Market Wrap 2025-10-23

Market Wrap 2025-10-23

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Market Overview

• Snapshot: Equities increased, Treasury values decreased, Crude oil prices rose, the Dollar remained stable, and Gold prices increased.
• Prior Session: Discussions between Trump and Xi are scheduled for next Thursday. The US might investigate China's adherence to the 2020 trade agreement. Macron is advocating for the EU to utilize its most potent trade tool against China. The US has imposed sanctions on Russian oil companies. Chinese oil companies are reportedly pausing purchases of Russian oil. The US is considering investments or funding in quantum computing. Japan's RENGO is aiming for wage increases of 5%. There was a weak 5-year TIPS auction. Tesla (TSLA) earnings were weak, but the stock recovered from its losses.
• Upcoming:
  • Data: Japanese CPI (September), UK Retail Sales (September), Eurozone, UK, and US Flash PMIs (October), US CPI (September).
  • Suspended Releases: US Building Permits (September), US New Home Sales (September).
  • Events: CBR Policy Announcement, European Council (23rd-24th).
  • Credit Review: Moody’s on France.
  • Speakers: RBA’s Bullock; ECB’s Cipollone and Nagel.
  • Supply: Australia.
  • Earnings: NatWest, Porsche, Sanofi, Eni, Saab, Procter & Gamble.

Market Wrap

US equity markets strengthened on Thursday, reversing Wednesday's declines. There was no specific catalyst, and equity futures had been rising since the start of European trading. Electric vehicle manufacturer Tesla (TSLA) fully recovered from losses incurred after hours on Wednesday following its earnings report, which was initially poorly received. Healthcare stocks experienced downward pressure after Molina (MOH) reduced its profit forecast due to rising medical costs. Quantum computing stocks were bid up on speculation that the US was considering equity investments. Later, Yahoo Finance reported that the administration is not necessarily considering taking equity stakes, with sources stating that companies have approached the White House with proposals, but any potential investment (possibly via warrants or loans) would aim for taxpayer returns and use leftover Chips Act funds. Energy stocks, meanwhile, increased, mirroring gains in crude oil benchmarks, which surged after the US sanctioned Russian oil majors Rosneft and Lukoil over the Ukraine war, leading to expectations that India will significantly reduce Russian crude imports, potentially paving the way for a US-India trade agreement. The rise in crude prices negatively impacted Treasuries, with yields increasing throughout the session, although there was little reaction to a soft 5-year TIPS sale. In afternoon trading, stocks received another boost following reports that Trump will meet with China's President Xi in Asia next Thursday. Additionally, the White House indicated that a meeting between US President Trump and Russia’s President Putin is still possible, as is a meeting between Putin and Zelensky; Trump is reportedly frustrated by the lack of concrete progress from Russia and wants to see tangible steps toward ending the war. Traders are now focusing on upcoming risk events, including US CPI data on Friday, next week's Federal Reserve meeting (where money markets are pricing in a 25bps rate cut, with many suggesting that the Fed may also end QT), and next week's meeting between Presidents Trump and Xi. Prior to that meeting, USTR Greer and Treasury Secretary Bessent will be in Malaysia on Friday.

US

Existing Home Sales: US existing home sales increased by 1.5% to 4.06 million in September (matching expectations of 4.06 million, and up from 4.0 million previously). The inventory of homes for sale was 1.55 million units, representing 4.6 months' worth of supply (unchanged from the previous 4.6 months). The national median home price for existing homes rose by 2.1% year-over-year to USD 415,200. Pantheon Macroeconomics stated that the rise to a seven-month high likely reflects the impact of lower mortgage rates, noting that the 30-year rate on new mortgages was down to 6.4% by mid-September (compared to over 6.9% in early June). Pantheon suggests that the historical relationship between rates and sales indicates a significant further recovery in existing home sales in the coming months, aided by the recovery in the supply of existing homes on the market. However, the consultancy expects sales to remain below pre-COVID levels due to limited scope for further mortgage rate declines, a weak labor market, and poor affordability, with typical monthly payments at about 40% of disposable income versus 25% in the 2010s, requiring modest home price declines to revive demand. Pantheon believes slight falls in home prices are probably required to get the market moving again, adding that it sees prices resuming their downtrend soon, as the fleeting boost from the recent drop in mortgage rates fades.

Fixed Income

T-Note Futures (Z5) settled 10 ticks lower at 113-15+.

T-notes decreased across the curve in response to rising oil prices, as traders await US CPI data on Friday. At settlement, the 2-year yield increased by 4.0bps to 3.484%, the 3-year yield increased by 4.1bps to 3.487%, the 5-year yield increased by 4.9bps to 3.602%, the 7-year yield increased by 4.8bps to 3.780%, the 10-year yield increased by 4.2bps to 3.995%, the 20-year yield increased by 3.6bps to 4.547%, and the 30-year yield increased by 3.8bps to 4.577%.

Inflation Breakevens: 1-year BEI increased by 1.7bps to 3.205%, 3-year BEI increased by 1.7bps to 2.627%, 5-year BEI increased by 1.2bps to 2.362%, 10-year BEI increased by 1.5bps to 2.287%, and 30-year BEI increased by 1.2bps to 2.226%.

The Day: T-notes were lower across the curve in response to rallying oil prices while traders await US CPI on Friday. The surge in oil prices followed the US sanctioning major Russian Energy companies; reports suggest that Chinese state oil firms were suspending Russian seaborne oil purchases in fear of sanctions, while the sanctions also bolstered expectations that India will cut Russian oil purchases to zero. Elsewhere, traders are very attentive to the US CPI report due on Friday, one of the only pieces of government data we will receive during the government shutdown. The data will help refine expectations for next week’s Fed meeting, where the central bank is likely to lower rates by 25bps. There will also be attention on the balance sheet, after Fed Chair Powell alluded to upcoming changes with the level of reserves approaching an ample level, a level that the Fed has long said would mark the end of the balance sheet drawdown. However, the Fed does want to revert to a Treasury-only balance sheet, so it would not be surprising if it continues to allow mortgage-backed securities to continue to roll off the balance sheet, currently at USD 35bln a month, while reinvesting the full amount of USTs that mature each month - currently it allows USD 5bln to roll off the balance sheet.

Supply

Notes

• The US Treasury will sell USD 69 billion of 2-year notes on October 27th, USD 70 billion of 5-year notes on October 27th, and USD 44 billion of 7-year notes on October 28th; all to settle October 31st.
• The US will sell USD 30 billion in 2-year FRN's on October 29th, to settle October 31st.

Bills

• The US will sell USD 86 billion in 13-week bills and USD 77 billion in 26-week bills on October 27th.
• It will sell USD 95 billion in 6-week bills and USD 50 billion in 52-week bills on October 28th.

STIRS/Operations

• Market Implied Fed Rate Cut Pricing: Oct 24bps (prev. 25bps), Dec 49bps (prev. 48bps), January 65bps (prev. 64bps).
• NY Fed RRP op demand at USD 7bln (prev. 4bln) across 15 counterparties (prev. 8)
• NY Fed Repo op demand at USD 3bln (prev. 0bln)
• EFFR at 4.11% (prev. 4.11%), volumes at USD 91bln (prev. 85bln) on October 22nd.
• SOFR at 4.21% (prev. 4.23%), volumes at USD 2.956tln (prev. 2.957tln) on October 22nd.

Crude

WTI (Z5) settled USD 3.29 higher at USD 61.79/bbl; Brent (Z5) settled USD 3.40 higher at USD 65.99/bbl.

Oil prices increased after the US sanctioned Russian oil majors Rosneft and Lukoil over the Ukraine war, leading to expectations that India will significantly reduce Russian crude imports, potentially paving the way for a US-India trade agreement. Overnight, the sanctions lifted energy stocks in China and Australia, but pressured Indian refiners. Europe plans to impose its own measures, including a ban on Russian LNG imports. The broader commodity rally followed a WSJ report late Wednesday, which stated that the US was to allow Ukraine to use European long-range missiles for strikes inside Russia; President Trump has since denied the report, calling it "fake news," adding that the US has "nothing to do" with such missiles, after reports that Ukraine could use British-made Storm Shadow missiles with US targeting data. Separately, Ukraine confirmed that its military hit Rosneft's Ryazan refinery (342k BPD capacity) overnight. As the US day got underway, Reuters reported that Chinese State oil majors were suspending Russian seaborne oil purchases due to worries related to Western sanctions, sending crude futures back towards highs. Crude futures were then knocked off highs following remarks from Kuwait's oil minister, who said that OPEC was ready to offset any shortages in the market by rolling back output cuts; he also spoke about how oil demand is shifting more towards the Middle East and Gulf regions. In other supply-related news, production at the Ekofisk 2/4 K oil and gas platform in the North Sea is shut, according to reports citing operator ConocoPhillips (COP). Elsewhere, JPMorgan estimates that China has been stockpiling oil for months, adding 160 million barrels in 2024 — its largest increase since 2020 — bringing reserves to about 1.25 billion barrels; the bank says Russia supplied 17% of its imports, much of it stored.

Equities

• Closes: SPX +0.58% at 6,738, NDX +0.88% at 25,097, DJI +0.31% at 46,735, RUT +1.27% at 2,483.
• Sectors: Energy +1.28%, Industrials +1.28%, Technology +0.99%, Materials +0.95%, Consumer Discretionary +0.75%, Financials +0.26%, Health +0.04%, Real Estate -0.01%, Communication Services -0.04%, Utilities -0.05%, Consumer Staples -0.40%.
• European Closes: Euro Stoxx 50 +0.49% at 5,667, Dax 40 +0.28% at 24,219, FTSE 100 +0.67% at 9,579, CAC 40 +0.23% at 8,226, FTSE MIB +0.41% at 42,382, IBEX 35 +0.07% at 15,792, PSI +0.58% at 8,354, SMI -0.40% at 12,564, AEX +0.82% at 974.

Stock Specifics:

• IonQ (IONQ), Rigetti Computing (RGTIW), D-Wave Quantum (QBTS), Quantum Computing (QUBT): The Trump administration is reportedly in talks to take equity stakes in quantum computing firms, according to the WSJ.
• Rigetti (RGTI) says it is in ongoing talks with the US government on quantum funding, via CNBC.
• Tesla (TSLA): Profit missed expectations.
• IBM (IBM): Shares were affected by sales in its hybrid cloud unit, which grew approximately 14%, decelerating from 16% growth in Q2.
• Molina Healthcare (MOH): EPS fell short of expectations, and the company slashed its profit guidance due to a challenging environment; Humana (HUM) and Centene (CNC) were weighed down by MOH.
• Medpace Holdings (MEDP): Top and bottom lines exceeded expectations; the company raised its FY outlook.
• QuantumScape (QS): Reported a shallower loss per share than expected and began shipping B1 samples of its QSE-5 cell.
• Las Vegas Sands (LVS): EPS and revenue beat expectations; the company added $2 billion to its stock buyback program and raised its annual dividend.
• Honeywell (HON): Reported solid Q metrics and lifted its FY profit view.
• American Airlines (AAL): Reported a shallower loss per share than expected and provided stellar next Q and FY profit guidance.
• Warner Bros. Discovery (WBD): Dismissed three offers from PSKY, including one that provided CEO Zaslav a position in leading the combined company.
• Moderna (MRNA): A Phase 3 study of its investigational cytomegalovirus vaccine did not meet the primary efficacy endpoint.
• Roper (ROP): Guidance underwhelmed.
• Coca Cola (KO) expects an impairment charge of approximately USD 1 billion during Q4 related to the sale of a portion of its interest in its bottling operations in Africa.
• NVIDIA (NVDA) Drive tweeted that they are working with Uber (UBER) to advance autonomous vehicle development.
• SuperMicro (SMCI) prelim Q1 update disappointed, seeing the stock tumble.

US FX Wrap

The Dollar Index saw little change on Thursday in risk-on trade, which saw Antipodes outperform and Yen underperform. For the buck, UST yields were higher throughout the session while attention largely turns to the US CPI on Friday. Amid the government shutdown, Geopolitical tensions were high, namely between Russia and the US, after fresh sanctions were announced on Russia. Participants will also be eyeing any updates from the talks in Malaysia between USTR Greer and Treasury Secretary Bessent on Friday.

The Euro was also little changed, with price action focused on more risk-sensitive currencies today. Nonetheless, overnight, ECB’s Kazaks said “it may well be the case that the next rate move could as easily be a hike as a cut” – comments which are in contrast to Villeroy (cut more likely than hike) and Kocher (sees equal chance). On trade, French President Macron has reportedly been calling on the EU to use its strongest trade tool, the Anti-coercion instrument, against China. Meanwhile, EZ Consumer Confidence beat expectations at -14.2 (exp. -15.0, prev. -14.9).

The Yen was sold on Thursday amid higher UST yields and US equity prices, which offset strength seen in the morning following reports that Japan's RENGO will be seeking wage hikes of 5% or more in 2026 Shunto negotiations.

The offshore Yuan saw strength vs the buck on reports that Trump will be meeting with Chinese President Xi next week, while after-hours on Wednesday, he said he thinks he will make a deal with Xi. However, the NYT also reported that the US is to probe China's 2020 trade deal compliance, which would likely complicate current relations, which are seemingly on edge given China's export controls and a touted response from the US.

The Pound was sold vs the Dollar and Euro with soft CPI earlier in the week still taking its toll, while BoE's Dhingra (Dove) spoke, warning that tariffs will lead to a reduction in overall growth but with minor downward price pressure in the medium term.

Antipodes benefited from the rally in stocks, with peaks seen after the WH announced the date for the Presidential meeting between the US and China, given that both Australia and New Zealand are key trading partners with China.

CAD was flat vs the buck despite the rally in crude prices. Canadian Retail Sales rose 1.0% M/M, in line with expectations, but the core retail sales (ex-autos) missed expectations. StatCan also expects September retail sales to have fallen 0.7% M/M in the preliminary estimate. Meanwhile, Canadian PM Carney is looking to meet with Chinese President Xi next week during his trip to Asia.

KRW was sold vs the Dollar after the BoK maintained rates overnight as expected; however, the decision was not unanimous, with board member Shin stating a rate cut is needed to support growth. It also said it will maintain a rate cut stance to mitigate downside risk to economic growth. Four members also said the door for rate cuts should be open for the near future, but two said current rates should be maintained.

In EMs, MXN firmed amid stronger-than-expected retail sales data, but the first half of October inflation data was soft. MXN was likely supported by the broader risk sentiment on Thursday. BRL also saw strength, likely also supported by risk sentiment, while President Lula said he will seek a fourth term in next year's election. CLP rallied, tracking gains in copper prices, but COP outperformed on the surge in energy prices following fresh Russia sanctions. TRY saw mild gains while the CBRT cut rates by 100bps as expected to 39.50%, noting the tight monetary policy stance will be maintained until price stability is achieved.