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The OIS continues to reduce the chance of a FED rate cut on Dec 10th, now just 43% (with 14 Fed speakers this week). After opening weakly equities rallied into the close and open the week higher but crypto continues to struggle. Bitcoin down -24.6% from October highs and Ethereum -35.4%.
Data continues to show middle- and lower-income Americans are struggling:
1. U.S. foreclosures are up 20% from last year as Americans’ struggle with mortgage payments and rising costs
2. U.S. subprime auto loan delinquencies are at their worst level in more than 30 years
3. 875,000 U.S. homeowners are now underwater on their mortgages — the most in 3 years, per intercontinental exchange
4. 401k hardship withdrawals hit highest ever great leading indicator heading into 2026
5. Most Americans now live in areas already in recession: 88% of the U.S. population is in states facing economic downturn, per fed beige book analysis
Japan’s 10Y Government Bond yield surges to its highest level since June 2008, and 20-year bond rises to the highest yield since 1999 on talks of a $110 billion stimulus package (while the central bank is about to hike rates). Behind door A you have a bond market crisis, behind door B you have a currency crisis!
*JAPAN 3Q GDP -1.8% ON ANNUALIZED BASIS; EST. -2.4% (Chart 1, Bloomberg)
On Wednesday, Nvidia will report earnings with an implied move of +/- 7.5% in the stock. With a $4.6 trillion market cap, this implies a $345 BILLION swing in market cap. That’s more than the entire market cap of all but 33 public companies in the world.

A new rare earth crisis is brewing as yttrium shortages spread, and China hasn’t shipped yttrium to U.S. since April. (Chart 2, Argus)

The week ahead:
Monday → U.S. government reopening
Tuesday → Fed liquidity injection ($10–20b), ADP employment
Wednesday →Nvidia earnings, FED minutes, UK & EZ inflation,
Thursday → September jobs report, Philly Fed manufacturing data, Japan inflation
Friday → UK retail sales, Global flash PMIs, UniMich consumer & inflation expectations
Total of 14 Fed Speaker Events This Week

Weaker Chinese economic data overnight after U.S. equities fall (Nasdaq -2%, S&P500 -1.7%) as chances of Fed rate cuts recede. Dec 10th meeting now prices exactly 50:50 after 3 Fed Presidents say they are more concerned about inflation. With equities falling Japan’s 10-year government bond yield rises to highest since 2008. This is NOT a good sign.
However, U.S. equity earnings are still strong, margins continue to increase, and the data centre build out continues. But the market is clearly getting nervous the AI trade and rotating out. Percentage below 52-week high – Google: -5% Amazon: -8% Microsoft: -9% Nvidia: -12% Tesla: -16% Palantir: -17% Bitcoin: -22% Ethereum: -35% Coinbase: -36% MicroStrategy: -62%
Chinese Oct industrial growth 4.9% y/y [Est.5.5%] (Chart 1, @C_Barraud, National Bureau of Statistics)
Chinese Jan-Oct fixed asset investment -1.7% y/y [Est.-0.8%] largest y/y drop since June 2020. (Chart 2, @C_Barraud, National Bureau of Statistics)

Chinese Oct retail sales 2.9% y/y [Est.2.7%]
Chinese Oct Unemployment 5.1% [Prev. 5.2%]

Kevin Hassett, National Economic Council Director, says the shutdown caused about 60,000 non-federal job losses, cost the economy $15 billion per week (around $92 billion total), and may cut Q4 GDP by 1.5 points.
CDS MARKET FLASHING WARNING SIGNS: CDS spreads continue to surge for AI companies. Oracle, CoreWeave 10Y CDS spreads are up over 30% in the past month alone, with other major players also up double digits. We are seeing a ton of heavy, upfront “capex” spending by these companies. Not only that, but these hyperscalers are tapping the credit market for this capital at a scale we haven’t truly seen before. The ultimate return on these investments is becoming more uncertain; hence investors are bidding up protection against the credit. (Chart 3, Bloomberg, @Coffee__Capital)
And with that their bonds are obviously falling too; Oracle’s $3.5 billion of 30-year debt issued in September has cratered by 8% from the October peak. (Chart 4, Bloomberg)
The unemployment rate for US college graduates is now 9.3%, higher than a peak of 8.7% during the 2008 Great Financial Crisis.
401(K) hardship withdrawals hit the highest level since record keeping began
The Cass Freight Shipments index has hit yet another new low for the current cycle. (Chart 5, @AvidCommentator, Cass Freight Index)

The Cass Freight Shipments index has hit yet another new low for the current cycle. Excluding a few brief months at the start of the pandemic, it is at its lowest level since the GFC era. CHINA FOREIGN MINISTRY, ON US APPROVED ARMS SALES TO TAIWAN: US ARMS SALES TO TAIWAN GROSSLY VIOLATE ONE CHINA PRINCIPLE……Never a dull day in geopolitics.!
Legendary investor Howard Marks puts it bluntly: “When you buy the S&P 500 at a 23x P/E, your 10-yr annualized return has always fallen between +2% and –2%, in every case, every case.” Today the market sits at a 25x P/E. Add inflation… and your “returns” are negative.
The White House announces that the October jobs report will be released WITHOUT an unemployment rate.

Silver hits a new all-time high, gold and equities rally with S&P500 now within 1% of an all-time high as Trump signs legislation to end the longest government shutdown in US history. Brent falls 3.7% while UK bond yields remain on the cycle lows on more weaker than expected data, GDP this time. And some relief in Australia with stronger employment data, with the unemployment rate falling to 4.3%.
Slowing trend in UK GDP growth since H1 2024. Just +0.1% QoQ in Q3, and flat on a per capita basis. GDP deflator at +3.8% YoY undermining relatively strong nominal GDP growth. The UK is in a private sector recession due to disastrous interventionist policies. (Chart 1, @Frencheconomics)

US Card Spending Rises Most Since Early 2024, BofA Data Show – Bloomberg ….. meanwhile regarding credit card debt, over 12% of balances are now 90+ days delinquent — the highest in 14 years. with interest rates above 21%
U.S. 71% believe that unemployment will go higher over the next 12 months, the highest level in 45 years

FED ’s Perli Says Won’t Be Long Before Fed Starts Buying Assets – Bloomberg …..
*FED’S COLLINS FAVORS HOLDING RATES STEADY ‘FOR SOME TIME’
*COLLINS: SEE RELATIVELY HIGH BAR FOR FURTHER EASING NEAR TERM

GOLDMAN SACHS: GLOBAL STOCKS TO RETURN 7.7% ANNUALLY OVER THE NEXT DECADE
GOLDMAN: U.S. STOCKS TO TRAIL GLOBAL PEERS OVER NEXT DECADE: Goldman Sachs strategist Peter Oppenheimer expects U.S. equities to post the weakest returns among major regions over the next 10 years, projecting 6.5% annual gains for the S&P 500.

*DEPT OF ENERGY: BUYING ROUGHLY 1 MILLION BARRELS OF CRUDE OIL

While S+P500 sits just 1% below all-time high we continue to see a wobble in the AI power generation theme. Uranium sits 15.7% from it’s high (having rallied 279% since April) and CoreWeave falls again (cloud computing company purpose-built for artificial intelligence workloads) now down 53.3% from its June high……
Meanwhile MORGAN STANLEY WARNS OF U.S. POWER SHORTAGE FOR DATA CENTERS BY 2028 Morgan Stanley says surging AI demand could create a power shortfall of up to 20% — about 13–44 GW — for U.S. data centres through 2028.

A staggering statistic. Americans aged 70 and above now own 39% of all stocks and mutual funds (which mostly invest in equities), almost twice as much as was common from 1989 to 2009.(Chart 2, Federal Reserve)
White House: There will be NO U.S. CPI and Payrolls data for October.