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Despite a midday wobble following a slightly less dovish Chair Powell—who seemed to throw cold water on hopes for a 50-bps cut in November—the S&P 500 dusted itself off and sprinted within a whisker of record highs, capping off yet another high-octane quarter for U.S. stocks. So, what's the magic formula? Simple: As long as the economy holds up, disinflationary rate cuts are rocket fuel for equities. With the Fed teeing up more cuts, the stock market’s rally still has legs, and investors can sleep easy knowing that the Fed is ready to roll out "insurance" cuts as potential risks creep into the economic picture. And with inflation seemingly under control, market pressure for deeper Fed rate cuts isn't going anywhere.

As we march into a new month, attention shifts to the usual U.S. macro frenzy. Signs of softening income growth and consumers starting to feel the squeeze from a cooling labour market are on the radar. The spotlight, as always, is on payrolls, the ultimate market mover for U.S. stocks. After Friday’s jobs report, the focus will shift to election risks—but for now, it's all about the jobs data.

In the past, a stronger-than-expected number might have sent stocks tumbling as investors feared it would stoke inflationary fires. But in today’s climate, it would likely be seen as a positive—a reassuring sign that recession risks aren’t as ominous as everyone thought. It's a twist in market psychology: what used to spark concern over inflation now sparks relief that the economy might stay on track.

Now, let’s dive into the Fed’s eyebrow-raising 50-bps rate cut that left every economist scratching their heads. Even Powell acknowledged that the economy was in a "good place. " With his growing confidence in the labour market's strength, people were asking: What’s the rush? In his latest speech, Powell reminded us that the Fed is still glued to its data-dependent mantra and not in as much of a rush as rates markets suggested.

As a result, U.S. Treasury yields edged up, the odds of another jumbo 50-bps cut dropped to around 30%, and the dollar caught a rebound after Powell hinted that future cuts might be dialled down to more “traditional” sizes. It’s like the Fed’s gone from race mode to cruise control, but don’t be fooled; the game of 50 is far from over.

While there wasn’t much evidence of heavy stock market rebalancing—maybe just a touch of profit-taking to boost the books—the dollar caught a solid bid on the back of quarter-end flows. With U.S. stocks soaring, international funds had to boost their dollar hedges, adding to the greenback’s strength.

Meanwhile, USD/JPY took the express elevator up, zooming into the 143.75-144 zone as the odds of a 50 bp cut in November pared. Toss in a bit of confusion around Ishiba’s stance on policy, and the yen gave way to the dollar surge overnight.

China, however, continues to captivate global investors with its latest hyperactive policy scramble. In a move akin to throwing everything but the kitchen sink at the economy, Beijing unleashed a sweeping series of monetary stimulus measures and real estate and stock market props that have left markets buzzing. The result? On the final trading session before mainland markets go dark for a four-day national holiday, China’s benchmark stock indexes exploded by over 8%, marking the best single-day rally in 16 years and capping off the most bullish month in over a decade.

This massive surge erased all year-to-date and 12-month losses in just a week—talk about a comeback. For investors, it looks like Beijing has adopted a “whatever it takes” mentality, a policymaking urgency that, given September’s grim business survey readings, might not just be necessary—it could be the lifeline China desperately needs to stabilize its economy.

Asia Open

Investors in Asia are bracing for the new quarter on Tuesday while catching their breath from the whirlwind that closed out Q3. Chinese stocks skyrocketed to their best day since 2008, while equities took a nosedive in Japan. Traders are keeping a close eye on Shigeru Ishiba, Japan’s newly minted prime minister, who’s seen as a bit of a monetary policy hawk.

And to stir the pot a bit more, Fed Chair Jerome Powell took the mic on Monday and did what he does best—dousing the market’s feverish hopes for aggressive rate cuts with a cold splash of reality. His message? Don’t get too cozy betting on back-to-back jumbo cuts.

Now, Powell wasn’t throwing a hawkish grenade into the room, but he was gently reminding everyone that maybe, just maybe, the markets were getting a little too ahead of themselves with all the rate cut hype. Mind you, Wall Street barely flinched, wrapping up Monday with a solid finish, capping off a quarter where the S&P 500 seemed to smash through record highs like they were going out of style. With hardly a bear in sight, the bulls were practically in a footrace, each trying to push the market to see how high it could soar.

And now, with China jumping into the mix, it’s a classic case of "How long can we ride these bullish waves?" Everyone’s trying to figure out how much paddle power is left in the tank before the tides turn. Inevitably, they always do.

As China trading screens go dark for its Golden Week holiday, all eyes shift across the Pacific to the U.S. jobs report—the next heavyweight contender in the market ring.

Let’s get honest about China’s latest "shock and awe" stimulus package—it didn’t quite spark that global hyper-bullish frenzy we used to see. In today’s fragmented, tariff-loaded global economy, Beijing’s economic magic doesn’t pack the same punch it once did.

Despite the flood of bullish headlines coming out of China, the ripple barely reached U.S. shores. That says much about China’s fading role as an economic engine for the U.S. and the increasing doubt that Beijing’s policymakers can right the ship. Throw in the growing possibility of a second Trump term—cue Tariff Wars 2.0—and U.S. traders are playing it safe, sitting on their hands. They know any gains could vanish quicker than you can say “trade deal.”

With the U.S. election looming, tensions are hitting a fever pitch. Beijing’s bracing for the potential return of Trump 2.0, which could unleash another wave of tariff hikes on Chinese exports. So, you can bet they're scrambling to fortify their defences—because the road ahead? It's shaping up to be bumpier than a Beijing back alley.

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