Powell tempers hopes of a December cut

General market commentary

On Wednesday, the US equity market retreated from earlier gains after comments from Federal Reserve Chair Jerome Powell suggested that another rate cut this year is not guaranteed. The Federal Open Market Committee lowered the federal funds rate by 25 basis points to a range of 3.75 to 4.00 percent, in line with expectations, and announced plans to end its balance sheet reduction programme in December. The Dow Jones Industrial Average slipped, the S&P 500 finished flat, and the Nasdaq Composite reached another record high, supported by Nvidia as it became the first company to achieve a market value of five trillion dollars. Bond yields rose as markets scaled back expectations for further easing, with the ten-year US Treasury yield climbing to 4.07 percent, while the US dollar strengthened against major currencies.

Earnings season remained a central focus in the US equity market, with most reporting companies surpassing analyst forecasts. Strong results from technology firms continued to support market sentiment, although elevated valuations and mixed after hours reactions from major names such as Meta, Microsoft, and Alphabet highlighted ongoing volatility. The outcome of the Asia Pacific Economic Cooperation conference also drew attention, as the United States finalised trade agreements with South Korea and Japan to boost investment and cooperation in critical minerals and energy. Investors were also watching for President Trump’s upcoming meeting with China’s President Xi Jinping, which is expected to address trade and geopolitical issues that could influence global markets.

Latest market and economic update

Asian shares advanced on Thursday after the Federal Reserve cut interest rates and U.S.-China trade talks continued, while the yen weakened following the Bank of Japan’s decision to keep rates on hold. KOSPI and Samsung shares rose on a new South Korea-U.S. trade deal, supporting positive market sentiment across the region.

US equity futures rose overnight after a meeting between Presidents Trump and Xi, signalling long-term stable US-China relations. Alphabet surged nearly 7% in after-hours trading on strong results, while Meta fell over 7% due to a $15.9 billion charge, and Microsoft dropped 4% after a $3.1 billion OpenAI-related earnings hit. Investors now await Apple and Amazon results later today.

Europe’s STOXX 600 closed 0.1% lower as investors awaited the Fed’s rate decision and parsed earnings. Banks rose on Deutsche Bank (+5%) and Santander (+4.3%), while healthcare gained on GSK (+6.6%). Miners and oil majors advanced, but telecoms fell. Adidas dropped 10.4%, dragging consumer discretionary, while Temenos and Next led gains.

The dollar index stayed above 99 on Thursday after a sharp rise, supported by Fed Chair Powell’s cautious remarks on further rate cuts. Markets now see less than a 70% chance of another cut this year. Traders also eyed the Trump-Xi meeting. EUR/USD traded around 1.1630, reflecting dollar strength.

Oil prices fell slightly in Asia this morning, pressured by a stronger dollar after the Federal Reserve downplayed the likelihood of a December rate cut. Caution ahead of the U.S.-China meeting on trade tensions also weighed. Brent fell to $64.81 a barrel and WTI to $60.31, with concerns over weak demand and a supply glut limiting gains.

The Federal Reserve cut interest rates by 25 basis points to 3.75%-4.00% in a 10-2 vote, highlighting divisions within its leadership. Two officials dissented, preferring a larger cut or no change. The Fed will also restart limited Treasury purchases, while Chair Jerome Powell indicated a December rate cut is “far from” certain.

Equities on the move

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

Samsung Electronics expects AI-driven memory chip demand to outstrip supply and will focus on mass-producing advanced HBM chips. It posted record quarterly revenue and operating profit, planning significant capital spending and production expansion next year. Supply constraints for mobile and PC memory are set to continue amid the ongoing AI chip boom.

Alphabet beat revenue and profit expectations as strong AI demand boosted both advertising and Google Cloud, with total quarterly revenue of $102.35 billion and adjusted EPS of $3.10. Google Cloud grew 34%, while ad revenue rose 12.6%. The company raised capital expenditure guidance to $91–93 billion, reflecting ongoing AI investments amid intensifying competition.

Microsoft spent a record $35 billion on AI infrastructure in its first quarter, exceeding expectations, while Azure cloud revenue grew 40% despite capacity limits. Total revenue rose 18% to $77.7 billion and profit reached $3.72 per share, beating forecasts. The OpenAI partnership and AI services like 365 Copilot continue to drive growth, supporting its $4 trillion market value.

Meta plans higher AI spending next year, including data centres for Superintelligence Labs, after 26% third-quarter revenue growth. A $16 billion one-time charge hit profit, sending shares down 8% after hours. The company’s 3.5 billion-user base supports strong AI-driven ad revenue, with Q4 revenue guidance of $56–59 billion.

MercadoLibre posted third-quarter net profit of $421 million, below expectations, impacted by currency effects and weaker demand in Argentina. Revenue rose 39% to $7.4 billion, boosted by Brazil’s free-shipping initiative, though margins fell to 9.8%. EBIT grew 30% to $724 million. Mercado Pago saw loans rise 83% and total payment volume grow 32%.

OpenAI is preparing a 2027 IPO, targeting a valuation of up to $1 trillion and aiming to raise at least $60 billion, following its transition to a for-profit model with Microsoft. The offering would be the world’s largest, supporting CEO Sam Altman’s ambitious AI plans, despite the company posting a $13.5 billion loss in H1 2025.

Caterpillar beat third-quarter revenue and profit estimates as AI-driven demand for energy and transportation equipment, including data centre power systems, lifted sales. Revenue rose 17.6 billion dollars, with a 17% gain in its energy unit and 7% in construction. Adjusted profit per share was $4.95, sending shares up 12%.

Starbucks posted its first quarter of global comparable sales growth in nearly 18 months, led by a 3% rise in international markets, though U.S. sales remained flat. Margins were squeezed by rising coffee bean costs and restructuring expenses. CEO Brian Niccol plans careful price increases, while store closures and labour investments continue amid ongoing recovery and union talks.

Chipotle cut its 2025 sales forecast for the third time, citing weak consumer spending and rising costs, sending shares down 15%. Third-quarter comparable sales rose 0.3%, below expectations, while restaurant-level margins fell to 24.5%. The company plans gradual price increases and staff retraining to address operational challenges.

E-commerce firm eBay forecast fourth-quarter profit below estimates, sending shares down 8.5% after hours. Third-quarter revenue and adjusted profit beat expectations at $2.82 billion and $1.36 per share. Tariff changes, including the removal of the de minimis exemption, and rising import costs continue to challenge cross-border trade.

Prudential Financial reported higher third-quarter profit, driven by strong international underwriting and investment gains. Adjusted operating income rose to $1.52 billion, or $4.26 per share, up from $1.21 billion, or $3.33 per share a year earlier. International operations earned $881 million, while PGIM reported $244 million, with assets under management at $1.61 trillion.

CVS Health raised its 2025 profit forecast and expects double-digit earnings growth in 2026, reflecting progress in its turnaround under CEO David Joyner. Q3 adjusted profit beat estimates at $1.60 per share, while a $5.73 billion charge weighed on net results. Pharmacy revenue rose 11.7% on new Rite Aid customers, boosting investor confidence.

Adidas’ CEO said U.S. retailers are ordering cautiously amid tariff uncertainty, prompting discounting that hurt full-price sales. Third-quarter North American sales fell 5%, though global revenue rose 3% to €6.63 billion. Tariffs are expected to cut €120 million from profits, partly offset by price hikes and supply-chain changes, while Samba and running shoes drive growth.

Used car retailer Carvana reported higher third-quarter revenue and profit, driven by strong demand for preowned vehicles amid rising new-car prices. Revenue rose 54.5% to $5.65 billion, beating estimates, while net income increased to $263 million from $148 million a year ago. Shares have gained about 78% this year, reflecting improved performance and cost-saving measures.

Mastercard is reportedly in late-stage talks to acquire crypto startup Zerohash for $1.5–2 billion, marking a major move into stablecoins. Zerohash, which provides blockchain and stablecoin infrastructure, recently raised over $100 million at a valuation above $1 billion. The deal follows Mastercard’s broader push into crypto partnerships with firms like Crypto.com, OKX, and Kraken.

Eli Lilly is partnering with Walmart to sell its weight-loss drug Zepbound at retail pharmacies across the U.S. at direct-to-consumer prices, starting at $349 per month. This expands access for self-paying customers, complementing LillyDirect and telehealth options, as the company competes with Novo Nordisk’s Wegovy in the $150 billion obesity treatment market.

Nvidia saw multiple price target upgrades after its GTC conference, reflecting strong AI demand and long-term revenue visibility. Bank of America raised its target to $275, Melius Research to $300, and DA Davidson to $250, citing robust GPU orders, partnerships with Microsoft and OpenAI, and potential 2025-26 data centre revenue well above consensus.

Bank of America raised Apple’s price target to $320, maintaining a Buy rating, citing strong five-year growth prospects across products and services. The bank forecasts 2025 revenue of $418 billion and EPS of $7.41, projecting EPS to reach $13.79 by 2030. Near-term strength is expected from iPhone 17 Pro and Pro Max sales.

Upcoming data and events

Today’s key economic data includes Q3 GDP for the Eurozone, covering Germany, France, and Italy, US consumer spending and PCE inflation, jobless claims, Germany’s inflation, ECB rates, mortgage rates, and a Fed speech. Apple, Amazon, Eli Lilly, Mastercard, Schneider Electric, and S&P Global are among the companies reporting their quarterly earnings.

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