Key takeaway:
Markets are digesting higher interest-rate expectations while reassessing energy supply risks and the quality of AI-driven growth. The rebound in U.S. and Asian markets is still accompanied by pronounced sector divergence.
【Today’s Key Themes】
First key theme: Inflation and interest-rate expectations. U.S. PPI and retail sales came in above expectations, while Fed officials continued to emphasize inflation risks. Speeches by central bank officials and economic data from the U.S. and Europe today will be important indicators for the dollar, bonds, and gold.
Second key theme: Energy supply and policy buffers. A sharp drawdown in U.S. crude inventories and pressure on diesel supplies coincided with the International Energy Agency releasing reserves. Oil prices still need to price in risks to energy infrastructure and transport routes. Areas to watch in China’s A-share market include oil and gas, refining, and shipping.
The third key theme: The AI industry is shifting from expansion to a test of execution. TSMC’s earnings growth coincides with lower valuation expectations for some AI companies. Computing demand, financing costs and revenue growth should be assessed together. Areas to watch in A-shares include computing infrastructure, servers and related components.
The fourth key theme: Storage technology and the competitive landscape. A rebound in storage stocks has come with significant volatility. Progress in 4F² technology still needs to be validated through yields, mass production and customer qualification. Areas to watch in A-shares include storage chips, equipment and materials.
The fifth key theme: Domestic deleveraging and a rebound in Asian markets. Margin financing balances fell on the Shanghai and Shenzhen exchanges, while Japanese and South Korean stocks opened higher this morning. Chinese ADRs and Hang Seng Index futures recovered in night trading. Going forward, watch for sentiment spillovers between markets and changes in A-share turnover.
【U.S. Equities】
All three major U.S. stock indexes closed higher on Thursday. The Dow rose 1.08% to 52,178.99; the S&P 500 gained 0.33% to 7,744.12; and the Nasdaq Composite advanced 0.08% to 26,713.03. The S&P and Nasdaq opened lower but ended higher, while the Dow outperformed.
Technology stocks were mixed. Micron Technology fell more than 6% at one point intraday but ultimately closed up 1.8%; CoreWeave dropped more than 9% at one point before ending nearly 6% higher; Dell fell nearly 7%.
Chinese stocks listed in the U.S. rebounded, with the Nasdaq Golden Dragon China Index up 1.96%. NetEase gained 2.7% and JD.com rose 2.6%.
【Macro】
U.S. September PPI and retail sales both exceeded expectations, with inflation and resilient demand continuing to shape rate expectations. Cleveland Fed President Beth Hammack warned that if businesses and households come to expect high inflation to persist, the Fed may need to take stronger action. Chicago Fed President Austan Goolsbee said inflation driven by overheated demand or large-scale construction of AI data centers would be more concerning.
The main expectation in rate markets remains that rates will be left unchanged in October. CME FedWatch puts the probability of no rate change in October at 71.8% and the probability of a 25-basis-point hike at 28.2%. By December, the probability of a cumulative 25-basis-point hike is 67.4%, while that of a cumulative 50-basis-point hike is 25.4%.
The U.S. Dollar Index fell 0.49% on Thursday to close at 102.055. At the close of New York trading, EUR/USD stood at 1.1212, GBP/USD at 1.3272 and USD/JPY at 158.14.
The high rates awarded at U.S. 4-week and 8-week Treasury bill auctions were 4% and 4.05%, respectively, both above the previous rates of 3.98%. In the week ending October 9, foreign central banks’ holdings of U.S. Treasuries fell by $14.588 billion.
High borrowing costs continue to weigh on the U.S. housing market. The average rate on a 30-year fixed mortgage held at 7.4%, with no decline for eight consecutive weeks. Pending home sales in the U.S. fell 4% in September from the previous month.
Trade policy remains uncertain. The EU has begun assessing a surge in imports in sectors including chemicals and machinery and may consider safeguard measures such as quotas. According to reports, differences have slowed U.S.-Mexico talks on auto and metal tariffs, though officials from both sides said negotiations are continuing.
【AI and Memory Supply Chain】
Volatility in storage stocks has intensified. A CITIC Securities research report said the sector has recently been affected by oil prices, inflation and interest rate expectations. The market is also beginning to focus on Chinese domestic suppliers’ technological progress in server DDR5 and the potential impact of competition on overseas manufacturers’ pricing power.
Technological progress should be distinguished from mass-production capability. DRAM technology is currently dominated by the 6F² cell structure, while 4F² technology remains at an early validation stage. Yields, output, gross margins and downstream customer qualification will need to be monitored. Areas to watch in A-shares include HDD, DRAM, NAND and related equipment and materials, with a focus on how quickly technological validation translates into actual supply.
Demand for AI chips continues to support earnings on the manufacturing side. TSMC’s third-quarter net profit rose 69% year on year, exceeding market expectations. TSMC confirmed that it is in talks with Elon Musk about collaborating on the Terafab chip factory, but insisted that it must retain control of production operations.
Financing and cash flow for AI infrastructure are drawing attention. Jensen Huang said CoreWeave’s financial position continues to improve and its cost of capital is declining, so Nvidia does not need to provide financial guarantees. Meanwhile, Reuters cited people familiar with the matter as reporting that Anthropic’s revenue growth has slowed. Some investors have discussed a valuation of around $1.5 trillion, below the market expectation of around $2 trillion previously.
【Technology Industry】
Competition among AI models continues to advance. Meta released Muse Spark Open, an open-weight model aimed primarily at coding and AI agent tasks, and is working with Apple to support developers running it locally on Mac devices. Microsoft announced that it had completed pretraining MAI-Base-2; its AI chief said the model has 3 trillion parameters.
Industrial AI partnerships are expanding. According to Handelsblatt, the German government plans a large-scale partnership with Nvidia, proposing to spend hundreds of millions of euros on computing capacity and training industrial AI models. Around 12 companies, including Siemens and Audi, plan to participate.
There are new developments in domestic applications. Cook said Apple Intelligence has been approved in China and will launch in beta at the end of October. Kuaishou’s Kling 4.0 has officially launched in full, supporting 4K and 1080p 10-bit HDR output, with videos of up to 30 seconds per generation.
Google announced research progress on its Willow quantum chip, using a technique called magic state cultivation to reduce the error rate of certain quantum states by around 40 times, achieving 99.99% accuracy. Its application in larger-scale quantum computing systems still requires further validation.
In the satellite industry, the EU plans to speed up its review of a satellite joint venture being pursued by Airbus, Leonardo and Thales. Elon Musk said the Star Mind computer, developed jointly by SpaceX and Nvidia, is scheduled to enter mass production next year.
【Crude Oil】
International oil prices diverged. WTI crude futures rose 3.03% to close at $97.97 per barrel, while Brent crude futures fell 0.13% to $105.92 per barrel, significantly narrowing the spread between the two benchmarks. The most active domestic SC crude oil contract rose 0.11% in night trading to 726 yuan per barrel.
U.S. crude inventories fell sharply. In the week ending October 9, EIA commercial crude inventories declined by 8.557 million barrels, far exceeding expectations for a 288,000-barrel decline and marking the largest drop since the week ending February 13. U.S. domestic crude production fell by 300,000 barrels per day to 13.679 million barrels per day.
Diverging trends in refined product supply and demand: Gasoline inventories increased by 3.518 million barrels, versus expectations for a decline of 800,000 barrels; distillate inventories fell by 2.527 million barrels, a larger-than-expected drop. Refinery utilization rose to 93.5%.
Energy transportation and supply risks remain. Official statements on passage through the Strait of Hormuz have been contradictory, while tanker fires and attacks on energy facilities in Russia and Ukraine have kept markets focused on supplies of crude oil, diesel and shipping capacity. The International Energy Agency agreed to release around 100 million barrels of reserves that have not yet been released, including 20 million barrels of diesel as soon as possible. From October 16, India will levy windfall taxes of 2.5 rupees per liter on gasoline exports and 8.5 rupees per liter on diesel exports.
U.S. natural gas inventories rose by 67 billion cubic feet for the week, below expectations for an increase of 76 billion cubic feet. Natural gas futures rose 3% intraday.
【Precious Metals】
Gold and silver strengthened. Spot gold broke above $4,170 per ounce intraday, gaining as much as 1.60%; New York gold futures rose 2% intraday to $4,190.10 per ounce. Spot silver rose 3% intraday to $57.30 per ounce.
Domestic night trading also advanced. The most active Shanghai gold futures contract closed up 0.99% at 899 yuan per gram; the most active Shanghai silver futures contract closed up 1.58% at 13,904 yuan per kilogram. Evening trading in gold T+D on the Shanghai Gold Exchange rose 0.66%, while silver T+D gained 1.25%.
ETF holdings diverged: SPDR Gold Trust’s gold holdings fell by 0.285 tonnes to 1,053.911 tonnes; iShares Silver Trust’s silver holdings rose by 136.21 tonnes to 15,508.16 tonnes.
【Domestic Market Signals】
A-shares retreated in the previous trading session. The Shanghai Composite Index fell 1.59% to 3,707.48; the Shenzhen Component Index fell 2.43%, the ChiNext Index fell 2.92%, the CSI 300 Index fell 1.23%, and the STAR 50 Index fell 1.50%.
Leveraged funds contracted. As of October 15, the combined margin financing balance on the Shanghai and Shenzhen exchanges stood at 2,466.161 billion yuan, down 31.325 billion yuan from the previous trading day. Trading in broad-market ETFs topped 10 billion yuan for the first time in two months. Trading activity and net fund flows should continue to be monitored separately.
Hong Kong stocks came under pressure in the previous trading session, with the Hang Seng Index falling 1.03% and the Hang Seng Tech Index down 2.72%. Hang Seng Index futures rose 0.88% in night trading to 24,274 points.
On the policy front, Shenzhen issued local implementation guidelines for reforming the sales system for commercial housing. China’s Ministry of Commerce said China will work with the EU to promote bilateral trade in dual-use items. Domestic refined fuel prices were left unchanged on October 15. The Ministry of Finance will issue 15.5 billion yuan of yuan-denominated government bonds in Hong Kong on October 23.
On commodity supply and demand, for the week ending October 15, apparent demand and output of rebar both turned from declines to increases, while mill and social inventories both shifted from increases to declines. Inventories at sampled float glass producers nationwide fell 1.9% week on week but remained 11.7% higher year on year. A U.S. private exporter reported sales of 330,000 tonnes of soybeans for export to China.
There are also new developments in overseas resource supply. Australia’s PLS Group approved an investment of around A$1.9 billion to expand spodumene concentrate capacity at its Pilgangoora mine. At the Centinela copper mine, labor negotiations have yet to make progress. The company said production remains on plan and maintained its full-year output forecast.
【Key Events】
All times below are Beijing time.
10:00 Bank of England Governor Bailey takes part in a fireside chat at the Institute of International Finance’s annual membership meeting.
11:30 Federal Reserve Chair Warsh attends the IMF Annual Meetings and holds a fireside chat with IMF Managing Director Georgieva.
12:15 Bank of Canada Governor Macklem attends the IMF Annual Meetings and takes part in a panel discussion.
17:00 Final eurozone September CPI readings, year on year and month on month, and the August seasonally adjusted trade balance.
20:30 U.S. September import price index, month on month.
21:15 U.S. September industrial production, month on month.
【Risk Disclaimer】
Speeches by central bank officials and inflation data may trigger volatility in the dollar, bonds and precious metals. Changes in energy infrastructure and shipping routes could quickly alter oil price expectations. AI company valuations, financing plans and technology validation all involve uncertainty; intraday moves and performance at the open do not indicate the direction of the full trading day. A-share sectors mentioned are for monitoring purposes only and do not constitute investment advice.
For research and educational purposes only; this does not constitute investment advice.