Rise and shine everyone. Happy Halloween! 🎃

US Equity Futures are lower this morning, after the negative reaction to big tech earnings. The US Dollar Index is flat this morning, with yields slightly lower. Commodities are lower, other than Crude and Ag.

There’s a lot to cover today in the world of macro & micro, so let’s get into it.

Macro - Strong GDP and Higher Inflation

First off, the US Real GDP number came in at 2.8% QoQ yesterday, slightly below expectations. However, the number continues to be exceptionally strong. Real private domestic final sales rose by 3.2% this quarter, and Core PCE rose slightly above expectations. QoQ PCE, however, came in at 1.5% vs. 2.5% previous.

Next, we had the BoJ meeting earlier this morning, and as expected the rates where held steady. The statement was notably brief. In the accompanying Quarterly Outlook on Economic Activity and Prices, it was noted that risks to economic activity appear balanced, while price risks are skewed to the upside for fiscal year 2025. However, we didn’t get any commentary on the political situation (this was a long shot) but neither did they talk much about market stability. But later the Yen saw some strength as BOJ Gov Ueda noted removal of ‘time to spare’ phrase in regard to policy decisions.

Japan’s political landscape remains uncertain, as no coalition government has yet formed. Prime Minister Ishiba, the only identified monetary policy hawk within the LDP, will have his political standing clarified on November 11th at an upcoming LDP-Komeito meeting.

We also got the EA Inflation numbers this morning. France, Italy and the EA are all showing higher numbers. (You can see details in the calendar below). But, let’s look at the EA. Headline Inflation came in at 2% vs. 1.9% est. and 1.7% previous, while Core Inflation remained stable at 2.7% YoY slightly above the 2.6% estimate. This is not alarming, as such but there is some repricing in the rate cut probabilities for December. After back-to-back cuts, and a stronger GDP number, the ECB can perhaps afford to consider skipping Dec for another cut.

Finally, China Manufacturing PMI saw its first expansion in 6 months. But seemingly this has not been enough to provide a big boost to equities. Markets are still pensive ahead of next week’s meetings.

What to Watch Today: US PCE Inflation Data at 8:30am ET

Micro - AI Spend in Focus

Meta and Microsoft - not the best reaction to results yesterday.

Microsoft was up on the release but down over -3.7% after the call. The company talked about slowing Azure growth because supply could not keep up. Their AI spending continues and while it is contributing to Revenue growth, there is still some skepticism surrounding the cost-benefit ratio. Not to mention, their $13.75B investment in OpenAI is also contributing to losses of about -$1.5B.

Meta, on the other hand, came out and just said it. They were spending and they would continue to spend to realize their AI potential. Zuck talked about increasing investments in infrastructure and other projects like the metaverse and AI-powered glasses because he believes these are core to the company’s future. He talked about AI having a positive impact on work but tangible earnings are yet to be delivered.

“Meta cautioned that losses from Reality Labs, its division focused on artificial intelligence and augmented reality, will continue to widen “meaningfully” this year, adding that the 2025 budget is still being finalized. Reality Labs reported a $4.4 billion operating loss in the quarter.” - Bloomberg

Starbucks’ Q4 2024 results saw global comparable sales drop 7%, with U.S. sales down 6% due to a 10% decline in transaction volume and China sales falling 14% amid competitive pressures and economic softness. Full-year sales grew 1% to $36.2 billion, though earnings per share decreased by 8% on a GAAP basis. In response, Starbucks is implementing a “Back to Starbucks” strategy and has raised its quarterly dividend, signaling commitment to long-term growth despite recent challenges.

What to Watch Today: Apple and Amazon after the close

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)