The Week in Markets
The US 10-year Treasury yield fell from 5.13% on 21 October to 4.96% on 22 October, according to US Treasury data, after Meta's third-quarter results, a jump in crude and a tech sell-off at Thursday's open. Meta narrowed its 2026 capital spending guidance to $135bn to $145bn from $130bn to $145bn and reported free cash flow of minus $2.12bn for the quarter. It also approved a new class of non-voting shares it says it could use to raise capital. The same week, French 10-year yields went through 5% for the first time since 2002 and UK inflation rose to 3.5%. Brent hit $112. Here’s what top asset managers had to say:
UBS's Chief Investment Office, writing on 19 October after the previous week's neocloud sell-off and before Meta reported, argues the funding scare belongs to the neoclouds and does not undermine the wider AI investment cycle. Neoclouds, the single-product GPU renters, spend heavily up front and wait for contracted revenue to arrive. Hyperscalers have diversified revenue, and UBS puts their cost of debt at 6.5% to 7% against a return on new data-centre investment of around 25% or higher. It estimates AI capex grows 33% to $1.2tn in 2027, with neoclouds under 10% of that, and cites rental rates for four-year-old GPUs up nearly 30% this year as evidence that demand still outruns supply. It keeps a positive view on AI but names the loop to watch: tighter credit slows deployment, and delays slow the cash needed to service debt.
FTSE Russell's David McNay and Robin Marshall mapped who finances whom and found a web. A special purpose vehicle buys Google and Broadcom chips for Anthropic with about $35bn of third-party debt led by Apollo and Blackstone, Broadcom's maximum lease exposure is $29bn by its own SEC filing, and Nvidia has signed memoranda with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to raise more than $500bn. They say this is not 2008: the public evidence so far shows no synthetic re-referencing of collateral, and bank lending is limited. The closer analogue, they suggest, is the late-1990s telecom build-out, and the risk is opacity: it is getting harder to tell where real demand comes from and who holds the residual-value risk.
Ashmore's Gustavo Medeiros and Ben Underhill say the stress shows up first in credit. By their count, as of 16 October, CoreWeave's credit default swaps were up more than 40% in the month, Oracle's five-year CDS had widened to almost 290bp from 260bp the week before, and spreads on Caa-rated US high yield were back above 1,000bp, a level Ashmore says "has often, though not always, accompanied late-cycle stress". They call the risk concentrated, with CoreWeave and Oracle together under 10% of expected 2027 hyperscaler capex, and argue that chip prices, GPU rents and TSMC and Micron guidance all point the other way.
BNY Investments' Vincent Reinhart explains why next week's FOMC is hard to call: Chair Kevin Warsh has said forward guidance "is not the business we should be in", calls data dependence "a dangerous preoccupation", and has asked the committee to consider fewer scheduled meetings. BNY expects at least one more hike this year and a hawkish message, and puts the odds of an October move higher than markets do, since a surprise would suit Warsh's aims. Its base case is still that action waits until December.
TwentyFour's Felipe Villarroel notes that French 10-year yields went through 5% this week for the first time since 2002, with some contagion to Italy and Spain but no panic. His reasons: French banks are sound and hold few OATs, so the sovereign-bank loop is weaker than in the euro crisis, and the ECB's toolkit deters shorts without being used. He expects the ECB to act only if policy transmission is impaired, and then with words or an end to QT before any buying. TwentyFour's OAT exposure is zero.
AllianceBernstein's Sandra Rhouma and Nicholas Sanders agree the problem is structural, with the deficit at 5.1% of GDP in 2025 and heading for 5.4% this year against a 4.9% to 5.0% target, but argue the sell-off has overshot. The France-Belgium spread is above 50bp despite similar deficits and debt, and OAT spreads now trade like BBB corporates on a single-A rating. They see the ECB tilting PEPP reinvestments toward France or pausing QT well before it reaches for the Transmission Protection Instrument, which they call a more distant option, and think volatility may be creating opportunities to add French exposure.
Read AllianceBernstein's analysis
UK consumer prices rose 3.5% in the year to September, up from 3.1% in August, with core at 2.8% and services at 3.7%, according to the ONS. Both Budget previews below were written before that print.
Nuveen's Laura Cooper says the 28 October Budget matters less to gilts than the Bank of England does. She expects the Chancellor to rebuild headroom to around £15bn from a Bloomberg consensus of £10bn to £12bn, against £23.6bn in March, and says £20bn would reassure more. Her bigger call is that markets, pricing more than 100bp of tightening through 2027 and a near-certain November hike, have too much in. Nuveen sees any November move as insurance to be reversed in 2027 and favours five-year gilts over the long end.
Insight Investment's David Hooker expects a "do no harm" Budget: fiscal rules kept, £15bn to £20bn of headroom preserved, means-tested cost-of-living relief funded by targeted taxes, possibly windfall levies on banks and energy companies. He reads the curve the other way from Nuveen, with short-dated gilts most exposed to energy prices and the shortening of issuance maturity a constructive supply backdrop for the long end.
*Nuveen's piece carries a UK professional-client declaration: the page is directed only to UK-resident professional clients and is not addressed to US persons.
State Street's Elliot Hentov and Vladimir Gorshkov say the Middle East conflict is approaching peak escalation and expect one more oil spike before de-escalation. Their summer base case of $90 to $100 oil in the second half has played out, with an average of $92 from 1 July to 15 October by their count. The new dashboard gives 80% to a delayed resolution with Q4 oil at $100 to $110 and 20% to a "1979 redux" above $120. The three buffers that contained the shock, Chinese demand compression, inventory releases and rerouted supply, are fading. For portfolios: higher short rates and a firmer dollar near term, and duration only once rates bite AI capex, which they say is not yet.
*State Street's piece is on its US institutional site, which is intended only for persons in the United States or those otherwise qualified under local law.
UBS's CIO recorded Brent at $112 on 22 October, a high since May and up 9.4% this month, after attacks on an Aramco field in Saudi Arabia's Eastern Province. Its base case is that oil moderates into next year: OPEC output rose 0.92mb/d in September to 25.1mb/d, about 85% of February's level, and trade routes are shifting. The G7 is releasing emergency stocks too. UBS says stay invested in equities and suggests broad commodities as the hedge.
China grows 4.5% on exports, and the surplus is the story
China's GDP grew 4.5% year on year in the third quarter, with exports up 16.4% over the first three quarters and retail sales up 1.1% in September, according to the National Bureau of Statistics. Lazard's Ron Temple frames that as everyone else's problem: a record $133.5bn monthly surplus in September on exports up 36.3% in dollar terms, a 2025 surplus of $1.2tn, and a 2026 figure likely to beat it. The EU's deficit with China is up 26% this year and now exceeds America's despite an economy 40% smaller; India's is $106bn year to date. Temple argues rare earths, at 0.1% of China's exports, show how many chokepoints it holds, and that China's own export dependence is unsustainable without domestic rebalancing.
Ashmore draws the allocation point. Diverted Chinese goods have already cut goods prices in non-US developed markets by about 0.6%, on Goldman Sachs estimates it cites, and Ashmore expects the same effect to hold down goods inflation in emerging markets, which it calls supportive for EM local rates.
*Lazard's piece is on its UK site, which is not intended for US citizens or for readers outside the UK.
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