Equities rebound as Trump softens China rhetoric

General market commentary

US equity markets rallied on Monday, reversing much of last Friday’s losses as easing trade tensions and renewed optimism around artificial intelligence boosted investor sentiment. The S&P 500 climbed 1.6% to 6,654.72 points, the Nasdaq gained 2.2% to 22,694.61, and the Dow Jones Industrial Average rose 1.3 percent to 46,067.58. Markets were buoyed after President Trump signalled a softer stance toward China over the weekend, calming concerns about additional tariffs. Comments from US Treasury Secretary Scott Bessent that Trump and his Chinese counterpart were preparing to meet in South Korea further lifted sentiment. Technology and consumer discretionary shares led gains, with Broadcom surging nearly 10% after announcing a partnership with OpenAI to develop in-house AI processors. Other AI-focused chipmakers also advanced, with Nvidia up 2.8% and Micron Technology more than 6% higher, helping to propel the PHLX chip index nearly 5% higher.

Ten of the eleven S&P 500 sectors advanced, led by technology and consumer discretionary, while communication services and financials also performed strongly. Oracle rose 5.1% and Estee Lauder climbed 5.8% following broker upgrades, with AI-related optimism supporting renewed buying in the technology sector. The rebound comes as the third-quarter earnings season kicks off today, with major banks including JP Morgan, Citigroup, Wells Fargo, Bank of America, and Morgan Stanley reporting results. Analysts expect S&P 500 earnings to grow around 8% to 9% year-on-year, led by technology, utilities, and materials, signalling resilient corporate fundamentals despite softer economic data. Trading volumes were slightly below average due to the US bond market closure for Columbus Day, but the day’s tone remained firmly risk-on. While the S&P 500 is still roughly 1.5% below its record high from 8 October, Monday’s strong performance suggests investors are positioning for a constructive earnings season and potential easing of monetary policy.

Latest market and economic update

Asian markets were mixed on Tuesday as investors monitored US-China trade developments. South Korea’s KOSPI reached a record high on Samsung’s strong profit forecast, while Japan’s Nikkei dipped 1.2% amid political uncertainty. Mainland China, Hong Kong, Australia, and Singapore were largely steady, with overall sentiment remaining cautious but resilient across the region.

US equity futures edged higher overnight following Monday’s strong gains, as President Trump eased concerns over US-China trade tensions. The Dow, S&P 500, and Nasdaq recovered about half of Friday’s losses, led by megacap tech shares. Quantum computing, clean energy, and rare earth shares also rose, while investors awaited major banks’ quarterly results later in the day.

European shares rebounded modestly, with the STOXX 600 up 0.4% as U.S.-China trade tensions eased. Technology rose 1.8%, led by ASML, while basic resources jumped 3% on copper gains. France’s CAC 40 edged up 0.2%. Top movers included PSI Software (+35.8%), Exosens (+10.5%) and Big Yellow Group (+15.4%) on takeover and investment news.

The dollar index remained above 99.2 on Tuesday, supported by easing US-China trade tensions and hopes for a Trump-Xi meeting later this month. The greenback held firm against most major currencies, trading at 1.1581 versus the euro, and extended gains against the yen, as limited US economic data and political uncertainty in Japan kept investors cautious.

Oil prices rose slightly in Asia today, stabilising after recent losses amid easing US-China trade tensions and a ceasefire between Israel and Hamas. Brent rose to $63.55 a barrel and WTI to $59.22. Markets remain cautious over supply glut fears, weak demand, and OPEC’s forecast of balanced global oil supply in 2026.

Philadelphia Fed chief Anna Paulson called for gradual interest rate cuts, citing rising risks to the labour market and downplaying the impact of persistent tariff-driven inflation pressures. She expects near-potential economic growth in 2026 and believes that careful, modest policy adjustments can help maintain full employment while preventing sustained increases in inflation.

Equities on the move

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

Broadcom and OpenAI have announced a multi-year partnership to develop and deploy 10 gigawatts of custom AI accelerators by 2029. OpenAI will design the chips while Broadcom manages deployment. Analysts expect the deal to significantly boost Broadcom’s AI revenue, potentially exceeding $40 billion annually from 2026, with further growth possible.

Samsung Electronics forecast third-quarter operating profit of 12.1 trillion won ($8.4 billion), beating estimates and last year’s 9.18 trillion won. Consolidated sales are expected at 86 trillion won, driven by strong memory chip demand, especially for AI-linked servers. The company will supply advanced high-bandwidth memory to major AI chipmakers in the coming quarters.

Robinhood is exploring acquisitions or partnerships in the growing prediction markets sector, said executive JB Mackenzie. The firm already offers event contracts via Kalshi and ForecastEx, with estimated annual revenues above $200 million. Analysts say Robinhood users account for up to 35% of Kalshi’s volumes as the market rapidly expands.

Michelin cut its 2025 outlook, citing weaker-than-expected North American sales and margins. The company now expects segment operating income of €2.6–3.0 billion, down from above €3.4 billion, and lowered free cash flow forecasts to €1.5–1.8 billion. Falling truck and agriculture demand, soft replacement tyre markets, tariffs, and a weaker dollar weighed on performance.

Country Garden’s controlling shareholder will convert $1.14 billion in loans to equity as part of its offshore debt restructuring, issuing shares at HK$0.60 each. Creditor votes are set for 5 November, with a liquidation hearing in January 2026. September sales fell 29% year-on-year, highlighting ongoing struggles in China’s beleaguered property sector.

Mizuho raised AMD’s price target to $275 from $205 after a multibillion-dollar OpenAI supply deal worth over $90 billion through 2030, potentially doubling earnings by 2027-28. The agreement could generate up to $22 billion annually, though warrant dilution and AI spending “circularity” pose risks. Nvidia and Broadcom also saw modest target increases amid AI optimism.

Goldman Sachs downgraded PayPal to Sell with a $70 target, citing margin pressures, slower 2026 growth, and fading credit tailwinds. Challenges include slower checkout adoption, U.S. tariffs, and rising marketing expenses. Transaction margin growth is projected at 3%, below consensus, reflecting investor caution in the digital payments sector.

BTIG upgraded Palo Alto Networks to Buy, raising its price target to $248 on strong demand and confidence in double-digit revenue growth. Positive customer feedback supports 2026 targets of 14% total revenue growth and 26% recurring revenue growth, while the CyberArk acquisition and cloud-focused strategy are expected to drive continued growth.

Bank of America downgraded Intel to Underperform, saying its recent share surge overstates operational improvements. Despite balance sheet strength and foundry potential, Intel faces server CPU challenges, no clear AI accelerator strategy, and limited flexibility to divest unprofitable units, leaving upside constrained amid competition and execution risks.

Goldman Sachs upgraded Estee Lauder to Buy, raising its price target to $115, citing a return to revenue growth and margin recovery. Stabilising sales in China, improving travel retail, and expanded US e-commerce presence support the turnaround. Cost savings, productivity gains, and the “Beauty Reimagined” strategy are expected to boost operating margins by fiscal 2028.

Morgan Stanley raised Rocket Lab’s price target to $68 from $20, citing strong demand for space capacity and its position as a publicly traded alternative to SpaceX. Shares are up 4%, having gained 152% in 2025. Growth drivers include the upcoming Neutron rocket, expanding space systems division, and satellite constellation plans, though execution risks remain.

Deutsche Bank expects European equities to rise in 2026, forecasting 12-16% upside, supported by earnings recovery, German fiscal stimulus, and easing trade uncertainty. Autos, Energy, and Materials should stabilise, while Health Care, Financials, and Industrials drive growth. Low valuations versus the US underpin the constructive outlook.

Analysts from Bank of America and Societe Generale forecast gold could reach $5,000 an ounce in 2026, while Standard Chartered raised its average forecast to $4,488/oz. Spot gold recently surpassed $4,000, up 53% this year, supported by geopolitical risks, central bank buying, and expectations of US rate cuts. Silver also remains strong amid supply shortfalls.

Upcoming data and events

Tuesday’s focus includes German CPI and ZEW Economic Sentiment, alongside EU Harmonised CPI. In the US, Federal Reserve Chair Jerome Powell’s speech may signal future monetary policy directions. Key earnings releases feature financials JP Morgan, Citigroup, Wells Fargo, healthcare giant Johnson & Johnson, and investment manager BlackRock.

This information is provided solely for educational and informational purposes and should not be construed as investment advice, advice on specific investments or investment decisions, tax advice, legal advice, or any other form of professional or regulatory advice. The information does not take into account your personal circumstances and is provided to you on the express understanding that it does not constitute advice and should not be relied upon in making any investment decision. Investing in financial instruments involves risk. You should conduct your own research before making any investment decisions and seek the assistance of a licensed financial advisor if you are unsure. No person should act on any opinion or information contained in this document without first obtaining appropriate professional advice. Calamatta Cuschieri Investment Services Limited does not accept liability for any actions, proceedings, costs, demands, expenses, damages, or losses suffered as a result of reliance on the information herein.