Core Insights - The dollar index rose by +0.65%, reaching a 2-week high, driven by the cancellation of the October employment report and hawkish FOMC meeting minutes [1][4] - The yen weakened significantly, hitting a 9.75-month low, due to concerns over increased Japanese government debt from a proposed stimulus package [2][7] - The US trade deficit narrowed more than expected, further supporting the dollar [2][3] Dollar Performance - The dollar's strength was bolstered by the cancellation of key employment data, reducing the likelihood of a Fed rate cut [1] - The hawkish tone of the FOMC minutes indicated that many officials prefer to keep interest rates steady for the remainder of the year [4] Yen and Japanese Economic Concerns - The yen's decline was exacerbated by dovish comments from a BOJ advisor, suggesting no interest rate hikes before March [7] - A supplementary budget of approximately 20 trillion yen ($129 billion) is anticipated to stimulate domestic demand, raising concerns about Japan's debt burden [7] Trade Deficit Impact - The US trade deficit shrank to -$59.6 billion in August from -$78.2 billion in July, which was narrower than the expected -$60.4 billion [3]

Market Trends & Global Economy - China is intensifying its scrutiny of American tech firms, initiating an anti-monopoly probe into Qualcomm, leading to a stock decrease of over 2% [2] - The US government shutdown continues, impacting federal employees (around 750,000 furloughed) and potentially delaying key economic reports [3][11] - Middle East peace deal impacts oil prices, with a decrease of around 16% due to fading risk premiums, while gold prices recovered to above $4,000 [6][7] - The dollar is near a two-month high, despite a decline earlier in the year, with analysts at ING suggesting this rally isn't justified by US fundamentals [11][12][13] Monetary Policy & Economic Indicators - The Federal Reserve is under scrutiny, with investors awaiting insights from Chicago Fed President Austin Goulby regarding potential rate cut adjustments due to recent data or the government shutdown [8][9] - Preliminary consumer sentiment for October is expected to decrease to 54, indicating reduced confidence in personal finances due to inflation and job market concerns [10] - The market is pricing in Fed rate cuts, potentially weakening the dollar further, with Euro dollar target by the end of the year is 120 [16] Earnings Season & Financial Metrics - Earnings season is approaching, emphasizing the importance of understanding key financial terms like revenue, net income, EPS, GAAP, non-GAAP, and free cash flow [19][20][21][22] - Companies exceeding analyst expectations (a beat) isn't always bullish, and future guidance often matters more than historical performance [23][24] - Bullish signals include beating revenue and EPS with healthy margins, positive cash flows, stock buyback announcements, and increasing orders [25][26] - Bearish signals include missing sales or EPS targets, cutting future guidance, shrinking margins, and questionable non-GAAP adjustments [27][28] Trending Stocks & AI Bubble Concerns - Levi Strauss's stock is falling despite raising its full-year outlook due to margin pressure and potential tariff costs, down over 6% [32] - BBVA Argentina is rising after the US Treasury confirmed a $20 billion program to buy Argentinian pesos [33][34] - Rigetti is surging as speculative AI names rebound, up over 80% this quarter, but analysts remain cautious due to cash burn [35] - SoftBank is in the red, down over 3%, after announcing a $54 billion deal to buy ABB's robotics unit, raising concerns about leveraged debt and high valuations in the AI sector [37] AI Market Dynamics - Concerns are rising about an AI bubble, with companies like Oracle taking on debt to fuel growth and OpenAI aggressively pursuing deals despite negative free cash flow [41][42][43] - Potential triggers for the AI bubble to burst include smaller entities in the AI ecosystem (neoclouds, special purpose vehicles) facing financial difficulties due to debt [44] Consumer Trends & Commodity Prices - Chocolate prices are increasing due to rising cocoa prices, driven by weather-related production issues in West Africa, US tariffs (up to 25% on key producers), and rising demand [45][46] - Bitcoin is sliding, trading around $1215,000 after being above $126,000 earlier in the week [48]

Group 1: Dollar Index and Economic Indicators - The dollar index rose by +0.63%, reaching a 2.25-month high, supported by higher bond yields and weakness in stocks, which increased liquidity demand for the dollar [1] - Fed Governor Michael Barr's hawkish comments on a cautious approach to further Fed rate cuts contributed to the dollar's gains [1][3] - The ongoing US government shutdown, now in its second week, poses a bearish outlook for the dollar, with potential negative impacts on the US economy [2] Group 2: Euro and Yen Performance - The EUR/USD pair fell by -0.64%, hitting a 2.25-month low, primarily due to dollar strength and weaker-than-expected German trade data [5] - Political uncertainty in France is negatively impacting the euro, although President Macron's announcement of a new prime minister could mitigate the need for a snap election [5] - The yen is also under pressure due to political risks in Japan, benefiting the dollar [1] Group 3: Federal Reserve Outlook - New York Fed President John Williams indicated support for lower rates this year if economic conditions evolve as expected, with inflation projected to rise to around 3% and unemployment increasing beyond 4.3% [4] - The market is pricing in a 95% chance of a -25 basis point rate cut at the upcoming FOMC meeting on October 28-29 [4] Group 4: European Central Bank (ECB) Stance - The ECB's September meeting minutes were slightly hawkish, indicating a decision against an interest rate cut due to upside inflation risks [6] - Policymakers suggested that maintaining the current policy rate is warranted given the materialization of upside risks [6]

Market Overview - The market currently lacks strong momentum and fundamental threats that would typically shift the narrative [1][2][3] - Absence of imminent central bank meetings and major US data releases contributes to the current market stability [2] - A "black swan" event is considered the only factor that could significantly alter the market narrative [2] Potential Risks - An overstretched market could trigger an internal correction [3] - A year-end dollar rally is identified as a potential source of pressure on existing positions, with possible spillover effects [4] - A stronger dollar could tighten financial conditions globally, impacting assets priced in dollars [6] Gold Market - A stronger dollar negatively impacts gold, as gold is often inversely correlated with the dollar [6][7] - Higher yields also put pressure on gold prices [7][8] - Short dollar positions and consensus long gold positions are vulnerable to a dollar rally [8][9] Outlook - Equities are expected to continue grinding higher despite concerns [10] - A significant internal hurdle is needed to disrupt the current upward trend in equities [10] - Expect a dollar bounce, which is probably bullish [10]