📈Morning Brefieng: AI sector rebound collides with still-expensive oil (20.10.2026)

• A strong rebound in semiconductor stocks and reports of massive infrastructure deals (negotiations for a $45B contract between Nscale and Anthropic) boosted Wall Street, but rising US bond yields (10Y to 5.14%) are limiting risk appetite.

• Brent crude holds around $110 per barrel amid Iranian threats regarding the Strait of Hormuz, drone attacks on Saudi Dammam, and reports of US Strategic Petroleum Reserve (SPR) declining to 282.7 million barrels – the lowest level since 1982.

• The People's Bank of China (PBoC) left LPR rates unchanged (1-year 3.00%, 5-year 3.50%), set the strongest yuan fixing since February 2023, and announced daily overnight repo operations up to 1 trillion CNY.

🇺🇸 Wall Street: how did the session end?

• Yesterday's session brought gains for major indices thanks to a return of demand for tech companies: S&P 500 gained 0.4%, and Nasdaq 100 rose 1.2%; currently, US500 futures are trading around 7738 pts (-0.01%), and US100 near 29658 pts (-0.29%).
• Dow Jones futures (US30) hold near 52281 pts (+0.12%), while the small-cap Russell 2000 index (US2000) consolidates around 2743 pts (-0.07%).
• Despite index gains, decliners outnumbered advancers roughly 2:1, meaning growth remains concentrated mainly in tech companies. Valuations faced pressure from a surge in 10-year Treasury yields to 5.14%, driven by expensive oil.
• The VIX volatility index is up 0.70% this morning to around 18.67 pts, signaling continued investor caution ahead of earnings from major tech giants.
• Top gainers: Western Digital (WDC; +6.23%, Tech) and SanDisk (SNDK; +5.56%, Tech) led a strong rebound in memory and chip makers; platforms Datadog (DDOG; +5.33%, Tech) and Twilio (TWLO; +5.30%, Tech) also posted solid gains; Amazon (AMZN; +5.03%, E-commerce & Cloud) rose following a target price upgrade by Morgan Stanley to $350 and optimistic AWS cloud forecasts; Moderna (MRNA; +4.40%, Healthcare) rounded out the list.
• Top decliners: Mosaic (MOS; -4.99%, Materials) under pressure from declining margins; the utilities sector suffered from higher debt yields – NRG Energy (NRG; -4.45%, Utilities) and Eversource Energy (ES; -3.58%, Utilities); Ameriprise Financial (AMP; -3.73%, Financials), Flex (FLEX; -3.52%, Tech), and Genuine Parts (GPC; -3.34%, Consumer Discretionary) also posted losses.
• Netflix and SpaceX will release their financial results from the Q3 after the US session.

🌏 Asia

• Nikkei 225 (JP225) drops about 1.0% to near 64185 pts – the Japanese market corrects an earlier rally influenced by hawkish comments (a Daiwa report indicating BoJ focus on inflation stabilization at the 2% target and wage pressure) and government discussions on funding rising defense spending.
• Hang Seng (HK.cash) declines by about 0.6% to around 23905 pts, and China A50 (CH50cash) pulls back 0.3% to near 13256 pts – lack of surprises from the PBoC and ongoing concerns over the real estate market weigh on Chinese equity sentiment.
• Australia's ASX 200 (AU200.cash) gains about 0.5% to 8798 pts, benefiting from strength in mining and energy stocks following high commodity prices.

🇪🇺 Europe before open

• Futures on major European indices point to a mixed and muted start to the session: DAX (DE40) trades near 25303 pts (-0.02%), Euro Stoxx 50 (EU50) around 6115 pts (-0.04%), and the UK FTSE 100 (UK100) oscillates flat near 10746 pts.
• The French CAC 40 (FRA40) stood out with distinct weakness yesterday, losing about 1.1% to around 7834 pts – investors sold off French assets and bonds following weekend riots in French cities and ahead of Moody's upcoming rating review.

💱 Currencies and Commodities

• Crude oil remains very expensive: Brent (OIL) gains 0.62% to around $109.9/b, and WTI (OIL.WTI) rises 0.50% to near $98.72/b – the market is pricing in roughly a $25 war premium according to Goldman Sachs following reports of drone strikes in Dammam, Iranian threats in the Strait of Hormuz, and depleting US strategic reserves.
• Gold (GOLD) stabilizes near $4143/oz (+0.08%) after yesterday's sell-off, finding support from central bank buying (Goldman Sachs estimates August purchases at 79 tons, primarily led by China); silver (SILVER) gains 0.70% to around $57.42/oz.
• EURUSD attempts a recovery, rising 0.18% to around 1.1232, rebounding from pressure caused by political events in France.
• Sterling strengthens ahead of labor market data: GBPUSD gains 0.22% to near 1.3332; USDJPY ticks down 0.15% to 158.19; the Polish zloty remains stable, pushing USDPLN to around 3.8892 (-0.05%).

📊 Macroeconomics: what data was already published?

• China – 1-year Loan Prime Rate: 3.00% (forecast: 3.00%; previous: 3.00%).
• China – 5-year Loan Prime Rate: 3.50% (forecast: 3.50%; previous: 3.50%).
• Data takeaway: The PBoC maintained benchmark lending rates for the 17th consecutive month, as widely expected following stable Q3 GDP data; markets interpret the pause as a sign that the central bank is shifting liquidity management toward short-term tools.

🔑 Key overnight news:

• Middle East tensions: Iran's Islamic Revolutionary Guard Corps (IRGC) warned that it controls the Strait of Hormuz, where 7 strategic subsea internet cables run, and threatened to extend blockade actions to Bab al-Mandab and the Suez Canal; in Saudi Arabia, a Yemeni drone attack disrupted Dammam airport.
• US reserve drain: The Department of Energy reported that crude stocks in the Strategic Petroleum Reserve (SPR) fell last week to 282.7 million barrels, reaching the lowest level since 1982.
• New PBoC liquidity architecture: China's central bank announced daily overnight repo operations worth up to 1 trillion yuan from October 21 to November 2, aligning with Governor Pan's plans to test overnight rates as a primary policy tool.
• Billions in AI infrastructure: European cloud provider Nscale is in advanced talks with Anthropic for a compute capacity deal worth ~$45 billion; SoftBank and MGX are negotiating entry into OpenAI's funding round, while Nvidia announced investment packages in German tech and robotics companies.
• Escalation in Ukraine and allied friction: Russia conducted large-scale air strikes on logistics hubs in Volyn and Khmelnytskyi regions and the Kyiv region; media reports indicate the US administration is pausing Patriot interceptor missile transfers amid disputes over Ukrainian attacks on Russian oil refineries.

What to expect today?

• 08:00 – Germany: September Producer Price Index (PPI) (forecast: 1.5% m/m vs 1.1% previously).
• 08:00 – United Kingdom: Labor market data package, including unemployment rate (forecast: 4.9%) and wage growth (forecast: 3.8% 3m/y).
• 11:00 – Germany / Eurozone: ZEW Economic Sentiment Index for October (consensus for Germany: 30.2 pts vs 34.7 pts previously).
• 14:30 – USA: Housing market data – Building Permits (forecast: 1.39M) and Housing Starts (forecast: 1.30M).
• 16:00 – USA: September Pending Home Sales index (forecast: -0.7% m/m).
• 19:00 – United Kingdom: Speech by Megan Greene of the Bank of England Monetary Policy Committee.

• 🔎 Suggested to watch

• Brent Crude (OIL) — Extreme multi-year technical overbought conditions (Z5L +1.99, 5L percentile 95.6%, RSI at 80.9) colliding with a war premium in the Strait of Hormuz and historical lows in SPR inventories leave the market vulnerable to sharp moves on sudden diplomatic developments.
• CAC 40 (FRA40) — Relative weakness in the French market (futures down over 1%, Z1R -1.69, RSI 35.9, 5L percentile just 67.2%) amid domestic unrest, government bond sell-offs, and uncertainty ahead of Friday's Moody's rating review.
• NASDAQ 100 (US100) — Despite high long-term levels (5L percentile 95.3%, Z5L +1.89), short-term RSI has slipped to an oversold 34.7; the tech sector balances between a wave of AI investments (Nscale-Anthropic deal) and rising cost of capital (US 10Y yield above 5.14%).
• China A50 (CH50cash) — Deeply oversold on a 1-year basis (Z1R -3.22, RSI at an extremely low 19.5, 5L percentile 45.2%); the lack of LPR cuts may trigger a technical rebound attempt in response to the announced PBoC overnight repo liquidity injection.