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Stocks are set to post an outstanding October return of around 3% as artificial intelligence momentum, a Fed rate cut and a US-China trade truce support optimism for both corporate earnings progression and an economic re-acceleration. Yesterday’s selling pressure reversed today despite it being spooky Halloween, as enthusiasm regarding Apple AAPL and Amazon AMZN results offset the impacts of poorly received profitability reports from Meta and Microsoft. The developments are offsetting earlier fears that significant AI capital expenditures may not deliver terrific returns. Meanwhile, investors appear to be front-running the seasonal tailwinds of November and December, with all major domestic equity benchmarks advancing, while the greenback, bitcoin and forecast contracts also catch bids. The commodity complex is bullish across the majors excluding lumber, which has been devastated by loftier long-end yields and immigration restrictiveness. This combination has hindered construction prospects due to worsening housing affordability and weak supply-demand dynamics. The Treasury curve is relatively unchanged, however, after rising meaningfully on this week’s hawkish Fed reduction amidst evidence that the cycle remains on solid footing.

Seasonal Tailwinds Incoming

November and December are typically friendly for stock market investors and the stage is set for a strong finish into year-end. Robust earnings characterized by elevated beat rates, improving trade relations and a pro-business environment in Washington are likely to send the S&P 500 to a 7-handle by Christmas. A rate cut next month would energize a faster sprint, but odds of additional monetary easing have declined meaningfully since the Fed’s hawkish reduction on Wednesday. Indeed, probabilities of one more trim before 2026 are now nearing a coin-flip after trading at a near certainty just a few days ago. Still, participants shouldn’t be too deterred if the central bank decides to pause in light of rising inflationary pressures, because what’s driving cost forces in aggregate is momentous consumer demand, while tariffs have had a very limited impact thus far, and that specific composition is especially conducive to buoyant profitability going forward.

International Roundup

China’s Manufacturing Slump Worsens

China’s manufacturing doldrums worsened this month with the October Purchasing Managers’ Index for goods producers sinking from 49.8 to 49, a six-month low, according to the National Bureau of Statistics. Economists anticipated that the gauge would fall to 49.6. Meanwhile, the non-manufacturing PMI was virtually unchanged with a score of 50.1 following September’s result of 50, which is also the contraction-expansion threshold. Various components of the manufacturing PMI, such as employment, orders and inventory, which were already in contraction, weakened further. The export component also weakened substantially as the country struggles with import tariffs imposed by the US.

Australia PPI Hotter than Anticipated

The Australia Producer Price Index was up 1% quarter over quarter (q/q) during the three-month period ended in September, slightly higher than the economist consensus estimate of 0.8% and the preceding period’s 0.7% print. Relative to the year-ago period, the gauge, which measures prices that businesses charge each other, was 3.5% higher, a slight acceleration from the 3.4% year-over-year (y/y) result for the three-month period ended in June of this year. For the q/q metric, property operators and residential builders charged 1% and 1.2% more. Other categories were either flat or slightly positive.

Hong Kong Economic Growth Accelerates

Hong Kong’s third-quarter gross domestic product (GDP) grew 0.7% q/q and 3.8% y/y after recording 0.4% and 3.1% rates of expansion in the preceding three-month timeframe. Relative to the third quarter of 2024, private consumption expenditures climbed 2.1% after growing 1.9% y/y in the preceding period. Government spending was up 1.6%, a slowdown from the preceding print’s 2.5% jump. Fixed capital formation also strengthened with its 4.3% y/y increase surpassing the second-quarter result of 1.9%. In other matters, exports of goods climbed 12.2% y/y, slightly better than the preceding period’s 11.5% gain. Services purchased by foreign customers, however, slowed, from the 8.6% gain in the second quarter to 6.1%. Regarding imports, goods were up 11.7% following the 12.6% lift in the second quarter while services ascended 2.6%, a much slower rate than the 7.3% print for the preceding period.

As Retail Sales Pick Up

September retail sales in Hong Kong were 5.9% higher y/y, an acceleration from the 3.8% expansion in August, according to advance data from the Census and Statistics Department.

Canada’s GDP Was Nearly Flat in September

Canada’s GDP grew only 0.1% in September, according to an advanced estimate from Statistics Canada. Additionally, a revised release shows that the economy shrank 0.3% in August, offsetting July’s expansion. For the advanced September number, increases in finance and insurance; mining, quarrying, and oil and gas extraction; and manufacturing grew, but the gains were partially offset by decreases in wholesale trade and retail categories. For the August print, the largest headwind was utilities, which slipped 2.3%. Transportation was also weak, dropping 1.7%, largely due to a work stoppage in air transportation.

Other categories that slipped and the amount of the changes were as follows:

• Wholesale trade, 1.2%
• Retail, 0.9%
• Mining, 0.7%
• Manufacturing, 0.5%

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