Calm on the stock exchanges and financial markets, rising Tesla and falling Volkswagen

Market reviews

• With little economic development in Europe, traders will likely look for clues on the direction of U.S. interest rates after last week's 50 basis point rate cut by the Federal Reserve. Markets are sharply divided on whether to cut rates by 50 or 25 basis points in November, with U.S. consumer spending data - the Fed's preferred measure of inflation - due on Friday and labor market data due next week a big factor in changing sentiment.

• Chinese shares jumped and bonds strengthened after China's central bank announced monetary stimulus, including a plan to cut the amount of cash banks must hold as reserves, known as reserve requirement ratios, by 50 basis points. Futures pointed to European bourses slightly higher, with attention focused on luxury stocks that rely heavily on Chinese consumers for revenue.

• The stimulus package also includes measures that will allow funds and brokers to access central bank funding to buy shares. While investors and analysts expect these sweeping measures to help lift the stock market in the short term, there remains scope for further easing measures, as well as fiscal measures, to help the weakened economy.

• China's stock markets have been the region's worst performers, with the blue-chip CSI300 index down 4% year-to-date to hit multi-year lows this year amid a gloomy economic outlook and persistently weak investor sentiment. The index rose 2.3% on Tuesday, while Hong Kong's Hang Seng index jumped 3.2% to a four-month high. Whether these trends are sustainable will depend on investor confidence that market sentiment is changing and that the world's second-largest economy will meet its growth target this year.

• The Australian dollar strengthened slightly after the Reserve Bank of Australia left interest rates on track. The Australian dollar earlier in the session hit a fresh 2024 high following stimulus from China.

• The financial market had a quiet day. TSLA pleased investors (+5%). Everything was also quiet in the morning.

• Data show a deterioration in economic conditions in the euro area, particularly in the manufacturing sector:
Composite PMI: 48.9 (previous 51.0). A reading below 50 indicates contraction in economic activity.
Manufacturing PMI: 44.8 (previous 45.8).
Services PMI: 50.5 (previous 52.9). Although the reading is still above 50, indicating growth, the pace of growth has slowed significantly.
The UK is doing slightly better than the euro area.
Composite PMI: 52.9 (previous 53.8). Although the reading remains above 50, indicating growth, the pace of growth has slowed slightly.
Manufacturing PMI: 51.5 (previous 52.5).
Services PMI: 52.8 (previous 53.7).
US economic data neutral
Composite PMI: 54.4 (54.6 previously)
Manufacturing PMI: 47 (unchanged)
Services PMI: 55.4 (55.7 previously)
Mixed trends in the economy continue, with strong growth in the services sector but weakness in manufacturing.

• The United States plans to buy 6 million barrels of crude for reserves amid low oil prices. Delivery is scheduled for the first months of 2025.
The purchase is expected to be the largest replenishment of stockpiles since the historic sell-off in 2022.

• Volkswagen is implementing a radical cost-cutting plan that could affect up to 30,000 German workers, Manager Magazin reports. Against this backdrop, auto parts supplier WKW has filed for bankruptcy. Another 3,800 jobs are at risk.

• Morgan Stanley strategists led by Michael Wilson are advising investors to take profits on U.S. "defensive" stocks
as their recent strong returns have led to stretched valuations.

• Citigroup's index of defense stocks has risen about 11% since late June, outpacing the 8.5% gain in a comparable index of cyclicals. Investors have rushed into stocks seen as relatively resilient to an economic downturn - such as health care and utilities - over the past few months amid concerns about a U.S. recession.

• Poland's Żabka prepares for IPO. American fund CVC Capital plans to conduct the first public sale of shares of Polish Żabka on the Warsaw Stock Exchange, which could be the largest IPO in Poland in at least three years.

• GM, Ford would have to stop exporting Chinese cars to the U.S. under a proposed rule aimed at cracking down on Chinese software and hardware.

• White House details plan to protect US auto sector to avoid second 'China shock' White House top economic adviser Lael Brainard will outline the Biden administration's broad approach to protecting the US auto sector on Monday.

• Fed President Goolsbee sees "many more" rate cuts over the next year. He said interest rates need to be cut "significantly" to protect the U.S. labor market and support the U.S. economy.

• BofA became the latest major bank to bet on new branches. Bank of America said it would open 165 branches by the end of 2026, after a decade of industry contraction.

• California sues Exxon over global plastic pollution. Cloudflare announced Monday plans to launch a marketplace next year where website owners can sell AI model providers access to scrape content on their sites. Scraping is the process of automatically collecting or extracting data from websites or other online sources.

• Stellantis aims to cut North American inventory by 100,000 vehicles by early 2025, CFO says
Parent company Chrysler already cut about 45,000 units in July and August.

• The Fed's paper outlines a slow process of unloading the central bank's mortgage bonds. Almost any possible path for U.S. interest rates would leave the Fed holding $600 billion in mortgage bonds within a decade.

• Goldman Sachs cut its forecasts for the dollar against a broad range of currencies after the Fed cut interest rates.

• Walmart is betting on its international business. To drive growth, it is expanding into China and Mexico.

• Biohaven shares rise as drug for genetic disease hits key study target Biohaven's drug for a genetic disease affecting the nervous system hit its key study target, sending shares up more than 12% as trial data eased investor concerns after a setback last year.

• Toyota cheated on forklift engine emissions? Toyota is facing a class action lawsuit in the US that accuses the Japanese automaker of cheating on emissions in nine of its forklift engines. The complaint was filed by the forklift manufacturer.

• China Automobile Association expresses concern over dealer losses. Car dealers suffered a combined loss of 138 billion yuan ($20 billion) in the first eight months of this year as they were forced to sell new cars at deep discounts, the China Automobile Dealers Association (CADA) said on Monday.

• Hedge funds are buying up U.S. tech stocks at their fastest pace in four months as rates fall, Goldman Sachs reports.

• Tesla (TSLA) shares rose more than 3% Monday morning after positive comments from Wall Street. The company's shares have enjoyed a steady recovery over the past month, rising about 15% since early September. Tesla will hold its highly anticipated robotaxi unveiling event on Oct. 10.

• European steelmakers are not charging China. They are asking Brussels to solve the problem of a surge in Chinese steel exports. European steel prices are falling below cost as the world market is oversupplied.

• Deere (DE) shares are down 1.5% in premarket trading after Trump threatened the company with a 200% tariff if he is elected again because it decided to move some production to Mexico.

• Visa (V) shares fall 1.8% in premarket trading as the Justice Department plans to charge Visa with monopolizing the U.S. debit card business, with a formal filing expected as early as Tuesday.

Key events that could impact markets on Tuesday:
- Economic events: German IFO Business Climate Index for September.

International Reviews

• Europe should have mandatory ammunition stockpiles. Lithuania's Andrius Kubilius, the EU's first defence commissioner (if approved by the European Parliament), wants to force countries to stockpile minimum stockpiles of ammunition and other materials. Ursula von der Leyen has given Kubilius 100 days after taking office to produce a white paper on defence strategy. In particular, the strategy should include a European air shield and cyber defence system.

• Merz has officially become the opposition candidate for chancellor of Germany. Germany's largest opposition force, the coalition of the conservative Christian Democratic Union (CDU) and the Bavarian Christian Social Union (CSU), has approved Friedrich Merz as its candidate for chancellor of Germany in the 2025 Bundestag elections. The leadership of both parties formally confirmed the decision made by their chairmen last week.

• Israel continues to purge Hezbollah in southern Lebanon. Lebanon reports hundreds of dead and thousands wounded. Iran is reinforcing its forces on the Syrian border toward Israel, but cannot directly help Hezbollah.

• Durov: Over the past few weeks, a dedicated team of moderators has made Telegram search much safer using artificial intelligence
- All problematic content we found in search is no longer available.
- To further deter criminals from abusing Telegram's search engine, we have updated our Terms of Service and Privacy Policy.
- Telegram will share IP addresses and phone numbers of rule violators with government agencies "in response to valid legal requests"