Equities poised to rally on Fed cuts and US-China trade

General market commentary

Equity markets closed higher on Friday, with the S&P 500 and Nasdaq reaching record highs, driven by gains in technology and communication shares. Investor sentiment was lifted by cooler-than-expected inflation data, reinforcing expectations of another Federal Reserve rate cut next week. The delayed CPI report showed headline inflation at 3.0% year-on-year in September, slightly below forecasts, while core inflation eased to 3.0%. Falling bond yields, with the 10-year U.S. Treasury yield at 4.00%, provided additional support. Trade tensions briefly resurfaced after President Trump ended negotiations with Canada, though this had little effect on market optimism.

Over the week, equities advanced as investors welcomed moderating inflation and signs of economic resilience. The S&P Flash PMI surveys showed continued expansion in both services and manufacturing, highlighting steady business activity. Corporate earnings reports added some volatility, but overall sentiment remained upbeat, with Wall Street and European markets both higher. The combination of easing price pressures, firm growth data, and expectations of near-term policy support from the Fed set a positive tone heading into the final days of October.

Latest market and economic update

Asian equities surged on Monday amid expectations of a US Federal Reserve rate cut and easing US-China trade tensions. Japan’s Nikkei hit a record above 50,000, while South Korea’s KOSPI also reached new highs. Gains in China, Hong Kong, Australia, and Singapore followed Wall Street’s record close and optimism over stimulus and trade progress.

US equity futures rose on Sunday, extending last week’s record highs, as expectations of a Federal Reserve rate cut and progress in US-China trade talks boosted sentiment. S&P 500, Nasdaq, and Dow futures advanced, with markets also focused on upcoming tech earnings from Microsoft, Meta, Alphabet, Apple, and Amazon for signals on AI, cloud, and consumer trends.

The Eurostoxx 50 closed at a record high on Friday, lifted by cooler-than-expected U.S. inflation and hopes of easing U.S.-China trade tensions. Consumer-facing equities slipped, with Kering down ~4%, while Valeo (+10.8%) and Sanofi (+2.5%) outperformed, supported by better-than-expected retail sales and business activity data across the region.

The US dollar weakened this morning, pressured by softer-than-expected US inflation data and expectations of a Federal Reserve rate cut this week. The euro gained against the dollar amid risk-on sentiment from the US-China trade framework, while other Asian currencies, including the yen, yuan, and won, also strengthened against the greenback.

Oil prices rose in Asian trade, supported by progress in US-China trade talks and fresh US sanctions on major Russian oil firms. Brent gained 0.5% to $66.25, while WTI climbed to $61.77. Optimism over a potential trade deal, softer US inflation, and easing supply glut fears boosted market sentiment.

U.S. Treasury Secretary Scott Bessent said he reached a “substantial framework” with China’s Vice Premier He Lifeng to avert U.S. tariffs and delay rare earth export controls. The deal sets up talks between Presidents Trump and Xi on trade cooperation, including major Chinese soybean purchases and efforts to address the U.S. fentanyl crisis.

Brazil’s President Lula and U.S. President Trump held a positive meeting at the ASEAN summit, agreeing to immediate talks on tariffs and sanctions. The discussions aim to resolve trade tensions after U.S. tariff hikes, with Brazil seeking a suspension during negotiations. The meeting was welcomed by Brazil’s beef and coffee industries.

China’s industrial profits rose 21.6% in September, following August’s 20.4% gain, amid weak domestic demand and US trade tensions. Growth was led by high-tech and equipment manufacturing, while state-owned firms declined slightly. Private and foreign firms saw gains, though economists warn the surge may reflect a low comparison base.

India’s economy is expected to grow 6.7% this fiscal year, slightly above earlier forecasts, following a surprise 7.8% expansion in Q1 and Goods and Services Tax (GST) cuts boosting consumer demand. Economists anticipate a 25bps RBI rate cut in December. Growth could strengthen if US tariffs ease, though private investment remains subdued amid global uncertainty.

Equities on the move

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

IBM announced it can run a key quantum error-correction algorithm on readily available AMD chips, advancing commercial quantum computing. The breakthrough enables real-time error management on conventional hardware and was completed a year ahead of schedule. IBM plans its Starling quantum computer by 2029. Shares rose sharply, with IBM up 7.88% and AMD 7.63%.

Baidu shares surged over 5% in Hong Kong this morning, driven by optimism over its international robotaxi expansion and fresh buying by Cathie Wood’s Ark Invest. A new partnership with Switzerland’s PostBus highlights its global push, while Ark also boosted holdings in Baidu and Alibaba amid growing confidence in Chinese AI firms.

HSBC will set aside a $1.1 billion provision in Q3 for potential costs linked to ongoing litigation over the 2009 Bernard Madoff investment fraud. The Luxembourg court partially rejected the bank’s appeal. The charge, impacting its common equity tier 1 ratio by 15 basis points, will not affect dividend guidance or return on tangible equity excluding notable items.

Novartis will acquire US biotech firm Avidity Biosciences for around $12 billion in cash, paying $72 per share, a 46% premium. Avidity will spin off its early-stage cardiology programmes into a new company. The deal, aimed at expanding Novartis’s drug pipeline, is expected to close in the first half of 2026, pending regulatory approval.

Newmont is exploring a potential acquisition of Barrick Gold’s Nevada mining assets. Newmont currently holds a minority stake in a joint venture operated by Barrick. The Nevada mines are highly valuable, and Newmont may consider buying Barrick’s stake or a full takeover, though Barrick’s receptiveness to any offer remains unclear.

Procter & Gamble beat quarterly estimates, with revenue up 3% to $22.39 billion, driven by higher prices for beauty and hair-care products. Tariff costs fell after Canada lifted duties, though U.S.-Canada trade talks ended. Margins dipped 50 basis points amid discounting and restructuring, while strong growth in China’s premium segment and U.S. essentials supported results.

Deckers Outdoor shares fell over 15% after the footwear maker lowered its annual sales forecast to $5.35 billion, citing weaker U.S. demand amid economic uncertainty and tariffs. While Q2 sales and profits beat estimates, analysts warned of ongoing pressure on UGG and Hoka brands, selective price hikes, and heightened competition, with shares down 50% year-to-date.

Safran raised its full-year forecasts after third-quarter revenues rose 18.3% to €7.85 billion, led by its jet engine division and strong aftermarket demand. Propulsion revenue grew 25.6%, with services up 21.1%. The company expects full-year revenue growth of 11–13%, higher operating income and free cash flow, benefiting from a “catch-up effect” in LEAP engine deliveries.

Porsche posted a larger-than-expected Q3 operating loss of €966 million, hit by EV strategy overhaul costs, U.S. tariffs, and weakening sales in China. The company expects 2025 to mark a trough, with margins recovering in 2026. Job cuts, price increases, and restructuring measures are planned, while CEO Oliver Blume will hand over leadership to Michael Leiters.

J.P. Morgan initiated coverage of CRH with an “overweight” rating and a December 2026 price target of 9,645 GBp. It highlighted the company’s diversified operations, strong cash generation, and steady EBITDA and margin growth, supported by reinvestment and shareholder returns, while noting risks from U.S. housing, European recovery, and a stronger dollar.

HSBC downgraded Kering to “hold” from “buy,” citing the shares’ rapid 120% rise since April and limited near-term catalysts. The target price was raised to €370, implying 7% upside. Kering’s 2025 outlook is subdued, with revenue and EBIT expected to fall, while a recovery is projected for 2026–2027, supported by strategic portfolio changes.

JPMorgan upgraded Coinbase to Overweight, raising its December 2026 price target to $404, citing easing risks and new monetisation opportunities. Key drivers include a potential Base token and enhanced USDC yield strategies, with Coinbase’s vertical integration and stabilising market share supporting long-term profitability.

Upcoming data and events

This week, major central bank decisions are expected from the Fed, ECB, BoJ, and Bank of Canada, with limited US data due to the government shutdown. Key earnings include Microsoft, Apple, Alphabet, Meta, Amazon, Visa, Mastercard, UnitedHealth, Eli Lilly, Exxon, and Chevron, while markets monitor US-China talks, GDP, China’s PMI, and Eurozone and Australian inflation.

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