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Morning Bid U.S.

A Reuters Open Interest newsletter

What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets, Reuters Open Interest

The stories driving markets appear to be moving in loops faster than investors can make significant adjustments, with Friday's dramatic China trade threats seemingly reversed by Sunday and the French Prime Minister who resigned last Monday now reappointed and forming another cabinet.

Wall Street plummeted almost 3% and gold surged again on Friday after President Donald Trump lambasted China's latest rare earth export curbs and vowed to slap 100% tariffs on Beijing, sending the S&P 500 to its worst weekly loss since May. However, futures regained about half of that daily percentage loss before Monday's bell after Trump on Sunday appeared to row back on the move saying, "Highly respected President Xi just had a bad moment. The U.S.A. wants to help China, not hurt it."

Trade Representative Jamison Greer said tensions rose after Washington reached out to China for a phone call following last week's announcement of expanded rare earths export curbs, only for Beijing to defer. What's not clear is what the latest spat means for rolling over the existing bilateral trade deal on November 10 or whether an expected Trump-Xi summit will now take place.

Meantime, China said export growth bounced back more than forecast in September while it rekindled lost U.S. trade elsewhere. Exports to the U.S. fell by 27% year-on-year but shipments bound for the European Union, Southeast Asia and Africa grew by 14%, 16% and 56% respectively.

The full fallout from the weekend's whiplash will be difficult to parse with the U.S. government still in shutdown, the Columbus Day holiday closing the Treasury market and stock markets bracing for the onset of the U.S. corporate earnings season from tomorrow. Two and 10-year Treasury yields plunged to their lowest in almost a month on Friday's jolt and the dollar recoiled - but the latter has regained some ground on Monday.

With the IMF/World Bank meetings taking place in Washington this week and a closely watched appearance from Federal Reserve chief Jerome Powell due on Tuesday, there was continued warnings about overextended market valuations and the risks of a sharp correction. "Valuations could now be at odds with the uncertain economic and geopolitical outlook, leaving markets susceptible to a disorderly adjustment," Financial Stability Board Chair Andrew Bailey told G20 ministers in a letter.

After Friday's tech-led slump, Asia opened lower but stabilized as Wall Street futures rebounded and hopes flickered for a tariff truce extension, even as Beijing defended rare earth export curbs. The dollar firmed against the yen and franc after Friday's safety rush, while bullion set another record above $4,070 as investors hedged policy and geopolitical risk. The near-term risk skew for AI, EV and defense supply chains remains sensitive to any tit-for-tat escalation.
Political anxiety in Europe eased somewhat as French Prime Minister Sébastien Lecornu was reappointed by President Emmanuel Macron and is now about to appoint a new cabinet, keeping Roland Lescure at finance and underscoring policy continuity despite a divided parliament and a tricky 2026 budget path. European equity benchmarks steadied after Friday's selloff, with futures and cash markets edging higher to start the week.
Earnings season kicks off Tuesday with JPMorgan, Goldman Sachs, Citigroup and Wells Fargo, and the market wants proof that roughly 8.8% y/y S&P 500 EPS growth can support stretched multiples. JPM and Wells are slated to release results around 7:00 AM ET (calls at 8:30 AM and 10:00 AM), Goldman at 7:30 AM (call 9:30 AM), and Citi at 8:00 AM (call 11:00 AM).

In today's column, I discuss how "juiced-out" bonds may be pushing money elsewhere.

I’d love to hear from you, so please reach out to me at mike.dolan@thomsonreuters.com.

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Today's Market Minute

The last surviving Israeli hostages began to be released on Monday as part of a ceasefire deal pushed by U.S. President Donald Trump, who landed in Israel to address the parliament.
U.S. companies and consumers are bearing the brunt of the country's new import tariffs, early indications show, contradicting assertions by President Donald Trump and complicating the Federal Reserve's fight against inflation.
The French presidency announced Prime Minister Sebastien Lecornu's new cabinet line-up on Sunday, with most top jobs remaining unchanged at a time when opponents are demanding a political shift to win their support for urgent budget talks.
The recent surge in suspected Russian "hybrid warfare" incidents across Europe has put governments on high alert, writes ROI energy columnist Ron Bousso, raising questions about the vulnerability of the region’s energy infrastructure as the continent enters the critical winter heating season.
Is China's stockpiling of crude oil bearish or bullish for prices? Unfortunately, writes ROI columnist Clyde Russell, there is no clear cut answer to the question.

'Juiced out' bonds pushing money elsewhere?

The market mood of the moment is whether bubbles are being blown in riskier markets by loose fiscal and monetary policies that lift the inflation horizon for years to come. Still compressed yields in gigantic global debt markets may give a glimpse of what's happening.

With mounting fears for central bank independence from Washington to Tokyo and little appetite anywhere for unpopular budget cutting, the prospect of inflation rates returning sustainably back to long-standing 2% targets has dimmed.

That doesn't even have to mean another bout of runaway post-pandemic inflation but it could see 3-4% inflation for the world's major economies start to get baked in. Already core inflation for the G7 economies as a whole is settling at 3%.

That may underpin nominal GDP growth and record high equities - goosing high-octane bets in tech, AI, private markets and even gold in the process. But it's a sour prospect for already clipped returns in global government and corporate fixed income that still houses the lion's share investment capital.

Apollo's chief economist Torsten Slok pointed out late last week that almost 90% of all public fixed income outstanding now trades with a yield of less than 5%. With inflation running at 3%, that leaves a real return of just 2%.