Markets
Risk sentiment soured from the onset today by reports in late, after-market US hours that Nvidia CEO Huang’s head could roll during a special ad hoc board meeting. The news, which got confirmed in the meantime, is causing tremors in the broader tech/AI sector. Many semiconductor-heavy Asian stock indices underperformed this morning. The technology sector is similarly underperforming in European benchmarks and on Wall Street, the Nasdaq (-1.5% at the open) is of course the laggard of the day with the company at the center of attention gapping 13% lower before dip buyers stepped in. Its main rivals take advantage though. The stock slide isn’t hurting the US dollar as much as before, perhaps because it’s more company specific this time around. EUR/USD tested the 2025 correction low at 1.1065 but that intermediate support – ahead of the more important 1.0882 level – holds (1.1092). DXY in a mirror move attacked the YtD high but it’s lacking conviction for the moment. The failed break-out attempt, for now at least, comes even as the greenback enjoys a widening interest rate differential vs. the common currency. US Treasuries underperform with yields up between 2 (30-yr) and 9 bps (2-yr). The bear flattening wasn’t so much additional repositioning after Tuesday’s Waller-CPI combo. It had everything to do with Trump suddenly casting doubt again on the prospect of a deal with Iran. The US president said he doesn’t need a deal with the Middle East country, adding on his social media platform that “Those days have long since passed”. Oil prices rose to $93.3 although gains were larger earlier. Natural gas prices (Dutch TTF) surge towards €91/MWh. Returning to that “distressing, borderline disturbing” (dixit Goolsbee) CPI, Cleveland Fed Hammack said policy needs to move to a restrictive stance. She views financial conditions as supportive of growth. The most hawkish labeled policymaker for now prefers to stick to regular-sized hikes though, saying they are less disruptive to the economy. If she feels the Fed is falling behind the curve, then she could support a larger move. The Fed will receive one more PCE inflation report (October) ahead of the December 9 policy meeting. That gathering unfortunately comes one day before the November CPI print. NY Fed governor Williams’ speech during after-market hours may provide further insight into the Fed’s reaction function.
News & Views
“MEXICO MUST STOP THEM, NOW, and if they do not do so, the Tariffs on Mexico will be IMMEDIATELY DOUBLED”. US President Trump in a social media post threatened to double tariffs on Mexican goods if the country didn’t stop what he claimed “huge caravans” of migrants preparing to cross the border. The Mexican peso lost some ground after the warning with USD/MXN moving from around 18.56 to 18.70. Tariff moves have been larger in the past as the US Supreme Court curtailed Trump’s tariff power earlier this year.
The Dutch government is at brink of collapse after PM Jetten (D66) struck a deal with left-wing opposition groups to try to pass legislation for a tax shift from income to wealth-measures (estimated impact of around €1bn). The centre-right VVD which is part of the three-party minority coalition government (CDA being number three) threatened to quit: “We were taken by surprise by the fact that our coalition partners struck such a deal with the opposition. If the other two coalition partners vote for the amendment (expected later today) we will have to see if this collaboration can continue”, deputy PM Yesilgoz warned. The amendment proposes taxing returns on assets above €60k per year at 38.5%, while the rate for returns below the threshold drops to 35.5%. That rate is 36% currently, regardless of the amount.
