EWY
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EWY
DJI
RUT
NDX
KOSPI
NQ1!
ES1!
Last week's 3.0% fall in RUT was followed by a 2.0% rebound this week. The Dow also gained 0.4%, while SPX fell 0.5%. Rotation and lower Treasury yields cushioned stocks outside AI.
The main driver of the tech-led selloff is the repricing of credit and AI funding costs. Since August 28, broad U.S. high-yield spreads have widened 80bp and CCC-and-lower spreads 314bp. By October 22, they stood at 340bp and 1,340bp, widening another 9bp and 43bp since the previous Friday even as Treasuries rallied. The assumption that this buildout can keep drawing on cheap capital is breaking down. That is why falling Treasury yields alone have not rescued the trade. Next week's hyperscaler results need to address funding and cash generation, not just demand.
SPX
VIX closed the week near 19.5, below the previous week's close, despite Thursday's jump. The pressure is still concentrated in AI rather than a broad index-vol panic. Short-dated protection repriced sharply on Thursday, and the front of the VIX futures curve inverted.
The positioning adjustment is already under way. CTAs have been cutting Nasdaq risk since mid-October, while recent prime-broker data show lower hedge-fund net exposure but still-large gross books and crowded AI positions. Next week's earnings and policy decisions will test the remaining positions.
US30Y
US10Y
US02Y Treasuries rallied again, extending the rebound we expected from the lows a few weeks ago. US2Y, US10Y and US30Y fell another 5bp, 9bp and 10bp this week.
September pending home sales fell 7.3% m/m as higher mortgage rates weighed on housing. Bonds are again acting as a hedge against the AI selloff. Higher energy costs have not disappeared, but the growth damage from tight financial conditions is becoming harder to ignore. Next week's Fed decision comes before Thursday's GDP and PCE releases.
USDJPY has pulled back but is holding above 155.56. With core inflation at 2.1% y/y, attention turns to the BOJ's October 30 decision. The BOJ is expected to follow the Fed's lead and hold, with the FOMC very likely to leave rates unchanged on October 28 as the U.S. midterms approach.
DXY
HG1!
DBA
RB1!
CL1!
BZ1!Brent rose 6% this week as renewed attacks on Saudi energy infrastructure and shipping raised supply risks. Russian diesel is heading to the U.S. and Germany has offered strategic stocks for sale, but high freight costs and ship-to-ship transfers are keeping delivered fuel expensive.
BZ is dangerously close to our 120 level. A break above it unleashes the Kraken. Trump has his eye on CL1!, but it trades more than $10/barrel below Brent. Either he pulls off some kind of TACO in the next two weeks, or we see some of the biggest spikes in oil futures prices.
XAGUSD
XAUUSD slid further this week, in line with our expectation that it will eventually trade below its July low.
HO1!
ZT1!
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