Stock Market Update

The S&P 500 futures currently trade 16 points above fair value.

Asian markets finished mixed on Monday as lingering concerns surrounding returns on AI investment continued to pressure technology-heavy markets ahead of a pivotal week of corporate earnings and central bank decisions. Japan's Nikkei 225 fell 0.8%, beginning a third consecutive week of declines as Advantest (-4%), Tokyo Electron (-4%), Ibiden (-3%), Disco (-2%), and Kioxia Holdings (-2%) extended the weakness in AI and semiconductor shares. China's Shanghai Composite edged up 0.2%, but the headline gain masked a 1.2% decline in the technology-heavy Shenzhen Component as Eoptolink Technology (-4%), Zhongji Innolight (-3%), Hygon Information Technology (-2%), and SMIC (-1%) retreated ahead of technology earnings and potential policy signals from the Fifth Plenum. Hong Kong's Hang Seng gained 0.5%, with elevated crude prices providing a relative tailwind for PetroChina (+4%), Sinopec (+4%), and CNOOC (+2%), while Sinopharm (+6%) and Meituan (+3%) also advanced. South Korea's KOSPI fell 1.5% ahead of quarterly results from SK Hynix and Samsung Electronics later this week, with Hyundai Motor (-2%), LG Energy Solution (-1%), and Samsung Electronics (-1%) among the decliners. Korea's record $116.63 bln second-quarter current-account surplus, supported by strong semiconductor exports, continues to underscore a disconnect between robust underlying chip demand and investor concerns surrounding valuations and returns on AI-related investment. The contrasting performances of technology-heavy Japan and Korea against oil-supported Hong Kong highlight the increasingly important role of sector composition as elevated crude prices and AI uncertainty pull regional markets in different directions. Investors also face monetary policy decisions from the Federal Reserve, Bank of Japan, and European Central Bank this week, while the possibility of renewed Middle East hostilities keeps energy and inflation risks in focus.

• In economic data:
  • Japan's August Coincident Indicator fell 1.8% m/m (expected -1.9%; prior +1.7%), while the Leading Index rose 0.4% m/m (expected +0.4%; prior +1.5%) to 118.0 (expected 118.0; prior 117.7).
  • Singapore's September Industrial Production rose 3.4% yr/yr (prior +15.4%) and fell 3.9% m/m (prior -1.0%).

European markets trade mostly higher as lower oil prices and easing bond yields provide some relief ahead of a busy week of central bank decisions and corporate earnings. Germany's DAX gains 0.9%, with Bayer (+3%) leading after positive drug-trial results and a regulatory approval in China, while Siemens Energy (+2%), Deutsche Bank (+2%), and Commerzbank (+1%) also advance; Germany's Ifo expectations index improves more than expected even as the assessment of current conditions deteriorates. France's CAC 40 rises 0.7%, with Societe Generale (+2%), BNP Paribas (+1%), and Credit Agricole (+1%) leading financials higher, while Hermes (+3%) advances following its latest sales update. French assets also receive some relief after Moody's affirmed the country's Aa3 sovereign rating, although its negative outlook remains in place amid persistent fiscal and political pressures. London's FTSE 100 gains 0.5%, with Computacenter (+7%) surging after raising guidance on strong AI-related demand, while Shell (-1%) and BP (-1%) retreat as crude prices pull back from six-month highs. The STOXX Europe 600 rises 0.4% and Italy's FTSE MIB gains 0.8%, while Spain's IBEX 35 slips 0.2%, with investors looking ahead to this week's Federal Reserve and European Central Bank decisions and another heavy slate of corporate earnings.

• In economic data:
  • Germany's October Ifo Business Climate Index rose to 90.2 (expected 90.0; prior 89.9), with Business Expectations at 91.6 (expected 90.0; prior 90.4) and the Current Assessment at 88.8 (expected 89.9; prior 89.5).
  • Spain's September PPI rose 18.3% yr/yr (prior +13.2%).
  • The U.K.'s October CBI Distributive Trades Survey improved to -10 (expected -47; prior -55).