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View detailsThe AI craze is "siphoning" global capital. Has AI already "bottomed out" the US dollar?
Trillions of dollars in AI infrastructure investment by US technology companies are reshaping global capital flows, and this enterprise-level upheaval has evolved into a key supporting factor for the US dollar. Although this dynamic has not yet fully entered the mainstream narrative of the foreign exchange market, its boosting effect on the US dollar is quietly emerging. American tech giants have significantly raised their expectations for AI-related capital expenditures. According to the Chui Feng Trading Desk, Barclays stated in its research report on the 9th that its spending forecast for 2025 has risen from hundreds of billions of US dollars over a year ago to approximately 500 billion US dollars. The total investment scale in the next five years will exceed 3 trillion US dollars, which, in some estimates, is equivalent to more than 10% of GDP. These investments are absorbing capital from around the world through channels such as corporate bond issuance. This trend has begun to show in macro data. In the first two quarters of 2025, the contribution of investment projects to the US GDP rose to an annualized rate of 1 percentage point per quarter, the highest level since 2023. The sentiment indicator of the US dollar has now turned positive, indicating that the market's view of the US dollar is improving. Barclays believes that these developments have strengthened its previous judgment that the US dollar may have bottomed out. Although the narrative of the foreign exchange market still focuses on data deficiency and the risk of government shutdown, the growth resilience brought about by the AI investment boom, the revaluation of interest rate expectations, and global capital inflows are forming a "silent support" for the US dollar. The scale of AI investment has expanded beyond expectations, driving the US dollar to bottom out The AI capital expenditure expectations of US technology companies have been significantly raised in the past few months. More than a year ago, the market's expectation for AI-related spending in 2025 was only several hundred billion US dollars. This figure has now climbed to approximately 500 billion US dollars, and the total investment scale in the next five years is expected to exceed 3 trillion US dollars. By partial estimation, this is equivalent to more than 10% of the US GDP. This investment boom has begun to have a substantive impact on the macroeconomy. In the first two quarters of 2025, the contribution of investment to the US GDP rose to an annualized rate of 1 percentage point per quarter, marking the first time this level has been reached since 2023. The economic output resilience brought about by AI investment is reshaping market expectations. Barclays pointed out that although the base effect may imply that the role of investment in driving growth will weaken at some point next year, AI investment is still in an accelerating phase at present. This accelerated growth has been accompanied by the outstanding performance of US assets, providing support for the US dollar. Furthermore, the multiplier effect of investment spending may push interest rate expectations to continue to face reality tests. The market's previous expectation of a significant slowdown in economic growth may be hard to achieve, which means the probability of a deep interest rate cut cycle by the Federal Reserve has decreased. This part of the output resilience has also driven the repricing of policy interest rate expectations, helping the US dollar stop falling and stabilize. Barclays' dollar sentiment index has now turned positive. Corporate bond issuance siphons global capital One underestimated dollar impact of the AI investment boom lies in its absorption effect on global capital. Through large-scale issuance of corporate bonds, the United States is absorbing resources and capital from all over the world. Whether through direct participation in rights issues or through reverse Yankee bond offerings, the advantages created by this investment boom are directing resources towards the US dollar. This capital flow constitutes a "silent" but substantial support for the US dollar. Barclays emphasized that in the macro field, sometimes the development at the enterprise level is regarded as taking place in some parallel universe. Although the narrative of the foreign exchange market still remains at the level of data deficiency and the risk of government shutdown, the "elephant in the room" is actually the huge AI investment by technology companies and the global capital flows it has triggered. The risks faced by the expectation of the US dollar bottoming out These developments reinforce Barclays' view in its September Outlook and Global Outlook reports that the US dollar may have bottomed out. In fact, the current trading level of the US dollar is even stronger than the institution's previous expectations that exceeded market consensus. Barclays said that in hindsight, it should have retained its initial medium-term forecast of 1.13 for the euro against the US dollar. However, this judgment still faces key risks. Barclays pointed out that the main risks include interference with the independence of the Federal Reserve, although the risks brought by Cook's judicial ruling have currently declined. In addition, the possibility of deterioration in the corporate bond market, especially the expansion of credit spreads in some sectors of the US technology credit sector, also constitutes a risk factor worthy of attention. Despite these risks, the growth resilience driven by the AI investment boom, the revaluation of interest rate expectations, and global capital inflows are providing multiple supports for the US dollar. This "silent rise of the US dollar" may mark an important turning point in the trend of the US dollar. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-11-11 -
View detailsThe leadership of the European Central Bank is set to undergo a major shake-up, and the competition for the next president has begun!
The European Central Bank is about to launch a large-scale reorganization of its top leadership team. This personnel change will ultimately determine who will succeed the current president, Christine Lagarde. On November 10th, according to media reports, by the end of 2027, four of the six seats on the Executive Board of the European Central Bank will be vacant, and a battle for the top monetary policy position in the eurozone has already begun behind the scenes. It is reported that the term of Deputy Governor Luis de Guindos will expire first in May next year, and the European Central Bank is about to ask Brussels to start the formal succession process. The report quoted three people familiar with the matter as saying that eurozone finance ministers will start discussing the matter this week. Subsequently, the terms of Lagarde, Chief Economist Philip Lane and Isabel Schnabel will also end one after another in 2027, triggering fierce competition among eurozone countries for the most powerful monetary policy position in the region, and the behind-the-scenes struggle for the position of the president of the European Central Bank has already begun. Analysts point out that the nationality and monetary policy stance of the deputy governor candidate will have a significant impact on the choice of Lagarde's successor, which is related to the complex power balance among the eurozone's upcoming expansion to 21 member states. Three main contenders for the position of central bank governor have emerged Regarding the candidate for the deputy governor position, the report indicates that Finland has decided to nominate its central bank governor Olli Rehn for the position. He is an economist and a former EU commissioner. Rehn is one of the more dovish voices on the ECB's Governing Council. He has warned of the risk that inflation may fall below the central bank's 2% target. It is worth noting that this competition for the appointment coincides with the expiration of Federal Reserve Chair Jay Powell's term in May. In addition, the report quoted a person familiar with the matter as saying that the Croatian government is also preparing to nominate Boris Vujecic, the governor of its central bank. The behind-the-scenes battle for the position of the president of the European Central Bank has already begun. It is reported that informed sources disclosed that Klaas Knot, the former governor of the Dutch Central bank, and Joachim Nagel, the governor of the German central bank, are the two main contenders to succeed Lagarde. Pablo Hernandez de Cos, the former governor of the Bank of Spain and current managing director of the Bank for International Settlements, a respected former academic economist, was described by a person familiar with the matter as the third candidate who "meets all the requirements". Nagel has begun lobbying Berlin to support him in becoming the next president of the European Central Bank. The report pointed out that informed sources disclosed that he has recently delivered a series of speeches and interviews, including in Greece, Spain, India and the United States, covering topics such as "Adapting Europe to its new global role". Although Germany is the largest member state of the Eurozone, it has never served as the president of the European Central Bank. Lars-Hendrik Roller, the chief economic adviser to former German Chancellor Angela Merkel, said recently, "I think it's time (for the Germans to lead the ECB), but it's complicated." Like Germany, Spain has never served as the president of the European Central Bank and is currently the only large eurozone economy that has maintained significant growth. After Guindos leaves office, Spain will also have no representative in the executive committee. Hernandez de Cos has taught at Spanish business schools and Carlos III University of Madrid. He has academic and institutional experience and is known for his pragmatic voice in the management committee. But the position at the European Central Bank is often part of a broader political deal among eurozone member states. A senior figure from the central bank said, "Unfortunately, qualifications are not necessarily the decisive factor." Complex considerations of power balance The allocation of seats on the Executive Board of the European Central Bank is a highly complex task. Jens Eisenschmidt, chief European economist at Morgan Stanley and former senior fellow at the European Central Bank, said: Reflecting the full representation of European member states in the Executive Board of the European Central Bank is an extremely complex task. It is worth noting that there is an unwritten rule for the selection of the Executive Committee members of the European Central Bank, that is, no country can occupy two Executive Committee seats at the same time, and governments of various countries also seek to maintain a balance between hawkish and dovish positions. The Eastern European and Baltic countries that joined the Eurozone after 2007 are demanding a say in the executive committee, and Latvia has openly sought a seat. Gender balance is also one of the considerations. Historically, the Executive Board of the European Central Bank has always been dominated by men. Since 1998, only 19% of the 26 members have been women. A person close to the discussion said, "France and the European Parliament will particularly emphasize gender issues." It is reported that Agnes Benassy-Quere, the deputy governor of the Bank of France, Christina Papaconstantinou, the deputy governor of the Bank of Greece, Laurence Boone, the chief economist of the OECD, and Helene Rey, a professor at the London Business School, All are regarded by insiders as strong female contenders for seats on the executive committee. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-11-10 -
View detailsCitigroup: AI gives rise to a new paradigm of "jobless boom", which may force the Federal Reserve to further cut interest rates
Citigroup believes that AI is giving rise to a "jobless boom" phenomenon, which may force the Federal Reserve to continue cutting interest rates in the coming months. According to the Chui Feng Trading Desk, Citigroup stated in its report on November 6th that under the impact of AI, economic growth and employment are decoupling: AI applications boost productivity, but at the same time dampen companies' willingness to recruit, leading to weak employment data. Weak employment and moderate inflation data will provide the Federal Reserve with room to continue cutting interest rates. The interest rate cut will in turn stimulate enterprises to increase capital expenditure on AI, creating a positive feedback loop. The positive feedback loop mechanism of "prosperity without employment" Citigroup's global macro strategy team stated that AI is forming a positive feedback loop mechanism of "jobless boom". The core logic of this cycle is: AI applications enhance productivity → enterprises reduce recruitment demands → employment data weakens → the Federal Reserve cuts interest rates → enterprises obtain lower financing costs → increase capital expenditure on AI → productivity further improves. This cycle breaks the traditional economic cycle's rule that employment and growth go hand in hand, creating a new paradigm of "growth without job creation". Analysts say that for investors, a weak job market is no longer necessarily a sign of an economic recession; instead, it may become a by-product of productivity improvement in the AI era. Weak employment and moderate inflation data will provide the Federal Reserve with room to continue cutting interest rates, and the rate cuts will in turn stimulate enterprises to increase capital expenditures on AI, creating a positive feedback loop. The path of interest rate cuts may exceed expectations Citigroup emphasized that in the new economic paradigm driven by AI, monetary easing and a strong economy can coexist, and the return cycle of technology investment may be longer and more stable than ever before. Although Federal Reserve Chair Powell said after cutting interest rates last week that a rate cut in December was "far from" a set conclusion, the team of Citigroup economist Andrew Hollenhorst believes that weak employment data and moderate inflation data will push the Fed to continue cutting interest rates in December, January and March. Analysts stress that if the US government can reopen in the near future, the Federal Reserve may need to consider the combined impact of the three employment reports. This judgment differs from the mainstream expectations of the market, suggesting that the interest rate cut cycle may be longer and more forceful than expected. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-11-07 -
View detailsFor the first time in history, China's "borrowing rate" has equaled that of the United States
The US dollar sovereign bonds issued by China's Ministry of Finance in Hong Kong have reached a historic milestone. The pricing of its three-year bonds is on par with the yield of US Treasury bonds, marking the first time that China's borrowing costs in US dollars have equalized those of the United States. On Thursday, China's Ministry of Finance issued $4 billion in sovereign bonds. The coupon rate of the three-year bonds was 3.625%, comparable to the yield of US Treasuries of the same maturity. The pricing of the five-year bonds was only 0.02 percentage points higher than that of US Treasuries. Previously, although Chinese dollar bonds had experienced negative carry trade in the secondary market, they always maintained a premium when issued in the primary market. The transaction attracted strong investor demand. The five-year bond was oversubscribed by 30 times, with more than half of the orders coming from central banks, sovereign wealth funds and insurance companies. David Yim, head of capital markets for Greater China and North Asia at Standard Chartered Bank, said, "Market liquidity is abundant and geopolitical tensions have also eased." This environment offers a window for multiple sovereign issuers, including China, to conduct international financing at historically low premiums. The financing cost of sovereign bonds has reached a historical low A syndicate composed of Chinese banks, US banks and other foreign banks underwrote Thursday's transactions. According to the bond terms and conditions prospectus, the raised funds will be used for "general government purposes", and the transaction will be settled next Thursday. The order book shows that institutional investors have shown a strong interest in the bond. Long-term allocation investors such as central banks, sovereign wealth funds and insurance companies occupied more than half of the subscription quota for five-year bonds, reflecting the market's recognition of China's sovereign credit. China's last issuance of US dollar sovereign bonds was in 2024, when it sold $2 billion worth of bonds in Saudi Arabia. This time, 4 billion US dollars were issued in the Hong Kong market, doubling the issuance scale compared to the last time. This indicates that against the backdrop of improved financing costs, China has increased the issuance of US dollar bonds. At present, many countries are seizing the opportunity of the fact that the financing cost of US dollar bonds has dropped to a historical low to issue bonds. In September this year, ABU Dhabi issued $2 billion in 10-year bonds, with a spread of only 0.18 percentage points over US Treasury bonds. In October, South Korea's Ministry of Finance issued $1 billion in five-year bonds with a spread of 0.17 percentage points. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-11-06 -
View detailsDriven by a surge in trading volume and ipos, the Hong Kong Stock Exchange's profits soared by 56% in the third quarter
The Hong Kong Stock Exchange's third-quarter results reached a record high, with net profit soaring to HK $4.9 billion. Strong trading activities and the IPO boom were the main drivers of the performance growth. On November 5th, the latest financial report released by the Hong Kong Stock Exchange showed that the net income of the Hong Kong Exchanges and Clearing Limited in the third quarter reached 4.9 billion Hong Kong dollars (630 million US dollars), a significant increase of 56% compared with the same period last year. The financial report also shows that the revenue and other income in the third quarter was 7.775 billion Hong Kong dollars, an increase of 45% compared with the third quarter of 2024. The main business income rose by 54% compared with the third quarter of 2024, due to the record high trading volume in the spot market, which led to an increase in transaction and settlement fees. (Source: Hong Kong Stock Exchange in the third quarter) It is worth noting that the Hong Kong Stock Exchange's revenue, other income and profits in the first three quarters of 2025 all reached record highs. Among them, the revenue and other income for the first three quarters of 2025 was 21.851 billion Hong Kong dollars, an increase of 37% compared with the first three quarters of 2024. The main business income rose by 41% compared with the first three quarters of 2024, due to the record high trading volume in the spot market and the stock option market, which led to an increase in transaction and settlement fees. The profit for the first three quarters was 13.419 billion Hong Kong dollars, an increase of 45% compared with the same period of 2024. The CEO of the Hong Kong Stock Exchange, Chan Yat-ting, said, "The Hong Kong Stock Exchange continues to capture the momentum of global diversification and the appeal of Chinese assets." Hong Kong is moving towards the goal of setting a new high in IPO fundraising in four years, mainly benefiting from the inflow of shares offered by mainland enterprises and the recovery of global interest in Chinese assets. The Hang Seng Index soared by 29% in the third quarter, driving stock and derivatives trading to a record high and generating substantial profits for the exchange. Core revenue has seen a significant increase and ipos have soared The core business of the Hong Kong Stock Exchange performed strongly, with transaction and settlement fee income increasing by 54% in the third quarter to HK $7.5 billion. This growth is mainly attributed to the explosive increase in stock trading volume. The overall stock trading volume doubled in the third quarter. More notably, the trading volume of mainland investors through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect mechanisms has increased by more than twice, demonstrating the strong interest of mainland funds in the Hong Kong market. Meanwhile, the Hong Kong IPO market performed outstandingly in the first nine months of 2024. A total of 69 companies raised HK $188.3 billion through initial public offerings, far exceeding the HK $55.6 billion raised in the same period of 2024. The secondary market stock offering also performed well, raising a total of HK $264.1 billion in the first nine months. As of the end of September, the Hong Kong Stock Exchange had an active IPO pipeline of 297 companies, providing a sufficient reserve for future performance growth. Analysis indicates that the soaring performance of the Hong Kong Stock Exchange reflects a shift in global investors' attitudes towards Chinese assets. The high enthusiasm of mainland enterprises for listing in Hong Kong, coupled with the renewed attention of international investors to the Chinese market, have jointly driven the recovery of the Hong Kong capital market. The 29% quarterly increase of the Hang Seng Index not only drove a sharp rise in trading volume but also boosted market confidence, creating a favorable environment for more enterprises to choose Hong Kong as their listing destination. This trend is expected to continue until the end of the year, supporting the Hong Kong Stock Exchange to maintain a strong growth momentum. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-11-05 -
View detailsGoldman Sachs: Despite Powell's hawkish stance, it still takes a rate cut in December as the benchmark forecast
Goldman Sachs predicts that even if the US government shutdown ends next week, the incremental data obtained by the Federal Reserve before the December meeting is more likely to be weak, which will provide support for interest rate cuts. The timing of this tone shift is unexpected. Based on the available data, the Federal Reserve's assessment of the economic outlook has not changed - the inflation rate, excluding tariffs, is approaching the 2% target, and the labor market continues to weaken. Despite this, Powell's cautious wording still brought uncertainty to the market. Goldman Sachs macro traders Rikin Shah and Cosimo Codacci-Pisanelli pointed out that the September dot plot indicated that the majority of committee members took interest rate cuts as the default option, and there were no signs of improvement in the labor market suggesting that this stance should change. Goldman Sachs believes that although Powell's hawkish remarks deserve attention, the majority opinion of the committee reflected in the dot plot still points to a rate cut. In the absence of evidence of improvement in the labor market, this consensus should not undergo a fundamental change. Even if the government shutdown ends next week, the incremental data that the Federal Reserve sees before its December meeting may still be biased towards weakness. The delayed resignation data from the Government Efficiency Department (DOGE) will weigh on the October jobs report and may also affect the November data. Goldman Sachs said that betting on a rate cut at the December meeting will eventually prove to be a good opportunity to go long, but it suggests waiting for a better entry point as there is a lack of a catalyst that immediately triggers a market reversal. Looking ahead to 2025, Goldman Sachs has repeatedly emphasized that the distribution of policy paths will become more dispersed, with numerous cross-influencing factors. The market's pricing of the terminal rate has been fluctuating around 3% for some time, but Goldman Sachs believes there is a great deal of uncertainty surrounding this level. Although Goldman Sachs is optimistic about the economic growth recovery next year, the corresponding interest rate trading strategy remains unclear. Risk Warning and Disclaimer
2025-11-04 -
View detailsGoldman Sachs predicts that the "US government shutdown" will end within two weeks. Is it more reasonable for the Federal Reserve to cut interest rates in December?
Following Citigroup, Goldman Sachs also optimistically predicts that the US government shutdown is expected to end "within two weeks", which is crucial for the Federal Reserve, which relies on data for decision-making. According to the Chui Feng Trading Desk, the latest analysis report released by Goldman Sachs shows that the partial shutdown of the US federal government, which has lasted for several days, is showing signs of coming to an end. The bank expects that the deadlock is most likely to be broken around the second week of November. Regarding how the shutdown will affect the Federal Reserve's interest rate decision in December, major Wall Street banks generally believe that the duration of the shutdown is the core variable. Previously, Citigroup said in a report that it was "increasingly confident" that the government shutdown would end within the next two weeks. Citigroup believes that once the government reopens, data releases will resume rapidly, and the Federal Reserve "may receive as many as three employment reports" before the December meeting, which will provide sufficient basis for another 25 basis point rate cut. Therefore, the bank maintains its benchmark forecast for the Federal Reserve to cut interest rates consecutively in December, January and March next year. The deadlock is expected to be broken, and Goldman Sachs predicts it will end within "two weeks" Although the duration of this government shutdown is almost surpassing the 35-day record set in 2018-2019, Goldman Sachs believes that the end of the government shutdown is "closer than the beginning". According to the report analysis, one of the reasons why this shutdown has lasted so long is that the Trump administration has taken unconventional measures, using last year's unused funds to pay military salaries and so on, thereby temporarily easing some conflicts. However, this space for maneuver is gradually being exhausted. As the negative impacts of the shutdown continue to accumulate, multiple key pressure points are forcing both parties in Congress to seek compromise. First of all, air traffic controllers and airport security personnel missed their first full payday on October 28th. This increases the risk of delays in air travel, especially as the second payday on November 10th approaches. The experience of the shutdown in 2018-2019 demonstrated that air traffic delays were a powerful catalyst for the government to reopen. Secondly, payments for the Supplemental Nutrition Assistance Program (SNAP, or food stamps) have also been disrupted. Although the court ruled that the government should use emergency funds to pay part of the welfare, the delay in payment has become a fact. Secondly, the salaries of congressional staff themselves have also been affected, which may directly prompt lawmakers to accelerate the pace of compromise. In addition, some political agendas may also create Windows for reaching an agreement. The report mentioned that several states will hold elections on November 4th, and Congress plans to enter a recess after November 7th. All these could serve as the driving force for lawmakers to reach an agreement before then. Overall, Goldman Sachs 'current expectation is that the shutdown "is most likely to end around the second week of November". Is a rate cut expected in December? The prospect of interest rate cuts depends on the duration of the "closure" According to Goldman Sachs 'calculation, if the government reopens around mid-November, it may take the Bureau of Labor Statistics (BLS) of the United States several days to release the postponed September employment report. More importantly, both the November employment report, originally scheduled for release on December 5th, and the November CPI report, originally set for release on December 10th, may face the risk of being delayed by one week. Employment and inflation are the two core pillars of the Federal Reserve's monetary policy decisions. But the report said it is still unclear how the Bureau of Labor Statistics will handle the missing October data. However, the Wall Street Journal article wrote that the team of Citigroup analyst Andrew Hollenhorst is more optimistic. In a report, it said it was "increasingly confident" that the government shutdown would end within the next two weeks. Once the government reopens, data releases will resume rapidly. The Federal Reserve "may receive as many as three employment reports" before the December meeting, which will provide sufficient basis for another 25 basis point rate cut. Therefore, Citigroup maintains its benchmark forecast for the Federal Reserve to cut interest rates consecutively in December, January and March next year. The team of Morgan Stanley economist Michael T Gapen believes that the longer the closure lasts, the lower the probability of a rate cut in December, listing three scenarios: Scenario One: It will end next week. If the government reopens quickly, the Federal Reserve will have a high probability of obtaining the three employment reports for September, October and November, as well as key data such as the CPI and retail sales for September and possibly October, before the December meeting. Morgan Stanley believes that these data are sufficient to support its decision to cut interest rates. Scenario Two: It will end in mid-November. In this case, the data will become "more limited", and the Federal Reserve may only be able to obtain the employment, retail and inflation reports for September. However, Morgan Stanley's analysis suggests that at that time, state-level unemployment data and private sector indicators may fill some of the gaps, making it still possible for the Federal Reserve to push forward with interest rate cuts. Scenario Three: It ends after Thanksgiving (late November). This is the most pessimistic scenario. At that time, the Federal Reserve is highly likely to only be able to obtain the September CPI and employment reports, while there is a risk that key data such as September retail sales will not be available. In this "data vacuum" situation, unless there are strong deterioration signals from the state level or the private sector, the possibility of the Federal Reserve pausing interest rate cuts in December will be higher. Economic costs are emerging, and GDP growth in the fourth quarter may suffer a heavy blow Apart from influencing the Federal Reserve's decision-making, the economic cost of this shutdown should not be underestimated. Goldman Sachs emphasized in its report that this shutdown not only may last the longest but also have a wider impact than ever before, far exceeding previous shutdowns that only involved a few institutions. Goldman Sachs 'team of economists estimates that if the shutdown lasts for about six weeks, the seasonally adjusted annualized real GDP growth in the fourth quarter of 2025 will decrease by 1.15 percentage points mainly due to mandatory leave for federal employees. The report thus lowered its GDP growth forecast for the fourth quarter to 1.0%. However, most of this impact is temporary. The report predicts that as employees on leave return to work and some federal purchases and investments shift from the fourth quarter to the first quarter of next year, GDP growth in the first quarter of 2026 will receive a 1.3 percentage point boost, pushing the GDP growth forecast for this quarter up to 3.1%. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-11-03 -
View detailsIs the Federal Reserve turning hawkish? Barclays: Powell aims to "break the inevitable expectation of a rate cut", and the data supports more rate cuts
After the FOMC meeting in October, the chairperson of the Federal Reserve stated at a press conference that inflation still faces upward pressure in the short term and employment is confronted with downward risks. The current situation is quite challenging. The committee still has significant differences of opinion on whether to cut interest rates again in December, and a rate cut is not a certainty. The market gave this statement a hawkish interpretation. The 2-year US Treasury bonds were sold off, yields rose sharply, and US stocks fell. The team of Anshul Pradhan, an analyst at the bank, believes that this is a communication strategy aimed at breaking the market's assumption that interest rate cuts are a certainty regardless of the data. The latest economic data shows that the demand for labor continues to slow down and the potential inflation level is not far from the 2% target. All these support the Federal Reserve to continue cutting interest rates. It's not a hawkish shift, but rather a break from the market's "established conclusions". In other words, the Federal Reserve hopes to reaffirm that its decisions are based on data rather than being held hostage by market expectations. Powell made it clear that the Federal Reserve will respond to the slowdown in labor demand, and this is precisely the fact that is happening. In the labor market, leading indicators including Indeed job openings and the labor balance (jobs plentiful vs hard to get) suggest that demand is slowing. Overall, if potential inflation is only a few tenths of a percentage point above the target and the unemployment rate is only a few tenths of a percentage point above the natural unemployment rate (NAIRU), then the policy setting should be neutral." The current market expects a rate cut of only 35 basis points by March 2026 and only 55 basis points to 3.3% by June. The implicit distribution in the options market indicates that there is a divergence in the number of interest rate cuts in March and June, with a modal expectation of only one cut by June. The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-10-31 -
View detailsNvidia's "10x Stock Journey" : Three years ago, when ChatGPT was first launched, its market value was 400 billion US dollars. Now, it's the first "5 trillion US Dollar company"!
On Wednesday, Nvidia's share price rose by approximately 3% to $207.16, bringing its market value to $5.03 trillion. This figure surpasses the combined market capitalization of its rivals AMD, Arm, ASML, Broadcom, Intel, RAM Research, Qualcomm and TSMC, and even exceeds the volume of the entire utilities, industrial and consumer staples sectors in the S&P 500 index. Nvidia's stock performance has become a key "barometer" for measuring this huge demand cycle driven by AI. The direct catalyst for this round of rise comes from the market's expectation of the sustained strong sales of its AI chips and the optimism about its product sales in the Chinese market. The growth trajectory of NVIDIA's market value is truly astonishing. With the launch of ChatGPT, the market demand for Gpus used for training and running large language models has soared. Within a few months after the release of ChatGPT, Nvidia's market value surpassed the $1 trillion mark. Subsequently, its growth pace has been accelerating continuously: May 2023-1 trillion US dollars; June 2024-3 trillion US dollars; October 2025-5 trillion US dollars. Nvidia's remarkable growth rate has outpaced that of the two tech giants, Apple and Microsoft, which only closed above a market value of $4 trillion for the first time this week. The fundamental reason why NVIDIA has become the "core" of this round of AI transactions lies in the fact that the Gpus it designs are the engines driving the entire artificial intelligence industry. Angelo Zino, senior vice president of CFRA Research, said: Strong demand is directly reflected in the order data. Wall Street Journal mentioned that NVIDIA disclosed that it has shipped 6 million Blackwell chips released last year and has another 14 million orders in hand. Huang Renxun predicted at the GTC conference: Bernstein analysts pointed out that Huang Rengxun's prediction implies that NVIDIA's chip sales in the 2026 calendar year will far exceed 300 billion US dollars, while the previous general expectation on Wall Street was 258 billion US dollars. "Bubble" Warning and High Valuation review Some investors and industry analysts have begun to compare the current rally in AI stocks to the dot-com bubble at the beginning of this century. Technology companies are investing hundreds of billions of dollars in data centers and chip development, and are burdened with heavy debts for this, but the revenue they generate so far is relatively small. Such an "outstanding valuation" sets extremely high expectations for the company. It is only reasonable when the profit margin and profits continue to follow the current trajectory or even improve. The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-10-30 -
View detailsTonight, will the Federal Reserve roll out a combination of
Amid the "fog" of the absence of key economic data due to the US government shutdown, the Federal Reserve may make another key interest rate decision of the year. The market widely expects that the FOMC will cut interest rates again and may simultaneously announce the end of its balance sheet reduction plan to address labor market risks and liquidity pressures in the money market. At 2:00 a.m. Beijing time on Thursday, the Federal Open Market Committee (FOMC) of the Federal Reserve will announce its interest rate decision. Subsequently, at 2:30 a.m., Federal Reserve Chair Powell will deliver a speech at a press conference. According to the pricing in the money market and a survey by Reuters, a 25 basis point interest rate cut is almost certain. This expected action mainly stems from policymakers' growing concerns over downside risks in the job market, despite the persistence of inflationary pressures. Meanwhile, due to the recent signs of liquidity tightness in the money market, most major banks, including Goldman Sachs and jpmorgan Chase, expect the Federal Reserve to announce the halt of its balance sheet reduction program at this meeting. This move aims to stabilize the financial system and prevent a recurrence of the repo market turmoil in 2019. However, due to the ongoing government shutdown in the United States resulting in the absence of key economic data, Powell is not expected to provide clear forward guidance on the policy path for December. Steven Englander, head of macro strategy for North America at Standard Chartered, said there has been "not much basis for a change of view" since September, when policymakers suggested a possible 25 basis point cut in October and December. Goldman Sachs economists believe that the threshold for the Federal Reserve to cut interest rates in December is very high, unless alternative data provides sufficient reasons, and the current data does not offer such a signal. A 25 basis point interest rate cut is almost certain The Federal Reserve's decision to cut interest rates this time is mainly based on its continuous attention to risks in the labor market. Powell said earlier this month that the Federal Open Market Committee remains focused on the threats facing the labor market. Despite the core CPI rising by 3% year-on-year, a full percentage point above the target, the moderate inflation report released last week may cause the Fed's inflation hawks to remain on the sidelines for the time being. "Labour data continues to play a greater role in the debate," said Krishna Guha, head of global policy and central bank strategy at Evercore ISI. As long as officials are reassured about inflation expectations and the levels of pressure on wages and service prices, Powell can continue to focus on employment and "bring the Fed's policy stance back to neutral". Federal funds futures indicate that investors believe a 25 basis point rate cut is almost a certainty. However, the high possibility of a rate cut does not mean that policymakers have reached an agreement on how to view the interest rate outlook. A considerable number of officials, while acknowledging the risks in the job market, continue to express concerns about inflation. Some officials also pointed out that the price increase in certain sectors of the economy, such as the service industry, remains stubborn, and these sectors are less affected by tariffs. Federal Reserve Governor Miran is expected to vote again in favor of a 50 basis point interest rate cut. In his recent speech, he pointed out that a 25-basis-point pace was too slow, but he believed there was no need to act by more than 50 basis points. Kansas City Fed President Jeff Schmid is seen as likely to vote against keeping interest rates unchanged. The divergence among FOMC members has intensified, with the labor market becoming the focus Although there is little suspense about the interest rate cut itself, the divisions within the FOMC are growing increasingly intense, and the focus is shifting from inflation to the labor market. Concerns over employment are intensifying. Analysts at ING have warned that the US economy is in a state of "low hiring and low firing", but there is a clear risk that it could evolve into a situation of "no hiring and firing". If this situation occurs, it will endanger the core goal of the Federal Reserve to "maximize employment". The minutes of the FOMC's September meeting also showed that the majority of participants believed that the downside risks to employment had increased. Although Fed officials believe that the job market remains roughly balanced between labor demand and supply, they are also concerned that companies might further cut hiring or resort to layoffs. This risk has been highlighted by Amazon's recent announcement of layoffs and the increase in unemployment benefit claims in various states. State employment agencies are still collecting and publishing weekly unemployment benefit claims data, providing a barometer of the health of the labor market. Furthermore, the differences among policymakers may be further manifested at this meeting. It is expected that some committee members will vote against it. For instance, director Miran has recently expressed her support for a more significant 50-basis-point interest rate cut. Meanwhile, some hawkish committee members who are more concerned about inflation may tend to keep interest rates unchanged. This divergence reflects the ongoing debate within the committee over whether to prioritize employment risks or inflation risks. Tightening liquidity may prompt the Federal Reserve to stop reducing its balance sheet Apart from the interest rate cut, another major highlight of this meeting is whether the Federal Reserve will announce the halt of its balance sheet reduction program. Most major Wall Street banks, including Goldman Sachs and jpmorgan Chase, expect the FOMC to take action due to the recent signs of liquidity tightness in the money market. Recently, the secured overnight financing rate (SOFR) briefly exceeded the upper limit of the federal funds rate target range, causing a significant decline in the demand for the New York Fed's overnight reverse repo facility, while the usage of the reverse repo facility increased. These signals indicate that the reserve level of the banking system may be approaching the lower limit of the "sufficient" level, raising market concerns about the repo market crisis in 2019. To prevent excessive liquidity depletion, analysts expect the Federal Reserve to announce the halt of its monthly $5 billion Treasury balance sheet reduction, but it may continue to allow mortgage-backed securities (MBS) to mature passively. However, this decision may also face internal differences. Officials such as Director Bowman have previously stated that they tend to maintain the smallest possible balance sheet size. Currently, the Federal Reserve allows $5 billion of maturing Treasury bonds and $35 billion of mortgage-backed securities (MBS) to flow out of its balance sheet each month. The Federal Reserve may continue to allow MBS to flow out of its balance sheet, but it will start reinvesting all maturing Treasury bonds instead of allowing $5 billion to exit the balance sheet. Under the "black box" of data, Powell finds it difficult to provide clear guidance Due to the government shutdown resulting in the absence of official data, the market expects that Powell will avoid providing clear forward guidance on the policy path for December at the press conference. The lack of reliable employment and inflation data has made it more difficult for the Federal Reserve to make a judgment. Goldman Sachs economists believe that if Powell is asked about his December move, he may restate the path suggested by the "dot plot" at the September meeting, that is, there will be another interest rate cut within the year. Goldman Sachs maintains its judgment on the possibility of a rate cut in December mainly for three reasons: First, the "dot plot" in September has set the third rate cut as the benchmark scenario, and the market has fully priced it in. Second, the Federal Reserve tends to complete the policy cycle of "three consecutive cuts". Thirdly, by the December meeting, the labor market data to be released may be distorted or incomplete due to the government shutdown, making it difficult to send a clear signal that the "alarm has been lifted", which makes it awkward to skip a rate cut that has been fully expected by the market. Goldman Sachs pointed out that a broader dataset shows that the labor market is significantly weaker than it was before the pandemic. The upcoming DOGE postponement of resignation may lead to a negative October employment report and have a certain drag on the November data. Even if this is old news, it would be particularly embarrassing to skip the interest rate cut that has already been signaled in the near future. In addition, the government shutdown disrupted the data collection in October and may to some extent also interfere with the data collection in November, which could lead to distortion or data loss, making the labor market data signals available before December less reliable. Overall, during the data vacuum period, the Federal Reserve can only "feel its way forward". Investors will closely watch Powell's description of the current economic situation, as well as any subtle hints he makes regarding labor market risks and policy paths, to determine whether the tone of accommodative policy will persist in the foreseeable future. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-10-29