Global Markest: US Shutdown, AI, and Weight Loss Drugs

Global stock markets struggled this week despite seasonal strength and mostly solid corporate results. Investors were unsettled by signs that artificial intelligence (AI) has yet to meaningfully boost profits despite the gargantuan sums invested by the US technology giants.

In America, independent data showed job cuts surged amid AI-driven restructuring, adding to weakening sentiment. China eased export restrictions on critical minerals for the US, signalling a fragile trade truce for the next year. The Bank of England held rates ahead of the Autumn Budget. The Governor, Andrew Bailey cast the deciding vote to keep rates as they are. However, money markets suggest a 70% chance of a cut in December.

The US Senate has cleared the first step of a deal to end the government shutdown that began on 1 October. The agreement, reached after intense weekend negotiations, would fund the government through the end of January and guarantee federal workers receive back pay and protection from permanent layoffs during the shutdown.

Meanwhile, October saw a sharp rise in layoff announcements in the US, as companies adjusted staffing amid the AI boom. More than 1.1 million job losses have been announced this year, the highest since the pandemic. Experts warn that slower hiring, softer spending, and rising costs are driving companies to tighten belts, making it harder for those affected to quickly find new roles.

In international trade, China has eased several export restrictions on critical minerals and rare earths bound for the United States, signalling that the recent trade truce between the two nations is holding. The move suspends controls on materials used in semiconductors, military hardware, and other high-tech industries for a year.

In the UK, The Bank of England opted to hold interest rates at 4% this week, pausing action ahead of the Autumn Budget on 26 November. Governor Andrew Bailey signalled that cuts are likely before Christmas, depending on upcoming inflation and labour market data. The central bank said inflation, at 3.8% in September, has probably peaked, supported by slower pay growth and subdued economic activity. Yields on UK government bonds nudged lower and prices rose, while the pound edged higher supporting a December interest rate cut.

European stocks opened this week strongly as progress on a US government shutdown deal boosted sentiment. Early gains were led by technology shares, after a 3% fall last week in the technology dominated NASDAQ index. Johnny Walker and Smirnoff maker Diageo jumped after naming Sir Dave Lewis as their new CEO. Weight loss drug company Novo Nordisk, steadied shareholder nerves as it released a new partnership to sell its drugs. It also gained support as it lost out to Pfizer in a contested bid for US weight loss company, Metsera which was deemed very expensive.

Turning to commodities, Oil prices remain under pressure as the market anticipates a supply surplus next year. Copper prices slipped in London after weaker manufacturing data from China raised doubts about demand. Gold, meanwhile, rallied to two-week highs on concerns ‘AI mania’ is masking the reality of a sharply deteriorating economy, whilst fast-moving inflation data points to the prospect of upside pressure into 2026.

Cryptocurrencies were also under pressure this week. Bitcoin, Ether and Solana all saw sharp declines as $400 billion was wiped from total market value. Once again, cryptocurrencies have shown how closely they move with technology stocks, with the Nasdaq acting as a key indicator.

Among notable corporate movers, International Consolidated Airlines Group (IAG), the parent company of British Airways and Iberia, fell 12.4%, affected by softer leisure travel to the US and tighter pricing conditions in Europe. Tesla shareholders have also approved a staggering $1 trillion pay deal for Elon Musk, if he meets certain 10-year targets.

Looking ahead, the focus this week will be on fresh economic data outside of the US and major corporate results. In Europe, attention turns to Germany’s ZEW confidence survey which will be released before we go to print. The Tuesday and UK’s third-quarter growth figures on expected Thursday. Investors will also be watching results from several big names, including Chinese tech groups such as Alibaba and Tencent, and major European companies like Siemens, Richemont and Allianz.

(Cover Image Source: Sweet Life)