US stocks declined amid AI concerns with weakness in tech and small caps - Newsquawk Asia-Pac Market Open

• US stocks were sold on Tuesday, with weakness seen in the wake of reports in The Information that internal data shows the financial challenge of renting out NVIDIA (NVDA) chips and its impact on margins. This hit large-cap tech and weighed on indices before then hovering into the close, while Oracle sold off aggressively but closed off lows as several analysts were out defending the Co. and described it as a buying opportunity. The downside in equities resulted in upside in T-notes, while gold had been pushing higher anyway, with futures hitting USD 4,000/oz and spot prices trailing to just beneath the psychological milestone.
• USD broadly strengthened against G10 peers, despite the continuation of the US government shutdown and absence of US data. Nonetheless, the NY FED SCE saw an uptick in the one-year-ahead and five-year-ahead inflation expectations, while the perceived probability of finding a job in the next three months if one’s current job was lost rebounded somewhat from a series low. There were also several Fed comments including from Miran, who noted that growth in the first half of the year was slower than expected amid uncertainty, but added there are reasons to be optimistic going forward, as well as warned of risks if policy is not adjusted and stated policy should be forward-looking given lags of policy impact.
• Looking ahead, highlights include Japanese Labour Cash Earnings & Current Account Balance, Australian Building Approvals & NAB Business Confidence, RBNZ Rate Decision, Supply from Australia, Holiday Closures in Mainland China & South Korea.

More Newsquawk in 2 steps:

1. Subscribe to the free premarket movers reports

2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days

LOOKING AHEAD

• Highlights include Japanese Labour Cash Earnings & Current Account Balance, Australian Building Approvals & NAB Business Confidence, RBNZ Rate Decision, Supply from Australia, Holiday Closures in Mainland China & South Korea.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks were sold on Tuesday, with weakness seen in the wake of reports in The Information that internal data shows the financial challenge of renting out NVIDIA (NVDA) chips and its impact on margins. This hit the large-cap tech sectors and weighed on indices before then hovering into the close, while Oracle sold off aggressively but closed off lows as several analysts were out defending the Co. and described it as a buying opportunity. The downside in equities resulted in upside in T-notes, while gold had been pushing higher anyway, with futures hitting USD 4,000/oz and spot prices trailing to just beneath the psychological milestone.
• SPX -0.38% at 6,715, NDX -0.55% at 24,840, DJI -0.20% at 46,603, RUT -1.12% at 2,458.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said he and Canadian PM Carney will discuss trade and Gaza, and will talk about lowering tariffs on Canadian sectors, while he added that they've made compromises to Canada on steel and that they will get it worked out. Furthermore, he thinks Canada will be very happy with tariffs and said they will treat Canada fairly, as well as stated they could renegotiate the USMCA and that the trade deal with Canada will be competitive.
• Canadian PM Carney said the US and Canada have to come to an agreement that works in areas where they compete.
• US-Canada trade talks were successful, positive and substantial, according to the Canadian government's minister for US trade, LeBlanc, who stated that principal areas for potential US-Canada trade deals would be in the steel, aluminium and energy sectors, while he hopes to finalise deals in these sectors swiftly before extending agreements to other sectors.
• OpenAI has banned users who appeared to be linked to Chinese government entities, with accounts potentially being used for profiling and research.
• EU is reportedly proposing doubling tariffs on foreign steel in order to protect the domestic sector.
• Norway’s Foreign Minister said Norway is exempt from the European Commission proposal on higher tariffs and lower quotas on steel in the EU.

NOTABLE HEADLINES

• Fed's Miran (voter) said growth in the first half of the year was slower than expected amid uncertainty, but added there are reasons to be optimistic going forward, while he noted risks if policy is not adjusted and stated that policy should be forward-looking given lags of policy impact.
• Fed's Kashkari (2026 voter) said it is too soon to know if inflation will be sticky from tariffs and noted that data is sending some stagflation signals, while he is bullish on labour and said workers have a very important role in the economy. Furthermore, he is not convinced that a few rate cuts will translate to lower mortgage rates and said if the Fed drastically lowers rates, they would expect the economy to have a burst of high inflation, as well as noted that the FOMC is committed to making decisions based on data and analysis, not political considerations.
• Fed's Bostic (2027 voter) said turbulence is leading firms and households to be cautious.
• Fed's Daly (2027 voter) does not think a potential AI bubble in the stock market would threaten broader financial stability, while she is not seeing evidence of mass job replacement as a result of AI, but she is seeing the addition of "technology in place of hiring" as the economy slows.
• NY FED SCE (Sept.) showed median one-year ahead inflation expectations at 3.4% (prev. 3.2%), three-year inflation expectations at 3.0% (prev. 3.0%), and five-year at 3.0% (prev. 2.9%).
• US President Trump is expected to announce another round of economic support for the agricultural sector, potentially on Tuesday, while the scale and mechanics remain unclear, according to NYT.
• US President Trump said a lot of things will be eliminated due to the shutdown, and he will tell us about the eliminated jobs in four or five days.
• US House Democratic Leader Jeffries stated that a one-year extension of Obamacare is a 'non-starter' for reopening the government.
• US Senate leaders were trying to lock in votes for Tuesday evening with a variety of options, including the noms bloc, privileged resolutions (maybe Canada tariff disapproval), and the duelling CRs again, according to Punchbowl.
• Oracle (ORCL) is reportedly banking on bigger revenue to offset profit margin decreases and internal data shows financial challenge of renting out Nvidia (NVDA) chips, according to The Information, which noted that previously undisclosed data on Oracle AI cloud business points to industry-wide challenge.

FX

• USD broadly strengthened against G10 peers, despite the continuation of the US government shutdown and absence of US data. Nonetheless, the NY FED SCE saw an uptick in the one-year-ahead and five-year-ahead inflation expectations, while the perceived probability of finding a job in the next three months if one’s current job was lost rebounded somewhat from a series low. There were also several Fed comments including from Miran, who noted that growth in the first half of the year was slower than expected amid uncertainty, but added there are reasons to be optimistic going forward, as well as warned of risks if policy is not adjusted and stated policy should be forward-looking given lags of policy impact.
• EUR weakened amid the firmer buck and with the single currency not helped by the ongoing political uncertainty in France, where National Rally leaders Bardella and Le Pen declined PM Lecornu's invitation to take part in talks.
• GBP gave way to the dollar strength and tested the 1.3400 level to the downside as newsflow and the data calendar remained light.
• JPY continued its underperformance, which saw USD/JPY climb to within a whisker of the 152.00 handle.

FIXED INCOME

• T-notes caught a bid as risk sentiment soured, while there was an overall, strong 3yr auction stateside, but had little impact on prices.

COMMODITIES

• Oil prices took a breather after a two-day bounce and settled flat with little impact seen after the EIA STEO raised its world oil demand forecast for this year but maintained its demand outlook for 2026.
• US Private Energy Inventories Data (bbls) Crude +2.8mln (exp. +1.9mln), Distillate -1.8mln (exp. -1.2mln), Gasoline -1.2mln (exp. -0.9mln), Cushing -1.2mln.
• EIA STEO raised its 2025 world oil demand forecast but maintained the 2026 demand forecast, while the world production forecast was raised for 2025 and 2026.
• Russian Deputy PM Novak said OPEC+ nations did not discuss increasing quotas by more than 137k BPD in November and that increasing quotas after November was not discussed.
• UAE's ADNOC set November Murban crude OSP at USD 70.22/bbl (prev. 70.10 in October).

GEOPOLITICAL

MIDDLE EAST

• Senior Hamas official Mahmoud Al-Mardaw said "President Trump's plan is mainly an Israeli plan" and "The resistance will not accept an agreement that does not end the war or one that can represent a reversal of the rights of the Palestinian people".
• Hamas official said the group was serious in reaching a Gaza ceasefire deal based on US President Trump's plan, while the Hamas team in Egypt looks to overcome all obstacles to achieving an agreement that meets Palestinian goals.
• Hamas agreed to hand over weapons to an Egyptian-Palestinian body, according to Sky News Arabia citing a Palestinian source, while Hamas rejects the presence of Tony Blair as governor in Gaza and agrees to have a remote monitoring role.
• Qatar's Foreign Ministry spokesperson said they are neither optimistic nor pessimistic regarding Gaza talks. It was also reported that Qatar's Foreign Ministry clarified that US President Trump's plan still requires many discussions and refinements, while it added that it is too soon to discuss alternatives, and one of the current obstacles is implementation, according to journalist Elster.
• Egyptian Foreign Minister said a US delegation will join Sharm el-Sheikh talks on Gaza on Wednesday, according to Iran International.
• US President Trump met with his top national security team to discuss the progress of the Gaza deal negotiations prior to the departure of envoys Steve Witkoff and Jared Kushner to Egypt, according to Axios citing sources.

RUSSIA-UKRAINE

• Russian President Putin said Ukraine is attempting to strike deep into Russian territory and is targeting civilian objects, while he added that this will not help Ukraine.
• Russia's Kremlin reiterated that the US supply of Tomahawk missiles to Ukraine would be a serious escalation.

ASIA-PAC

NOTABLE HEADLINES

• US President Trump said he will meet Chinese President Xi in a few weeks in South Korea.
• US House Committee said Applied Materials (AMAT), KLA Corp (KLAC), Lam Research (LRCX), ASML (ASML NA), and Tokyo Electron (8035 JT) fueled China chip production, following a months-long investigation, while it noted several recommendations, including aligning allied, such as Dutch and Japanese, export controls with US restrictions, so the Netherlands and Japan catch up to American controls and enforcement. It also recommended expanding country-wide controls for the PRC to make diversion more difficult, widening the list of restricted entities and prohibiting all allied manufacturers from selling to additional Chinese military entities.

EU/UK

NOTABLE HEADLINES

• UK Industry Minister McDonald said they will always defend the critical steel industry which is why they are pushing the European Commission for urgent clarification of the impact of this move on the UK.
• French Prime Minister Lecornu said he is focusing his talks with other politicians for now on the budget.
• France's National Rally (RN) leaders Bardella and Le Pen declined PM Lecornu's invitation to take part in talks.
• ECB President Lagarde said all EU institutions are watching France and hopes that a rate path can be found for respecting its international commitments, including on the budget.

DATA RECAP

• German Industrial Orders MM (Aug) -0.8% vs. Exp. 1.1% (Prev. -2.9%, Rev. -2.7%)