Trading Desk

Z1!

NKD1!

SOXIsn't it just majestic?

SOXXTSMC reported strong demand even as AI-related equities sold off. HPC revenue grew 22% from the previous quarter, and the company raised its 2026 dollar-revenue growth guidance to around 44%. Yet spreads on the AI-related high-yield basket widened 25bp over October 13-14, against just 2bp for non-AI borrowers. Strong chip sales do not settle the funding and investment-return problem I have been highlighting.

KOSPII warned about this ominous-looking chart last week. It lost roughly 20% in a week. As I wrote then, "KOSPI is indicative of the typical run into the tulip stage of any bull run, and typically, as we have seen from its PA, it doesn't bounce back to key levels (7.1K)."

Foreign selling in Korea now coincides with fading corporate buybacks. The latest desk flows showed continued selling in Korean technology even as local institutions and retail bought.

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HTI1!

HSIThe buying has shifted back toward banks and defensives. This week's desk flows showed selling in Hong Kong technology, reversing last week's selective growth buying. China's September PPI rose 5.0% year on year, while core CPI held at 1.0%. Energy and raw materials drove much of the producer-price increase, leaving a widening gap between upstream price pressure and consumer pricing.

VIX traded above 22 on Friday before closing near 20. The pickup in vol I expected heading into the election has started to materialize. Discretionary positioning has moved further underweight, but systematic exposure remains elevated. With vol-control funds more sensitive to losses, higher realized vol would add selling pressure to an already weaker tape.

US30Y

US10Y

US02YThe curve flattened as the long end led this week's bond rally. The hot CPI print initially pushed yields higher, but that move reversed as equities sold off. Treasuries rallied hard across the curve after I called for a meaningful rebound.

USDJPYThe BOJ reiterated on Friday that further rate increases remain ahead as underlying inflation approaches 2%, while describing financial conditions as still accommodative.