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US set to ban Nvidia’s scaled-down AI chips to China, sparking shift in global AI race and market turmoil

Morning Macro 7th November

Breaking: The US is set to ban Nvidia’s scaled-down AI chips from being sold to China! Washington’s move targets B30A chips – used to train large language models when efficiently arranged in large clusters – designed to bypass earlier sanctions. But this would create a big opportunity for China to build its own chips domestically, as Nvidia CEO Jensen Huang warned: “China is going to win the AI race.”

Equities are having a rough time. The S&P 500 dropped more than 1.1% and Nasdaq 1.7% yesterday, with futures consolidating this morning. Big tech stocks suffered with Amazon down 2.8%, Nvidia down 3.6% (Chart 1, Bloomberg), Microsoft down 2%, Palantir tumbled 6.8%! Meta is now down over 22% from its August high!

China’s exports unexpectedly fell 1.1% y/y in October, the first drop in eight months, as a sharp 25% slump in shipments to the US outweighed gains elsewhere. The decline, driven by weakening global demand and fading export resilience, signals mounting pressure on China’s slowing economy amid weak consumption and a prolonged property slump – a triple whammy to growth. Meanwhile, modest tariff relief from the US may offer only limited support. Exports still exceeded $3 trillion year-to-date, though momentum is fading. (Chart 2, Bloomberg)

The Bank of England held rates stable at 4% – as expected – before the Nov 26 budget announcement; however the committee was split 5-4. The OIS market is now pricing over 70% chance for a cut in the December meeting, while its fully expecting a cut in the Early February meeting.

US travel stocks are in focus after upbeat updates from Expedia and Airbnb. Expedia lifted its full-year outlook on resilient holiday demand, with shares up 18%, while Airbnb forecast strong Q4 bookings, rising 5.5%. UK-listed IAG reported Q3 revenue and profit slightly below estimates but noted solid travel demand and strong Q4 bookings despite some North American softness.

European peers didn’t face the same fate with Air France down almost 15% on the day, even despite good earnings! (Chart 3, Bloomberg)

Japanese household spending rose 1.8% y/y in September, missing expectations of 2.5% and slowing from August’s 2.3%. The data point to a steady yet fragile recovery in consumer demand, with weaker spending on essentials like food, housing, and utilities offset by gains in medical care and household items. On a monthly basis, personal spending fell by 0.7% – marking the first fall since June.

Data today – US Michigan Consumer Expectations, Canada Employment

Longest US Shutdown Hits 6 Weeks as Flight Cuts Loom; Global Stocks at Record Highs

Morning Macro 6th November

We are officially in the longest US shutdown in history – consensus estimates are that shutdown would cost the economy around $15 billion each week; we have now entered the 6th week of the shutdown! Meanwhile, the US Department of Transportation announces mandatory flight cuts at major airports from Friday. The US may cut air traffic by 10% if no deal is reached to end the shutdown.

The US Supreme Court heard arguments this week on the legality of Trump’s sweeping tariffs, and many justices looked skeptical. Polymarket is now pricing only a 30% chance of the Court ruling in favour of Trump! If the tariffs are ruled out, this would cost the US around $30 billion per month in lost revenue!

But elsewhere the party is still going – the question is how long until the music stops? Globally the proportion of stock indexes at an all-time high is the highest since 1999! (Graph 1, Macrobond)

Now with lacking data in the US, everyone’s attention was on the ADP employment data, which showed that in October, private sector employment rose by 42k, marking the first monthly gain since July and surpassing expectations of 25k. Despite the positive data, US treasury yields didn’t even flinch, showing the little importance ADP data have in the market.

In the Eurozone, PMI data were positive for Spain (56) and Italy (53.1), recording their strongest expansions in over a year, driven by resilient services, new orders, and easing cost pressures. Germany (53.9) showed its fastest growth since mid-2023, supported by a rebound in services despite softer sentiment. Meanwhile France (47.7) remained mired in contraction, reflecting weak domestic demand. Overall, Europe’s private sector recovery is being powered by services strength amid lingering manufacturing weakness. Outside continental Europe, the UK (52.2) also regained momentum, but the expansion was driven by the services sector as the manufacturing side remains in contraction!

And the US showed steady growth on the PMI front too; the S&P Composite PMI rose to 54.6, driven by solid gains in both manufacturing and services activity. New business strengthened and employment edged higher, though confidence slipped to a six-month low. Inflation pressures continued to ease, with costs and prices rising at their slowest pace since April. Meanwhile, the ISM Services PMI climbed to 52.4, signalling the strongest expansion since February. Business activity and new orders rebounded sharply, though employment remained weak amid uncertainty linked to the shutdown.

Data today – Bank of England interest rate decision 

Bitcoin Drops 20%, Global Stocks Slide, Fed Liquidity Tensions, and Mixed Global Economic Signals

Morning Macro 5th November

Bitcoin is now down 20% since October 6th (Chart 1, TradingView) – yesterday’s selloff, saw it reaching the lowest point since June! The move was driven by an almost $1.3 billion liquidation in leveraged crypto positions.

In the stock market, global equities slumped yesterday and have continued this morning in Asia, as investors are unwinding positions in overheated AI and tech stocks. The Nasdaq fell sharply, with Nvidia, Palantir, and other chipmakers leading declines amid fears that valuations had run far ahead of earnings and both S&P and Nasdaq e-mine futures even traded lower post New York’s close (Chart 2, Bloomberg). Meanwhile, the Nikkei closed 2.5% lower on the day.

China’s private RatingDog General Services PMI declined to 52.6 in Oct 2025 though still above expectations. This is the softest reading in the services PMI since July, pressured by a slight decline in foreign sales and a decline in employment. Input cost inflation rose to a year high due to higher wages and increasing prices of raw materials, while selling prices fell slightly amid higher competition. Taking this with the reported decline in manufacturing PMI earlier this week, the RatingDog Composite PMI stood at 51.8.

But China’s 10-year yields dropped near its lowest level in three months at 1.73%. The PBoC announced it will resume its government bond purchases after a 9-month hiatus, net injecting 20 billion yuan ($2.8 billion) of liquidity via buying government bonds.

What Fed rate cut? When a central bank cuts short-term borrowing rates but interbank lending remains at the same levels, something already screams in the money markets. SOFR was seen yesterday trading at a 32bps above the IOER set by the Fed (Chart 3, Bloomberg) – banks are screaming for cash, hence no surprise the Fed is restarting the printers at a current balance sheet of $6.6 trillion! Last week, the spike was attributed to fiscal year ends etc, but when a $4-5 trillion market in daily flow experiences these widening rates, something is about to crack.

Gold prices remain pressured around the $4,000/oz marker, with the 10-day MA now presenting near-term resistance (Chart 5, TradingView). A wave of persistent ETF withdrawals has driven gold’s pullback. Short-term support now sits around $3,940/oz, with more significant support at the $3,900/oz handle. 

2025 has now been the year with the most job cuts since COVID! YTD approximately 950k jobs have been cut (Chart 4, Challenger, Gray & Christmas) – although the US government has contributed to nearly a third of those cuts. “We’re not just in a low hire, low fire environment anymore. We’re firing.” – Dan North, Allianz Trade. Amazon, Target, Starbucks and Paramount have all announced recently that they are cutting jobs!

Meanwhile, German factory orders rose 1.1% m/m in September, marking the first increase in orders since April. This rise was driven by increases in the manufacture of electrical equipment (9.5%), aircraft, ships, trains, military vehicles (7.5%), and the automotive sector (3.2%). Orders for metal products fell 19% following large orders in August. Still, on a Q/Q basis, factory orders declined 3.3% in Q3 2025.

And French industrial production surprised to the upside, as it came at 0.8% higher m/m in September, driven by strong recoveries in transport equipment and electronics manufacturing. 

Data releases today – Euro Area PMI, GB Services PMI, ADP Employment, US ISM PMI

UK Yields, Markets React to Fiscal Vigilance; Tech and Crypto Movements Highlight Global Risk Sentiment

Morning Macro 4th November

UK long-end yields extended their rally, with the 30-year gilt dropping 6bps to 5.144% – the lowest since April – as Chancellor Rachel Reeves reaffirmed her “iron-clad” commitment to fiscal discipline ahead of what’s expected to be a tough, tax-heavy budget later this month. Her three priorities are lofty – cutting NHS waiting lists, reducing the national debt and improving the cost of living.

It’s not going to be cheap – UK Chancellor Rachel Reeves should boost her fiscal buffer to £20 billion by implementing around £26 billion in tax increases in the November 26 budget, the Resolution Foundation said Tuesday. (Figure 1)

The pound weakened further, down 0.3% to hover near $1.31. Meanwhile, the FTSE 100 slipped 0.7%, though its heavy weighting of global exporters provided some cushion, leaving it faring better than most European peers as sterling’s slide helped offset domestic market weakness.

Amazon continues its surge, up another 4% (Figure 2) yesterday on $38 billion deal with OpenAI for access to AWS cloud infrastructure and Nvidia graphics processors (Nvidia climbed 3%), as the circle of AI investment continues. S&P 500 is beginning to move sideways, just below 6,900 points and its all-time high of last week and Emini futures are down 1% this morning.

Palantir earnings saw it gain 7% beating expectations, but profit taking immediately meant it dropped and is now 5% lower than before the report. (Figure 3)

Bitcoin has fallen to $104,430, its lowest since 17 October – if it falls another $1k it will be at a new low since 23 June!

RBA kept rates in line at 3.6%. The board anticipates one additional rate cut in 2026, projecting underlying inflation to climb above 3% in the near term before easing back to around 2.6% by 2027.

Data today: France budget balance, Lagarde speech, Bowman speech, Redbook.

BoJ & ECB Hold Policy Rates, US Government Shutdown Hits 31st Day, Record Gold Demand

Morning Macro 31st October

In central banking, following the Fed, the BoJ and the ECB held their policy rates steady at 0.5% and 2%, respectively.

The Euro Area expanded just 0.2% q/q. The third largest economic area is struggling to make meaningful progress! Germany and Italy stagnated, Ireland, Finland and Lithuania contracted, while the growth was led by Spain (0.6%) and, surprisingly France (0.5%) due to a sharp rise in exports. Unemployment held steady at 6.3%, consumer confidence and services sentiment were up, while inflation expectations edged down. Inflation is due to be out today and if the deflation worries continue the ECB will have to cut sooner than expected. The OIS over the next year is pricing below 12 bps – so it shouldn’t come as a surprise if the euro weakens form its current levels (Chart 1, Bloomberg).

The 31st day of the US government shutdown! Earlier estimates had shown that every week could shave off 0.1% from the GDP, so now we are talking about at least 0.4% less for Q4 2025. Speaking of GDP, yesterday’s Q3 GDP wasn’t released, something that makes the job for the Fed even harder. 

In Japan unemployment rate picked up to 2.6% and the labour force participation continued declining! Inflation came really hot at 2.8% – above expectations – the markets are slowly ramping up their bets for another hike by the BoJ. Expect the gap on Chart 2, Bloomberg to tighten as the interest rate differential (white line) remains well below historical levels, while the USD/JPY should weaken with monetary tightening. But housing starts and construction orders in Japan remain an issue!

Meanwhile, Chinese PMIs surprised to the downside – with the manufacturing sector contracting (49), while non-manufacturing edged up to 50.1.

Gold demand hit a record 1,313 t in Q3 (+3% y/y), worth $146 bn (+44%), as investors added 222t and central banks holdings were up 28% q/q, while jewellery slumped. Supply also hit records, with mine output up 2%, as gold averaged $3,456/oz (Chart 3, World Gold Council).

The Fed cut rates by 25 bps, but the front end didn’t get the memo – the SOFR rate fixed at 4.27%. Heavy T-bill settlements ($83B this week), month-end balance sheet constraints, and Canada’s fiscal year-end squeezed liquidity. Interest on Reserve Balances – the rate at which banks deposit at the Fed – was at 3.9%, when the spread between the IORB and SOFR is that wide, it screams cash demand is high!

France’s CAC 40 fell 1% as markets soured over a provisional 33% tax on share buybacks passed in a parliamentary vote – a move investors fear will hammer large French firms. SocGen dropped over 5% as traders cut buyback expectations. If the tax is upheld in the final budget, it could undermine Paris as a financial hub and push companies to list abroad. The proposal effectively kills the appeal of buybacks, wiping out a key shareholder-return tool.

Data today – Euro Area inflation, Canada GDP, Fed Governors speeches

US Treasury Yields Grind Higher, KOSPI Rise, Renewed Optimism Across Asia

Morning Macro 30th October

US Treasury yields still grinding higher this morning while Asian equities extended gains on a burst of trade optimism. The 10-year Treasury yield ticked up to 4.08% (Figure 1, Bloomberg) and the 30-year to 4.63%, as investors digested the Federal Reserve’s muddled message – a 25-basis-point rate cut paired with a hawkish tone that muddied the outlook for December.

Risk appetite faded as Powell’s “no preset path” comment unnerved traders. Stocks erased early gains despite Nvidia’s historic $5 trillion valuation, while the dollar strengthened. The Fed’s divided stance (with Miran calling for 50 bps and Schmid calling for no cut) has added another layer of uncertainty for investors already juggling diverging central bank paths. OIS pricing implies the lower bound of the fed funds rate at 3.706% after the December meeting up from 3.64% pre FOMC, with only 17.5 bps of cuts priced for December.

The Fed’s quarter point cut comes at a time when the SP500 is at all-time highs, the 5th time this has happened (figure 2, JP Morgan). In all prior instances the index was up a year on, with the worst one year return 15% and the average return 20%. To add fuel to the fire, the Fed will also be halting QT in December. In fact, they will reinvest all mortgage backed securities principals into treasury bills. If in doubt, print your way out.

Over in Asia, Beijing will pause countermeasures and export controls for one year, while Washington removes the 10% “fentanyl tariff.” Both sides pledged cooperation on fentanyl and agriculture, extended tariff exemptions, and committed to properly address TikTok-related issues.

Also the KOSPI rose another 0.23%, setting a new all-time high and extending a 19% rally this month, as South Korea announced a blockbuster $350 billion trade package with the US (Figure 3, Bloomberg). The deal includes major Korean investment in U.S. shipbuilding and energy purchases, aimed at deepening industrial ties and securing long-term supply chains. The agreement follows an upbeat meeting between Presidents Trump and Xi in Korea, where the two leaders pledged to ease trade tensions and halve certain tariffs on Chinese goods – a move investors saw as supportive for global growth.

The renewed optimism across Asia came as Japan’s bond markets stayed subdued after the Bank of Japan held policy steady. The board voted 7–2 to keep rates unchanged, with limited changes to inflation forecasts – a clear sign that a December hike remains unlikely. JGB yields drifted slightly lower post-meeting, underperforming recent U.S. moves. The US–Japan 10-year yield spread widened to about +242 basis points, up from recent lows around 230, reinforcing yen weakness and boosting export-heavy Japanese equities (Figure 4, Bloomberg).

Data today: Euro Area GDP, Italy unemployment, ECB decision, initial jobless claims