Breakfast Bites: Tech euphoria continues
Flash PMIs show slowing manufacturing but solid services activity
Rise and shine everyone
Yesterday, US indices bounced back after a soft open and closed at all-time highs. Treasury yields edged higher as several Fed officials spoke through the day. Markets are flat this morning ahead of PMI releases and more speeches, one by Fed Chair Powell.
Argentina ADRs gained yesterday after Treasury Sec Bessent signaled strong US support for the Milei government, saying all options are on the table to stabilize the economy. Milei is grappling with a currency under pressure, dwindling reserves, and bond yields at distressed levels, while inflation remains painfully high. With midterm elections approaching, political stability is also at stake, and Washington’s backing is seen as a lifeline to shore up confidence. Markets reacted quickly, with the peso firming and Argentine assets rallying, though structural risks remain unresolved.
Oracle rose on news of a CEO transition and confirmation it is part of Trump’s TikTok deal with Xi. The proposal would move TikTok’s US operations into a new entity majority-controlled by US investors, with Oracle securing user data, retraining the recommendation algorithm, and overseeing its independence from ByteDance. The plan still needs final regulatory and Chinese approval.
Nvidia’s $100bn investment into OpenAI fueled another round of AI euphoria. The deal includes building 10 gigawatts of compute capacity using Nvidia systems, with the first gigawatt set to go live in the second half of 2026 on its Vera Rubin platform.
Nvidia shares jumped about 4% on the news, pushing the stock to fresh highs and reinforcing its leadership in AI hardware, with spillover gains across the tech sector.
In an interesting turn of events, Disney said Jimmy Kimmel’s suspension has been lifted and he will return on air today.
In Asia, trading was thin because of a holiday in Japan. Korea’s Kospi extended its run to fresh records, while Shanghai and Hang Seng lagged, both down about 1 percent.
Late yesterday, Chinese financial officials provided an update. PBOC Governor Pan reiterated policy will remain supportive and liquidity conditions adequate, with the focus on spurring consumption. The CSRC said it will improve mechanisms for stock listings and M&A. The announcements helped steady sentiment after a weak session, though markets largely shrugged off the policy tone, with Shanghai and Hang Seng still closing about 1 percent lower as investors remain cautious on China’s growth outlook.
Flash PMIs
A full list of Flash PMIs are out this morning, with the US readings to follow at 9:45 am ET.
Germany
Manufacturing PMI slipped to 48.5 in September from 49.8, surprising expectations for stabilization at 50. This was the sharpest contraction in four months with new orders falling at the fastest pace since January.
Firms relied on backlogs to maintain output but these were depleted at the quickest rate in nine months. Employment fell at the sharpest pace in three months.
Services PMI rose to 52.5 from 49.3, beating expectations and moving back into expansion. Cost pressures increased, with input costs rising at the fastest pace since April and output charges climbing at the strongest rate in six months.
Eurozone
Manufacturing PMI fell to 49.5 from 50.7, pointing to renewed contraction. New orders posted their sharpest drop since February and employment continued to decline.
Output growth slowed significantly after August’s 38-month high, while business confidence slipped to the lowest level of the year.
Services PMI rose to 51.4 from 50.5, the strongest expansion so far this year. New orders improved modestly and employment growth continued, though at a slower pace. Input cost inflation eased slightly, pointing to some moderation in price pressures.
United Kingdom
Services PMI fell to 51.9 from 54.2, below expectations. The sector expanded but at a slower pace, with rising wage, energy and food costs keeping operating expenses elevated. Business confidence weakened amid subdued economic conditions and uncertainty.
Manufacturing PMI dropped to 46.2 from 47.0, the steepest contraction since April. Output fell sharply with auto supply chain disruptions weighing on orders. Factory gate inflation eased to the lowest since December 2024, while confidence improved on hopes of a recovery in demand.
India
Manufacturing PMI eased to 58.5 from 59.3, still signaling strong expansion. New orders remained above trend, though competitive pressures weighed slightly. Input and output cost inflation picked up, with output prices rising at the fastest pace in over 12 years.
Services PMI dipped to 61.6 from 62.9 but continued to show robust growth near multi-year highs. Hiring slowed and foreign sales weakened, though inflation pressures eased on both input and output sides.
Australia
Manufacturing PMI slipped more than a point in September but still marked its 9th straight month of expansion.
Services PMI fell three points but held its 20th month of growth.
Officials highlighted that new manufacturing orders fell back into contraction as US tariffs began to bite.
Chart of the Day
The OECD warned that the global economy is still set to take a hit from Trump’s sweeping trade measures, even as growth has held up better than expected this year.
The OECD raised its 2025 global growth forecast on front-loaded activity ahead of Trump’s tariffs but kept 2026 growth projections weaker, with world GDP seen slowing to 2.9% and US growth to 1.5% as higher import duties and uncertainty take hold.
The effective US tariff rate has risen to 19.5%, the highest since 1933, with early signs of impact showing in consumer prices, spending patterns, and softer labor markets.
OECD warned of significant risks from further trade levies or inflation pressures, noting central banks should stay vigilant, while the Fed is expected to ease gradually as labor markets cool.
What We’re Watching Today
9:45 am ET: US flash PMI
9:50 am ET: US President Trump to address the UN in New York
12:35 pm ET: Fed Chair Powell comments
After the Close: Micron (MU) Earnings
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)
