Global Market Morning Update

Global Markets at all-time highs seem to have been resilient, while many investors and large financial institutions begin to realise, perhaps, the exuberance in stock markets globally is nothing but an asset bubble, spurred by large leverage in A.I. bets predicated on irrational valuations of Open A.I. and the few stocks revolving around these trades and irrational valuations. The most recent developments have revealed an even stranger pattern—what financial analysts are calling “circular capital flows.” Recent announcements include:

• AMD: A multi-year GPU supply agreement where AMD issued warrants for approximately 10% equity to OpenAI, causing AMD’s stock to surge ~24% and adding ~$70 billion to its market cap
• Nvidia: A $100 billion investment and supply deal with OpenAI
• Oracle: A $300 billion cloud infrastructure partnership
• CoreWeave: An $11.9 billion contract signed in March 2024

Collectively, these partnerships represent over $1 trillion in announced deals, yet the money appears to be moving in circles. As short-seller Jim Chanos and others have noted, these arrangements often involve companies effectively using each other’s capital to buy one another’s products, creating what might be described as an AI investment bubble.

How global equity markets have been reacting across assets, here we have a macro outlook:

Bonds

• U.S. Treasuries: The yield on the 30-year U.S. Treasury held steady at 4.73%, reflecting overall calm following recent Fed rate cuts. The 10-year yield remains near 4.13%. Dollar-denominated bonds globally offer yields from 4.25% to 4.93% for maturities ranging from 2026 to 2035, while some emerging market bonds (e.g., peso-denominated) are trading at higher yields between 4.95% and 6.20%.
• Trend: Bond markets seem calmer, with expectations for further Fed cuts later in the year, supporting yields but keeping price action subdued. Long-dated bonds in Japan and Europe have underperformed over the past year due to policy changes and fiscal pressures.

Currencies

• U.S. Dollar: The DXY dollar index traded at 98.88—up 0.3% for the session and roughly 1.1% over the past month—driven by safe-haven demand around U.S. government shutdown risks and broad-based economic strength in the U.S.
• Euro: Supported by stronger Eurozone economic data and a pause in ECB easing.
• GBP: Lags peers amid weak UK domestic growth and persistent inflation.
• Asia FX: The Japanese yen hit its weakest level since February as the market rules out further BoJ hikes until at least March 2026. This yen weakness has added pressure on most Asian currencies. The Indian rupee is trading near all-time lows due to dollar strength, leading to speculation about central bank intervention.
• Outlook: Key risk events in October include policy decisions from the RBNZ, Fed, BoC, and BoJ, plus ongoing volatility linked to global economic headlines.

Commodities

• Gold: Spot gold soared, briefly topping $4,000/oz for the first time ever—up 0.4% on the session and reflecting robust safe-haven demand.
• Oil: Brent crude is down 0.3% at $65.30 per barrel, while WTI crude traded above $62, confirming a bullish technical breakout for oil despite ongoing market volatility.
• Other Commodities: Agricultural commodity prices are mixed. For example, canola gained 1.1% to 614.3 CAD/T, while cocoa dropped 2.2% to $6,146/T. Sugar and several grains saw losses, while energy prices (such as benchmark European gas) ticked up modestly.
• Outlook: Commodity sentiment remains sensitive to macroeconomic headlines and the U.S. dollar’s strength.

ETFs

• Top Performers: Gold-miner, AI, and semiconductor ETFs are this year’s standout winners, with the VanEck Gold Miners ETF (GDX) up as much as 125% year-to-date as investors pour into precious metals funds.
• Other Notables: abrdn Physical Platinum Shares ETF (PPLT) (+68% YTD), VanEck Semiconductor ETF (SMH) (+30–36% YTD), and iShares Gold Trust (IAU) (+46% YTD).
• Broader Market: US index ETFs are steady, with top-performing Vanguard sector ETFs continuing to post robust gains, especially in technology and communications.
• Thematic Flows: Ongoing rotation toward alternative assets (metals, crypto, defence, and AI-linked equities) underscores present diversification preferences among investors.

ETF Performance by Sector and Region

• US-focused tech and communications ETFs (VOX, VGT, SMH) are among the best sector performers in the US.
• Europe: Aerospace & defence sector ETF (EUAD) is outperforming due to rising defence budgets and geopolitical factors.
• Metals & mining ETFs (GDX, SIL, RING) lead the global sector chart with triple-digit gains, while gold-backed ETFs (IAU) remain core safe-haven plays.
• China: Leveraged China equities (YINN) have surged as stimulus and recovery bets pay off.