Elon Musk has done what a week of hedge-fund selling could not: he has made people want to own the AI trade again. SpaceX turned in a blowout quarter after the US close, Super Micro jumped on a beat of its own, and by the time Seoul opened, the memory makers that were thrown out on Tuesday were being bought back. But before London can join the party it has a bill to settle. UK inflation lands at 7am, and the number is expected to be the highest in nine months, two weeks before a Bank of England meeting that is already flirting with a rate rise.
The 60-Second Market View
The overnight tone is constructive, with a British caveat. Wall Street closed Tuesday mixed but healthy underneath: the S&P 500 rose 0.28 per cent to 7,712.57 and the Dow added 1.02 per cent to 52,495.88, while the Nasdaq Composite finished flat at 26,424.82. The more telling move was in smaller companies, with the Russell 2000 up 1.65 per cent as money rotated towards industrials. The VIX eased to 17.31.
After the bell the tone changed for technology. Nasdaq 100 futures are up about 0.9 per cent and S&P 500 futures about 0.35 per cent. In Asia, South Korea’s KOSPI is up more than 3 per cent, Tokyo’s Nikkei about 1.1 per cent and Taiwan about 1.3 per cent, while Hong Kong is roughly flat and Shanghai is little changed. Brent crude is back near $110 a barrel, the dollar index sits near 101.8, sterling near $1.337, and the 10-year gilt yields about 5.43 per cent.
What Happened Overnight?
Tuesday in New York was a day of nerves around oil. Unconfirmed reports of a US-Iran compromise pushed crude lower and lifted technology shares for a while, before denials reversed most of it. Qatar’s foreign ministry said only that talks were ongoing. What held up was earnings: with roughly an eighth of the S&P 500 having reported, the large majority have beaten forecasts, which helps explain why the Dow and small caps did the heavy lifting.
Then came the after-hours reports. SpaceX posted third-quarter revenue of $14.58 billion against forecasts near $13 billion, net income of $4.4 billion, and $63 billion of contracted revenue still to be recognised. Its shares rose about 8 per cent after hours. Musk also confirmed on the call that SpaceX and Tesla have formed special committees of independent directors to look at a merger, while stressing that no terms are agreed and a deal is not a certainty. Super Micro Computer jumped about 15 per cent on its own beat. Netflix went the other way, falling roughly 5 per cent after guiding fourth-quarter revenue and profit below expectations.
Asia took the hint. Samsung and SK Hynix recovered part of Tuesday’s slide, Japanese memory maker Kioxia rose about 6 per cent and SoftBank bounced. The exceptions were telling: battery giant CATL fell about 10 per cent in Hong Kong after a profit miss, and Australian data centre developer NEXTDC lost around 40 per cent after cutting its outlook. Investors are buying AI winners again, but they are not forgiving anyone who disappoints.
The Big Story: SpaceX Revives the AI Trade. Britain’s Inflation Test Comes First.
Last week was brutal for anyone long technology. Hedge funds cut tech exposure at the fastest pace in at least a decade, semiconductors took the worst of it, and the question in every dealing room was whether the AI buildout could keep paying for itself. SpaceX has just given the bulls a fresh answer. The striking detail is where the money came from: its cloud and computing business, which sells capacity to other technology companies, overtook Starlink as the biggest earner for the first time. That is AI spending showing up as real revenue at a supplier, which is exactly what sceptics said was missing.
The merger talk adds a second layer. A combination of SpaceX and Tesla would be one of the largest deals ever attempted, and Musk himself called the shareholder hurdle high, because Tesla would need a majority of all outstanding shares rather than just those voting. Traders should treat it as a story that can move Tesla’s price for months, not as a done deal. Tesla reports tonight, so the question gets asked again within hours.
For British investors, though, the morning belongs to the Office for National Statistics. Economists expect September CPI inflation to rise to 3.4 per cent from 3.1 per cent, with core inflation, which strips out energy and food, edging up to around 2.7 to 2.8 per cent. Much of the jump is the energy shock from the Middle East flowing through to petrol and household bills, plus a favourable base effect from last year dropping out. The awkward part is core. If the energy shock is starting to bleed into other prices, the Bank of England’s case for raising rates on 5 November gets much stronger.
That is the second-order story. A hot number would likely push gilt yields higher at the short end and support sterling, which has been one of the stronger major currencies this week. But it would also tighten the squeeze on mortgage holders and on the Chancellor, John Healey, a week before his Budget on 28 October. A soft number would do the opposite: it would ease pressure on gilts and give the doves on the Monetary Policy Committee room to wait. Either way, the reaction in two-year gilts will tell you more than the headline.
FX
Sterling goes into the release near $1.337 and around 83.9 pence per euro, close to its best levels of the week on the back of firm UK data and rising rate-rise expectations. That positioning cuts both ways. If inflation merely matches forecasts, some of the good news is already in the price and the pound could drift. The dollar index is steady near 101.8 and the yen remains weak near 158.1 per dollar, still close to levels where Tokyo has grumbled before. The euro sits near $1.123.
Equities
Expect a firmer European open after Asia’s lead, with technology and semiconductor suppliers likely to be in demand. The FTSE 100 closed Tuesday down 0.29 per cent at 10,733, and London’s heavy weighting towards energy and miners means it often lags a tech-led rally. Energy names will take their cue from Brent near $110. Also worth watching in the UK today: ministers are expected to approve Shell and Equinor’s Jackdaw gas field in the North Sea, a signal that energy security is winning the argument for now.
In the US, tonight is the heaviest evening of the earnings season for the AI trade. Meta, Tesla, IBM, Lam Research and Texas Instruments all report after the close. Meta matters most, because investors want to know whether its capital spending plans for this year move again and, more importantly, how it plans to pay for them.
Bonds
Government bond yields remain high but steady. The US 10-year Treasury yields about 5.12 per cent and the 2-year about 4.79 per cent. The 10-year gilt is near 5.43 per cent, with the 2-year near 4.98 per cent, which is the part of the curve most sensitive to this morning’s inflation figure. German 10-year Bund yields sit near 3.42 per cent. Long-dated Treasuries outperformed on Tuesday, which is a reminder that bond investors are weighing slower growth as well as the oil shock.
Commodities
Brent is back near $110 after a choppy Tuesday driven by headlines about US-Iran talks, and US crude is close to $99. Shipping data shows Gulf exports have actually recovered above pre-war levels thanks to pipelines, ship-to-ship transfers and naval escorts, yet the price refuses to fall far. That gap tells you the market is pricing the risk of disruption rather than the barrels themselves. Spot gold is near $4,119 an ounce and has struggled to get back through $4,200 while real yields stay this high. Copper is steady.
Crypto
Bitcoin is holding near $82,700 after defending the $82,000 area earlier in the week. It has been trading like a high-beta technology stock lately, so tonight’s tech earnings matter more for it than anything crypto-specific.
Today’s Economic Calendar
07:00 — UK CPI inflation for September. The biggest domestic release before the Bank of England meets on 5 November; a hot core number strengthens the case for a rate rise.
07:00 — UK producer prices for September. Factory gate costs show whether the energy shock is still building in the pipeline.
Morning — Expected government approval of the Jackdaw North Sea gas field. A test of how far energy security now outranks the no-new-licences stance.
Before the US open — AT&T, Abbott, Thermo Fisher, Philip Morris and Moody’s report. A broad read on whether earnings strength extends beyond technology.
15:30 — US weekly crude inventories. A short-term read on demand while Brent sits near $110.
After the US close — Meta, Tesla, IBM, Lam Research, Texas Instruments and SAP. The night that decides whether the AI rebound has legs.
Levels Traders Are Watching
These are reference points, not targets. For GBP/USD, the $1.3300 area is the nearby floor after this week’s rally and $1.3400 the obvious round-number test if inflation runs hot. On the 10-year gilt, 5.50 per cent is the line that has caused discomfort for the Treasury this month. For Brent, $110 is the pivot, with Monday’s five-month high above it. On the S&P 500, 7,600 is support from last week’s lows. For gold, $4,200 remains the ceiling it has failed to clear.
Where This Leaves Traders
The honest read this morning is that the mood has improved faster than the facts. SpaceX and Super Micro have given the AI trade a reason to breathe, and the rebound in Seoul shows how quickly money comes back when a supplier proves the spending is real. But one strong quarter from a newly listed company does not answer last week’s question on its own. Tonight’s numbers from Meta and Tesla do far more to settle it, and the market will be particularly unforgiving of any hint that spending is rising faster than the revenue behind it.
Closer to home, the bias for sterling is modestly firm going into the release, but positioning makes it vulnerable to an in-line number. What would change that view is core inflation. A reading of 2.8 per cent or above makes a November rate rise the base case and probably pushes short-dated gilt yields higher; a reading at or below last month’s 2.6 per cent would take much of the urgency away. The markets to keep on screen are GBP/USD, two-year gilts, Nasdaq 100 futures, Brent and Tesla in pre-market trading.
The opportunity today is clarity: by tonight, traders will know a lot more about both UK rates and the AI trade. The risk is that two big events in one session tempt people into oversized positions on the first move. For beginners, the lesson is simple. Watch how the market reacts to the inflation figure in the first 15 minutes, not just the number itself, because the reaction tells you what was already expected. If you want a clearer sense of how you handle days like this and where your trading could improve, take the free Samuel & Co Trading Trader Assessment before the next big release.
