Pre-market market trends

1. Pre-market trading of US stocks on Tuesday, October 8th, saw futures for the three major US stock indices rising together. As of the press time, Dow Jones futures rose by 0.14%, S&P 500 index futures rose by 0.42%, and Nasdaq futures rose by 0.47%.

2. As of the press time, the DAX index in Germany fell by 0.06%, UK's FTSE 100 index fell by 1.05%, France's CAC40 index fell by 0.54%, and Europe's Stoxx 50 index fell by 0.40%.

3. As of the press time, WTI crude oil fell by 2.29%, to $75.37 per barrel. Brent crude oil fell by 2.15%, to $79.19 per barrel.

Market News

Federal Reserve Two Officials Speak in Support of Further Rate Cuts. Federal Reserve Board member Kuggler said on Tuesday that she strongly supports the recent rate cuts by the Federal Reserve. If inflation continues to slow down as she expects, she will support further rate cuts. Kuggler stated, "The labor market still has resilience, but I support taking a balanced approach to the dual mandate of the FOMC so that we can continue to make progress on inflation while avoiding unwelcome slowdowns in job growth and economic expansion." Meanwhile, John Williams, President of the New York Federal Reserve, who has permanent voting rights on the FOMC, said on Tuesday after the 50 basis point rate cut in September, that it would be appropriate for the Federal Reserve to cut rates again "over time." He stated, "Currently, I think the monetary policy is well positioned for the prospects. If you look at the economic forecasts, you will find it to be a very sound foundation, and the economy will continue to grow, with inflation returning to 2%."

J.P. Morgan: U.S. Core CPI Expected to Rise Moderately in September, Overall Inflation Decline May Impact Future Rate Decisions. The U.S. September CPI data will be released at 20:30 Beijing time on Thursday. Morgan Stanley predicts that the U.S. core CPI will rise by 0.26% month-on-month in September, slightly higher than the market's general forecast of 0.20%. The bank also forecasts that the core CPI in September will rise by 3.2% year-on-year, in line with the market's general expectations. J.P. Morgan also stated that the overall CPI in September is expected to rise by 0.09%, with the overall inflation rate declining due to a drop in gasoline prices. The bank believes that there are nuances in the outlook for the September CPI report, with expectations of a moderate increase in core CPI, while the trend for goods and services inflation remains mixed. The bank suggests that the overall decline in inflation expectations driven by the fall in gasoline prices may affect the market's perception of the direction of the Federal Reserve's monetary policy. The bank added that this CPI report will play a key role in assessing inflation trends and the potential impact on future rate decisions.

Third Quarter Earnings Season On the Horizon, Stock Market 'Engine' Struggling to Accelerate? The third-quarter earnings reports of S&P 500 component companies have begun to be released this week. According to FactSet data, analysts expect earnings per share of S&P 500 component companies to increase by 4.1% year-on-year, to slightly above $60 - based on a 4.7% sales growth (considering economic growth and inflation have slowed to single-digit growth, this expectation is realistic). Product costs have not increased significantly, but other expenses such as employee salaries continue to rise, suppressing the improvement in corporate profit margins. Profit growth is fastest in the technology sector, but it is slowing down in sensitive 'cyclical' industries. Evercore expects earnings to slightly decrease year-on-year for financial, non-essential consumer goods, and industrial companies; similarly, the performance of the materials and energy sectors is also poor, especially energy, due to a decrease in oil prices from the third quarter of last year. However, although the earnings growth of S&P 500 component companies is expected to slightly exceed expectations, this will not lead to a significant increase in stock prices.

Hundreds of Billions of Hot Money Flow into U.S.-Listed Chinese ETFs, Asset Managers Expect Optimistic Sentiment to Continue. In the past week, as the Chinese onshore financial markets were closed for the National Day holiday, investors poured in $5.2 billion (approximately 36 billion RMB) of new assets into U.S.-listed exchange-traded funds (ETFs) targeting the Chinese market. Data from TrackInsight, a Paris-based data analytics company, shows that more than twenty ETFs focused on China achieved double-digit returns within a week, ranging from 10% to 28%, outperforming the 3000+ ETFs traded in the U.S. last week. Dave Mazza, CEO of Roundhill Investments, noted a shift in investor sentiment. Mazza stated, "We believe that at some point the tide will turn, and China will once again become an investable object."

Looming Largest Risk in the Oil Market! Is Oil Price Likely to Surge to $350 in the Worst Scenario? Escalating conflicts in the Middle East have once again made the most critical oil artery in the world a global focal point. The Strait of Hormuz is widely regarded as a vital chokepoint for oil transport. This waterway, located between Iran and Oman, is a narrow but strategically important strait connecting the oil-producing countries in the Middle East to major markets worldwide. According to the U.S. Energy Information Administration (EIA), the average daily oil flow through the Strait of Hormuz was 21 million barrels in 2022, equivalent to approximately 21% of global crude oil trade. For many energy analysts, a blockade or severe disruption in flow through the Strait of Hormuz is the worst-case scenario - leading to oil prices skyrocketing to over $100 per barrel. Bjarne Schieldrop, Chief Commodity Analyst at SEB, goes so far as to say that if the worst-case scenario occurs and the Strait of Hormuz is blockaded for a month or longer, Brent crude could surge to $350 per barrel.

Individual stock news

PepsiCo (PEP.US) Q3 performance was mixed, lowering full-year revenue guidance. The financial report shows that PepsiCo's Q3 revenue decreased by 0.6% year-on-year to $23.32 billion, lower than the market's expectation of $23.86 billion; core EPS was $2.31, slightly higher than the market's expectation of $2.29. The company attributed the revenue shortfall to weak North American consumer demand, recall events, and geopolitical tensions disrupting some international markets. Additionally, the company expects full-year organic revenue growth to be in the low single digits, down from the previous estimate of 4%; the company still forecasts full-year core EPS to be at least $8.15, largely in line with market expectations.

Buffett continues to sell Bank of America (BAC.US) stocks, cashing out over $10 billion in total. According to a document filed with regulatory authorities on Monday, in the 14th round of sales, Berkshire Hathaway (BRK.A.US) earned over $10 billion by reducing its stake in the second-largest U.S. bank. The 94-year-old Buffett began reducing this large investment in mid-July and has since put pressure on the company's stock price. In the most recent round of trades, Berkshire Hathaway cashed out $383 million within three trading days, selling fewer shares than in previous rounds. The company's filing shows that Buffett's selling tendency slows down when the stock price falls to $39.

Stellantis (STLA.US) countersues UAW: Strike threat violates contract terms. Last Thursday, Stellantis filed a federal lawsuit against the United Auto Workers (UAW) union, alleging that the union threatened a strike due to Stellantis' delayed investment plans, violating the contract terms reached last fall. Stellantis is trying to hold UAW and local union chapters responsible for any potential income losses and other damages caused by a strike. Stellantis stated that the new lawsuit led to a meeting with the UAW last Saturday, during which the UAW proposed reintroducing a concept called 'jobs bank,' which typically prohibits layoffs by Detroit's three auto manufacturers. Stellantis rejected the proposal, citing it as a 'factor that led to the bankruptcy of automakers in 2009' and 'jeopardizes the future of crisis-hit companies.' UAW President Shawn Fain stated on Monday that 'serious mismanagement at the executive level of Stellantis is stifling the company' and refuted the claim that the 'jobs bank' led to bankruptcy.

Vodafone (VOD.US) extends partnership with Google (GOOGL.US) for another decade, to promote AI smartphones and services. Global telecom giant Vodafone announced today the strategic expansion of its existing partnership with Google for a period of ten years. With support from Google Cloud and Google's Gemini AI chatbot, Vodafone will bring new services, devices, and TV experiences to millions of customers in Europe and Africa. Vodafone will promote Google's cloud storage subscription services, including Google One AI Premium service, which gives access to the Gemini chatbot. The company will expand the access of Google's AI Pixel devices in Europe through its 5G network and continue promoting the Android ecosystem. The UK-based operator will also demonstrate to customers how to use the latest AI features of Pixel devices in stores.

Honeywell (HON.US) rises over 3% in pre-market trading, plans to spin off its advanced materials business. Honeywell announced its plan to spin off the advanced materials business, making it a standalone company listed in the U.S. The products produced by this business are used in various fields, from bulletproof armor to pharmaceutical packaging. CEO Vimal Kapur has been streamlining the company's business portfolio in recent years, shifting focus to the aviation, automation, and energy sectors. Last year, the advanced materials business accounted for 10% of Honeywell's total sales of $36.66 billion. Honeywell expects this business to generate sales of $3.7 billion to $3.9 billion in the 2024 fiscal year. The planned spin-off is expected to be completed by the end of next year or early 2026 and will not affect the company's overall prospects.

DocuSign (DOCU.US) rises over 5% in pre-market trading, included in the S&P MidCap 400 Index. DocuSign is set to be included in the S&P MidCap 400 Index, replacing MDU Resources (MDU.US), with the change taking effect before the opening on October 11th.

Important economic data and events notice

00:00 the next day Beijing Time, EIA published the Monthly Short-Term Energy Outlook Report.

FOMC voter and Atlanta Fed President Bostic will deliver a speech on the economic outlook at 00:45 Beijing time on the next day in 2024.

FOMC voter and Boston Fed President Collins will deliver a speech at a community banking conference at 04:00 Beijing time on the next day in 2025.