By Jamie McGeever
ORLANDO, Florida, Oct 26 (Reuters) – Stocks mostly rose on Monday, lifted by renewed optimism around AI as Anthropic filed for a US IPO and as investors awaited more ‘Big Tech’ earnings later this week. Weaker oil prices also support risk appetite.
The big exception, however, was Brazil, where financial assets plunged following left-wing incumbent Luiz Inacio Lula da Silva’s shock win in Sunday’s presidential election.
In my column today, I look at whether ‘stagflation’ pressures may be building in the US. A deflating artificial intelligence bubble puts downward pressure on Wall Street and wider economic growth, but the revival of oil and energy prices is putting upward pressure on inflation. It’s a tricky one for investors, and the Fed.
Today’s Key Reads
• Brazil stocks, real tumble as Lula win ends bullish run
• Anthropic’s IPO filing shows explosive growth, risks and staggering costs
• Meta eyes record $95 billion equity raise to fund AI expansion
• In China, the AI bubble has already burst
• Fed to hit pause on rate hikes, but maybe not for long
• Today’s Key Market Moves STOCKS: Brazil -14%. Asia mixed, Europe and UK up around 0.8%. Wall Street higher: Nasdaq +0.8%, S&P 500 +0.7%, Dow +0.3%.SECTORS/SHARES: Seven sectors on the S&P 500 rise, four fall. Tech +1.5%, comms services -1.4%. Tesla +5%, DoorDash -6%.FX: Brazilian real -8.5%, biggest fall since devaluation in 1999. Philippine peso sinks to record low near 64.00/$. US dollar index edges higher.BONDS: Brazil buys back bonds, cancels auctions. US 2-year auction is ok — foreign demand dips, domestic demand surges.COMMODITIES/METALS: Oil slips — Brent -0.8%, WTI -1.5%. Gold +0.5% back above $4,000/oz.
Today’s Talking Points:
AI funding blitz
If investors were showing signs of AI fatigue in recent weeks, they’re hiding it well as this week gets underway. On Monday, Anthropic filed for a US IPO, Meta announced plans for a $95 billion equity raise, and SpaceX said it has struck a $40 billion deal with Apollo Global Management for AI chip funding. The Anthropic IPO could value the company at a record-breaking $1.5 trillion or more, and Meta’s capital raise would also be a record.
The eye-popping sums needed to fund the AI buildout have begun to suck some of the air out of the AI bubble, but that was shrugged off on Monday, at least temporarily — tech and AI stocks fueled a solid rebound on Wall Street. Competition for investor capital is heating up.
Brazil
Politically, Brazilian President Luiz Inacio Lula da Silva’s surprise election victory on Sunday was truly historic: never before had a candidate won the decisive second-round vote after losing the first. It also means a record-setting fourth term for Lula, who turns 81 on Tuesday. Unsurprisingly, given the historic significance of Lula’s comeback, there was a reaction across Brazilian markets.
Few doubt the scale of Brazil’s fiscal and economic challenges, but Monday’s collapse in Brazilian assets is likely to reverse, to some degree. Part of the selloff was because investors were caught so flat-footed. As late as Sunday, prediction markets were pointing to an 80% chance of a win for Senator Flavio Bolsonaro. But Lula’s scope to push through an agenda that investors fear will be limited, due to Bolsonaro’s backing in Congress.
Central bank bonanza
This week is one of the busiest in years for policymaking in the world’s developed economies, with half of the G10 central banks set to decide interest rates. Monetary authorities in New Zealand and Canada are widely expected to hike by 25 basis points, while those in the US, euro zone and Japan are expected to keep them on hold but signal possible increases in December.
The common enemy is inflation, which is already too sticky in many countries. Oil and global energy prices remain elevated as war continues to choke Middle East supply routes, and the worry for policymakers is this bleeds into core inflation and becomes embedded in inflation expectations. But if the AI bubble deflates, growth, consumer confidence and investor sentiment could deflate too, putting policymakers in an even tighter bind.
What could move markets tomorrow?
• Japan services producer price inflation (September)
• South Korea GDP (Q3, advance)
• US Treasury sells $70 billion of 5-year notes at auction
• US durable goods (September)
• Corporate earnings, including Visa, Coca-Cola, Boeing, Seagate Technology, HSBC, Novartis
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(Reporting by Jamie McGeever;Editing by Bill Berkrot)
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