US stocks declined with underperformance in the NDX after AI CEOs called for a slowdown in AI development - Newsquawk Daily Asia-Pac Market Open

• US stocks were sold on Monday but finished off earlier lows, with weakness primarily driven by chip and memory names after a group of prominent AI CEOs, including those from OpenAI, xAI and Anthropic, called for a slowdown in the pace of AI development amid safety concerns. The majority of sectors finished lower, although Communication Services, Health Care and Consumer Staples outperformed. The AI developments weighed heavily on semiconductor and memory names given their significant exposure to the AI buildout, while cybersecurity names such as CrowdStrike (CRWD) and Palo Alto Networks (PANW) rallied. Software names also outperformed as concerns over increasingly advanced AI replacing existing software services eased. Elsewhere, Financials came under pressure after Bank of America (BAC), speaking at the Barclays conference, warned that sales and trading revenue is expected to be roughly flat Y/Y. Citi (C), however, pared earlier losses after guiding to low-single-digit Y/Y growth in investment banking revenue and mid-single-digit growth in markets revenue.
• USD was firmer to start the week amid the broad-based risk-off trade given the wider AI development concerns, although risk sentiment did improve throughout the duration of the US session. Dollar-related newsflow was fairly sparse on Monday, given the aforementioned AI worries, but also ahead of the pivotal FOMC confab on Wednesday; the central bank is expected to hike rates by 25bps, with money markets assigning around a 90% probability to a 25bps rate hike. In the latest Reuters poll, 15% expect the Fed to hold rates steady, so it is no dead certainty what they shall do.
• Looking ahead, highlights include New Zealand Electronic Card Retail Sales, South Korean Trade Data, Chinese House Prices, Industrial Production & Retail Sales, Supply from Japan.

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LOOKING AHEAD

• Highlights include New Zealand Electronic Card Retail Sales, South Korean Trade Data, Chinese House Prices, Industrial Production & Retail Sales, Supply from Japan.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump said Iran wants to make a deal "quickly and badly" and that he will determine whether the US engages, although the administration is open to the concept.
• US Treasury Secretary Bessent called for whistleblowers to provide tips on those facilitating Iran’s terrorism.
• US imposes Iran-related sanctions on Russia's VTB Bank.
• US is said to be seeking a "step-by-step" agreement with Iran which could lead to negotiations while maintaining military and economic pressure, according to ILNA citing Pakistani sources.
• Iran has repeatedly said it does not want to negotiate an agreement with the US, while US President Trump again said that Iran wants to reach a deal quickly, according to Tasnim.
• Iranian President Pezeshkian said US claims that Iran is seeking a nuclear weapon are a lie, while he questioned: "How can we negotiate with America, when they never adhered to their commitments?!"
• Iran’s Deputy Foreign Minister for economic diplomacy said the basis of new US sanctions has changed, making it easier to sanction individuals and companies in certain sectors, according to IRNA.
• Iran has no plans for talks under current circumstances, according to Iranian journalist Ghaderi, who stated that, as emphasised in the conditions announced to the US, there will be no talks and the Strait of Hormuz will not be reopened until the war on all fronts ends, the blockade is lifted and Iran's financial resources are released.
• Iran’s Persian Gulf Strait Authority published an updated list of 77 vessels allegedly violating its Strait of Hormuz protocols. Listed vessels could face passage restrictions, fines, detention or confiscation, while vessels cooperating with sanctioned ships could also be added to the list.
• IRGC Navy said the Strait of Hormuz is closed and remains under the control of the IRGC Navy, according to Tasnim. IRGC also stated that supertanker "Algaya", which was attempting to pass through the restricted area south of the Strait of Hormuz, exploded after hitting a mine, although US CENTCOM later denied IRGC's claim that a tanker in the Strait of Hormuz exploded after hitting a naval mine.
• Houthi spokesperson claimed responsibility for the attack on Saudi Arabia’s King Khaliq Air Base and said "The Armed Forces will continue to carry out significant military operations towards Saudi territory as long as it continues its unjust aggression against our people".
• Yemeni Houthis said they hit an assembly of Saudi forces and reinforcements in the Al-Jawf desert north of Kanais.
• Yemeni Armed Forces successfully intercepted two Saudi Arabian fighter jets, according to IRIB.
• Yemeni sources announced a new field advance by Houthi forces, saying that these forces have dominated the strategic heights of Kahbub, according to Fars News.
• Saudi Arabia carried out airstrikes on Mokha in Yemen, according to Tasnim.
• Saudi Crown Prince met the US CENTCOM chief to discuss the latest regional developments, according to Saudi state TV.
• US Vice President Vance said he is in contact with Yemen’s Houthis, Saudi Arabia and the UAE.
• UK PM Burnham is considering Saudi requests for military support against Houthi attacks as the UK fears a "catastrophic" economic impact from a new front in the Iran war, according to Bloomberg.

US TRADE

• US stocks were sold on Monday but finished off earlier lows, with weakness primarily driven by chip and memory names after a group of prominent AI CEOs, including those from OpenAI, xAI and Anthropic, called for a slowdown in the pace of AI development amid safety concerns. The majority of sectors finished lower, although Communication Services, Health Care and Consumer Staples outperformed. The AI developments weighed heavily on semiconductor and memory names given their significant exposure to the AI buildout, while cybersecurity names such as CrowdStrike (CRWD) and Palo Alto Networks (PANW) rallied. Software names also outperformed as concerns over increasingly advanced AI replacing existing software services eased. Elsewhere, Financials came under pressure after Bank of America (BAC), speaking at the Barclays conference, warned that sales and trading revenue is expected to be roughly flat Y/Y. Citi (C), however, pared earlier losses after guiding to low-single-digit Y/Y growth in investment banking revenue and mid-single-digit growth in markets revenue.
• SPX -0.47% at 7,621, NDX -0.82% at 29,127, DJI -0.31% at 52,412, RUT -0.41% at 2,892.
• Click here for a detailed summary.

TARIFFS/TRADE

• Canadian PM Carney welcomed US President Trump’s remarks that a deal could be reached soon, saying he is prepared to negotiate with the US and that US officials may now better understand Canada’s red lines, while he added that Canada will reach an agreement with the US at some point.
• Chinese Foreign Minister held a call with his French counterpart and said protectionism will push up inflation and hamper the green transition, according to Xinhua.
• Germany will lobby EU countries on a new China policy and may seek additional tariffs.

NOTABLE HEADLINES

• NY Fed plans to conduct approximately USD 15.6bln in reinvestment purchases (prev. USD 17.0bln) and no reserve management purchases over the noted monthly period (Sept 15th - Oct 14th)
• US President Trump said he hopes everyone realises that price increases across America were caused by Biden and the Biden administration, not by "TRUMP". He added that with the temporary exception of oil, prices are falling sharply and oil will drop "like a rock" once the conflict with Iran ends.
• US President Trump said the AI/data centre outburst is happening because the US is leading every other country by a wide margin and warned against killing the "Golden Goose".
• US Senators are debating requirements for AI giants to commit to preventing catastrophe, according to a Senate aide.

FX

• USD was firmer to start the week amid the broad-based risk-off trade given the wider AI development concerns, although risk sentiment did improve throughout the duration of the US session. Dollar-related newsflow was fairly sparse on Monday, given the aforementioned AI worries, but also ahead of the pivotal FOMC confab on Wednesday; the central bank is expected to hike rates by 25bps, with money markets assigning around a 90% probability to a 25bps rate hike. In the latest Reuters poll, 15% expect the Fed to hold rates steady, so it is no dead certainty what they shall do.
• EUR gave up ground to the firmer dollar and failed to benefit from the hawkish-leaning comments from several ECB speakers.
• GBP softened and spent most of the session beneath the 1.3500 handle before gradually nursing losses, while participants look ahead to UK employment and average earnings data.
• JPY weakened with USD climbing towards the 155.00 level, where it then met resistance and faded the majority of the advances.

FIXED INCOME

• T-notes settled higher, and the yield curve flattened as oil pared early gains and AI CEOs called for a slowdown in AI development, while the US 10yr yield hit 5% for the first time since 2023.

COMMODITIES

• Oil prices were higher but settled well off intraday highs, with price action dictated by geopolitics, while initial support was seen due to the postponement of the Iran-Gulf nations meeting and the shutdown of Saudi Arabia's East-West pipeline. Further upside was also seen following reports that the IRGC shot down a US drone and after comments from the Iranian Foreign Ministry, before crude caught another bid after AP reported that the crucial Saudi pipeline will remain mostly out of service for several weeks while repairs are carried out. However, several more constructive geopolitical developments emerged through the US afternoon, helping the energy complex pare some of its earlier gains, with Trump stating Ukraine and Russia had agreed not to strike each other's energy infrastructure, while he remarked that Iran wants to make a deal "quickly and badly", adding that he would determine whether the US is open to the concept, although Iranian sources quickly pushed back on the remarks. Finally, ILNA, citing Pakistani sources, reported that the US is seeking a "step-by-step" agreement with Iran.
• Key Saudi oil pipeline hit in strikes will be mostly out of service for several weeks for repairs, according to AP citing officials.
• Saudi Arabia is seeking to further boost oil supply through the Strait of Hormuz, according to Bloomberg citing sources.
• US Energy Secretary Wright said there are no plans for uranium enrichment in Saudi Arabia and that the seven-day rolling average of oil shipments through Hormuz is rising and will continue to increase, while he added that oil refining capacity is too tight currently.
• US Interior Secretary Burgum said the Iran war is accelerating a shift in oil production away from the Middle East toward the US and wider Western Hemisphere, according to Fox News. It was separately reported that Burgum sees possibility of Venezuela coal exports being part of US deal.

GEOPOLITICAL

RUSSIA-UKRAINE

• US President Trump said Ukraine has agreed not to hit Russian energy targets and Russia has agreed to do likewise.
• Ukrainian President Zelensky said Ukraine proposed that partners secure an agreement with Russia and that Ukraine is ready to ensure a corresponding halt to its strikes. He also stated that Ukraine would agree to an energy truce if Russia does, but is not convinced Russia is willing to abide by any agreement.
• Moscow and Kyiv have resumed talks on a possible energy ceasefire, but Putin is reluctant to reach a deal before winter, according to the FT citing sources.
• Russia’s Defence Ministry said it hit two cargo vessels in the Black Sea, according to IFX.
• Polish Defence Minister said Poland recovered a drone from the Baltic Sea and that initial findings suggest it was a Russian military drone.
• US House Democrats are moving amendments to the Graham Russia/Iran sanctions bill that would scrap broad secondary tariffs, exempt the EU from "country" treatment, tighten waiver authority and authorise USD 15bln in new military financing for Ukraine, according to RFE.
• France is lobbying EU countries to lift sanctions on Uzbek-Russian oligarch Alisher Usmanov as part of a prisoner release with Azerbaijan, according to the FT citing sources.

ASIA-PAC

NOTABLE HEADLINES

• PBoC is reportedly set to add macroprudential assessment metrics for banks, tightening scrutiny of bond durations and fund investment ratios, according to sources.

DATA RECAP

• Chinese New Yuan Loans (Aug) 60.0B vs. Exp. 400B (Prev. -340.0B)
• Chinese Total Social Financing (Aug) 1660.0B vs. Exp. 2040B (Prev. 1410.0B)
• Chinese Outstanding Loan Growth (Aug YY) 4.9% vs. Exp. 5.1% (Prev. 5.1%)
• Chinese M2 Money Supply (Aug YY) 7.5% vs. Exp. 7.6% (Prev. 7.7%)
• Indian CPI (Aug MM) 0.73% (Prev. 0.88%)
• Indian CPI (Aug YY) 4.82% vs. Exp. 4.8% (Prev. 4.45%)

EU/UK

NOTABLE HEADLINES

• ECB President Lagarde said Europe faces an unprecedented risk of being cut off from AI in a speech titled "A new age of capital: growth, sovereignty and AI".
• ECB’s Cipollone released a text titled "The future of euro cash: trusted today, designed for
  tomorrow".
• ECB’s Kazimir said all options will be considered at the next decision, with action taken if necessary.
• ECB’s Schnabel said recent developments in energy prices are quite worrying.
• ECB’s Simkus said he cannot exclude action at any meeting and that December is a natural time to assess the situation further.
• ECB’s Stournaras said timely ECB action could reduce the risk that future large rate hikes cause pain.