Top stories
Markets have seen a strong recovery over the course of the week, with US tech stocks rebounding following the selloff in the aftermath of the US midterm elections. One notable exception however, was Nvidia, whose CEO Jensen Huang resigned yesterday following the revelation of two extramarital affairs, one of which was with an alleged Chinese spy. Huang co-founded the company in 1993 and will be replaced for now by Chief Financial Officer Colette Kress while the board searches for a permanent replacement. Nvidia’s shares fell as much as 14.3% at the market open yesterday but pared losses to close down 4.3%. Nvidia shares are down 30% since the 6 October market peak. As recently as 3 November the company was the world’s largest by market capitalisation, valued at just over $5 trillion.
President Trump’s strategy on Iran continues to evolve. Trump told CNN that it is “highly unlikely” he will order a new wave of strikes on Iran, provided negotiations over its nuclear programme and the Strait of Hormuz progress. He went further on Monday, saying the war with Iran was “effectively over” adding that the resumption of US strikes was “quite unlikely”. Trump said there had been “positive momentum” in discussions about ending the conflict, following a meeting with Sheikh Mohammed, prime minister of Qatar at the White House. Yesterday, Trump called time on Vice President JD Vance’s attempts to increase the momentum of negotiations via mediators, posting on social media that “we don’t need a deal with Iran; those days have long since passed”.
Nominations have now closed for the replacement for Christine Lagarde as President of the European Central Bank, with only two names put forward – Klaas Knot and Pablo Hernandez de Cos, former central bank chiefs in the Netherlands and Spain respectively. The candidates will be considered by the eurozone’s 21 finance ministers today, followed by an informal summit on Friday and a special meeting on 26-27 November, though a final decision may not come until December. Lagarde will finish her tenure early, but will still oversee two more policy meetings before stepping down on 7 February 2027. Klaas Knot told the Financial Times the central bank should be prepared to “contain spreads when driven by unwarranted and disorderly market dynamics” but noted that rising government debt costs did not justify ECB bond buying. Knot also said that if energy prices held close to current levels, there was little need for interest rate rises.
By the numbers
US inflation climbed more than expected with CPI up 0.4% in October month on month vs 0.3% expected. Core inflation was up 0.3%, unchanged from September and August but ahead of expectations of 0.2%. The 3 month/annualised pace of core inflation climbed to 3.75% while headline CPI on the same measure climbed to 5.72%. The Bureau of Labour Statistics did not release year-on-year CPI data for October because the government shutdown last year prevented the collection of data in October 2025. As a guide, the 13-month inflation rate climbed to over 4%.
US non-farm payrolls in October increased by 165,000 vs expectations of 70,000. In addition, revisions to prior month data were +84,000. The unemployment rate fell to 4.0% vs 4.1% expected. Combined with weekly unemployment claims currently running at the lowest four week moving average since 1969, the data highlighted the US labour market remains in solid health.
Chinese inflation eased in October, with CPI at 0.7% year-on-year, down from 0.9% in September. Producer prices climbed at a four year high of 5.7% driven by higher energy costs as a result of the Iran war.
Market Movers
The building US inflationary pressure highlighted in the US CPI numbers, when combined with a labour market that looks like it is tightening, not cooling, has again shifted expectations for US interest rates over the next twelve months. The market reaction saw a sharp selloff in US Treasuries, with the most sensitive two-year bonds up as much as 22 basis points intraday on Tuesday. This is the biggest one day move since ‘Liberation Day’ in April 2025. The impact on borrowing costs was clear – Tuesday also saw the saw the US Treasury issuing $42 billion of 10-year notes at a 5% coupon, the highest rate the US has paid since 2006. The comments from Federal Reserve governor Christoper Waller ahead of the CPI release did not help the market mood. Waller had warned that if core inflation did not cool and remained at 0.3% (which it did), the central bank should consider raising rates by 50 basis points, which would be the first ‘jumbo’ rate increase since 2022. Waller said that if core inflation remained unchanged, “hiking only 25 basis points would put our credibility at risk”. Dallas Fed President Lorie Logan also suggested she could back more radical action on rates, saying “it may be possible to move more rapidly this winter than the FOMC has moved so far this fall”, adding that “it remains clear to me, given the current outlook, that the FOMC needs to implement at least two more 25 basis point rate increases”. While interest rate hikes cannot do anything about commodity prices, the upwards trend in core inflation will concern Fed members, and with the US economy running hot, further rates appear probable. Markets are now fully pricing a rate hike next month, with two subsequent rate hikes in the first half of 2027. The strength of the US economy means a tightening of financial conditions may well be absorbed, but higher rates pose risks of a further repricing of risk assets.
The Investment lens
The oil price has erased some of last week’s decline as the US strategy for the war with Iran becomes more confusing. President Trump’s comments earlier in the week boosted expectations further despite Iran dismissing his claims as “fake news”. It’s clear from the falls in the oil price in recent weeks that the market ‘wants to believe’. But how close are we really to a peace deal? We have been here before, with the US President talking up the prospects for a deal, while Iran has downplayed progress. Maybe there won’t be a deal at all – Trump’s comments yesterday suggest he’s comfortable with no deal and a continued uneasy stalemate. The Gulf nations will not be comfortable with this outcome.
The sides were said to be working on an Iranian proposal, previously rejected by Trump, which would see Iran allow free movement of shipping through the Strait of Hormuz if the US lifted its blockade on Iran’s ports, allowed Iran to export oil, and granted access to some of its frozen assets held overseas. The initial agreement would then be followed by negotiations over a final deal. The Financial Times reports the sticking points are the sequencing of the deal and the fate of Iran’s 440kg stockpile of enriched uranium, believed to be beneath the rubble of Iran’s nuclear facilities that were bombed last June. The US wants Iran to grant access to International Atomic Energy Agency inspectors to the site.
Any genuine progress towards a deal will be a positive for market sentiment – much of that good news may already be now priced into oil markets, but it would certainly help calm inflation concerns, reducing the likelihood of central banks having to go too much further in hiking interest rates. Such a move would have a positive impact across equities and bond markets that are coming under some pressure from the ‘higher for longer’ narrative.
