TQ Morning Briefing
Kalshi's October hike contract fell to 13 cents after the Fed chair declined to preview the meeting. Earlier, an AI cloud loan priced at 95 cents and a bitcoin buyer paid 16.7% for new money. The Fed goes quiet Saturday.
Seoul Won Back a Quarter of Thursday's Drop
Thursday ended with the Dow up 1.1% and the Russell 2000 up 1.4%. The S&P 500 rose 0.3%, and the Nasdaq finished slightly higher after an early slide. The 10-year Treasury yield closed at 5.10%, down 9 basis points.
The Kospi rose 2.05% on Friday to 5,668.05, ending a seven-session losing streak. A day earlier it fell 7.6% and tripped a circuit breaker.
The rebound recovered about a quarter of Thursday's loss. The sharpest gains came in shares less tied to AI, Seoul Economic Daily reported.
Market Implication
Thursday's rally came with lower yields, and in Seoul the AI names took the smaller share of Friday's bounce. The open question is whether cheaper rates reach the companies borrowing to build AI.
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Hot Data, a Quiet Chair and Half the Hike Odds
September consumer prices rose 3.7% from a year earlier, and core prices rose 0.3% for a second month, a tenth above forecast. Producer prices ran hotter than forecast on Thursday.
In Bangkok, Fed Chair Kevin Warsh passed. "I don't prejudge meetings. I don't believe in saying now what I might do at the meetings that we have in the balance of this year," he said, Reuters reported.
Kalshi's quarter-point October hike contract fell from about 29 cents before he spoke to 13 cents Friday morning. Most of the drop came within half an hour of his remarks, near midnight Eastern. Trades carry no stated reason.
Cleveland Fed President Beth Hammack, a voter this year, said Thursday that with an inflationary mindset taking hold, the Fed "might need to move even more," Reuters reported.
Structural Setup
The quiet period starts Saturday. No Fed official is scheduled to speak before the Oct. 28 decision. The bet now sits for 12 days with no new guidance.
IBKR's Margin Book Dipped. Bitcoin's Got Pricier.
Interactive Brokers said Thursday that customer margin loans rose 36% from a year earlier, to $105.2 billion.
The yearly number hides a dip. At the end of June, those loans stood at $108.5 billion. They ended the third quarter about 3% lower, though the quarter's average balance was higher than the second quarter's. Customer cash rose to $186.2 billion, from $182.4 billion. Shares fell as much as 2% after hours.
At the expensive end, the borrowing kept going. Strive priced $630 million of a new 15% perpetual preferred at $90, after upsizing the deal by 2 million shares. That works out to about 16.7% on money earmarked partly for bitcoin. Its older preferred pays about 13%.
The index door narrowed the same night. MSCI adopted rules that make "non-operating companies" ineligible for its global indexes. Its earlier simulation flagged Strategy and Metaplanet. The final list comes Nov. 11, and changes take effect at the Nov. 30 close. Strategy shares were down about 3% before the open, Investing.com reported.
Sector Read
At Interactive Brokers, quarter-end margin borrowing dipped before the selloff while cash edged up. The leverage still growing is the costliest, and the index demand behind treasury stocks like Strategy now has a Nov. 11 deadline.
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The Truce Broke. Diesel Margins Fell Anyway.
Sunday's energy truce, which Moscow never confirmed, is over. Ukrainian drones hit Rosneft's Ryazan refinery on Thursday, a plant that handles about 5% of Russia's refining throughput. "The block (on attacking refineries) is out. We're done," President Volodymyr Zelenskiy told the Financial Times.
In the Gulf, Hormuz clearance averaged 11.62 million barrels a day in the week to Oct. 13, about 68% of its baseline, ship tracker Kpler said.
On Thursday, International Energy Agency members agreed to speed up release of more than 20 million barrels of diesel. European diesel refining margins fell nearly 2% on Friday, to $78.67 a barrel, Reuters reported. That is the gasoil crack over Brent, not the U.S. diesel gap that ran near $102 on Tuesday. Sparta Commodities analyst Abhishek Kumar called it a faster schedule for earlier pledges, not new volume.
Brent is up about 0.5% this week. U.S. crude is up about 5.9%, after a large U.S. inventory draw tied to hurricane shut-ins.
Watch Signal
Diesel's discount now rests on stockpile barrels already promised. If refinery strikes continue while Hormuz runs near two-thirds of Kpler's baseline, those margins have less behind them than Friday's drop implies.
Volta Paid the Top of the Range
Volta's $5 billion AI loan priced Thursday at 6.5 percentage points over the benchmark rate and 95 cents on the dollar, Bloomberg reported, citing people familiar. JPMorgan and Goldman Sachs added investor protections. The yield ended above the roughly 11% the banks first floated.
Price talk had started near 5 points in September. It widened to 6.25 to 6.50 during marketing. The final spread landed at the top of that range, and the price fell to 95 cents from 97 to 98 cents in early talk.
The banks underwrote only a $1.3 billion term loan. The other $3.7 billion finances about 36,000 Nvidia chips, and the debt is unrated.
The Read
Nvidia’s chief said Thursday that CoreWeave’s cost of capital is decreasing. The same day, the next chip-backed loan priced at the wide end of talk and two to three points below early indications. Investors balked at an unrated loan from a first-time borrower, Bloomberg reported, and the banks would not commit to the chip-backed piece. A softer Fed path would trim the base rate. It would not change those terms.
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Economic Data: Import prices, 8:30 a.m. Industrial production, 9:15 a.m. Foreign demand for U.S. securities, 4 p.m.
Fed Speakers: None scheduled. The quiet period runs from Saturday through Oct. 29.
Earnings: Travelers, M&T, Truist, Citizens Financial and Regions, before the open. Netflix, Tuesday.
Overnight: Korea's Kosdaq gained 4.46% and tripped a buy-side trading curb.
Overnight, after a sentence that previewed nothing, the odds of an October hike fell by half.
Volta's loan priced Thursday, before Warsh spoke, at 6.5 points over the base rate.
The cleanest test is the next AI loan to price after the odds fell. A hold would lower its base rate. If its spread still lands at or above Volta's 6.5 points, lenders are charging for risk the Fed doesn't set.
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