MARKET WRAPS
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U.K. CPI, PPI, Public Sector Finances; trading updates from Handelsbanken, DNB Bank, Iberdrola, Segro, Aberdeen Group, Akzo Nobel, SKF, Atos, Puig Brands
Opening Call:
European stock futures traded higher early Wednesday. Asian stock benchmarks were mixed; the dollar strengthened; Treasury yields were flat; while oil futures were mixed and gold rose.
Equities:
European stock futures point to a higher open. Risk sentiment improved after a multiday global tech selloff, though concerns about the sustainability of the artificial-intelligence trade linger, MUFG analyst Michael Wan said.
Investors are increasingly focusing on AI-related companies' balance-sheet health and credit cycle in addition to their robust growth.
"The market is increasingly asking not only whether AI demand is real, but who is funding it, on what terms and with what margin of safety," Tickmill Group market strategy partner Patrick Munnelly said in a note.
Forex:
The dollar gained ground amid slightly higher Treasury yields, which tend to enhance the appeal of U.S. fixed-income assets.
"In addition to higher U.S. interest rates, the energy independence of the U.S. economy amid the war-driven surge in energy prices" has boosted demand for the greenback, CBA's Carol Kong said.
"We expect the U.S. dollar to trend modestly higher in coming months," partly due to potentially more foreign capital inflows into U.S. markets, the economist and currency strategist added.
Bonds:
French bonds remained near multiyear highs amid nationwide protests and budget problems, which are a reminder of global debt woes.
"The public unrest certainly does not support OAT sentiment, and the last few days underscore how difficult it will be for any French government to strike a balance between the pressure from the markets [calling for more austerity] and the pressure in the streets [calling for more spending]," Commerzbank rates strategist Christoph Rieger said.
Risk premium for French OATs is in uncharted territory, Citi rates strategist Jamie Searle said. "As such, there is no obvious anchor level, and sentiment is in the driving seat," he said.
Energy:
Brent crude futures rose amid attacks on vessels in the Strait of Hormuz, a key waterway for oil transportation.
Iran's Islamic Revolutionary Guard Corps said that "two non-compliant" oil tankers struck mines in the strait, ANZ Research analysts said. "At least 18 vessels have been hit over the past two weeks, according to ship tracking data from Kpler," the analysts added.
Metals:
The precious metal is likely to be weighed down by higher crude oil prices that are keeping inflationary pressures in place and reinforcing hawkish monetary-policy expectations, said Bas Kooijman of DHF Capital.
"Although the Fed is widely expected to leave rates steady [in October], attention will likely remain on clues regarding another possible increase in December," he added. Higher interest-rates typically weigh on the non-interest-yielding yellow metal. Copper prices are supported by tightening supply as Chile, the world's largest copper producer, faces its lowest output in 23 years, ANZ research analysts said.
Chile's finance minister said he expects copper output to fall 7% this year, with only a minor recovery projected for 2027. Operational issues are also increasing, with at least seven worker fatalities at Chilean mines over the past month, the analysts added.
TODAY'S TOP HEADLINES
More Oil Is Now Coming Out of the Persian Gulf Than Before the Iran War
Persian Gulf oil exports have surpassed prewar levels, as an improvised shipping system under U.S. protection is helping tankers move oil through one of Iran's fiercest waves of attacks in the Strait of Hormuz.
Middle East oil flows, including shipments through Hormuz and alternative routes across the region, averaged more than 24 million barrels a day in the week through Oct. 18, surpassing prewar levels of 23.3 million, according to ship tracker Kpler.
CoreWeave's Struggles Reveal a Simple Problem in a Complicated AI Market
AI is complicated. The financial challenge facing CoreWeave is easier to grasp: Its returns need to exceed its borrowing costs.
And no amount of hype tied to the promise of AI technologies can change that.
Airfield Attack Marked Opening Shot in Putin's Sabotage Campaign Against Europe
BERLIN-A massive cargo plane, used to carry military assistance to Ukraine and parked at an airfield in eastern Germany, was attacked by explosive-packed drones in early August. German officials say they were piloted by Russian military-intelligence agents.
One drone slammed into the Antonov freighter but failed to explode. Another collided with a different plane, and a third detonated near the airport perimeter, authorities say. Had the assault worked as planned, investigators say, the result would have been mayhem and casualties at one of Europe's most important air-cargo airports.
Musk Ordered Starlink Slowdown That Blindsided Ukraine
WASHINGTON-Elon Musk ordered the slowdown of a military-grade version of Starlink relied on by Ukraine, a decision that sparked panic in Kyiv and confusion inside the Trump administration, U.S. officials and people familiar with the matter said.
Both Musk and President Trump have expressed anger at Ukraine for attacking Russian diesel refineries in recent weeks, which the president blames for high energy prices. Last week, Musk capped the speeds at which Ukrainian hardware could stay connected to the satellite-based network, the people said, rendering some offensive drones and interceptor drones virtually useless.
Anthropic S-1 Shows Red-Hot Growth, Risks and Massive Computing Costs
Anthropic is generating breakneck revenue growth but faces a long list of risks that include a narrow customer base and uncertain access to much-needed computing power as it prepares for a mega-IPO, according to new disclosures.
The company has signaled that it could potentially spend $750 billion in the coming years on obtaining more computing capacity, including deals it is still negotiating.
Tesla and SpaceX Formed Committees to Discuss Potential Merger, Elon Musk Says
SpaceX and Tesla have formed special committees to discuss a potential merger, Elon Musk said Tuesday.
"The special committees have not reached an agreement of the terms of any transaction and there is no guarantee that they will but I do think there is a lot of merit in combining the companies," Musk said Tuesday on SpaceX's quarterly earnings conference call.
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Expected Major Events for Wednesday 06:00/UK: Sep Public sector finances
06:00/UK: Sep Producer Price Index
06:00/UK: Sep CPI
08:00/ICE: Sep Labour Force Survey
08:30/UK: Aug UK House Price Index
09:00/EU: Annual General government deficit and debt - 2nd notification
09:00/BEL: Oct Consumer Confidence Survey
15:59/GRE: Aug Balance of Payments
17:59/POR: Aug ICSG Copper Report
23:01/UK: BRC Consumer Sentiment Monitor
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