Stock Market Update

The S&P 500 futures currently trade 37 points below fair value.

Asian markets finished mostly higher on Friday as dip buying stabilized equities following Thursday's sharp selloff, although persistent AI investment concerns and Middle East tensions kept the recovery in check. Japan's Nikkei 225 recovered from an intraday decline of more than 2% to finish just 0.3% lower, with Hitachi (-4%), Taiyo Yuden (-4%), Disco (-4%), and Mitsubishi UFJ (-2%) among the laggards, leaving the index down 4.0% for the week. Japan's core CPI accelerated to 2.1% yr/yr in September, matching expectations and returning above the Bank of Japan's 2% target, adding to the case for further tightening at a time when oil prices above $114 are creating another potential source of inflation. China's Shanghai Composite gained 0.9% and the Shenzhen Component rallied 2.8% as stepped-up state-backed ETF purchases helped stabilize equities, with Cambricon Technologies (+6%), SMIC (+4%), and Zhongji Innolight (+4%) participating in the rebound. Hong Kong's Hang Seng reversed an early decline to finish 0.7% higher, helped by MiniMax (+17%), Z.AI (+7%), Xiaomi (+4%), and Tencent (+1%), although the index still lost roughly 5% for the week. South Korea's KOSPI edged up 0.3%, with SK Hynix (+4%) rebounding alongside Samsung Biologics (+8%) and SK Square (+3%), while Hyundai Motor (-2%) and KB Financial (-3%) remained under pressure. Friday's stabilization does little to resolve the underlying debate surrounding the financing and returns of massive AI investments, with the Nikkei's 4.0% weekly decline highlighting the damage inflicted on markets heavily exposed to the theme. Brent crude remaining above $114 adds another challenge for the region, keeping energy supplies and inflation in focus amid escalating Middle East tensions.

• In economic data:
  • Japan's September National Core CPI increased 2.1% yr/yr (expected 2.1%; prior 1.7%); National CPI increased 2.1% yr/yr (prior 1.9%) and was unchanged m/m (prior 0.1%).
  • Japan's October Manufacturing PMI fell to 53.3 (expected 54.5; prior 54.1), Services PMI rose to 52.0 (prior 51.3), and Composite PMI was unchanged at 52.3 (prior 52.3).
  • Australia's October Manufacturing PMI edged up to 49.7 (prior 49.6), Services PMI fell to 47.8 (prior 51.9), and Composite PMI fell to 47.7 (prior 51.3).
  • India's October Manufacturing PMI slipped to 54.9 (prior 55.1), Services PMI rose to 56.2 (prior 55.2), and Composite PMI rose to 56.7 (prior 55.9).

European markets trade broadly lower as oil prices remain elevated amid Middle East tensions, while mixed earnings and weakening eurozone business activity keep sentiment cautious. Germany's DAX falls 0.8% as Deutsche Telekom (-3%) leads declines, while Rheinmetall (+2%) and Infineon (+1%) buck the weakness; Germany's composite PMI remains in expansion at 52.8, although growth slows more than expected as stronger manufacturing offsets softer services activity. France's CAC 40 drops 0.7% as Kering (-12%) plunges following disappointing quarterly sales, Safran (-7%) retreats despite stronger-than-expected revenue growth, and L'Oreal (+4%) rallies after beating sales expectations. France's composite PMI falls sharply to 48.4 from 51.1, returning the private sector to contraction and contrasting with Germany's continued expansion. London's FTSE 100 declines 0.6% despite stronger-than-expected October PMIs, as a plunge in consumer confidence and weaker September retail sales highlight a widening gap between improving business activity and household conditions, while Shell (+1%) and BP (+2%) benefit from elevated oil prices. The STOXX Europe 600 falls 0.6%, Italy's FTSE MIB loses 0.5%, and Spain's IBEX 35 slips 0.3%, with the eurozone composite PMI slowing to 51.9 from 53.1 and missing expectations.

• In economic data:
  • The eurozone's October Manufacturing PMI fell to 52.4 (expected 52.7; prior 52.9), Services PMI fell to 51.7 (expected 52.6; prior 53.0), and Composite PMI fell to 51.9 (expected 52.7; prior 53.1).
  • Germany's October Manufacturing PMI rose to 54.2 (expected 53.5; prior 53.9), Services PMI fell to 51.7 (expected 52.5; prior 52.9), and Composite PMI fell to 52.8 (expected 53.3; prior 53.8).
  • France's October Manufacturing PMI fell to 49.3 (expected 50.5; prior 50.6), Services PMI fell to 48.4 (expected 50.7; prior 51.2), and Composite PMI fell to 48.4 (expected 50.5; prior 51.1).
  • The U.K.'s October Manufacturing PMI rose to 52.8 (expected 51.8; prior 51.9), Services PMI rose to 53.1 (expected 51.8; prior 52.1), and Composite PMI rose to 53.1 (expected 51.8; prior 52.0).
  • The U.K.'s September Retail Sales fell 0.4% m/m (expected -0.1%; prior 0.7%) and increased 0.8% yr/yr (expected 1.0%; prior 2.7%); Core Retail Sales fell 0.7% m/m (expected -0.1%; prior 0.9%) and increased 0.8% yr/yr (expected 1.5%; prior 2.9%).
  • The U.K.'s October GfK Consumer Confidence fell to -24 (expected -14; prior -13).