Daily summary: Geopolitics and debt continue to weigh on valuations

USA

• The US ends Monday with moderate losses, mainly in reaction to the Fed Chair’s speech and an exchange-of-fire episode in the Middle East.
• The Russell 2000 stands out for the scale of the declines, with its futures down nearly 1%. US500 and US30 are holding up better, each down around 0.5%. Nasdaq 100 futures are slipping only 0.2%. This suggests the market reaction is driven primarily by concerns about the future level of interest rates, as Russell constituents are disproportionately hurt by higher financing costs.
• The exchange-of-fire episode in the Middle East proved limited in scale and intensity. However, looking at precedents from the past six months of the Iran campaign, sudden spikes in this type of tension more often than not have tended to escalate (though not universally). Iran has pledged a “disproportionate” response to any attacks by the US, but Iran’s ability to strike military targets, especially outside the Persian Gulf, remains in question.
• US Treasury Secretary Scott Bessent had a day full of market-signaling messages. Among today’s remarks were:
  • “We have more in common with China on Iran than not”
  • “Oil prices will fall”
  • “I’m not going to guess what the Fed will do”
  • “I believe the BOJ will take steps to strengthen the yen”
  • “We are not in a trade war with Canada”
  • Additionally, continuing the trend of opaque high-level meetings, the US Treasury Secretary met with a Russian delegation, including Finance Minister - Anton Siluanov.

Company news, US:

• PG&E (PCG.US): The US power and gas distributor starts the week with a crushing drop of nearly 20%. The decline is driven by a recent reform of wildfire liability management rules which, contrary to analyst and market expectations, includes no limited-liability clauses for private companies. Edison International is also falling on the back of the new legislation.
• Microsoft (MSFT.US) and Humain are expanding their strategic cooperation. Microsoft plans to offer Humain One within Microsoft 365.
• Tesla (TSLA.US): Shares rise about 4% after confirmation that the humanoid robot Optimus has entered the production phase at the Fremont, California plant.
• SpaceX (SPCX.US): Elon Musk confirmed on X that SpaceX and Tesla are jointly building “over 100 gigawatts of solar power production per year.” SpaceX shares are unchanged, but sector peers such as Howmet Aerospace are down several percent in response.
• Science Applications (SAIC.US): Shares gain about 8% after the company published above-consensus guidance for the end of the fiscal year. The rise is supported mainly by government IT contracts.
• Pinterest (PINS.US): The company’s CFO resigned, and shares are down about 3%.
• Chevron (CVX.US): The energy major gains after an agreement regulating oil trade between the US and Venezuela was reached. Shares are up about 2%.
• MicroStrategy (MSTR.US): The treasury-style company continues to rise, up about 2% today, boosted by Bitcoin strength and fiscal concerns.

Europe

• Major European indices are posting visible losses, mainly in reaction to the above-mentioned escalation episode in the Persian Gulf. A renewed spike in energy commodity prices, combined with worries about filling European storage ahead of winter, is weighing on European assets.
• German, Swiss, and French indices are down the most, with declines exceeding 1%. The Netherlands, Italy, and Spain are holding up better, keeping losses below 0.5%. Poland’s WIG20 stands out on the upside, with futures up about 1.3%.
• The Swiss Bankers Association conducted a survey according to which the SNB is expected to keep rates unchanged in 2026 and 2027.
• A German economic institute published data showing foreign investment in Germany rose by about 50%, even though US investment fell 44% over the period. The share of US investment in Germany fell from 14% to 36%. Investment from the UK, Switzerland, and China replaced US investment.

Company news, Europe:

• Soitec: Shares rose 8% after Reuters reported that the French chip-materials producer said it “locks customers into multi-year supply agreements with deposits and fixed prices to meet growing demand for optics for AI data centers.”
• Defense sector: European defense stocks are falling significantly on Monday. This reflects a mix of profit-taking after recent gains and concerns about further sabotage or arson incidents affecting defense and dual-use facilities in Europe. Rheinmetall is down over 3%, while Airbus and Safran are down 2%.

Forex

• The US dollar is posting small losses today, mainly against the Canadian dollar, the euro, the yen, and the Swiss franc. The dollar index is down about 0.2%, largely in the wake of today’s comments from the US Treasury Secretary.

Commodities

• The US attack and Iran’s response overnight from Sunday to Monday increased risk for traffic in the Persian Gulf. Energy commodities, especially gas and oil, are clearly rising. Brent crude returns to USD 90 per barrel, and European natural gas gains over 5%, climbing to EUR 70.
• Chile, the biggest player in the copper mining industry, published data showing output fell 9.8%, reaching the lowest level since 2011.
• Palladium is giving back last week’s gains, dropping as much as 4%. Platinum is also down 2%.

Crypto

• The cryptocurrency market is mirroring the sentiment in major indices, staying clearly negative but without sharp sell-offs.
  • Bitcoin is flat at USD 78,500.
  • Ethereum is down about 0.7% to USD 2,460.
  • Solana is down over 1% and is holding at USD 102.