News impacting sentiment from all angles

The net effect has been solid intraday trader flows playing out in crude, NAS100 and Nvidia, US banks and Chinese/HK indices. In FX, we see good volume in EURUSD, GBPUSD and USDJPY, with LATAM FX seeing some upbeat buying in USDMXN, USDCLP and USDBRL.

At a stock level, earnings reports stepped up a gear with numbers and guidance dropping from Bank of America (BAC), Goldman Sachs, J&J, United Health, Citi, Charles Schwab, LVMH and ASML. The US banks saw a mixed reaction in terms of share price moves, with Citi seeing the biggest move on the day (-5.1%) with Q3 net interest income missing the mark. BAC opened on the front foot trading into $43.36, but immediately saw sellers push the stock back to $42.33, before flatlining for most of the session and closing +0.6%.

The bigger influence came from the news and the subsequent punchy reaction in LVMH ADR and ASML ADR. Both have seen quite violent reactions in the respective share prices, where the moves have influenced other plays in their sectors. What’s interesting in both reports was the weaker demand from China impacting revenue, which was a central theme in both reports. LVMH reported Q324 group sales well below consensus at -3% y/y, with weakness in sales in its fashion division falling 5% y/y – cooling demand in Asia clearly evident.

ASML reported numbers a day earlier than expected, and they have struck a chord with shareholders who have dumped the stock hard on the day - reporting Q3 orders at E2.6b, around half of what the street was looking for. Guidance on sales and gross margins were also well under consensus expectations, and while somewhat expected, given the recent capex cuts from the likes of Intel, many see the weakness in orders as the red flag and analysts have been scratching their heads over this one – clearly, the street has missed something here and the market has been positioned well offside.

AMSL ADRs have closed 15.6% lower, with the read-through into other US and global AI and tech plays quite apparent. Sizeable selloffs have been seen across the space in ASM International, ARM, AMD, Broadcom, and Nvidia. Nvidia also feeling headwinds from regulatory affairs, with the Biden administration reviewing capping sales to the Persian Gulf – not a region Nvidia currently source any notable revenue from, but caps here could close a future growth region and naturally, investors will be questioning if it could lead to further regions also being affected.

At an index level, the S&P500 and NAS100 cash markets closed -0.8% and -1.4% respectively, with both markets settling close to session lows. Tech took out the points, while energy was the clear underperformer, driven by a weaker crude price that has looked to price out the threat of reduced Iranian crude output. We can see the intraday tape of S&P500 futures, and when the index broke the Asia & EU session lows of 5902, it was one-way selling into 5850.

US Treasuries saw solid buying in the long end of the curve, with 10s and 30s 7bp and 9bp lower respectively, resulting in a solid bull flattening. In FX markets, EURUSD trades a touch weaker on the day, with selling capped into 1.0882, with traders refraining from pulling this pair much lower as pre-positioning ahead of tomorrow’s ECB meeting is the priority. With US long-end Treasury yields falling, the low yielders in G10 FX (JPY and CHF) have found better buyers. USDMXN has gained 1.9% and while local developments around the new institutional framework are in play, traders also see Trump’s odds (from betting sites) of taking the White House increasing further, and while we’ve only seen modest selling in other tariffs proxies (EUR and CNH), Trump tariff risks see the MXN lower on the day

China continues to get great attention, with traders working the various China/HK equity indices to the downside yesterday, where clearly the measures announced on Saturday are seen as a medium-term driver and not one that inspires conviction longs at this point in time, News from LVMH and ASML won’t do sentiment towards the region any favours today either and our opening equity index calls here suggest a tougher day at the office for longs, with the NKY225 notably set to underperform.

By way of event risk, on the docket, we get NZ CPI, which could influence pricing on 50bp v 75bp November RBNZ rate cut debate and could impact the NZD. We also get UK CPI, with expectations that headline CPI pulls back to 1.9% y/y and core CPI falls 20bp to 3.4% - so, unless we get a big upside surprise the numbers should play firmly into a 25bp cut from the BoE in the November meeting.

Good luck to all.