Washington and Tokyo Redraw Economic Lines

Markets are exhaling, but not relaxing. U.S. equity futures hovered just above record highs on Tuesday, buoyed by a swirl of trade diplomacy, central-bank suspense, and corporate recalibration. The immediate catalyst was a new U.S.-Japan framework on critical minerals, a small but symbolically potent step in the West's economic realignment around supply-chain security. Investors, however, have one eye on Tokyo and the other on Washington, where the Federal Reserve meets amid a month-long government shutdown and fraying economic visibility.

With just one down day in the past seven sessions, US equities have resumed their record-breaking ascent, edging closer to symbolic thresholds: the S&P 500 is within 1.8% of the 7,000 mark, and the Nasdaq 100 requires merely a 0.7% gain to reach 26,000. Even the once-mythical 50,000 milestone for the Dow Jones is now under discussion, although a further 5.1% rally would be required. More immediately, the 48,000 mark is in sight, just a 1% gain away.

The deal between Washington and Tokyo, covering the mining and processing of rare earths and other strategic inputs, underscores how economic policy is now a tool of national resilience. These materials, vital to sectors from semiconductors to defense, have long been dominated by China. In strengthening cooperation with Japan, the U.S. is not just diversifying its sources of supply, it is deepening an alliance that sits at the heart of the Indo-Pacific strategy. Just as President Trump prepares for talks with his Chinese counterpart, the message is that America is rebuilding its industrial footing with allies, not adversaries.

Yet markets are not rallying on geopolitics alone. Investors are wagering heavily that the Federal Reserve, facing slowing momentum and a lack of fresh government data, will pivot from restraint to reassurance. Futures pricing implies near certainty of a 50-basis-point rate cut before year-end. The central bank's two-day meeting, beginning Tuesday, will test whether Jerome Powell's Fed can end its "quantitative tightening" without signaling panic. For now, analysts expect ambiguity. With much official data suspended by the shutdown, the Fed must fly by private indicators: consumer sentiment, home prices, and surveys from regional banks.

This policy limbo has left traders unusually dependent on corporate results. And so far, the private sector has delivered. Nearly 90% of S&P 500 firms reporting have beaten earnings estimates, extending a bull market that has now reached its third anniversary. Tech titans - Microsoft, Apple, Alphabet, Amazon, and Meta - will soon reveal whether artificial intelligence can keep justifying trillion-dollar valuations. Their guidance may matter more to markets than Powell's words.

Earnings week has also revealed the corporate bifurcation of the post-pandemic economy. Some firms are riding the twin winds of automation and healthcare resilience: UnitedHealth surged after raising its profit forecast, while UPS leapt nearly 10% on robust global demand. Others are cutting back. Amazon's decision to eliminate 14,000 corporate jobs is emblematic of an industry seeking efficiency after years of expansion. Paramount, too, is joining the ranks of companies pruning payrolls to please investors.

Even so, optimism prevails. PayPal jumped 12% after announcing a partnership with OpenAI, allowing users to make purchases through ChatGPT. It looks like AI is no longer a futuristic promise but a monetized reality. Elsewhere, NextEra Energy's agreement with Google to restart a nuclear facility reflects a broader rebranding of nuclear power.

Meanwhile, oil prices have slipped below $65 a barrel, due to supply overhangs and tentative progress in U.S.-China talks. Gold has retreated, too, as investors unwind safety trades in anticipation of a thaw in trade tensions.

The government shutdown continues. Federal workers' unions are now pressing Congress to end the stalemate, while markets fret over the absence of official data.

Today features a robust line-up of corporate earnings reports (including HSBC, Visa, PayPal and UnitedHealth) serving as an appetiser before a much fuller schedule tomorrow. That includes the Federal Reserve's decision on interest rates and quarterly results from Microsoft, Alphabet and Meta. 

Asian-Pacific markets have not followed Wall Street's bullish lead. They are all trading in negative territory at close or in late sessions. Australia, Japan and Hong Kong were each down by approximately 0.5%. European indices paint a mixed picture.

Today's economic highlights:

On today's agenda: new car registrations in the EU27, in the United States, the FHFA House Price Index MoM, the Conference Board Consumer Confidence, and the Richmond Fed Manufacturing Index. See the full calendar here.

• Dollar index: 98,927
• Gold: $3,939.5
• Crude Oil (BRENT): $64.17 (WTI) $60.59
• United States 10 years: 3.98%
• BITCOIN: $115,343

In corporate news:

• Amazon faces criticism from Senator Bernie Sanders over plans to automate up to 500,000 jobs, with Sanders demanding accountability and support for displaced workers.
• UnitedHealth raised its 2025 earnings forecast after beating Q3 estimates, signaling confidence in cost management and growth into 2026.
• British American Tobacco paused a planned U.S. vape launch due to increasing FDA enforcement on unlicensed nicotine products.
• Invesco reported a 38% jump in quarterly profit as strong inflows and higher fees pushed assets under management to a record $2.12 trillion.
• Trump announced plans to meet Nvidia CEO Jensen Huang during his Asia tour, amid growing trade and tech tensions.
• Xylem raised its annual profit forecast on strong demand for water treatment equipment, surpassing Q3 expectations.
• MSCI posted a 16% increase in Q3 profit driven by strong demand for its index products and higher asset-based fees.
• PayPal shares surged 13% after partnering with OpenAI’s ChatGPT for AI-driven shopping and announcing its first-ever dividend.
• Carrier Global cut its 2025 sales and profit outlook due to weak U.S. residential HVAC demand, despite better-than-expected Q3 results.
• Zebra Technologies issued a strong Q4 forecast thanks to resilient demand and reduced tariffs, especially in warehouse automation.
• Meta, TikTok, and Snap will comply with Australia's new law banning users under 16, despite opposing the regulation.
• Telekom and Nvidia plan to jointly build a €1 billion data center in Munich to boost AI infrastructure in Europe.
• A group of investors managing $11.5 trillion urged food giants like Nestle, Danone, Kraft Heinz, Amazon, Carrefour, and Walmart to shift towards plant-based proteins for climate and supply chain resilience.
• Citi and Coinbase announced a partnership to enhance digital payments for institutional clients, integrating fiat and crypto transactions.
• NextEra Energy and Google will restart a shuttered Iowa nuclear plant to power AI data centers under a 25-year energy agreement.
• NXP forecast higher-than-expected Q4 revenue, driven by recovering automotive demand and recent strategic acquisitions.
• Meta Platforms appointed Vishal Shah to a key AI role and launched new social media features.
• NextEra Energy and Google entered a 25-year agreement to restart Iowa's Duane Arnold nuclear plant.
• Welltower Inc. announced a $23 billion expansion into senior housing and a 20.7% increase in Q3 normalized FFO per share.
• VSE Corporation announced a public offering of common stock and raised its full-year guidance.
• Waste Management reported mixed Q3 2025 financial results with missed EPS estimates.

Analyst Recommendations:

• Confluent, Inc.: Stifel upgrades to hold from neutral and raises the target price from USD 21 to USD 25.
• Crowdstrike Holdings, Inc.: Arete Research upgrades to buy from neutral with a price target raised from USD 456 to USD 706.
• Fox Corporation: Arete Research upgrades to buy from neutral with a price target raised from USD 66 to USD 97.
• Oracle Corporation: CITIC Securities Co Ltd downgrades to sell from hold and reduces the target price from USD 298 to USD 243.
• Selective Insurance Group, Inc.: BMO Capital Markets downgrades to market perform from outperform and reduces the target price from USD 88 to USD 81.
• Amkor Technology, Inc.: D.A. Davidson maintains its buy recommendation and raises the target price from USD 30 to USD 40.
• Apple Inc.: Baird maintains its outperform recommendation and raises the target price from USD 230 to USD 280.
• Biomarin Pharmaceutical Inc.: Wells Fargo maintains its overweight recommendation and reduces the target price from USD 90 to USD 70.
• F5, Inc.: Piper Sandler & Co maintains its neutral recommendation and reduces the target price from USD 355 to USD 277.
• Lattice Semiconductor Corporation: Deutsche Bank maintains its buy recommendation and raises the target price from USD 60 to USD 80.
• Netflix, Inc.: Arete Research maintains its neutral recommendation and raises the target price from USD 833 to USD 1084.
• Nextracker Inc.: Wells Fargo maintains its overweight recommendation and raises the target price from USD 72 to USD 109.
• Rambus Inc.: Wells Fargo maintains its overweight recommendation and raises the target price from USD 73 to USD 115.