising, but still a net-supportive factor for the benchmark.
• Schneider Electric (SU FP) to sell EUR-denominated notes in a six parter.

Commodities

• Crude benchmarks are lower by over 1.5% this morning, extending on the pullback seen in the Asia-Pac session. WTI Dec’26 currently holds at the bottom end of a USD 100.60-102.63/bbl range, whilst Brent Jan’27 trades at the lower end of a USD 109.22-110.98/bbl band. However, both benchmarks remain comfortably within Friday’s broad ranges (WTI: USD 98.84-103.92/bbl; Brent: USD 108.33-112.45/bbl), when crude surged and both benchmarks closed near the top of their ranges.
• The gradual pressure in the crude complex lacks a clear driver, but markets may be focusing on a meeting in Tehran on Monday between senior officials from Saudi Arabia, Turkey and Pakistan and their Iranian counterparts, to discuss regional coordination. On the diplomatic front, Iran’s FM Araghchi proposed a 7-day plan to reopen the Strait of Hormuz, subject to conditions, while US President Trump said he is nearing a decision on whether to negotiate a deal with Iran or resume military strikes. The pullback in crude has helped lift broader sentiment across equities this morning.
• Dutch TTF bucks the trend and is firmer by c. 3%, holding towards the upper end of a EUR 94.25-97.64/MWh range. The contract has climbed steadily throughout the Asia-Pac session and into the European morning, although it has eased slightly from its session peak. There has been no clear headline catalyst for the move, although colder weather forecasts have been cited as supportive, while the European gas benchmark remains underpinned by ongoing LNG disruptions and low EU storage levels heading into the winter period. Elsewhere, Iran’s President is set to visit Russia today to attend the gas exporting countries’ summit, while Goldman Sachs last week said it still sees upside risks to its year-end TTF forecast of EUR 70/MWh. Across the Atlantic, Henry Hub futures are a touch lower, within a USD 2.932-3.026/MMBtu range.
• Precious metals are firmer, with spot gold back above the USD 4k/oz mark and holding at the upper end of a USD 3,978-4,022/oz range, after trading sideways just beneath that level overnight, as participants await this week’s central bank announcements, including the FOMC on Wednesday. Spot silver trades within a USD 53.62-54.41/oz band.
• 3M LME Copper is little changed and sits at the top end of a USD 14,247.78-14,361.18/t range.
• US CENTCOM said it helped Gulf states export more than 1.5bln bbls of oil since the summer.
• Libya reopened the oil pipeline from the Hamada and Tahara oilfields to Zawiya. It was also reported that Libya’s NOC reopened the Brega refinery following its closure for maintenance.
• United Arab Emirates closed additional beaches amid concerns over environmental and health impacts following an oil spill in the Persian Gulf.
• IEA chief Birol said he doesn’t see any credible pathway for energy markets to return to pre-Iran war levels in 2027.
• Iranian President is to visit Russia today to attend the gas exporting countries’ summit, Tasnim reported.

Trade/Tariffs

• EU reportedly plans to hit China with import curbs on chemicals and furniture, Bloomberg TV reported; to present new curbs on China trade as early as Q1’27.
• US President Trump defended his decision to impose tariffs during a campaign rally in Georgia, claiming they had made the US richer. He announced that Volkswagen (VOW3 GY) had agreed to build a new USD 4.2bln Audi plant in the state. Trump added that his administration had “many other announcements” to make following the announcement of Volkswagen AG’s plans to build the factory.
• US President Trump said they are getting close to a deal with Canada and that a deal could come before the elections.
• White House economic adviser Hassett said US trade negotiations with Canada had picked up and were “gathering steam”, according to an interview with Fox News.
• China said it “firmly opposes” a US Treasury proposal to expand the scope and severity of restrictions on US investment in China, describing the measures as discriminatory and “a typical example of an overly broad application of national security concerns”. China’s MOFCOM added that the proposed restrictions ran counter to the “important consensus” reached by the two countries’ presidents and would harm bilateral economic and trade cooperation, as well as US companies’ interests, while it added that Beijing will closely monitor developments and reserves the right to take corresponding measures.

Geopolitics: Iran

• US President Trump said it was “getting to be decision time” on whether to strike a deal with Tehran or resume attacks, stating, “I have a decision to make: Do I finish it off, which would be very easy to do, or do I make a deal? That’s all,” according to an interview with Fox News’ Sunday Morning Futures.
• US President Trump reiterated on Sunday that the Iran conflict will be ending soon one way or another, while he said higher oil prices are a small price to pay for preventing Iran from acquiring a nuclear weapon and that there won’t be a strike on Iran ‘today’.
• US President Trump’s administration’s senior intelligence official warned in a memo that Iran had ramped up efforts to target US personnel, adding that lethal plots by Tehran against US citizens had reached “advanced stages”.
• US ordered the departure of diplomatic personnel and adjusted staffing at embassies across the Middle East due to Iranian efforts to target Americans and threats from Houthi militants in Yemen, according to a US official.
• US official said that they have put together an expanded list of bombing targets in Iran, which include energy and economic infrastructure, while it was also reported that Israeli PM Netanyahu could order a strike on Iran even if he loses the election, according to The New York Times.
• Senior officials from Saudi Arabia, Turkey and Pakistan are expected to meet with Iranian officials in Tehran on Monday to discuss regional coordination, according to Sabereen News.
• US forces in the Middle East are reportedly prepared to launch major strikes against Iran within 96 hours of US President Trump’s approval, CNN reported. US officials familiar with military planning say it is a question of when, not if, Trump orders renewed strikes against Iran; action likely to be after midterms. “Officials say that Trump has not made up his mind on what he will do after the midterms but that he appears to be leaning toward ordering major action”.
• Iran’s Foreign Minister Araghchi proposes a 7-day plan to reopen the Strait of Hormuz with conditions, while he stated that US military aggression and sanctions are key obstacles, adds energy cooperation with Russia boosts security and exports.
• Iranian Foreign Minister said the Qatari delegation’s visit to Iran is within the context of talks in the region. Adds that, US sanctions will impact on regional ties. Consultations are continuously underway with Pakistan to resolve technical problems more quickly.
• Iran’s FM spokesperson Baghaei, in response to the claim of a negotiation proposal from the Europeans, said “apart from a statement emphasizing the importance of negotiations, we did not see any specific proposal from the Europeans”.
• Iran’s FM spokesperson said “Iran has never closed the window of diplomacy and has been steadfast in implementing international agreements, but the history of America’s reneging on commitments cannot be ignored”.
• Iranian Foreign Minister Araghchi said “fundamental and strategic changes” in the region mean “nothing will be the same” after the 40‑day war, including management of the Strait of Hormuz, while he stated that Tehran’s policies will not change “whether war breaks out or not” and warned against a military attack on Iran.
• Iranian Foreign Ministry spokesperson Baghaei criticised US Secretary of State Rubio’s accusations of piracy against Iran and stated that the US takes pride in piracy itself.
• Iranian officials warned their targets will include US diplomats if the US returns to war, according to NYT.
• Iran’s head of the Parliament’s Civil Engineering Commission said that the Strait of Hormuz is completely under Iran’s control, adding that they are increasing speed of oil price growth in the coming days.
• Iran is reportedly launching missiles at ships, according to Open Source Intel.
• Iranian activist on Telegram posted an IRGC launcher in Sirik was hit by a missile from an unknown fighter jet minutes after firing a missile towards the Strait of Hormuz.
• Iranian Foreign Ministry Spokesperson Baghaei said the outcome of Israel’s elections does not matter to Tehran.
• Israeli Defence Minister Katz denies plans to attack Iran before the elections, N12 reporters say, citing sources.
• Israeli PM Netanyahu told Israel’s Channel 14 that they will strike Iran again. In relevant news, Israeli PM Netanyahu and IDF Chief Zamir reportedly clashed over a proposed military action against Iran as Netanyahu wanted to strike Iran before the elections, while Zamir requested further discussions and warned of escalation just two days before Israel’s election, according to Channel 12.

Geopolitics: Saudi-Houthi

• Houthis say they targeted Saudi Arabia’s East-West crude oil pumping stations with drones and also attacked King Khalid International Airport in Riyadh, although there is no immediate confirmation from Saudi Arabia.
• Houthi media outlets report airstrikes targeting locations in Sanaa, Yemen.
• Saudi-led coalition said it carried out military operation against Houthi targets in Yemen to neutralise sources of threats, while operation destroyed five ballistic missile storage facilities and four missile launch platforms in Houthi-controlled areas.
• Saudi-led coalition said it destroyed two missile launchers in Yemen’s Sanaa and that one had targeted Riyadh.
• “A fire broke out at the Rabigh refinery (400k BPD) in Saudi Arabia after the Yemeni armed forces targeted the refinery”, Sabereen News.

Geopolitics: Ukraine

• US President Trump said US-Russia-Ukraine three-way talks are to take place very soon and that he believes both sides want a deal.
• Ukrainian President Zelensky said the US, Russia and Ukraine plan trilateral technical talks in November, while he stated that Kyiv will not trade anything in exchange but is willing to hold talks and that territorial issues must be handled at the leaders’ level, although other matters can be handled by technical working groups.
• Russia’s Defence Ministry said Russian forces hit a cargo vessel in the Black Sea.
• EU leaders are preparing to come to a deal on around EUR 45bln of support for Ukraine by end-2026, Politico reported citing sources; as a loan, guaranteed by the existing EU budget.

Geopolitics: Other

• North Korea said it sent a letter to the UN Security Council saying South Korea fabricated mine explosion incidents to delay and impede North Korea’s border fortification, according to KCNA. South Korea’s provocation, such as opening fire on North Korean service personnel, is a violation of the UN Charter.

Crypto

• Bitcoin is a touch firmer this morning and trades just above the USD 80k mark; Ethereum is also mildly stronger, and sits around USD 2.3k.

US Event Calendar

• 08:30: Sept. Chicago Fed Nat Activity Index, est. -0.10, prior -0.04
• 10:30: Oct. Dallas Fed Manf. Activity, est. 8.8, prior 9.8
• 11:30: US to sell $95 billion 13-week bills and $82 billion 26-week bills
• 13:00: US to sell $69 billion 2-year notes

Central Bank Speakers

• None: the Fed is in its external communications blackout ahead of Wednesday’s FOMC decision

DB’s Jim Reid concludes the overnight wrap

As we hit the last week of October, markets are continuing to grapple with three major themes: France, Iran and AI. Although less relevant for DM investors, Brazil’s surprise election result overnight, which could lead to a -25% currency adjusted decline in Brazilian equities today if overnight derivative contracts are a guide, will also be one to watch. So lots going on and also a busy week ahead around the globe. So for those who saw their clocks go back this weekend, I hope you used it for an extra hour of sleep!

Although several hundred thousand people marched and protested in France over the weekend, the more extreme scenes of the previous weekend were absent, suggesting the authorities have regained some control of the situation. France also got a boost on Friday night as Moody’s defied market expectations and maintained their Aa3 rating (negative outlook) on the sovereign. The expected one-notch cut would only have taken it in line with S&P’s A+, so shouldn’t have been too destabilising. The Euro spiked a couple of tenths very late on Friday immediately after the news and is +0.13% higher this morning, with French bond futures rising nearly three-quarters of a point.

Next the Middle East. This is likely to remain one of the main market focuses this week, with the pause in direct US-Iran fighting looking increasingly fragile. Reports from various media suggest Washington and Israel are considering renewed strikes after the US midterms, which are only 8 days away now, against a backdrop of a larger US military presence in the region, reduced diplomatic staffing and increasingly forceful Iranian warnings about retaliation. Trump said to Fox yesterday that it’s “getting to be decision time” on whether he will resume attacks or make a deal. At least the deal part is still part of the conversation.

Meanwhile, disruption around the Strait of Hormuz remains a key market risk, particularly after last week’s renewed rise in oil prices. Before the US vote comes Israel’s election tomorrow, the sixth since 2019, with the final polls still pointing to deadlock: neither Netanyahu’s bloc nor the opposition appears close to the 61 seats needed for a majority, while Eisenkot’s opposition has a modest lead in the latest polling averages. Protracted coalition talks or fresh elections are reasonable risks. Netanyahu has said he does not favour a pre-emptive strike on Iran before the election, but has left the post-election position open. A result that weakens Netanyahu could lower the immediate odds of Israeli-led escalation, whereas another stalemate — or a Netanyahu-led coalition — could leave the incentive for renewed military action intact.

The third theme is AI, and this week should provide an unusually important test of the recent concerns around the sector. Alphabet and Microsoft report on Wednesday, with Amazon following on Thursday, so the market’s reaction to their results and, especially, the latest capex plans could rival Wednesday’s FOMC for top billing. Indeed, given the recent AI-related market wobbles, the earnings may ultimately matter more for markets than the Fed, the ECB meeting on Thursday or the BoJ on Friday. September’s important PCE comes the day after the FOMC, so will have a bit less impact than normal but will count heavily towards the December FOMC. Other US releases include Thursday’s US Q3 GDP. Elsewhere, Wednesday also brings the UK Autumn Budget, where those of us in this country will keep a careful eye on what the Chancellor has in store for our taxes! Friday is particularly busy in Europe, with flash October inflation and preliminary Q3 GDP releases.

Focusing in on the US week ahead now, our economists expect the Fed to leave rates unchanged on Wednesday. Futures are pricing in less than a 10% chance of a hike after briefly spiking above 50% less than a couple of weeks ago after the CPI print. The interest will therefore be in Chair Warsh’s press conference and how the Fed balances still-elevated inflation and solid growth against the recent tightening in financial conditions. Our economists expect the statement itself to contain only limited changes, although dissents to a hold are possible. The broader message is still likely to be hawkish: our economists think recent inflation data support the case for further tightening over time, even if the Fed chooses to pause this week. They also expect Warsh to make clear that tighter financial conditions are not a substitute for higher policy rates.

The US data should matter for that debate too. Tomorrow brings September durable goods orders and October Conference Board consumer confidence, with our economists expecting durable goods to remain firm, helped by aircraft orders and AI-related capex. The biggest data day is Thursday, when September personal income and spending, PCE inflation and the advance Q3 GDP estimate are all released. Our economists are tracking September core PCE at +0.36% MoM, equivalent to 3.14% YoY absent revisions, although revisions to some August PPI components could keep the annual rate from rounding up to 3.2%. Our economists expect Q3 real GDP growth of +3.3% annualised, up from +2.2% in Q2. On Friday, the Q3 employment cost index will provide an important read on labour-cost pressures; a strong upside surprise would make it harder to maintain the view that the labour market is not adding to inflation pressure.

Elsewhere in the US, today brings the September Chicago Fed national activity index and October Dallas Fed manufacturing survey. Wednesday also sees the September advance goods trade balance and retail inventories, while Friday brings October MNI Chicago PMI. Other large US reporters during the week outside of Microsoft, Alphabet and Amazon include Visa, Coca-Cola, Boeing, Mastercard, Intel, Caterpillar, Eli Lilly, ExxonMobil and Chevron.

Globally, central banks dominate. Our economists expect the ECB to keep policy rates unchanged on Thursday (see here), following tomorrow’s bank lending survey. Our Chief Japan economist expects the BoJ to hold on Friday (see here). The market is pricing less than a 3% probability of either hiking. However, it’s an 85% and 88% probability of the Bank of Canada and Reserve Bank of New Zealand of hiking on Wednesday.

Europe has a particularly busy end to the week but before that Germany’s October Ifo survey is out today and November GfK consumer confidence on Wednesday. On Friday, flash October inflation is released across the region: our economists expect headline CPI of 2.92% YoY in Germany, 3.58% in France and 4.95% in Italy. Preliminary Q3 GDP figures for Germany, France, Italy and the Eurozone are also due on Friday. In the UK, the main event is Wednesday’s Autumn Budget.

In Asia, China’s Central Committee plenum runs through to Thursday, while September industrial profits are released tomorrow. Japan has a heavy Friday calendar, including October Tokyo CPI, September unemployment, the job-to-applicant ratio, retail sales, industrial production and housing starts, alongside the BoJ decision. Australia’s September CPI is due on Wednesday.

Politics adds another layer. The market will react to Brazil’s shock election result today that we mentioned above and go into detail on below, Israel holds legislative elections tomorrow, the EU-Canada summit takes place on Thursday and Friday, and the G20 foreign ministers meet in Atlanta on Friday and Saturday.

Finally, it is a major global earnings week beyond US megacap technology. SK hynix (Wednesday) and Samsung Electronics (Thursday) earning will have global ramifications from the tech sector, while healthcare earnings includes Novartis, Eli Lilly, AbbVie, AstraZeneca and Sanofi; energy includes Shell, TotalEnergies, ExxonMobil, Chevron and BP; and autos include Porsche, Ford, Mercedes-Benz and Volkswagen.

In Asia, the KOSPI (-0.90%) is leading declines as weakness in technology shares weighs on sentiment. Elsewhere, the Nikkei (-0.34%), CSI 300 (-0.47%), and Shanghai Composite (-0.09%) are also trading moderately lower. In contrast, the Hang Seng (+0.51%) and S&P/ASX 200 (+0.17%) are outperforming and bucking the broader regional trend. S&P 500 (+0.20%) and Nasdaq (+0.24%) futures are higher.

In Brazil, President Lula pulled off a remarkable and genuinely market-moving comeback overnight, winning a record fourth term by 51.8% to 48.2% against Flávio Bolsonaro, despite having lost the first round 45.1%-47.0% three weeks ago. It is the first time since Brazil returned to direct presidential elections in 1989 that the first-round runner-up has gone on to win the runoff. The result wrong-footed a market that had increasingly priced a Bolsonaro victory. A Tokyo-listed ETF tracking Brazilian equities fell around -15% in Asian trading, with the real also tracking a -10% decline according to derivatives. Bolsonaro had been viewed as the more market-friendly candidate and, after right- and centre-right parties increased their Senate share from 47% to 63% in the first round, investors had been anticipating a better chance of fiscal consolidation. Lula, by contrast, has promised an adjustment without yet specifying how it will be delivered. The important medium-term point, however, is that the rightward shift in Congress remains even after Lula’s victory, which should constrain the administration’s ability to pursue a materially looser fiscal agenda. So once the immediate election premium and Bolsonaro’s challenge to the result are digested, the bigger question for Brazilian assets will be whether Lula can use that congressional constraint to establish a credible fiscal path. That matters, especially with debt concerns already keeping rates high.

Recapping last week now, markets grappled with several risks including the French fiscal situation, AI growth fears, and a fresh jump in energy prices. We’ll dive into each, but in terms of the size of the market moves, the French situation saw the biggest reaction. In fact, the weekly widening in the Franco-German 10yr spread was still +29.5bps, even as it retreated by -6.8bps on Friday. That came as France’s 10yr OAT yield climbed +21.5bps last week to 5.01%, whilst the 10yr German bund yield fell -8.0bps to 3.34%. So that left the spread at 167bps, not far off from its closing peak during the Euro Crisis, when it moved as high as 189bps. Other assets struggled as well, with both the CAC 40 (-2.19%) and the STOXX Banks (-5.10%) falling to their lowest level since March and June, respectively, although the STOXX 600 saw a comparatively smaller decline of -1.39% (-0.31% Friday).

As that was happening, several AI names remained under pressure last week, with the Philly semiconductor index losing ground for a third consecutive week, falling -3.21% (+0.44% Friday). And, in turn, losses for chip stocks dragged down US equities more broadly, with the NASDAQ down -0.71% (-0.21% Friday), whilst the S&P 500 fell -0.47% (-0.52% Friday). The individual decliners included CoreWeave, which fell -11.65% (-2.46% Friday), and whose 5yr CDS rose another +19bps last week to 1146bps. Meanwhile, Meta’s share price fell -9.40% last week (-0.96% Friday) following its earnings, and its 5yr CDS rose +22bps to 127bps.

Elsewhere, Brent crude oil prices rose for a 3rd consecutive week, up +6.24% (+3.14% Friday) to $116.72/bbl, closing in on its $118.35/bbl post-2022 peak reached in March. Moreover, European natural gas futures also hit a post-2022 high of €93.85/MWh, having risen +7.20% last week (+4.23% Friday). That came as fears mounted about a wider escalation in the Middle East, including a New York Times report which said that the US and Israel had drawn up plans for renewed strikes against Iran after the midterm elections.

Amidst all that, US Treasuries put in a strong performance, with the 10yr yield down -7.9bps last week (+4.1bps Friday) to 4.99%. Otherwise, the Euro weakened somewhat against the Dollar, falling -0.33% last week to $1.1202. And in credit, spreads widened across the board, with US HY (+6bps), EUR HY (+40bps), US IG (+5bps), and EUR IG (+15bps) all widening. Indeed, for US HY, it was the 6th consecutive weekly widening, which is the first time that’s happened since 2022. The headline moves understated the decompression down the rating spectrum: Euro BBs widened +26bps and Bs +46bps, while CCCs were +105bps wider. US BBs widened just +3bps and Bs +8bps compared with +59bps for CCCs. So one of the clearer messages from the week was that the pressure remains concentrated in the weakest credits rather than representing indiscriminate HY selling, especially in the US.

Europe’s political elite is belatedly confronting the electoral cost of deindustrialization, as right-wing gains in local elections expose surging voter anger over globalist policies that have crushed the industrial base. The push to curb cheap Chinese imports suggests Brussels is scrambling for political survival, as Nomura analysts recently said elections across the continent over the next year and a half are expected to shift right.

Bloomberg reports that the EU is preparing restrictions on imports of chemicals, furniture, and machinery from China, expanding efforts to shield domestic manufacturers and narrow the massive trade deficit with China, which stands at $404 billion. The report cited people familiar with the matter.

“Our industries have called for action and we have heard them, and we will respond, including some more safeguards,” Commission President Ursula von der Leyen said earlier this month.

The proposed safeguards build on earlier news that Brussels aims to implement the Chinese hybrid vehicle cap in December to shield the EU’s crumbling automotive industry, as cheap overseas cars gain market share and leave domestic companies like VW laying off tens of thousands of workers.

Brussels has finally chosen to move up the “escalation ladder” with China, risking retaliation from Beijing as its own political power appears to be eroding across Europe after decades of backfiring globalist policies that have left the continent with a hollowed-out industrial base.

EU trade chief Maroš Šefčovič is expected to discuss trade with Chinese counterparts early next year, as Brussels must perform a delicate balancing act to avoid provoking Beijing into imposing export restrictions on critical materials and permanent magnets.

Earlier this month, we first reported “Better Late Than Never?” and our verdict was “just 10 years too late.” The more interesting question is how far Brussels is willing to climb up the escalation ladder with Beijing.

Deutsche Bank’s Marion Muehlberger answered that in a ten-question Q&A published earlier this month, ahead of Šefčovič’s trip to Beijing, titled “Crunch time for EU-China trade relations” (available to Pro subscribers). The centerpiece is a single table, which may be the most useful cheat sheet on EU-China trade policy we have seen: every tool Brussels could deploy against Beijing, ranked from most to least likely, with the precedent and the catch for each one.

So far Brussels is willing to raise tariffs and cap imports. But the higher it climbs up the escalation ladder, the greater the risk that Beijing pulls the rare earth supplies, starving the very factories European elites are scrambling to save. 

Authored by Philip Marey via Rabobank,

Summary

• We expect the FOMC to remain on hold in October. However, we are likely to see Hammack, Kashkari and Logan repeat their July dissents in favor of a hike at this meeting.

• At the press conference, we expect Warsh to repeat the hawkish form of not providing forward guidance that he presented at Jackson Hole. He may say that the inflation data do not tell him that underlying trends have meaningfully improved, without explicitly stating that a rate hike is coming soon.

• After skipping October, we expect the FOMC to hike at the next meeting in December.

• Our baseline forecast for 2027 is that the Fed remains on hold, in line with the most recent dot plot, but the risk is to the upside as we expect inflation to rise further in the coming months.

Introduction

The next meeting of the FOMC takes place on October 27-28. We expect the Committee to keep the target range for the federal funds rate unchanged at 3.75-4.00%. However, we do not expect this decision to be unanimous. We are likely to see a repeat of the dissents by Hammack, Kashkari and Logan at the July meeting, in favor of a hike. At the press conference, we expect Chair Warsh to stick to his principle of not giving forward guidance, but we also think that he will do this in a hawkish way. There will be no update of the economic projections in October, the next is in December.

On hold, with hawkish dissents

At the previous meeting in September, the FOMC unanimously raised the target range for the federal funds rate by 25 bps to 3.75-4.00%. The economic and rate projections provided by the Committee also showed a hawkish shift in the Fed’s reaction function. After hiking in September, skipping October has the benefit of observing more data before the next move. Hiking in December will get the federal funds rate where the median FOMC participant thinks it should be by year-end. Several Fed speakers have also recently indicated that they are not in a hurry. Skipping October also has the benefit of avoiding raising rates less than a week before the midterm elections. The party of the President usually loses seats in the midterms and a rate hike may not lead to a better election outcome. What’s more, President Trump has made clear he actually wants the Fed to lower rates. Of course, the FOMC will deny that the midterms played a role in their decision, as they should.

We expect the FOMC to remain on hold in October, but this is not likely to be a unanimous decision. We are likely to see Hammack, Kashkari and Logan repeat their July dissents in favor of a hike at this meeting. Note that there were four dots in the September dot plot indicating two additional hikes of 25 bps before the end of the year. Skipping October would make this impossible (with 50 bps in December a less likely move), so there are four FOMC participants who don’t want to remain on hold in October, given that recent inflation data have likely bolstered their view. We think that three of these are actually voters, the three dissenters from the July decision to be precise.

Another hawkish form of no forward guidance?

Regarding the next meeting in December, Kevin Warsh has been consistent in refusing to give forward guidance during post-meeting press conferences and other public appearances.

Therefore, we expect him to stick to this principle at the October press conference. However, he is likely to repeat the hawkish form of not providing forward guidance that he presented during his Jackson Hole speech. In his take on the economy, we expect him to repeat that underlying trends in inflation have not meaningfully improved, without explicitly saying that the next hike is coming soon.

We expect the next hike in December. There seems to be strong support for this in the Committee and we expect the inflation data to solidify this support. Given recent developments in oil prices, CPI inflation is likely to rise further, which should raise the probability of a December hike.

Conclusion

Looking further ahead, to 2027, the risks to our baseline scenario that the Fed remains on hold are to the upside. In the September dot plot, the median FOMC participant expected to remain on hold in 2027, after one more hike in 2026. In contrast, futures markets have priced in about three hikes from now. If inflation climbs further due to the recent rebound in oil prices, the median FOMC participant may start to consider an additional hike in 2027, instead of remaining on hold. Our baseline scenario is that after a long pause, the Fed will start cutting in 2028.

Based on our energy price forecasts, we expect CPI inflation to fall to 2.2% in the final quarter of 2027. This should open the door to the first rate cut in the first quarter 2028 (we have pencilled in March). Although outside the scope of the table below, we expect the second cut in March 2029 and the third cut in March 2030.

Based on the resilience that the economy has shown this year, we think that the terminal target range for the federal funds rate is 3.25-3.50%, which means that the FOMC will not cut as far as they now expect (until 3.2%).

On Monday, X-energy (XE) signed its second Amazon-backed reactor project in the US, a 960MW, 12-unit plant on the site of a retired AEP coal plant in Indiana. The same day, its stock sat at $10.36, the bottom of its 52-week range and 71% below its high.

That, in one sentence, is the state of the nuclear renaissance in October 2026: the customers have never been bigger, and the shareholders have never been more nervous.

Regular readers know we have been tracking the AI-nuclear trade since before Microsoft agreed to restart Three Mile Island back in September 2024, and lately we have been fixated on the growing gap between the physical market and the tickers, first in “The Nuclear Renaissance Disconnect: Utilities Plan Big While Stocks Lag” (Sept 22) and then a week later in “Uranium Term Prices Hit A Record… So Why Is Nuclear Getting Nuked?” Since then the gap has only widened. Goldman’s clean-tech team led by Brian Lee put a number on it in its latest Nuclear Nuggets: Global reactor tracker (available to pro subs):

Nuclear equities materially underperformed the broader market over the past three months, with our nuclear coverage averaging a -21% return over the period compared to the S&P 500, which returned +3%. Similar to prior quarters, performance varied across the group, although weakness was broadly spread across both SMR and uranium-exposed names. In particular, OKLO declined 29%, the weakest performance in our coverage, which we attribute to continued risk-off sentiment toward advanced nuclear developers and limited near-term commercial catalysts.

And the shorts smell blood: NuScale (SMR) saw the largest jump in short interest, up 16% in a month, while Uranium Energy (UEC) saw some covering (-14%), which Goldman reads as “relatively more constructive positioning toward uranium-focused names.” Translation: if you must own nuclear, own the rocks, not the PowerPoints.

And that was the good part. Goldman’s data run to Oct 9. The week that followed was much worse.

Four Weeks, Nine Deals… And A Sell-The-News Puke

Start with what the buyers have done. Between Sep 22 and Oct 20, the hyperscalers and Washington signed, funded or floated at least nine US nuclear deals, from Google’s uprates at Georgia Power to Amazon’s 20-year Calvert Cliffs PPA with Constellation (CEG), the DOE’s ~$4 billion uprate loan to Vistra and, the big one, Google’s 3,590MW deal with Constellation, 890MW of which is new capacity squeezed out of 11 existing reactors.

The deal flow surprised even the people paid to forecast it. Here is Scotiabank’s utilities team (Andrew Weisel et al) in its latest Scotiabank Circuit (also available to pro subs), with a rare mea culpa:

For each of these data center announcements, we admit that we incorrectly expected a news flow drought until after midterm elections, making these updates seem like more positive proof points that demand for long-term nuclear and data-center contracts remains robust.

Scotia crudely estimates the Google deal alone could add “as much as $2/sh of EPS (+~10%)” for Constellation, and says the two contracts make CEG “the leading U.S. IPP by data center-contracted capacity.” Taiwan’s Yuanta went further, calling Google’s multi-reactor deal the template for a “revaluation of existing nuclear power assets,” and illustrating it with a chart it credits to, ahem, Zero Hedge.

So how did the stock react to becoming Big Tech’s nuclear landlord? Well, CEG traded above $300 on the Google headline on Oct 6. Two weeks later it was at $263, down 7.4% last week alone and 26.4% YTD, per JPMorgan’s Jeremy Tonet, whose Sparks & Quarks note offered the simplest explanation of all: on Wednesday, “our trading desk saw supply in CEG, with investors reducing exposure post contracting wins.” Sell the news, buy… some story stock with momentum and an Div/0 PE ratio.

Part of the problem is that the easy megawatts are spoken for. Raymond James (J.R. Weston), raising its CEG target to $341, notes that the Amazon and Google agreements “have largely committed the ~1 GW of nuclear uprates within CEG’s ~5-GW PJM Cycle 1 pipeline, leaving ~4 GW of gas, storage and other development opportunities,” and that additional uprates “likely face longer interconnection timelines.” The other part is that pricing on the new PPAs is undisclosed, and the market (as it so often does) has assumed the worst.

CIBC, which initiated on both CEG ($358 PT) and Talen (TLN, $499 PT) last week, thinks that’s a mistake: in its view the market “still assigns insufficient value to CEG’s contracting upside,” while TLN’s valuation “implies minimal upside from data centre deals.” HSBC, launching coverage of 28 US utilities this week, rates all four IPPs (CEG, NRG, VST, TLN) a Buy. Echoing virtually every other sellside desk, then, the Street loves what the tape hates.

The Cheapest Nuclear Megawatt Is The One Already Built

If there is one trade the past four weeks clarified, it is the uprate. New nuclear remains brutally expensive and slow; squeezing 5-20% more out of a reactor that is already licensed, already staffed and already on the grid is neither. As Scotiabank puts it, “though new nuclear build remains challenging, we’re impressed with recent nuclear uprate activity.” The NRC lists ~30 expected uprate applications through 2032, totaling ~2.4GW, led by Constellation (12), Duke (5), Southern (4) and Vistra (4). And that data predates the Amazon, Google and DOE deals.

We made the same point with numbers when the Google deal hit, when we put out this chart: gas is still the cheapest firm capacity on a $/kW basis, but the grid queue is now up to 4.5 years, while restarts and uprates sit on sites that are already connected.

UBS’s Jon Windham lays out the full US pipeline in his latest X-energy note: 2,421MW of planned uprates against a 5,000MW target by 2030, another 2,255MW of restarts (Palisades, Crane/TMI-1, Duane Arnold), and some 14GW of large new build that, apart from VC Summer, still has an FID date of “TBD.” Put differently, the US is about halfway to its uprate goal with four years to go, which is why every federal dollar and every hyperscaler check is now chasing the same few reactors.

Why are the owners of those reactors suddenly so valuable? HSBC’s Meike Becker answers in one sentence, in the bank’s 210-page US Utilities initiation:

Between nuclear tax credits, which provide an inflation adjusted floor at c45USD/MWh and rising, the explosion of capacity payments in PJM, which provide an uplift of c14-15USD/MWh to market prices, rising PJM forward prices of 60+USD/MWh and now long-term PPAs, the profitability of US nuclear has dramatically increased and been derisked.

HSBC models Constellation’s implied nuclear price rising from the mid-$40s/MWh in 2022-24 to the mid-$80s by 2029/30, assuming 75% of the fleet is contracted by 2032 at “c75+USD/MWh for existing assets and higher for extensions.” The catch, as HSBC flags, is that the PTC is only guaranteed through 2032, and “affordability pressure and regulation” could slow contracting.

A word of caution on the bigger picture: BloombergNEF’s latest outlook (via Needham) sees just 13.7GW of US nuclear additions through 2036, mostly restarts, uprates and a handful of conventional projects, versus as much as 67.8GW of new gas through 2030. In other words, nuclear wins the contracts, gas wins the volume, at least for this decade.

SMRs: Amazon’s Money, Shareholders’ Problem

Which brings us back to X-energy, and to the anchor of this week’s flow, BTIG’s Energy Transition Blog (Greg Lewis and team):

AEP signed a joint development agreement with X-energy to evaluate feasibility of a ~960MW nuclear energy project in Indiana. The project is backed by an Amazon funding agreement, and AMZN plans to enter a long-term PPA if the project reaches positive FID. Located at a former coal plant, XE would initially install 12 SMRs (~80MW each), part of a broader agreement with AMZN to add over 5GW of nuclear capacity to the US grid by 2039.

Note the “if.” UBS calls the AEP deal “a significant positive” and reminds us that Amazon owned ~23% of XE’s Class A shares as of June 30, which helps explain who keeps signing XE’s customer agreements. JPMorgan says the deal delivers on the 1GW announcement management promised on its 2Q call, but wants “firm contracted offtake, financing structure, capex, and licensing timeline” before investor confidence returns. Near term, UBS says, the focus stays on XE’s Seadrift project in Texas, expected to receive construction approval in early 2027. Meanwhile XE, which filed for its IPO in March and listed in April, now trades at a $4.1 billion market cap, give or take a few Amazon PPAs.

Then there is Deep Fission (FISN), which plans to drop reactors a mile down a borehole. BTIG notes it firmed up a master energy purchase agreement with the Great Plains Development Authority for a 150MW first phase in Kansas, targeting COD in 3Q28 and up to ~2GW later. Canaccord’s George Gianarikas, who rates it a Buy, read the fine print in his “Digging deeper”  note: the agreement “binds Deep Fission to supply power once licensed and operating, while the GPDA has no minimum purchase obligation.” And the cash: ~$72 million at the end of 3Q, ~$40 million by year-end, overhead of ~$3 million a month and, per management, “about $90 million yet to get to spent” on the pilot. Canaccord expects “the company to need additional capital.” So do we. The analyst’s defense of the sector is worth quoting, if only for the prose:

In this nuclear arena, perfection is a ghost. Every contender bears its own vulnerability.

The market’s verdict was less poetic. Needham’s Power & Infrastructure Weekly shows its nuclear reactor basket fell 19.2% in the week to Oct 16, the worst subsector in its coverage, and is now down 50.6% over six months and 74.6% over twelve. The fuel-cycle basket is down 76.3% over a year.

Needham’s diagnosis: “We view the weakness primarily as a repricing of financing and execution risk rather than deteriorating power demand,” with data center capex “increasingly being underwritten above $13MM/MW” and dilutive converts (CIFR’s surprise $850 million) setting the tone. Oklo (OKLO), at $27.97, is now 84% below its 52-week high; NANO Nuclear (NNE) is 74% below; Centrus (LEU) 72% (more on that in the final chart below).

And the issuance pipeline isn’t closed. Buried in the Nuclear Nuggets disclosure appendix: Goldman “is acting as a manager or co-manager of a pending underwriting” for Oklo (ironically, in the same note in which it cut its Oklo price target to $49 from $57).

It isn’t all dilution and despair. Goldman’s SMR tracker logged real licensing progress: the NRC issued the first US construction permit for a BWRX-300 at TVA’s Clinch River site (Sep 30), Holtec filed its Preliminary Safety Analysis Report for two SMR-300s at Palisades, and Blue Energy filed its first construction permit application. On the other side of the ledger, Bechtel will step away as EPC contractor on TerraPower’s Natrium project after the current phase (as we covered when it hit), a reminder that the hardest part of nuclear is still pouring the concrete. Reuters reported this week that SMR developers are scrambling to lock in EPC partners precisely because, as the Breakthrough Institute’s Adam Stein put it, most “have no internal knowledge of how to build a large facility.”

Indiana, meanwhile, is turning into the nuclear capital of the Midwest, at least on paper. Besides XE/AEP, AtkinsRéalis signed an MOU with the state and Hoosier Energy for up to eight CANDU reactors, or 6GW, which JPMorgan values at “~$12-24B.” CIBC’s Krista Friesen calls it a “modest positive,” though “highly preliminary, with financing, offtake arrangements, and development timelines yet to be established,” and “would not anticipate a near-term addition to backlog.” And The Nuclear Company floated a 6.6GW, six-reactor “Prosperity One” campus in Kentucky, which so far consists of a site. Big numbers, small commitments.

Uranium: A Record Term Price On The Thinnest Volume Since 2009

The fuel market is telling the same story in miniature. Per Goldman, spot U3O8 hovered around $90/lb through September and into October, while the long-term price held at a record $96/lb. But look at the volume:

Despite broadly bullish sentiment following the WNA Symposium and expectations for stronger utility demand, spot market activity remained subdued, with September volumes falling to their lowest monthly level since December 2009.

The Sprott Physical Uranium Trust, the marginal spot buyer of the last cycle, “was absent from the market in September,” and Goldman estimates 2026 term volumes are still tracking below the five-year average. A record price that nobody trades looks a lot like a standoff.

Which is what we were getting at when the Constellation news hit:

in light of today’s Constellation news, a reminder on the Uranium market.

— zerohedge (@zerohedge) October 6, 2026

Goldman’s commodity grid shows the rest of the chain flat to softer on the month, with spot conversion down 3% (and 6% over three months), even as SWU is up 287% over five years.

Speaking of conversion: Yuanta singled out Solstice (SOLS), “the only nuclear fuel conversion facility in the US,” as the name that “merits attention.” Activist Starboard apparently agrees. Jeff Smith unveiled a stake on Tuesday, calling the stock “stupid cheap” and urging management to focus on its refrigerants and nuclear businesses. When the activists show up, the bottom is either close or, well, still a ways off.

Meanwhile, The Rest Of The World Just Builds

While US investors agonize over financing, the rest of the world keeps pouring concrete, and mostly in one country. Of the ~80 reactors under construction globally, 38 are in China, against eight in India and seven in Russia. All five 2026 grid connections on Goldman’s list (most recently Tianwan-7 on Oct 8) are Chinese, as are half of the ten construction starts.

The phase-out crowd, meanwhile, is in full retreat. Barclays’ sustainable investing team, in its “Nuclear Renaissance gathers steam” spotlight, counts the reversals:

• Italy’s Senate approved a return to nuclear nearly 40 years after the ban,
• Switzerland’s parliament lifted its ban on new plants (referendum pending in 2027),
• Belgium moved toward a state takeover of Engie’s fleet,
• Taiwan cleared Taipower’s restart plan for Maanshan, which could restart as soon as 2028.

Goldman adds that the Dutch scrapped Borssele’s 2033 shutdown date, paving the way for operations to 2054. Barclays’ conclusion: “policy risk is continuing to ease for nuclear developers.” Japan, too, is back, as we noted last month:

How it’s done: This is TEPCO’s Kashiwazaki-Kariwa nuclear power station in Niigata. The seven-unit site has 8.2GW of capacity, making it the world’s largest power plant. Unit 6 entered commercial operation on 16 April 2026, returning a 1.36GW Advanced Boiling Water Reactor to service and marking TEPCO’s first commercial nuclear operation since Fukushima. Expect a SoftBank/Oracle/OpenAI data center in its vicinity in the next few months.

— zerohedge (@zerohedge) September 30, 2026

Then there are the newcomers. BTIG flags that the Philippines, which has never operated a reactor (its Bataan plant has sat dormant since the 1980s), now targets ~1.2GW of nuclear by 2032, ~2.4GW by 2035 and ~4.8GW by 2050, mostly via SMRs; Vietnam recently approved a ~2.4GW plant for the early 2030s. The EU’s Innovation Fund, in its latest €3.4 billion round, made its first-ever SMR award, to Calogena’s 30MWt heat-only pilot in France. As BTIG puts it, “we expect the growing global emphasis on energy security and soaring energy demand (think AI data centers) will motivate more countries to look to nuclear as a stable source of power.”

One late twist: Reuters reported on Wednesday that Hungary’s new Magyar government is considering replacing Rosatom as main contractor on the Paks II expansion, whose first concrete was poured in February (it is on Goldman’s 2026 construction-start list above). The project, originally estimated at €12.5 billion, has already cost Hungary more than €2 billion. Rosatom says it has received “no formal notification.” Expect that one to end in court, much like Finland’s.

Midterms, Money And The Megawatts That Already Exist

Which leaves the one variable no PPA can hedge: Washington. With the midterms on Nov 3, Samsung Securities’ energy team (in its midterm policy note expects the outcome to “influence the pace of nuclear power policy implementation rather than its strategic direction,” since the core supports, from the 45U tax credit to the Nuclear Fuel Security Act and the ADVANCE Act, all passed with bipartisan votes. The soft spots are the executive-order initiatives: the $17.5 billion of conditional DOE loans for long-lead AP1000 components (seven sites signed LOIs, none disclosed) and the NRC overhaul, where Democrats have already questioned the departure of 400 NRC technical staff. A Democratic House “can conduct investigations, hold hearings, issue subpoenas,” which is about what we expected when we wrote that data centers and nuclear would be likely targets if Dems win the House.

Demand, for its part, keeps getting revised up. HSBC just raised its US data center demand forecast by 80% to ~900TWh in 2030, and JPMorgan notes SpaceX’s “blue sky” scenario of adding 20GW of incremental power next year, with “high confidence in at least 10 GW.” UBS sums up the hyperscaler side: their continued support of new nuclear “highlights the pace at which demand for clean energy is outstripping available supply.”

So what explains the puke? Our take is that the market is finally drawing the line Goldman’s numbers hint at. On one side are the owners of licensed, grid-connected reactors (Constellation, Vistra, Talen), whose megawatts are being bid up by the richest companies on earth with a federal tax floor underneath. On the other are the pre-revenue developers, who still need several more rounds of capital (and underwriters’ fees) before the first electron, and whose “customers” in some cases have no minimum purchase obligation. The first group is probably oversold. The second has, in all likelihood, more dilution ahead before it bottoms.

We remain long-term believers that modular reactors, ideally deployed behind the meter, are the endgame for AI power. But between now and 2030, the cheapest, fastest nuclear megawatt is the one that already exists, while waiting for the ones that don’t exist yet has been a costly exercise for shareholders:

Much more in the full Goldman “Nuclear Nuggets: Global reactor tracker – October edition; 3Q26 Preview” and the BTIG “Energy Transition Blog“, both available to pro subs, along with the Scotiabank, UBS, JPMorgan, HSBC, Needham, Raymond James, CIBC, Canaccord, Barclays, Samsung and Yuanta notes cited above, all available here.

We extensively covered the unusually strong El Niño, its weather impacts by region, and the risks this adverse weather poses to crop production and global food inflation. 

Here’s what this year’s El Niño looks like next to the three strongest that came before it. What stands out to you? https://t.co/owJvWsOvZl

— Ben Noll (@BenNollWeather) October 3, 2026

UBS’s energy team hosted a call Tuesday with meteorologist James Block to assess El Niño impacts for weather markets. The discussion comes amid a global refining crisis and continued disruptions to Strait of Hormuz energy flows, with European natural gas futures approaching 90 euros per megawatt-hour this week.

Block offered some relief to energy consumers as the Northern Hemisphere approaches winter. He expressed high confidence that warmer-than-normal conditions will be present across several major energy-demand regions, including the northern US, Europe and parts of Asia. That could moderate heating demand as energy supplies, such as heating oil, remain tight.

Above-average temperatures, however, would not eliminate the risk of one or two cold blasts. Block warned of the potential for “black swan” events, including snowstorms and ice storms. In the Mid-Atlantic and Northeast, a powerful nor’easter coinciding with an Arctic cold outbreak could blanket major cities with heavy snow, even within a mild winter. 

Here are the key takeaways from the discussion:

Strongest El Niño in more than 75 years

According to the expert, the current El Niño is unequivocally the strongest observed since modern sea surface temperature monitoring began in the 1950s. A “Super El Niño” is typically characterized by Pacific Ocean temperatures exceeding normal levels by more than 3°C, and the expert believes that anomalies could surpass 3.5°C this season. The event is expected to peak in January before gradually weakening, with conditions likely returning to normal by May 2027. While Super El Niño events generally result in milder winter weather, they can also generate so-called “black swan” weather events, including severe snowstorms and ice storms. Should such episodes occur, the expert believes they are most likely between late January and early February and would probably be short-lived, lasting between one and two weeks. Overall, however, the implication for energy markets is lower-than-average heating-related demand for this winter.

Regional outlooks

The impact from El Niño varies significantly by region. In the United States, the expert expects temperatures across the Northern Plains, Northeast and parts of Canada to average 1.5°C to 3°C above normal. In contrast, the Southern Tier is expected to experience cooler-than-average conditions. Texas, in particular, is likely to see colder and wetter weather than normal, although the probability of an extreme freeze event remains lower than in a typical winter. For Europe, the signal is less pronounced than in North America but still points towards a relatively mild season. The expert expects temperatures across Southern and Central Europe to average approximately 0.5°C to 1.5°C above normal. The impact is likely to be smaller in Northern Europe, although conditions are still expected to trend warmer than average overall. In Asia, confidence is highest for above-normal temperatures in India and Japan. Forecast signals for China are less robust, as weather patterns there are influenced more heavily by continental effects and local terrain. This is particularly relevant because energy demand is concentrated in northern China, where the warming signal appears weaker.

Beyond temperature: hurricanes, wind and precipitation

The discussion also covered the outlook for the remainder of the hurricane season, as well as expected wind and precipitation patterns. The expert does not anticipate any additional storms affecting the Gulf and highlighted the unusually quiet hurricane season to date, which has produced only one significant storm. Wind conditions in the United States are expected to benefit from a more southerly storm track, leading to stronger wind speeds, particularly in key wind-power generation regions. The outlook for Europe is less certain. On precipitation, the southern United States is expected to experience a wetter and stormier pattern, resulting in higher rainfall and improved water availability. Europe, by contrast, is expected to be both warmer and drier than average.

US Weather Pattern For El Niño & La Niña Winter 

Global El Niño Weather Pattern

Related:

• NOAA Winter Outlook: Record El Niño Points To Wetter South, Warmer North

So far, El Niño-related increases in vertical wind shear have helped suppress Atlantic tropical cyclone development, with no tropical development or storms hitting the US East Coast.