Futures Stall As Waller Threatens 50bps Hike Hours Before CPI; Brent Breaks Below $90

Futures Stall As Waller Threatens 50bps Hike Hours Before CPI; Brent Breaks Below $90

US futures are flat as a Waller hawkish curveball, hours before the October CPI report, took the air out of Wall Street's best session in six months, while oil extended its slide on US-Iran diplomacy hopes and the Claude-maker Anthropic lined up what could be the biggest IPO ever; as a result the 2Y yield jumped 5bps to 4.61% and a December rate hike is now fully priced. As of 6:25am ET, S&P futures are up 0.1% at around 7,578 while Nasdaq futures are down 0.2% and Dow futures rise 0.4%. That follows a session in which the S&P soared 2.35% to 7,550, its best day since the April Iran ceasefire, the Nasdaq 100 jumped 3.4% and the SOX exploded 6.85% even as Nvidia slid 4.3%, the only decliner in the chip index. In premarket trading, the Mag 7 is mixed: Nvidia is up 0.6% and Alphabet gains 1% even as the Megaspeed scandal widens, confirming our article from yesterday , while memory, semis and software are lower; Sanmina and Aaon soar about 20% on strong guidance, while Groupon tumbles 20% and Rocket Lab drops 6% on a wider loss. The day's driver is the Fed (again): Governor Waller said he backs a December hike and would consider a half-point move if core CPI prints around 0.3% or higher, which pushed odds of a 25bp hike from just over 80% to above 99%. Treasuries fell to session lows on the comments, with the 2Y up 5bps at 4.61% and the 10Y little changed around 4.86%, twisting the curve flatter, while bunds and gilts held onto early gains as energy prices slid. The dollar erased an early drop after Waller, with risk-sensitive currencies such as the krone and Aussie lagging. In commodities, Brent briefly slipped below $90 for the first time since August after Trump said further strikes on Iran would not be necessary, gold is down 1.5% to about $4,077, silver drops 1.9% and copper is softer. Bitcoin is down about 1%, trading near $74,000. US economic data slate includes October CPI (8:30am; no year-on-year figures this time due to the 2025 shutdown) and weekly ADP employment (8:15am); NFIB small business optimism already printed at 97.8, below the 98.2 estimate. Fed speaker slate includes Logan (10:50am), Schmid (1:30pm), Bowman (3:30pm) and Paulson (6:30pm). The Treasury sells $42 billion of 10-year notes at 1pm; the US bond market is closed on Wednesday for Veterans Day. In premarket trading, Mag 7 stocks are mostly higher, although Nvidia (NVDA) shares are down 1% day after the chip giant wiped out more than $190 billion in market value as its board launched an investigation into CEO Jensen Huang (Alphabet (GOOGL) +0.6%, Meta Platforms (META) +0.8%, Apple (AAPL) +0.4%, Amazon (AMZN) +0.4%, Microsoft (MSFT) -0.2%, Tesla (TSLA) -0.9%) Aaon (AAON) gains 17% after the air conditioning equipment firm posted third quarter results. Groupon (GRPN) falls 16% after the discount platform revised full-year 2026 sales lower. Harrow (HROW) rises 16% after the eyecare-pharmaceutical company reported revenue for the third quarter that beat. The firm also reiterated its revenue forecast for the full-year which beat Wall Street’s estimates. Lucid (LCID) declines 3% after the electric vehicle company reported quarterly revenue that missed estimates. On Holding (ONON) falls 5% after the footwear company’s direct-to-consumer revenue missed Street estimates. Rocket Lab (RKLB) falls 7% after the space company reported a wider-than-expected third-quarter loss per share. Sanmina (SANM) climbs 14% after the provider of electronics manufacturing services provided a forecast for the first quarter and fiscal 2027 that beat estimates. Take-Two Interactive Software (TTWO) rises 4% as the video-game company gave an outlook that is seen as conservative ahead of the release of its highly anticipated Grand Theft Auto VI Trade Desk (TTD) falls 5% after the advertising technology company reported third-quarter results and gave a fourth quarter outlook. In other corporate news, Anthropic is targeting a market value of about $1.4 trillion in its Nasdaq IPO, with the company and its backers seeking to raise up to $64.4 billion, and AMD, Broadcom, Nvidia and others to invest $26 billion; the company says its run-rate revenue reached about $81 billion as of Oct. 31 and it has about $900.9 billion in committed spend, which is one way to set a valuation floor. SoftBank reported its first net loss in almost two years after swallowing a $3.7 billion writedown on its US data-center projects. Nvidia's general counsel was reported to have intervened in a US government probe of suspected AI chip smuggling by Megaspeed, while Trump said the FBI is looking into Jensen Huang's affair and the White House is considering new export controls on Nvidia's advanced chips, per The Information. Marvell's $115 billion bid for Lumentum is getting a lukewarm early verdict from merger arbitrage investors. GFL Environmental turned down a buyout offer from a Blackstone, KKR and Energy Capital Partners consortium, the Globe and Mail reported. Banks led by JPMorgan could offer one of the year's biggest discounts to offload some of the $5 billion in Qualtrics debt they have been stuck holding. Citigroup plans to hire 100 bankers after winning approval for its China securities venture. Dropbox priced $1.1 billion of convertible notes and Akamai priced $2.2 billion of converts. Bayer won US approval for its stroke drug asundexian, and Boeing is cutting thousands of workers in its commercial airplanes unit. Bloomberg's framing sums up the morning: nothing from last week's AI rout has been fixed, but the gains are back . AI is bouncing, oil is falling, and a soft CPI print later today would leave very little to dislike. None of the worries have gone away (the politics of the AI buildout, Nvidia's governance and a war that is quieter rather than over), they simply hurt less. Yesterday's rally was the broadest of the year, with all 11 S&P sectors higher and 423 of 500 members rising, while the VIX collapsed 5.7 points to 19.9 in its sharpest drop since April 2025, as we detailed in last night's recap . Of course, not everyone is convinced: BTIG put 73% odds on another puke . Sentara Capital founder Will Allen said the moves in the US, the Kospi and across Asian tech point to a strong bounce, and that this is what markets needed after what looked like capitulation late last week , though time will tell if it is sustainable. JPMorgan strategists including Rajiv Batra and Mixo Das describe the latest AI selloff as an intra-cycle reset and another deleveraging event in the AI supercycle , and recommend a diversified approach in Asia with exposure to an AI recovery and to sectors that benefit from easing oil risk. Bloomberg Intelligence market structure analyst Deniz Besiroglu notes that Anthropic could soon rank tenth in the Nasdaq 100 at a $1.3 trillion valuation, making demand from tracker funds significant relative to a potentially thin float, even with Nasdaq's low-float weight cap. On the other side of the ledger, T. Rowe Price's Arif Husain warns that Treasury yields risk climbing again until the US enters a slowdown , i.e., yields won't truly peak until a recession hits. “The Anthropic IPO is key for the future of the AI trade and the risk is asymmetric: a failure would really hit hard, while a success just means the trade can carry on,” said Olivier David at Vega Investment Solutions. The chip trade has decoupled from Nvidia's governance mess: the SOX just had its best day relative to Nvidia since 2019 , the third-widest outperformance in a decade, and TSMC's monthly sales jump and Infineon's higher 2027 data center forecast may keep that going today. The overnight susprise came from the Fed's Waller (Voter) who said that a half-point  rate hike may be needed in December if October core CPI inflation comes in around 0.3% or higher. Waller said half-point rate hike may be needed in December if October core CPI inflation comes in around 0.3% or higher. Waller would support quarter-point rate hike in December even if October CPI improves. Waller said further policy tightening will be needed. Waller said what matters is that promised hikes are delivered within a reasonable period of time. Waller said he was willing to wait on policy tightening in October. Waller said US inflation is too high. Waller said September's inflation data were bad. Waller said he is particularly concerned about the breadth of price increases. Waller said Fed staff analyses suggest more producer price increases ahead. Waller said Fed staff analyses point to potential for energy price shock to be more persistent. Waller said labour market is solid, with supply and demand roughly in balance. Waller said employment is close to the Fed's goal. Waller said it is unclear whether labour market is as healthy as the unemployment rate suggests. Waller said questions over labour market dynamism and productivity growth need more research. Waller suspects GDP growth is backing off in current quarter. Waller expects output to continue growing at a solid pace. Goldman's Rich Privorotsky, who runs the checklist in detail here , says that in hindsight we have just witnessed one of the most aggressive episodes of net and gross de-risking in Goldman's US prime book in a decade . With a Middle East that is at least not escalating, enough barrels to balance the physical market, and Nvidia's woes compartmentalized, the final piece is CPI: an in-line or softer print would challenge the roughly 80% odds of a December hike (as of his writing, before Waller), and then the setup looks considerably more constructive . His key observation: Brent fell almost 6% yesterday and the 10Y barely moved, a sign that rates are more reflexive to AI growth expectations than to energy . He thinks the market misread the elections, and the likely outcome is data centers built with more conditions attached rather than a nationwide moratorium. His gut says the market confused the AI narratives: undersupply is not the problem; fear of compute oversupply and efficiency gains is the medium-term worry . He is "broadly encouraged" but warns vol tends to be autocorrelated after a violent rally off the lows, with hot CPI and renewed Middle East escalation the obvious risks; he would chase aerospace, transports, select discretionary and high quality, unlevered AI, and notes SPX December upside back at 13 vol makes it easier to stay invested . The positioning backdrop remains washed out. Goldman's Sean Vogel notes that US Info Tech is just 14.4% of net exposure in GS Prime, in the 1st percentile on 1-year and 3-year lookbacks , and semis positioning has almost fully roundtripped in 2026. The flip side: CTAs are sellers in every scenario this week, with Goldman estimating about $31 billion of S&P futures to sell over the next week if the market stays flat, a seller that doesn't care which way the market goes. Separately, Citi says Nasdaq 100 futures positioning saw $11.1 billion of net outflows last week. JPM's Market Intel desk under Andrew Tyler says today's CPI print will help solidify December Fed expectations, calling Waller's 50bp talk a bit surprising given the Fed's relatively sanguine tone in recent months . Jay Barry had flagged the 2Y yield as about 25bps too low versus model value, so a near-term flattening is possible, which tends to support secular growth and the Magnificent Seven; after yesterday's "Everything Rally" the desk thinks the tactical move in tech is toward hyperscalers as the preferred long , given ongoing financing, monetization and valuation challenges for the picks-and-shovels part of the AI trade. Dubravko Lakos-Bujas reiterates his year-end S&P target of 8,000, noting October was the largest single-month unwind for long momentum (down about 11%, a 6-sigma move), AI multiples are down about 35% since May, and QQQ's RSI below 30 has historically led to an average 4% rally over the next five sessions. On CPI, Goldman's economists expect core at just 0.16% versus a 0.2% consensus (headline 0.21%), helped by shelter disinflation and declines in used cars and health insurance; JPM's Feroli is at 0.23% core and DB sees 0.20% for both. As Privorotsky puts it, core at 0.2% would be constructive, 0.3% would challenge the rally , and Waller just told everyone where his line is. Goldman's derivatives desk says the CPI straddle implies an 80bp move. Our full preview is here . “I’m not surprised to see interest rate expectations being priced up with what we see as sticky inflation in the US,” said Karen Georges, equity fund manager at Ecofi in Paris. “That brings the focus to today’s CPI.” Oil, meanwhile, keeps unwinding its war premium. Privorotsky calls it "containment, not de-escalation" : Gulf governments prefer continued economic pressure on Iran over more military action, and if flows normalize without more infrastructure damage the risk premium has further to unwind, though he sees the risk as two-sided after such a fast repricing and is staying balanced. Saudi Arabia's main shipping firm is sending tankers through Hormuz in coordination with the US military, and refined product loadings in the Persian Gulf recovered to about 3 million b/d in October from about 1 million at the May trough. The tape is not all clean: Iran's IRGC said two tankers caught fire in Hormuz, per Tasnim. In Europe, French and Italian bonds extend their outperformance as energy slides, with the OAT-Bund spread narrowing 3.4bps to 147bps on Monday, a 3-week low, even as ECB's Lane told Bloomberg a December hike would be prudent if the data don't shift. See also our take on France's debt reckoning . In Europe, the Stoxx 600 is up 0.8% at 661.56 and on course for a record close, as lower oil prices remain the region's main tailwind; the DAX gains 1.2%, the Euro Stoxx 50 adds 1.1% and the FTSE MIB outperforms while the FTSE 100 lags, up 0.3%. Banks, construction and industrials lead while energy, health care and materials lag; JPM's desk notes Beta and Quality leading with Momentum and Growth lagging. Infineon jumps about 6% on an upbeat 2027 outlook amid AI demand, Vodafone slips despite lifting its outlook, BT dips after pausing its tie-up with Starlink and Ferrexpo slumps after halting production in Ukraine. Asian stocks are on track for their best two-day gain since August, with the MSCI Asia Pacific Index rising 1.9% after climbing as much as 2.3%, as the tech rebound and lower oil boosted sentiment. Korea's Kospi led with a 4.3% surge, back above 5,200 and triggering a sidecar early on, as foreigners turned net buyers for the first time after a 7-day selling streak (a move Goldman's Asia desk calls more technical than fundamental). Japan's Nikkei gained 2.9% to reclaim 60,000 and the Topix rose 2.2%, the Taiex added 2.3% and the ASX 200 rose 1.1%, while Chinese stocks lagged with the CSI 300 up 0.2% and the Hang Seng up 0.3% as traders digested mixed trade data that showed China's annual surplus topping $1 trillion. Goldman notes $22 billion left EM Asia ex-China last week, the second-largest weekly outflow on record, led by $16 billion from Taiwan, while hedge fund net leverage in the region sits at the 4th percentile. In FX, the Bloomberg Dollar Spot Index is little changed after erasing an earlier drop on Waller's comments; the DXY trades in a 101.55-101.74 range. EUR/USD is flat near 1.1224 and GBP/USD slips to around 1.3447 after BOE Deputy Governor Lombardelli said a December hike is plausible but depends on the Iran conflict. Risk-sensitive currencies lead G-10 losses, with the krone down 0.7% after cooler-than-expected Norwegian inflation and the Aussie down 0.3%. USD/JPY holds around 158 even after a sharp miss in Japanese household spending. Goldman's Jake Fox calls Waller's 50bp remarks a bit of "hedging" , worth 3-4bps of December FOMC pricing, which is now essentially a full 25bp hike. In rates, Treasuries are cheaper at the front end after Waller backed a December hike just hours before CPI, with the 2Y yield up 5bps at 4.61% while the 10Y is little changed around 4.86%, twisting the curve flatter; Treasuries were pushed to session lows on the remarks as December hike odds jumped above 99%. Goldman's London desk notes the specifics were less hawkish than the headline (Waller still leans toward 25bps if inflation improves, and said he is not looking to "slam" the economy with 150bp or 200bp of hikes), but the market took the headline. Bunds and gilts held onto early gains as crude slid, before fading from their best levels on the Waller readacross and a pare in Dutch gas losses; the UK's 2056 gilt sale drew an average yield of 5.54%. The Treasury sells $42 billion of 10-year notes at 1pm, after Monday's 3-year auction tailed by 0.4bp and saw the biggest tail since May , with $25 billion of 30-year bonds on Thursday after Wednesday's holiday. Monday's NY Fed survey showing layoff fears at the highest since the Covid crash did little to slow the rate-hike chatter. In commodities, WTI is down 1.5% at $85.62 and Brent is down 1.7% at $91.02 as of 6am , with Brent trading in a $89.21-92.84 range after briefly breaking below $90 for the first time since August, following Monday's almost 6% slump; Trump said the US remains "locked and loaded" but doesn't expect to need it, and Qatar says mediation between the US and Iran has gained momentum. US gasoline dropped below $4 a gallon for the first time since July. Dutch TTF gas is lower in a EUR 78.92-82.00/MWh range. Spot gold is down 1.5% at about $4,077 and silver falls 1.9% to $52.40 as the dollar firms; LME copper is softer near $13,840. Goldman's James McGeoch calls gold an oil trade dominated by CTAs , with ETF demand pulling back. US economic data slate includes October CPI (8:30am) and weekly ADP employment (8:15am). Fed speaker slate includes Logan (10:50am), Schmid (1:30pm), Bowman (3:30pm) and Paulson (6:30pm). The EIA publishes its monthly STEO around noon and the API reports inventories at 4:30pm. On the corporate calendar, TransDigm, Sea and Sally Beauty report before the open and CoreWeave reports after the close; conferences include Baird global industrials, BMO financials, Wolfe health care, UBS global health care and Citi fintech, and Anthropic is planning a live-streamed IPO event with CEO Dario Amodei and JPMorgan CEO Jamie Dimon. Market Snapshot Top Overnight News Trump said he plans to hold off on new military strikes against Iran for the time being after appeals from countries in the region, including Qatar’s prime minister, while keeping a naval blockade in the Strait of Hormuz for now: Reuters Qatar's Foreign Ministry said mediation efforts are ongoing, positive responses from both sides, and mediation has gained significant momentum in recent days: RTRS An Iranian diplomatic source denies reports of an agreement with the US on uranium enrichment at 3.67% or other nuclear issues, insisting Tehran's two-day proposal remains unchanged and no detailed nuclear discussions have taken place, according to Avash: Newsquawk The US evacuated American aircraft from a Royal Air Force base in England on Monday in the wake of a threat from Iran, according to people familiar with the matter: Reuters A Qatari-Pakistani proposal increases the likelihood of a preliminary agreement to reduce Iranian uranium enrichment; US proposal includes releasing USD 6-9bln in Iranian assets if an agreement is reached. Qatari-Pakistani proposal would immediately reopen the Strait of Hormuz and lift the US naval blockade: Al Hadath  Saudi Arabia's main shipping firm is sending some tankers through the Strait of Hormuz in coordination with the US military: BBG France summons Iran's envoy over a supermarket fridge hack and warns of a response: Reuters US-mediated three-way talks between Russia and Ukraine have begun in Abu Dhabi, the head of Kyiv's delegation said: AP UK and Russia need a new backchannel to avoid 'miscalculation', says UK Defence Secretary Streeting: FT Fed Governor Christopher Waller said the Fed ought to raise short-term rates in December even if inflation cooled last month, and should consider an upsized half-point hike if the inflation picture worsens: Reuters Trump said the FBI is reviewing Nvidia CEO Jensen Huang’s affair with a suspected Chinese spy, while describing Huang as a “very honorable man”; the crisis has brought the company’s succession risks into focus: BBG Jensen Huang's affair with an alleged Chinese spy further complicates Nvidia's China problem: CNBC Rep. Thomas Massie introduced articles of impeachment against Defense Secretary Pete Hegseth, setting off a two-day clock for an expected House vote on charges including waging war against Iran without congressional approval: Reuters Canada will seek to ease trade frictions with the US after tariff-weary voters rebuked Trump in the midterm elections, Foreign Minister Anand said: BBG Anthropic is targeting a valuation of around $1.3 trillion in its IPO later this month, below Wall Street's initial expectations: WSJ GS says SpaceX has had a much smaller impact on equity indices than many investors expected: excluding it, the Nasdaq-100 P/E would be less than half a turn lower, and its inclusion has not had a major effect on the index’s return, volatility or concentration: Goldman Japan’s household spending unexpectedly fell the most since 2020 in September, highlighting persistent weakness in consumption: BBG China’s October trade was mixed, with exports +35.2% (vs. +36.3% Street) and imports +41.6% (vs. +33.9%), sending the year-to-date trade surplus above US$1 trillion amid rising Western scrutiny: SCMP The BoJ’s brief record of the latest policy meeting indicated many board members see a near-term interest-rate hike as necessary, signaling a good chance of a December move: BBG ECB Chief Economist Philip Lane said the ECB should raise borrowing costs again at its next meeting if the data don’t shift, with inflation probably “a little bit” above 4% by year-end: BBG GS expects a 0.16% increase in October core CPI (vs. +0.2% consensus) and a 0.21% increase in headline CPI (vs. +0.3%), consistent with a larger 0.23% rise in core PCE: GIR Investors have been buying stocks they believe can shield them from a downturn as fears the AI bull market may be over prompt a violent rotation in global equities: FT The FDA is requiring new safety warnings on all GLP-1 drugs after finding evidence of a potentially increased risk of a rare eye condition: CNBC Wall Street is poised to deliver another banner year for bonuses on record profits at big banks: BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks traded higher as markets continued to claw back the losses from the recent tech slump, while lower oil prices and US-Iran optimism also provided some encouragement. ASX 200 was led higher by outperformance in real estate, industrials and the mining sector amid tailwinds from a lower yield environment in Australia. Nikkei 225 rallied back above the 60,000 level with SoftBank spearheading the advances amid the tech rebound and with stocks unfazed by the weaker-than-expected Household Spending data from Japan. KOSPI benefitted from the tech rally with a sidecar triggered in early trade but is off today's best levels. Hang Seng and Shanghai Comp were positive but lagged behind regional peers as participants digested the somewhat mixed trade data in which dollar-denominated Exports and Imports topped forecasts, although Trade Balance was at a narrower-than-forecast surplus and yuan-denominated Exports slowed. Top Asian News Japanese Finance Minister said BoJ is estimated to make JPY 1tln from faster ETF sales and it is undecided how much BoJ will remit to the government. No impact on BoJ operations from how much proceeds the government expects from the BoJ's ETF sales. Some smaller banks are worried about money shifting to retail JGBs. Nothing decided on preferential tax treatment for retail JGBs and will leave the debate to the LDP. New Zealand PM Luxon meets with Opportunity Party leader Wong ahead of a pact. European bourses (STOXX 600 +0.7%) are firmer across the board, benefiting from the pressure across the energy space with negotiations ongoing on both the Russia-Ukraine and US-Iran fronts. As it stands, major indices are stronger by 0.2%-1.3%; the FTSE MIB outperforms. European sectors hold a strong positive bias. Banks sit at the top of the pile, joined closely by Construction and then Industrials. Unsurprisingly, Energy lags given the pressure seen in underlying oil prices. As for key movers this morning: Infineon (+5.8%) gained following decent headline metrics, and FY27 outlook impressed, amidst growing AI demand. Sticking with earnings, Vodafone (-1.8%) slips despite lifting outlook, but adj. earnings did fall. Elsewhere, BT (-0.7%) opted to pause its tie-up with SpaceX’s Starlink, amidst the recent Ukraine controversy. Finally, Ferrexpo (-5.5%) shares tumbled after temporarily halting production in Ukraine. US equity futures are mixed and trade on either side of the unchanged mark. Earlier, contracts moved a touch off best levels following hawkish remarks from the Fed’s Waller. He mentioned that further tightening is needed, and shared his openness to a larger 50bps rate hike if Oct core CPI (M/M) printed at 0.3% or above. The report is set to be published today, where consensus for the core is at 0.2%. FX DXY was initially softer, but now trades flat on the session within a 101.55-101.74 range. Initial pressure stemmed from falling energy prices as the geopolitical backdrop improves, but the index then jumped after hawkish comments from the Fed's Waller. He mentioned that further policy tightening will be needed, adding that a 50bps rate hike may be needed in December if October core CPI inflation comes in around 0.3% or higher. Comments come ahead of the October CPI report this afternoon, whereby the Core M/M metric is expected to print at 0.2%. Therefore, a hotter-than-expected report will likely cement a December rate hike, with money markets potentially even pricing in a chance of a larger 50bps move. EUR/USD is flat and holds within a 1.1216-1.1239 range. The single currency remains at the whim of the USD, with little reaction seen to French Q3 unemployment falling to 8.2% (exp. 8.4%). On the central bank front, ECB's Moulin said he expects policy continuity if either Knot or de Cos takes over as ECB President. GBP/USD is a touch lower and holds within a 1.3427-1.3458 range. BoE Deputy Governor Lombardelli said, according to the Guardian, a further 25bps hike in December is plausible, with every meeting live, but that the decision will depend on developments in the Iran conflict; little reaction was seen. UK BRC Retail Sales Monitor came in at 1.1% Y/Y (exp. 1.2%). USD/JPY trades within a 157.85-158.16 range. Japanese Household Spending fell 6.7% Y/Y (exp. -3.1%), while the current account surplus narrowed more than expected. The BoJ Summary of Opinions showed a member saying the BoJ should raise rates when possible without becoming too cautious. Antipodeans are mixed: NZD/USD is firmer at the top end of a 0.5622-0.5649 range, with RBNZ chief economist Conway saying the MPC agrees further rate hikes are needed. AUD/USD is softer within a 0.6909-0.6930 range, beneath its 21DMA at 0.6983, after varied Australian consumer and business surveys and mixed Chinese trade data. NOK is softer, with EUR/NOK gradually climbing to the top of a 10.508-10.570 range after Norwegian CPI came in cooler than expected at 3.6% Y/Y (exp. 3.7%), with core CPI at 2.7% (exp. 2.8%). Central Banks Fed's Waller (Voter) said that further policy tightening will be needed; Waller said half-point rate hike may be needed in December if October core CPI inflation comes in around 0.3% or higher. OUTLOOK FOR INTEREST RATES: Waller said half-point rate hike may be needed in December if October core CPI inflation comes in around 0.3% or higher. Waller would support quarter-point rate hike in December even if October CPI improves. Waller said further policy tightening will be needed. FORWARD GUIDANCE: Waller said what matters is that promised hikes are delivered within a reasonable period of time. Waller said he was willing to wait on policy tightening in October. INFLATION: Waller said US inflation is too high. Waller said September's inflation data were bad. Waller said he is particularly concerned about the breadth of price increases. Waller said Fed staff analyses suggest more producer price increases ahead. Waller said Fed staff analyses point to potential for energy price shock to be more persistent. LABOUR MARKET: Waller said labour market is solid, with supply and demand roughly in balance. Waller said employment is close to the Fed's goal. Waller said it is unclear whether labour market is as healthy as the unemployment rate suggests. Waller said questions over labour market dynamism and productivity growth need more research. GDP GROWTH: Waller suspects GDP growth is backing off in current quarter. Waller expects output to continue growing at a solid pace. Fed's Waller (Q&A) said he expects further tightening "sooner rather than later" to return inflation towards 2% over the medium term. A 0.3% MM rise in US October CPI would indicate inflation is moving away from target and would require more aggressive policy action. Does not think we will see broad-based productivity gains from AI for a while. In the context of recent equity moves, said that is generally not too important for his monetary assessment. Revised up his neutral view, and in that context, policy is not as tight as he thought it might be some 18 months ago. At a minimum they need to take back the three insurance cuts. But, he is not "super hawkish", does not want to "slam" the US economy. Not looking to tighten by 150bps or 200bps. The balance sheet is not a tool that will be used for tightening. Does not think his peers on the Fed believe rates are in the correct place. Recent pullback in market pricing for the Fed has moved it to be more in-line with the Fed's view. BoJ Summary of Opinions noted that a member said it is appropriate to continue raising rates as underlying inflation nears the price target, while a member said maintaining policy is suitable to assess risks around the economy and prices a little more. ECB's Lane said it would be prudent to hike rates in December if incoming data do not materially change the outlook, speaking to Bloomberg. ECB's Moulin expects policy continuity if either Knot or de Cos takes over as ECB President. BoE's Breeden said firms are now very good at adapting to cost shocks. BoE Deputy Governor Lombardelli said a further 25bps rate hike in December is plausible, with every meeting live, but a decision will depend on developments in the Iran conflict, the Guardian reported. RBNZ chief economist Conway said inflation is too high in New Zealand and the MPC agrees further rate hikes are needed. Pockets of weakness remain in the domestic economy. There is clear excess capacity in the labour market. Risk is that cost shocks become broader inflation pressures. PBoC injected CNY 190bln via overnight reverse repos with the rate at 1.25%. PBoC set USD/CNY midpoint at 6.7167 vs exp. 6.6655 (prev. 6.7188). Riksbank Minutes: overall, members are skewed towards further tightening, but the exact timing is less clear. Fixed Income A contained start has given way to a Waller-induced bearish skew in USTs, while EGBs and Gilts hold onto initial gains. USTs spent the morning under very modest pressure, of a few ticks at most, in contrast to peers at the time which were modestly firmer. A discrepancy that was potentially a factor of the constructive risk tone lifting US yields early doors, while Europe reacts more to the energy moves as Dutch TTF began lower (though since off lows) and crude continues to falter. Then, USTs were hit and pushed below the 107-00 handle to a 106-27+ base on hawkish remarks from Fed’s Waller. Waller, in short, said a December move is warranted and if October’s Core CPI at 13:30GMT today prints around 0.3% (exp. 0.2%, prev. 0.3%) or above, then a 50bps hike could be merited. Waller’s remarks saw pricing for a 25bps December hike increase from just over 80%, to >99%. Further out, December 2027 also shifted hawkishly, though the base case remains a 4.25-4.50% rate by then; currently, the target rate is 3.75-4.00%. After CPI, we get commentary from Logan, Schmid, Bowman and Paulson. Back to Europe, Bunds hit a 123.25 peak in the mid-morning, as global crude benchmarks hit lows on continued geopolitical optimism and despite a handful of comments/sources from the Iranian side that are less constructive on the situation. Since, EGBs have faded from best on the readacross from Waller, but also as Dutch TTF pared its losses, after the morning’s regional weather forecasts turned colder. Finally, Gilts opened on the front foot given the energy moves. Hit an 87.29 peak, firmer by about 40 ticks at best. Aside from energy, focus on BoE commentary after Lombardelli made clear that every meeting is live, but that it is too soon to make a call on December, and referenced market pricing as being about 50/50. Since, Breeden spoke on cost-push inflation. Ahead, we have Pill scheduled; it will be interesting if he does not lean towards a December move, given his hawkish bias. UK sold GBP 1bln 5.375% 2056 Gilt: avg. yield 5.54% (prev. 5.517%), b/c 3.75x (prev. 3.84x), tail 0.3bps (prev. 0.3bps). Japan sold JPY 450.7bln 30-yr JGBs; b/c 3.36x (prev. 3.88x), average yield 3.847% (prev. 4.109%). Lowest accepted price 104.55 vs prev. 101.05. Average accepted price 104.90 vs prev. 101.21. Tail in price 0.35 vs prev. 0.16. Commodities Crude benchmarks are lower and extending declines after Monday's slump, as the mood between the US and Iran turned more constructive (see below for details). WTI Dec'26 trades within a USD 83.88-86.93/bbl range (vs Monday's USD 85.02-91.42/bbl range), while Brent Jan'27 moves within USD 89.21-92.84/bbl (vs Monday's USD 90.56-98.43/bbl range). Ahead, the EIA STEO is due later today. Dutch TTF is lower within a EUR 78.92-82.00/MWh range, having dipped beneath EUR 80/MWh and Monday's 79.00 low before paring, likely tracking the weakness in crude amid hopes of the Strait of Hormuz reopening. Spot gold is softer within a USD 4,081.22-4,146.70/oz range (vs Monday's USD 4,054.49-4,148.60/oz range), taking a breather after rallying yesterday alongside lower oil prices and as the USD benefits from hawkish comments from the Fed's Waller. 3M LME copper is softer, at the bottom of a USD 13,837.00-13,991.73/t range (vs Monday's USD 13,776.63-13,938.00/t range), having been underpinned by the constructive mood earlier, with the upside capped as participants digested the latest Chinese trade data, in which imports rose 41.6% Y/Y (exp. 32.0%) and exports 35.2% (exp. 33.5%), although the trade surplus narrowed more than expected. In geopolitics, meetings between US President Trump, VP Vance and the Qatari PM were described as positive, while Trump said the US is "locked and loaded" but that military action seems unlikely at this point. A rerun of yesterday's reports this morning reiterated that a Qatari-Pakistani proposal increases the likelihood of a preliminary agreement to reduce Iranian uranium enrichment, with the proposal that would immediately reopen the Strait of Hormuz and lift the US naval blockade, and the US proposal including the release of USD 6-9bln in Iranian assets if an agreement is reached. Meanwhile, Foreign Minister Araghchi said there are no plans for a meeting between Supreme National Security Council chief Rezaei and US VP Vance. Ahead, geopolitics will likely dominate the tape (barring US CPI), with traders eyeing US-Iran and Russia-Ukraine mediation efforts, with the trilateral Russia-Ukraine-US meeting taking place in Abu Dhabi today and tomorrow. UAE's ADNOC set December Murban Crude OSP at USD +4/bbl vs Dubai quotes, reports suggest. UAE is reportedly selling 1.7mln barrels of Arab light from a salvaged tanker, loading between November 10th and 20th. German Chancellor Merz is in favour of maintaining the EU's approach to emissions trading, Handelsblatt reported; the Chancellor is against weakening the regulation any further. Trade/Tariffs USTR announces the US extends the trade probe regarding Vietnam's IP protection for three months to the end of February. White House considering new export controls on NVIDIA (NVDA) advanced chips, according to The Information. China's Finance Ministry said Vice Premier He Lifeng and Canada's Minister of Finance and Trade Minister co-chaired the second Canada-China economic and financial strategic dialogue. Both sides reaffirmed their commitment to multilateralism and support for a transparent and predictable trade and investment environment. Both sides welcomed the implementation of bilateral local currency swap arrangements and recent positive progress in China-Canada trade consultations. The Finance Ministry, financial regulators and central banks of the two countries separately signed a memorandum of understanding on fiscal cooperation. Canadian Finance Minister said Canada modifies tariff relief measures, extending the horizontal remission for US tariffs by one year to June 30th 2028. Canada tariff relief will include non-steel goods used in mining, quarrying, or the extraction of oil and gas. Canada is granting targeted tariff relief for certain imported goods that are in short supply in the Canadian market. Geopolitics: Iran Qatar's Foreign Ministry said mediation efforts are ongoing, positive responses from both sides, and mediation has gained significant momentum in recent days. An Iranian diplomatic source denies reports of an agreement with the US on uranium enrichment at 3.67% or other nuclear issues, insisting Tehran's two-day proposal remains unchanged and no detailed nuclear discussions have taken place, according to Avash. A Qatari-Pakistani proposal increases the likelihood of a preliminary agreement to reduce Iranian uranium enrichment, according to Al Hadath citing sources; US proposal includes releasing USD 6-9bln in Iranian assets if an agreement is reached. Qatari-Pakistani proposal would immediately reopen the Strait of Hormuz and lift the US naval blockade. US President Trump posted that he had an excellent conversation with Qatar's PM and discussed Iran, while he noted that several Gulf states would prefer the status quo, in other words, a continuation of the naval blockade and the new Operation Iron Gate. US President Trump said US is locked and loaded with the best equipment ever made, but adds that they don't think there's going to be a reason to use it. Iran militarily is effectively over. Iran is talking to us very politely. Qatar's PM Al Thani said he discussed the region with US President Trump and discussed ways to progress US-Iran talks. Qatar's PM has made an unscheduled stop at the G7 to brief Europeans and Saudi Arabia on the Middle East situation following talks with US President Trump. Iranian VP Aref said "Whether peace is achieved or not, the path of confrontation with the enemy will continue". Iranian Foreign Minister Araghchi said there are no plans for a meeting between Supreme National Security Council chief Mohsen Rezaei and US Vice President Vance, Al Mayadeen reported. Solution to the conflict is in diplomacy and the implementation of the conditions Iran has outlined. Iran's Supreme National Security Council Secretary Rezaei said war on Iran has inflicted grave damage on the US government and called on the US to stop publishing false news about illusory negotiations. The time has come to surrender to the seven conditions that Iran has set out again and again. Adviser to the Commander of the IRGC Aerospace Force said one of the areas of progress for Iranian specialists is designing missiles that use waves emitted from radar systems, enabling the identification and targeting of the enemy's radar equipment. The 'Hormuz' missile was designed with the aim of countering radar systems and is capable of homing in on sources of radar wave emissions. Sound of an explosion in the Strait of Hormuz, Sabereen reported. " Explosion of two violating oil tankers in the Strait of Hormuz", IRIB reports. Geopolitics: Ukraine A Russian delegation has departed for Abu Dhabi for talks with the US and Ukraine, TASS reported citing a source. Recent reporting suggests talks have paused for a break. Russia's Defence Ministry said Russian forces hit a cargo vessel and a tanker in the Black Sea, according to IFX. UK Defence Secretary Streeting said UK and Russia need a new back channel of communication to avoid the risk of a miscalculation, according to FT. US Envoy Kushner said that "the meeting with the Ukrainians, Russians and European partners was very positive". Ukrainian official Umerov said the Ukrainian delegation has begun meetings in the UAE; the first meeting in Abu Dhabi is with European, NATO and EU representatives, alongside US envoys Witkoff and Kushner. Geopolitics: Other Saudi-led coalition said it intercepted and destroyed two missiles launched by Yemen's Houthis towards Riyadh. Saudi airstrikes continue against residential areas in Yemen's Saada, according to reports cited by SNN. Israel conducts an airstrike on Al-Qantara in southern Lebanon, according to Mehr News. US President Trump said on call with C-Span that Venezuela gave the US 1mln barrels last week and that we will find out whether an Iran deal will happen. Iraq will temporarily close its Mandali border crossing with Iran from Friday to complete technical requirements. Will reopen the Sheeb border crossing with Iran. Gulf Cooperation Council states agree to establish a military command headquarters in Kuwait. North Korean leader Kim's sister, Kim Yo Jong, criticised South Korea's announcement regarding the landmine blast and criticised the UN Secretary General for echoing Seoul's position and breaching neutrality, according to KCNA. Yemeni news sources report Saudi airstrikes on a gas station and an oil company building in Sana'a and a missile strike on the eastern city of Saada, according to IRNA. Taiwan said China is conducting 'area denial' drills in the Western Pacific. Crypto Bitcoin is a touch firmer this morning and trades around the USD 74.3k, whilst Ethereum is flat and holds around USD 2.1k. US Event Calendar 6:00am: Oct NFIB Small Business Optimism, 97.8, est. 98.2, prior 97.9 8:15am: Oct. 24 ADP Weekly Employment Change, prior 16.750k 8:30am: Oct CPI MoM, est. 0.3%, prior 0.6% 8:30am: Oct Core CPI MoM, est. 0.2%, prior 0.3% 8:30am: Oct Core CPI Index SA, est. 339.684, prior 338.896 8:30am: Oct CPI Index NSA, est. 337.209, prior 336.940 8:30am: BLS won't publish Oct. 2026 YoY CPI or real earnings data 1:00pm: US to sell $42 billion of 10-year notes Central Bank Speakers 10:50am: Fed's Logan Gives Opening Remarks 1:30pm: Fed's Schmid Participates in Fireside Chat 3:30pm: Fed's Bowman Speaks on Economic Outlook 6:30pm: Fed's Paulson Speaks on Economic Outlook DB's Jim Reid concludes the overnight wrap Markets have put in a very strong performance over the last 24 hours, with all the main risk factors fading into the background. First, the fears around AI-related growth eased significantly, which pushed the Philly semiconductor index (+6.85%) to its best daily performance since July. So in turn, that meant the S&P 500 (+2.35%) built on Friday’s recovery and posted its strongest day since the Iran ceasefire announcement in April. The index is now "only" down -0.25% in the four business days since the midterms. Second, there was growing optimism on the geopolitical front, as hopes for diplomatic progress between the US and Iran pushed Brent crude (-5.85%) to a 2-month low of $92.57/bbl. And third, the risk-on tone meant the fiscal concerns in Europe eased, with the Franco-German 10yr spread (-3.4bps) tightening to a 3-week low of 147bps. So all round, investors became a lot more optimistic on the near-term outlook, and the VIX index (-5.72pts) posted its sharpest daily decline since April 2025 when equities rebounded from their post-Liberation Day sell-off. This strength was clearest in the most AI-exposed assets, which continued to recover from last Thursday’s slump. Indeed, the Philly semiconductor index is up +11.35% in the last two sessions, having now unwound almost two thirds of its -15% decline following the midterm election results. There wasn’t an obvious catalyst for the bounceback, but as our equity strategists noted, equity positioning had become sizeably underweight after last week’s moves, and in tech, positioning was now beneath its lows after Liberation Day. So that meant the conditions were in place for a sharp recovery. Indeed, the only company which moved lower in the Philly semiconductor index yesterday was Nvidia (-4.27%), which hit a 7-month low after the company’s announcement of an independent investigation involving CEO Jensen Huang. Remember we have earnings from CoreWeave as well after tonight’s US close, so that’ll be one to watch. Whilst tech stocks were bouncing back sharply yesterday, the other positive catalyst was the latest decline in oil prices, which followed several headlines that raised hopes about a diplomatic resolution. For instance, a Qatari official told Bloomberg that both the US and Iran were talking with mediators on the details of a deal. Moreover, there was also a reaction to Trump’s weekend comments to CNN that it was “highly unlikely” he’d order extensive strikes on Iran, even as he said it would depend on them signing a “very strong agreement”. Late in the US session yesterday, Trump also posted that there was “positive momentum toward an end to this Conflict” and suggested that Gulf allies “prefer the status quo”, even as the US was “locked and loaded” if developments in the region change. So that led to optimism that renewed escalation would be avoided, with Brent crude (-5.85%) ending the session at a 2-month low of $92.57/bbl and down another -1.21% this morning to $91.45/bbl. That combination of tech positivity and oil declines effectively led to the reverse of the stagflation playbook, with investors feeling more positive on growth, and less worried about inflation. In terms of the reaction in US Treasury yields, it was the risk-on reaction that dominated, with 2yr yields rising +5.0bps to 4.56% thanks to a +11.2bps rise in the real yield, even as the inflation breakeven (-6.2bps) fell back. Indeed, the optimism on near-term inflation meant that 1yr US inflation swap (-13.6bps) closed beneath 2% again for the first time since mid-August. However, when it came to the Fed, the easing financial stress won out, and investors grew more confident that they would deliver a rate hike in December, with market pricing up from 78% on Friday to an 84% chance by the close. Further out the curve, the 10yr (+2.6bps to 4.88%) and 30yr (+1.4bps) yields saw more modest increases. With all that happening, today will also see the latest US CPI print for October, which is the last CPI print ahead of the Fed’s decision next month. Last month’s CPI print for September was a very strong one, with the fastest monthly headline CPI in six months, at +0.65%. However, this time, our US economists expect inflation to have come down from its September pace, with both headline and core at +0.20% on the month. However, this report will be slightly unusual because we won’t get a year-on-year number for inflation. That’s because of last year’s government shutdown, which meant the October 2025 inflation level wasn’t produced, so there isn’t a number from last year to compare it to. Otherwise, remember that markets will also be focused on the read-through to the PCE inflation print (the Fed’s target measure), but we’ll have to wait until the PPI release on Friday for some more of the components. Ahead of that, Asian stocks are rallying hard again this morning with US futures consolidating. Contracts on the S&P 500 (+0.21%) and Nasdaq 100 (+0.08%) are relatively quiet. The big move has come from the KOSPI (+4.73%), which is bouncing back after three days of consecutive declines. The Nikkei 225 (+2.82%), TOPIX (+2.06%) S&P/ASX 200 (+1.10%) and Taiwan TAIEX (+2.31%) are also advancing. Elsewhere, the Hang Seng (+0.37%), CSI 300 (+0.36%) and Shanghai Composite (+0.33%) continue to eke out gains. This morning, the 10yr US Treasury yield is back down -1.0bps to 4.87%. Euro Stoxx futures are +0.84%, having closed before the last leg of the US gains last night. The rise in European futures carries on from an optimistic session on the continent yesterday, as the tech rebound and lower oil prices boosted risk assets. The STOXX 600 (+1.26%), the FTSE 100 (+1.02%), and the DAX (+1.73%) all rose strongly. Moreover, France’s CAC 40 (+1.16%) hit a two-month high, whilst Italy’s FTSE MIB (+2.69%) posted its best performance since April. Then for sovereign bonds, there was also a clear risk-on move, with 10yr bund yields (+0.9bps) edging up to 3.26%, but with 10yr OATs (-2.3bps) and BTPs (-2.7bps) falling back. Finally, we didn’t get much data yesterday, although there were the latest inflation expectations numbers from the NY Fed. They showed 1yr inflation expectations moving up a basis point to 3.91%, the highest since May 2023. And the 3yr measure also inched up 4 basis points to 3.29%, which is the highest print since June. So that leant against the otherwise disinflationary newsflow yesterday. Meanwhile, there were also signs of pessimism on the labour market, as expectations of higher unemployment mounted. Indeed, the mean probability that the US unemployment rate would be higher in a year rose to 45.3%, the highest since April 2020 during the pandemic. Looking at the day ahead now, the main data highlight will be the US CPI print for October, and we’ll also get the NFIB’s small business optimism index for October. From central banks, we’ll hear from the Fed’s Waller, Logan, Schmid, Bowman and Paulson, along with the ECB’s Sleijpen, Cipollone, Lane and Escriva, and the BoE’s Breeden, Lombardelli and Pill. Finally, today’s earnings releases include CoreWeave.
Tyler Durden
Tue, 11/10/2026 - 08:23

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