Bank earnings and dovish Fed tempered by trade jitters

General market commentary

Equity markets finished lower on Tuesday in a volatile trading session as trade tensions between the United States and China intensified. China imposed new sanctions on U.S. units of South Korean shipbuilder Hanwha Ocean, following Washington’s decision to raise fees on Chinese ships docking at American ports. President Trump added to investor unease by threatening to halt U.S. purchases of cooking oil from China, while also accusing Beijing of deliberately reducing imports of American soybeans. These developments, combined with the ongoing U.S. government shutdown—now in its second week and the fifth-longest in history—added to uncertainty. Technology and consumer discretionary shares led declines, while consumer staples and industrials saw gains. The Nasdaq Composite fell 0.8% to 22,521.7, the S&P 500 dropped 0.2% to 6,644.3, and the Dow Jones Industrial Average rose 0.4% to 46,270.5.

In other markets, bond yields edged lower, with the 10-year Treasury yield at 4.03%, as investors priced in expectations for further interest rate cuts by the Federal Reserve amid signs of a softening labour market. Oil prices declined, with West Texas Intermediate crude falling 1.7% to $58.50 a barrel after the International Energy Agency raised its supply forecast and warned of weaker demand. Gold gained 0.7%, while silver slipped 0.2%. Earnings season began strongly, led by major banks such as JPMorgan, Citigroup, Goldman Sachs and Wells Fargo, all reporting results ahead of expectations. Wells Fargo shares rose sharply by more than 7%, while Citigroup gained nearly 4%. Despite heightened volatility and trade-related risks, corporate earnings growth and expectations of lower interest rates provided some support to broader market sentiment.

Latest market and economic update

Asian equities rebounded on Wednesday after earlier losses, supported by dovish comments from Federal Reserve Chair Jerome Powell and strong US bank earnings. Japan’s Nikkei 225 rose 1.4%, South Korea’s KOSPI gained 1.7%, and Australia’s S&P/ASX 200 climbed 0.9%. Trade tensions with China limited broader gains, while Chinese CPI and PPI data highlighted ongoing deflationary pressures.

US equity futures rose around 0.2% overnight following a choppy Wall Street session, supported by strong bank earnings and dovish remarks from Federal Reserve Chair Jerome Powell. Gains in Nasdaq 100, S&P 500, and Dow Jones Futures reflected cautious optimism amid solid corporate results and expectations of further Fed rate cuts.

European equities fell on Tuesday, with the Stoxx 50 and Stoxx 600 down about 0.3% as rising US-China trade tensions dampened sentiment. Autos and miners led declines, while defensive sectors outperformed. Michelin slumped 8.9% on a profit warning, whereas Ericsson surged 16% after strong quarterly results. Political uncertainty in France further weighed on markets.

The dollar index fell below 99 on Wednesday, extending losses as Jerome Powell’s comments on a weakening labour market bolstered expectations of further US rate cuts. The ongoing government shutdown and renewed US-China tensions added pressure. The euro strengthened to 1.1624, supported by France’s move to suspend major pension reforms, further weighing on the dollar.

Oil prices fell slightly in Asian trade, remaining near five-month lows amid renewed US-China trade tensions and weak Chinese inflation data. The International Energy Agency warned of a potential 2026 supply glut, citing rising production and sluggish demand. Brent fell to $62.26 and WTI to $58.18 a barrel, with investors awaiting US inventory data.

Federal Reserve Chair Jerome Powell indicated the Fed may soon end its quantitative tightening programme, citing tightening liquidity and firm repo rates. He noted the U.S. economy shows firmer growth, but the labour market remains weak. Powell stressed a cautious, meeting-by-meeting approach to rate cuts, balancing inflation and employment concerns amid ongoing uncertainty.

China’s consumer inflation fell 0.3% year-on-year in September, while producer prices declined for a 36th consecutive month, highlighting persistent deflation. Core inflation rose 1%, but weak spending and a sluggish property market weighed on growth. Further government stimulus is expected to support the economy.

The IMF warned China must rebalance its economy towards domestic demand, weakened by a prolonged property crisis and rising non-performing loans. Export growth is slowing and credit demand remains weak, raising financial stability risks. Subsidies for sectors like electric vehicles have mixed results, boosting specific industries but creating resource misallocation and fiscal strain.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

LVMH reported a 1% rise in third-quarter sales, its first growth this year, driven by improving Chinese demand. The results beat expectations, lifting US shares 7.5%. While fashion sales fell 2%, the decline eased from Q2. Analysts see signs of recovery for the luxury sector amid fresh creativity and renewed investor optimism.

Citigroup exceeded third-quarter profit expectations, driven by record revenue across divisions despite a $726 million loss from selling a 25% stake in Banamex. CEO Jane Fraser credited restructuring and strong U.S. consumer spending. Markets and banking divisions performed strongly, while Citi plans a potential Banamex listing and continues improving risk controls using AI.

Wells Fargo beat third-quarter profit estimates, reporting $5.59 billion, as the Federal Reserve lifted its seven-year asset cap, allowing the bank to pursue growth. CEO Charlie Scharf raised the ROTCE target to 17–18%, citing strong credit quality, rising loan growth, and a rebound in investment banking fees, including major M&A advisory wins.

JPMorgan Chase beat third-quarter expectations as dealmaking rebounded, lifting investment banking fees 16% and net income 12% to $14.4 billion. Adjusted revenue reached $47.12 billion, driven by strong client activity and market performance. CEO Jamie Dimon cautioned that job market weakness and geopolitical uncertainty persist despite the economy’s underlying resilience.

Johnson & Johnson plans to spin off its orthopedics unit DePuy Synthes and has raised its 2025 sales forecast, driven by strong pharmaceuticals and medical device growth. The company is focusing on higher-growth healthcare areas, including oncology, immunology, neuroscience, and cardiovascular products, to strengthen its core business and drive long-term growth.

Domino’s Pizza beat quarterly profit and U.S. same-store sales expectations, driven by promotions, new menu items, and value deals like the $9.99 pizza. U.S. same-store sales rose 5.2%, while international sales lagged. CEO Russell Weiner highlighted franchisee support, DoorDash partnerships, and rewards programs as key growth drivers amid consumer budget caution.

Italy plans to fund its 2026-2028 budget partly through contributions from banks and insurers, raising €4.5-5 billion over several years. Measures include IRPEF tax cuts, a tax amnesty, corporate investment breaks, and worker compensation for past inflation. Banks’ deferred tax assets and lower dividend taxes will provide short-term liquidity without increasing their overall tax burden.

Netflix and Spotify are teaming up to bring popular video podcasts to Netflix from early 2026, starting in the U.S., with plans to expand to other countries. Shows like The Bill Simmons Podcast, The Rewatchables, and Conspiracy Theories will be available. The deal helps creators reach more viewers, earn more revenue, and reflects the growing role of video in podcasting.

EasyJet shares surged over 7% amid unconfirmed reports that shipping giant MSC is considering a bid, potentially valuing the airline at around £4 billion. Analysts note limited synergies with MSC’s operations but suggest a break-up scenario could drive interest. EasyJet remains a likely target for European carriers due to its valuable airport slots.

Broadcom launched its Thor Ultra networking chip, enabling AI data centres to link hundreds of thousands of processors, challenging Nvidia’s dominance. The chip supports large AI models for applications like ChatGPT. Broadcom, which also designs AI chips for Google and OpenAI, aims to expand in the $60–90 billion AI market, emphasising advanced chip design and testing.

Stellantis announced a $13 billion investment in the US, creating 5,000 jobs and introducing five new models over four years, including reopening the Belvidere, Illinois plant. The move aims to offset potential tariffs and boost sales. Shares rose 8% after hours, while the investment supports underutilised plants and strengthens ties with the United Auto Workers union.

Sunac China’s offshore debt restructuring plan has been approved by a majority of creditors, the property developer said. In a court-convened Hong Kong meeting, 98.5% of voting creditors, representing roughly 94.5% of total claims, backed the plan, which covers about $7.96 billion in offshore debt, marking a key step in the company’s financial reorganisation.

Morgan Stanley downgraded Siemens to Equal-weight from Overweight, citing a weak recovery in its Digital Industries division, intensifying competition in China, and continued mid-sized software acquisitions limiting returns. The downgrade comes ahead of Siemens’ fiscal 2025 results and 2026 guidance, which are due to be released on 13th November.

Micron Technology was downgraded by New Street Research from buy to neutral, citing peak valuations and the likelihood that potential earnings beats would be offset by multiple compression. The firm maintained a $190 price target and noted that US-China trade tensions continue to pose risks for the semiconductor sector.

RBC Capital Markets initiated coverage of AppLovin with an Outperform rating and $700 target, citing its strength in performance advertising and marketing technology. The company’s focus on return on ad spend, diversification into e-commerce, and fixed-cost model support profitability. Strong 2025 performance and secular trends underpin growth and free cash flow potential.

RBC Capital Markets upgraded T-Mobile US to Outperform, citing strong subscriber growth and UScellular acquisition benefits. The $270 target implies 22% upside. Promotions, new services, and expansion into rural and fixed wireless markets support growth, while leadership changes and capital return plans remain intact, with EBITDA forecasts above consensus for 2025–26.

Morgan Stanley turned more bullish on Roblox, forecasting it could surpass 1 billion monthly users by 2030 and reach $300 per share in a bull-case scenario. The bank expects growth from advertising and AI-driven innovation, projecting EBITDA of over $9 billion by 2030. It reaffirmed an Overweight rating and a $170 base-case target.

JPMorgan upgraded DoorDash to Overweight, raising its price target to $325 for December 2026, citing recent acquisitions and expansion into new markets and verticals. The Deliveroo deal adds 7 million users and over 700,000 businesses, while grocery and advertising initiatives boost growth prospects. Gross order value and EBITDA are expected to rise strongly through 2030.

Upcoming data and events

Earnings season continues with Bank of America, Morgan Stanley, and ASML Holdings among the companies scheduled to report results today. Key economic data include the Empire State Manufacturing Index, Federal Reserve officials’ insights, and the release of the Fed’s Beige Book, offering updates on manufacturing activity, regional economic conditions, and broader US economic trends.

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