Key takeaway:
Policy expectations are driving a repricing of stocks, precious metals, and crude oil. Tight energy supplies and divergence across the AI supply chain remain key to assessing how long the market trends will last.
【Today's Key Themes】
Third major theme: A weaker U.S. dollar and stronger precious metals. Gold broke above $4,090 and gold ETFs saw inflows, even as markets priced in a higher likelihood of Fed rate hikes. Interest rates and inflation expectations remain important variables.
Fourth major theme: The AI supply chain is shifting from broad-based enthusiasm to divergence in company capabilities. Large cloud service providers, emerging AI cloud companies, chipmakers, and smartphone makers are showing different performance. Regulation, power, supply, and delivery are key factors to watch.
Fifth key theme: domestic funding and policy signals converge. The outright reverse repo operation, increase in margin financing balances, and policies on resource recycling and energy efficiency in computing infrastructure warrant close attention. Also watch for sector divergence after the previous day's sharp A-share rally and the risk of premiums in cross-border ETFs.
【U.S. Equities】
All three major U.S. indexes closed higher. The Dow rose 3.03% to 53,356.48; the S&P 500 gained 1.58% to 7,688.64; and the Nasdaq advanced 1.44% to 25,736.51.
U.S.-listed Chinese stocks also rebounded, with the Nasdaq Golden Dragon China Index closing up 3.48% and Alibaba gaining 5%.
【Macro】
The dollar and Treasury yields retreated. The U.S. Dollar Index fell 0.3%, closing at 101.566 in late New York trading; the dollar traded at 158.49 yen. The U.S. 2-year Treasury yield fell by more than 5 basis points overnight.
U.S. economic data showed a mix of slowing growth and persistent price pressures. The final reading of the S&P Global Services PMI for October was 56.1, below the expected 57.9. The ISM Non-Manufacturing PMI was 54.5, below both the expected 54.8 and the previous reading of 54.9.
The ISM New Orders Index fell from 59.8 to 55.9, while the Prices Index remained elevated at 73 and the Employment Index rose to 51.4.
U.S. ADP employment increased by 86,000 in October, above expectations of 69,000. Rate markets are still pricing in a risk of rate hikes: CME FedWatch puts the probability of a 25-basis-point hike in December at 81.5%, versus an 18.5% probability of rates remaining unchanged.
Overseas central banks continue to focus on inflation. Sweden's central bank raised its policy rate from 1.75% to 2%, while Brazil's central bank held its Selic rate unchanged at 13.75%. The Swiss National Bank president said policy would be adjusted if price stability were at risk.
【AI Memory Supply Chain】
Regulation of AI infrastructure has emerged as a new source of market divergence. Of 41 related local ballot measures in the U.S., 40 produced outcomes unfavorable to data center construction. The market is placing greater emphasis on companies' access to funding and power, as well as their ability to deliver projects. Shares of large cloud service providers rose, while emerging AI cloud provider CoreWeave fell about 10% intraday.
The Information reported that Microsoft cut data center spending due to delayed deliveries from IREN.
Memory shortages and rising costs are beginning to weigh on end-user demand. Qualcomm's mobile phone chip revenue fell 26% year over year to $5.14 billion. The company expects global phone shipments in calendar 2027 to be flat to lower, and is responding to rising semiconductor input costs by raising product prices.
Qualcomm forecast revenue of $10.4 billion to $11.2 billion for the next quarter and adjusted earnings per share of $2.15 to $2.35. The midpoint was below the market consensus of $2.32, and the stock fell more than 5% after hours.
The data center business continues to scale up. The company reiterated its target of $5 billion in fiscal 2027 revenue and expects revenue to exceed $650 million in the December quarter.
Arm reported quarterly revenue of $1.44 billion, up 27% year over year and above market expectations. Its revenue outlook for the next quarter is around $1.54 billion. The company said data center demand is growing, but supply capacity continues to constrain expansion. Its shares rose more than 4% at one point after hours before turning down 3.8%.
【Technology Industry】
OpenAI launched Images 2.6, adding native GIF generation and editing to ChatGPT and improving image generation speed. It also announced plans to acquire Pierre Computer. Axios reported that Meta acquired AI startup Conductor.
China's AI agent and robotics industries continue to advance.
Twenty organizations, including Huawei and Alibaba, are jointly building infrastructure to connect AI agents. JD.com disclosed that its embodied AI data collection now covers more than 100 specialized scenarios and over 100,000 real-world operational tasks. It also outlined plans to purchase 3 million robots, 1 million autonomous vehicles, and 100,000 drones over the next five years.
Technology company financing remains active. Microsoft completed a $25 billion bond sale, while Meta issued €9 billion in bonds. Goldman Sachs and Apollo are discussing with investors allocations in a portion of a roughly $40 billion chip financing deal for SpaceX.
Automotive demand is under pressure. Preliminary data from the China Passenger Car Association showed retail sales in the national passenger vehicle market totaled 1.693 million in October, down 25% year over year. Data from the China Association of Automobile Manufacturers showed that China imported 21,000 complete vehicles in September, down 48.7% year over year.
【Crude Oil】
International oil prices fell sharply. WTI crude futures settled at $88.12/barrel, down 8.29%; Brent crude futures settled at $94.62/barrel, down 8.67%, after falling more than 10% at one point intraday. The domestic SC crude oil front-month contract fell 7.07% in overnight trading to 628 yuan/barrel.
There are still signs of tight physical supply. U.S. commercial crude inventories fell by 865,000 barrels for the week, compared with market expectations for an increase of 1.987 million barrels. Distillate inventories declined by 3.565 million barrels, a much larger drop than expected.
Among other commodities, the domestic front-month fuel oil contract was down more than 6% at the 23:00 close, low-sulfur fuel oil fell nearly 5%, and coking coal rose nearly 2%. The Baltic Dry Index rose 3.93% to 2,694 points. Indonesia's National Economic Council supports cutting nickel output through mining work plans and budgets to ease oversupply.
【Precious Metals】
Gold and silver strengthened markedly overnight. Spot gold rose further this morning, breaking above $4,090/oz and gaining 0.75% on the day. Spot silver briefly climbed 5% overnight to $52.29/oz.
Domestic night trading rose in tandem. The most-active Shanghai gold futures contract closed up 2.61% at 875 yuan/g; the most-active Shanghai silver futures contract closed up 4.80% at 12,575 yuan/kg.
Holdings in SPDR Gold Trust, the world's largest gold ETF, increased by 2.851 tonnes from the previous day to 1,040.513 tonnes.
【Domestic Market News】
The central bank plans to conduct a 300 billion yuan outright reverse repo operation today. In funding data, margin financing balances on the two exchanges totaled 2,264.355 billion yuan as of November 4, up 1.329 billion yuan from the previous trading day.
A-shares rose significantly in the previous trading session: the Shanghai Composite Index gained 2.16%, the Shenzhen Component Index rose 4.22%, the ChiNext Index climbed 6.40%, and the STAR 50 Index advanced 9.92%. Hang Seng Index futures gained 2.11% in overnight trading, closing at 24,429 points.
Five government departments issued an action plan for implementing a comprehensive conservation strategy. It calls for accelerating the development of projects to recycle scarce and precious metal resources, and advancing energy-saving and carbon-reduction upgrades to infrastructure such as computing facilities, communications base stations, and server rooms. China-Canada economic and trade talks made positive progress, including a further extension of relevant exemptions under the preliminary joint arrangement.
The methodology for the SSE Hong Kong Stock Connect Index has been revised to exclude securities with an average daily trading value below HK$5 million over the past year. Note the trading arrangements for cross-border ETFs: the China-Korea Semiconductor ETF Huatai-PB and the Nasdaq ETF Huatai-PB will be suspended from the market open until 10:30 today due to substantial premiums.
HanchorBio signed an exclusive licensing agreement for HP570. It will receive a total of $30 million in upfront payments and is eligible for potential development, regulatory, and commercialization milestone payments of up to $1.07 billion, as well as tiered royalties on sales.
Areas to watch in A-shares include memory and semiconductor equipment, energy efficiency and power support for computing infrastructure, precious and scarce metal recycling, robotics, and licensing deals for innovative drugs. Each should be assessed in light of demand, delivery, and earnings progress.
【Key Events】
15:00 The Ministry of Commerce holds its regular press conference.
15:45 France's September industrial production, month over month.
16:00 Switzerland's October seasonally adjusted unemployment rate.
18:00 Eurozone's September PPI, month over month.
18:30 U.S. Challenger job cuts for October.
20:00 Bank of England announces its interest rate decision.
20:30 Bank of England Governor Bailey holds a press conference.
20:40 Swiss National Bank President Schlegel delivers a speech.
21:30 U.S. initial jobless claims for the week ending October 31.
21:50 Federal Reserve's Hammack delivers a speech.
22:10 Federal Reserve's Barkin delivers a speech.
23:00 U.S. Global Supply Chain Pressure Index for October.
23:30 U.S. EIA natural gas inventories for the week ending October 30; Bank of Canada Governor Macklem attends a hearing.
【Risk Disclaimer】
For research and educational purposes only; this does not constitute investment advice.
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