Daily Summary: Wall Street Rises Ahead of Tomorrow's Fed Meeting💡

The main factor driving market volatility: During Tuesday’s trading session, the financial markets were buoyed by renewed optimism surrounding artificial intelligence and relief over falling oil prices. Investors were keen to return to semiconductor stocks following Anthropic’s filing of documents for its initial public offering and news of multi-billion funding to acquire technology for the company. At the same time, the market remains on tenterhooks awaiting the outcomes of key central bank meetings, led by the Federal Reserve’s decision on Wednesday. Although investors expect interest rates in the United States to remain unchanged at this meeting, they are keeping a close eye out for signals regarding a likely rise in the cost of borrowing in December.

Geopolitics: The first signs of a possible de-escalation have emerged in the Middle East after representatives from Iran, Saudi Arabia, Turkey and Pakistan agreed to continue talks aimed at promoting peace and security. Despite diplomatic efforts, the risk in the region remains high due to the Yemeni Houthi rebels, who have reported a missile attack on Saudi Arabia’s largest refinery, Ras Tanura, whilst parliamentary elections are underway in Israel. In Europe, ongoing student and trade union protests in France, along with concerns about the country’s budgetary situation ahead of the forthcoming parliamentary proceedings, remain a source of concern for the markets. Meanwhile, in Brazil, market sentiment has stabilised following Monday’s sell-off triggered by the re-election of President Lula da Silva, and the country’s finance minister has reassured investors that fiscal discipline will be maintained.

Macroeconomic data: Data released from the US economy showed an increase in new orders for computers and peripheral equipment, confirming that capital expenditure in the technology sector remains strong. In the eurozone, concern was raised by the consumer confidence reading in France, which fell in October to its lowest level since June 2013 as a result of mounting social tensions. Furthermore, the European Central Bank’s quarterly credit survey confirmed that the interest rate rises to date are beginning to visibly curb lending activity. Investors are now bracing themselves for Thursday’s release of US economic growth and PCE inflation data, as well as Friday’s inflation figures from Poland, Germany and the eurozone.

Indices: The S&P 500, the main broad-market index in the United States, gained around 0.6 per cent, whilst the technology-heavy Nasdaq rose by over 1.1 per cent, thanks to a very strong performance by integrated circuit manufacturers. The Dow Jones Industrial Average closed around its benchmark level, whilst the Philadelphia Semiconductor Index has already recorded a rise of over sixty per cent since the start of the year. In Europe, the STOXX 600 index rose by nearly 0.5 per cent, buoyed by solid gains on the stock exchanges in Germany, Italy, France and Poland, where the W20 index gained almost 1 per cent. The British FTSE 100 index proved to be a clear laggard in Europe, falling by 0.75 per cent, mainly due to weakness in the banking sector.

Shares: On the New York Stock Exchange, Broadcom stood out with a 4 per cent rise following news of $63 billion in financing from a consortium of banks to fund the purchase of its chips for Anthropic, which also boosted shares in AMD and Micron. Oracle’s shares rose by nearly 5 per cent after the company announced the integration of OpenAI tools into its applications and the availability of processors from Google, Cerebras and OpenAI on its cloud platform. Among traditional economy companies, Coca-Cola raised its full-year profit forecasts despite weaker demand in North America, whilst Boeing’s shares fell by nearly 10 per cent following the publication of a larger-than-expected quarterly loss. In Europe, HSBC’s results proved disappointing, with its shares falling by over 5 per cent following lower revenues, whilst at the other end of the spectrum, semiconductor equipment manufacturer Besi saw its shares rise by more than 11 per cent after Applied Materials increased its stake.

Currencies: The US dollar strengthened slightly against the major currencies ahead of a flurry of central bank decisions, which saw the dollar index rise by nearly 0.3 per cent to around 102.2 points. The euro remained under pressure due to high energy prices and France’s fiscal problems, causing the EUR/USD exchange rate to fall to around 1.1140. In the Japanese yen market, the USD/JPY exchange rate rose to around 157.90, whilst the country’s finance minister reiterated the authorities’ readiness to take decisive action to defend the currency ahead of Friday’s Bank of Japan meeting. In emerging markets, the Brazilian real recouped around 2 per cent of its losses against the dollar following Monday’s slump, whilst the Polish zloty gained slightly against the euro, with the EURPLN rate below 4.40, and lost ground against the dollar as the USDPLN rose to 3.95.

Commodities: Crude oil prices fell by nearly $2 per barrel in response to reports of peace talks in the Middle East, pushing the price of Brent crude below $114 and US WTI crude to around $100. US natural gas prices also fell by 1.5 per cent, whilst in Europe natural gas prices rebounded slightly, though remained close to four-year highs due to cooler weather. Lower oil prices eased inflationary concerns and supported the precious metals market, causing the price of gold to rise by over 1 per cent and exceed $4,055 per ounce. Silver also followed gold’s lead, with its price rising by just under 1 per cent and returning above the $54 per ounce mark.

Cryptocurrencies: Improved sentiment on the US stock market and a return of capital to technology companies have led to positive sentiment in the digital asset market. The leading cryptocurrency, Bitcoin, gained around 0.8 per cent during Tuesday’s trading session, remaining at very high levels above the $80,400 mark. The stabilisation of sentiment surrounding the artificial intelligence sector following last week’s correction has helped to restore appetite for riskier assets. Investors in the cryptocurrency market, just like those on traditional stock exchanges, are currently awaiting Wednesday’s statement from the Federal Reserve, which will set the direction for liquidity and the dollar in the coming weeks.