Fed minutes spark another AI rally

General market commentary

US equity markets advanced strongly on Wednesday, with the S&P 500 and Nasdaq both closing at record highs as optimism around technology and artificial intelligence drove gains. The Nasdaq rose 1.1% to 23,043.4, while the S&P 500 gained 0.6% to 6,753.7. The Dow Jones Industrial Average finished broadly flat at 46,601.8. Technology shares led the rally, boosted by notable performances from AMD, which jumped 11%, and Nvidia, up 2.2%. Wedbush Securities noted signs of a “very strong” earnings season ahead for the tech sector, reinforcing positive sentiment across markets.

Investor attention also centred on the Federal Reserve’s September meeting minutes, which indicated that most policymakers expect further interest rate cuts later this year. The expectation of continued monetary easing helped support valuations, even as divisions within the Fed remain over the pace of future reductions. Overall, sentiment across equity markets was buoyant, with the AI-driven momentum showing little sign of fading and investors largely brushing off concerns about the ongoing government shutdown.

Latest market and economic update

Asian equity markets mostly advanced this morning, lifted by strong gains in technology shares following Wall Street’s record highs. Japan’s Nikkei and TOPIX neared record levels, while mainland Chinese markets rallied after reopening from holiday. However, Hong Kong’s Hang Seng lagged on steep falls in health technology shares and weakness in HSBC.

U.S. equity futures held steady overnight, supported by strength in technology shares and optimism around AI-related megacaps and chipmakers. Investors remained cautious ahead of remarks from Fed Chair Jerome Powell and awaited earnings reports from Delta Air Lines and PepsiCo, balancing ongoing enthusiasm in tech with uncertainty over the policy outlook.

European shares closed at record highs on Wednesday, rebounding from earlier losses, supported by strong bank and industrial performances. The STOXX 50 and STOXX 600 rose 0.8%. Top gainers included Allianz, Santander, UniCredit, AXA, BBVA, Siemens, LVMH, Hermes, and Safran, while steelmakers ArcelorMittal and ThyssenKrupp jumped, offset by falls in auto equities.

The U.S. dollar remained strong on Thursday, slipping slightly below 98.8 but staying near a two-month high. It gained nearly 1% against the euro, which is currently trading at 1.1645, supported by political uncertainty in France and safe-haven demand amid the ongoing U.S. government shutdown. The dollar also rose over 3% versus the yen this week.

Oil prices slipped in Asia this morning, with Brent down 0.6% to $65.86 and WTI 0.7% lower at $62.10, as hopes for a Gaza ceasefire eased geopolitical tensions. Rising U.S. crude inventories, up 3.7 million barrels, weighed on markets, despite falling fuel stocks and resilient demand, while production forecasts for 2025 were raised to a record high.

U.S. President Donald Trump announced that Israel and Hamas had agreed to the first phase of a U.S.-brokered peace deal, including a phased Israeli withdrawal from Gaza and the release of all hostages by Hamas, expected by Monday. The plan also proposes a transitional government, Hamas disarmament, and a special economic zone, aiming to end the two-year conflict and rebuild Gaza.

The latest FOMC minutes showed most Federal Reserve policymakers favouring further rate cuts amid a softening labour market and reduced upside inflation risks. The Fed lowered the benchmark rate to 4.00%–4.25%, its first cut in nine months. Officials expect modest labour market changes and anticipate tariff-driven inflation effects to persist into next year.

Equities on the move

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

China tightened rare earth export controls, expanding restrictions on processing technology, barring unauthorised overseas cooperation, and limiting exports to defence and semiconductor users. The rules cover more magnet types and components, with overseas manufacturers requiring licences. The Ministry of Commerce aims to manage access while allowing some licensing facilitation.

Goldman Sachs noted that the current rally in technology and AI is underpinned by fundamental growth, even as the market exhibits some characteristics of past bubbles, including high valuations and concentrated gains. With strong balance sheets and limited new entrants, the bank emphasised the importance of diversification amid rising competition and market risks.

SoftBank Group will acquire ABB’s robotics division for $5.4 billion, advancing its strategy to merge robotics with artificial intelligence. ABB, which had planned to spin off the unit, will now focus on electrification and automation, using the proceeds for technology development, production expansion, and potential acquisitions. The deal is expected to close in 2026.

Nvidia CEO Jensen Huang said the US is “not far ahead” of China in AI and praised the H-1B visa policy for attracting top talent. He reported strong demand for Blackwell chips, expressed interest in investing in AI startups, and revealed regrets over not funding xAI and OpenAI earlier, highlighting Nvidia’s aim to support AI infrastructure growth.

Netflix is reportedly nearing a deal with Warner Music Group to produce movies and documentaries based on the label’s artists and songs. The partnership aims to leverage Warner’s extensive catalog, bringing global stories to screen. Details remain unconfirmed, and neither company has commented, though Warner CEO highlighted the untold potential of its music rights.

Costco Wholesale reported stronger-than-expected September sales, with net sales reaching $26.58 billion, up 8% year-on-year. U.S. comparable sales excluding fuel and FX rose 5%, while Canada and other international markets grew 9.3% and 7.5%. Digitally-enabled sales surged 26.1%, highlighting robust e-commerce growth ahead of the crucial holiday shopping season.

Coca-Cola will launch 222 ml single-serve mini cans in U.S. convenience stores next year, priced at $1.29, targeting cash-conscious and calorie-aware consumers. Later, the company will introduce cane sugar-sweetened glass bottles. The move aims to boost trial and affordability amid slow volume growth, offering popular variants like Coke Zero, Sprite, Fanta, and Diet Coke.

Disney announced it will raise prices for certain U.S. theme park tickets during peak holidays, including Thanksgiving and New Year’s Eve, starting in 2026. Walt Disney World one-day tickets will exceed the current $199 top price, while most Disneyland ticket tiers will rise by 3% or less, with the lowest-priced ticket remaining at $104.

The FDA approved Regeneron’s Libtayo for adults with high-risk skin cancer after surgery and radiation. In a trial, it greatly reduced the chance of the cancer coming back or causing death by 68%. Approved quickly under priority review, Libtayo gives patients a new treatment option with clear instructions and safety guidelines.

Chevron CEO Mike Wirth told employees he expects the company to exceed financial targets following its $55-billion acquisition of Hess. The deal, completed in July, was projected to deliver $1 billion in synergies and boost 2026 free cash flow guidance from $10 billion to $12.5 billion. Chevron highlighted the role of its workforce in achieving these goals.

Salesforce announced it will invest $1 billion in Mexico over five years to expand operations and promote AI adoption, including a new Mexico City office and Global Delivery Center. The move aims to create jobs, build AI skills, and position Mexico as a consultancy hub, despite the company forecasting third-quarter revenue below estimates.

Cisco Systems launched new Silicon One P200 chips and 8223 routers to speed up AI data centre connections. The technology allows faster long-distance data transfer and directly competes with Broadcom, showing Cisco’s push to expand in the growing AI networking market, aiming to attract more customers and strengthen its position in the sector.

Citi upgraded Freeport-McMoRan to Buy, citing copper prices expected to reach $12,000 per ton in early 2026 and the shares sharp post-Grasberg pullback as an attractive entry. The bank maintained a $48 price target, seeing Grasberg’s issues as temporary, with production set to recover, and Freeport benefiting from U.S. expansion and rising copper demand.

Stifel raised Tesla’s price target to $483 from $440, citing progress on Full Self-Driving (FSD) and the emerging Robotaxi network. The firm noted Tesla’s camera-based FSD could be available for personal use by 2025, highlighted the Austin Robotaxi launch, and flagged regulatory support from the Autonomous Vehicle Acceleration Act as a potential boost to growth and valuation.

Morgan Stanley expects TSMC shares to rise following its Q3 analyst meeting on October 16, anticipating higher full-year revenue guidance driven by strong AI semiconductor demand. The bank forecasts 2025 revenue growth of 32-34% or potentially above 35%, with high fab utilisation and possible 2026 price hikes, highlighting TSMC as a key play in AI-driven semiconductor growth.

HSBC downgraded Intel to Reduce from Hold, citing a 55% rally driven by one-off investment deals rather than improvements in manufacturing. Foundry operations face execution issues and weak customer traction, while potential deals with Apple or TSMC offer limited impact. HSBC set a $24 price target, highlighting structural challenges and uncertain client and server demand.

JPMorgan downgraded FedEx to Neutral, citing earnings risks and structural issues in its freight business. Margin pressure from weak fundamentals, rising costs, and competition is expected. The bank said FedEx’s valuation is unlikely to improve until profitability challenges in Europe and the U.S. are resolved amid broader transport sector uncertainty.

UBS rates European industrial shares Schneider Electric, GEA Group, and Kone as Buys, with price targets of €280, €73, and €65 respectively. Schneider benefits from data centre growth, GEA from food and dairy demand, and Kone from Maintenance and Modernisation, all expected to deliver solid organic growth and margin improvements.

BofA upgraded Puma to Neutral from Underperform, raising its price target to €23, citing lower estimate risk and improved valuation. Despite expected 2025 sales declines and a third-quarter operating loss, the brokerage highlighted stable liquidity and reduced financial risk. Analysts expect the new CEO to focus on brand stability and retail optimisation rather than premium repositioning.

Upcoming data and events

Today’s market focus will be on the initial jobless claims report in the US and a speech by Federal Reserve Chair Jerome Powell, while key earnings releases are expected from TSMC, PepsiCo, Delta Air Lines, and Levi Strauss & Co.

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