29/10/2025 Daily Reports
U.S. markets closed at fresh record highs on Tuesday as optimism surrounding artificial intelligence and strong corporate momentum continued to drive risk appetite. Nvidia surged after revealing plans to build AI supercomputers for the U.S. Department of Energy and reporting massive chip demand, pushing its valuation near the $5 trillion mark. Microsoft gained after finalizing a deal that allows OpenAI to restructure while giving the tech giant a significant stake. Broader sentiment remained upbeat as investors bet that robust innovation in AI could sustain earnings growth across major indices.
Attention now turns to a highly anticipated Federal Reserve policy meeting, where a 25-basis-point rate cut is widely expected. Market participants will look for hints on future policy amid limited U.S. economic data due to the ongoing government shutdown. Meanwhile, earnings from Apple, Alphabet, Amazon, Meta, and Microsoft are set to shape near-term direction and test whether enthusiasm for AI can translate into continued profit growth. Positive trade signals between the U.S. and China, coupled with upbeat earnings results, have further supported the global risk-on tone at the start of the week.
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- US Treasury Yields Hold Steady: The 10-year yield remains near 4%, while the 2-year sits around 3.5%, keeping the curve flat. Fiscal improvements and higher tariff revenues ($120B) provided mild support.
- Money Market Tightness Persists: Heavy bill issuance and declining reserves are pushing repo and SOFR rates higher. The Fed may consider buying short-term T-bills to stabilize liquidity.
- Fed’s QT Strategy in Focus: At the upcoming FOMC meeting, policymakers may maintain the MBS roll-off while offsetting it with T-bill purchases—essentially tapering quantitative tightening without halting it entirely.
- Market Expectations: Investors anticipate a 25-bp rate cut due to job market concerns, with another cut likely in December. More than 100 bp in total easing is priced in over the next year.
- Global Spillovers: The U.S. remains the key driver of European rates, with limited domestic volatility in the eurozone. Euro yields may have fallen too far in tandem with U.S. Treasuries, hinting at potential upward adjustments ahead.
What’s Next?:
The Fed appears to be entering a “fine-tuning” phase—balancing between liquidity support and tightening withdrawal. A shift toward T-bill purchases could mark the quiet beginning of a new policy cycle focused on market stability rather than aggressive easing.
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- Markets across the US, Europe and Asia are bracing for today’s pivotal Federal Reserve policy decision, the single biggest driver of cross-market movements. Any change in the Fed’s stance on interest rate cuts will have a ripple effect on interest rates, foreign exchange rates, risk assets and tech valuations. Ahead of the announcement, U.S. futures rose, bolstered by a pre-market rally in Nvidia, with strong AI orders and U.S. government supercomputer initiatives reigniting tech-sector optimism. The broader Nasdaq is moving higher, with investors watching upcoming Big Tech earnings reports to see if the recent rally can be sustained or if investors will take profits.
- In Europe, the DAX is trading cautiously as investors await clarity from the Fed and corporate earnings reports. The autos sector remains a bright spot, buoyed by robust margins at major manufacturers, while consumer-linked cyclicals remain subdued. Any surprises in U.S. rate guidance or dollar strength could put pressure on European exporters and financials.
- Meanwhile, in Asia, the Nikkei is trading near record highs, driven by a weaker yen, positive diplomatic developments and optimism surrounding trade. Exporters are benefiting from favorable currency movements, although sentiment remains sensitive to potential slowdowns in Chinese demand. Today’s Fed statement will likely set the tone for global risk appetite heading into November, with implications for markets across regions.
