Gold at high levels corrects, what is the outlook after repeatedly hitting new highs? The Fed doves, the dollar rises, and U.S. Treasuries are sold off! Nvidia hits new highs, Tesla "turns the table" overnight... What exciting market movements did you miss this week?

Market Review

The US Dollar Index rose overall this week, as the market expected the Federal Reserve to slow down the pace of rate cuts, with the index standing above the 104 mark, hitting a two-and-a-half-month high. It has been the fourth consecutive week of gains. So far this month, the US Dollar Index has risen by more than 3%.

Spot gold had a volatile week, with the highest rise to $2,758 per ounce at the beginning of the week due to factors such as the Middle East war, which stimulated investors' demand for safe-haven assets. It then continued to dive by $50, briefly losing the $2,710 mark before recovering, closing at $2,747 per ounce. This year, gold prices have risen by more than 30%.

In terms of non-USD currencies, after several European Central Bank officials made dovish speeches, currency traders increased their bets on rate cuts. The euro fell below $1.08 for the first time since early August, marking the fifth consecutive week of decline. Goldman Sachs said that under the scenario of domestic tax cuts in the United States, the euro could fall by as much as 10%.

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Additionally, with uncertainty surrounding the U.S.-Japan election clouding the market, the dollar against the yen once broke through 153 this week for the first time since the end of July, and it is expected to close higher for the fourth consecutive week. Yen foreign exchange strategists estimate that there is a risk of the yen/dollar falling to the 160 mark in the coming weeks.

International oil prices fluctuated higher this week, as traders downplayed hopes for a ceasefire in the Middle East and turned their attention to the global supply and demand balance. Goldman Sachs expects the average Brent crude oil price to be $76 per barrel in 2025. U.S. and Israeli negotiators will meet again in the coming days to resume ceasefire talks, but Israel's intensified strikes on multiple fronts and the uncertainty of its response to Iranian attacks have left the oil market on edge.

In terms of the stock market, the S&P 500 and Dow Jones ended their six-week winning streak, while the Nasdaq hit a new high during the week and continued to rise for seven weeks. Nvidia's stock price hit a historical high this week, briefly surpassing Apple to become the most valuable stock; Tesla rose by 22% on Thursday, marking the best single-day performance in over 11 years, not only erasing all of 2024's losses but also adding about $150 billion to its market value. U.S. stocks, Nikkei, and other cross-border ETFs have seen a large amount of high-position redemptions, with the fund share reduction ratio approaching 40%. In the A-share market, the Beixin 50 Index, which doubled in 15 days, has experienced significant shocks.

Morgan Stanley said that the market is unlikely to see a sharp sell-off like the one after the Republicans won both houses of Congress in 2016. Goldman Sachs strategists said that the era of the S&P 500's decade-long surge has ended, and it will face competition from assets such as U.S. Treasuries in the next 10 years, with an annualized nominal total return rate of just over 3%. However, J.P. Morgan has a completely different view, expecting an annualized return rate of 6.7% for large-cap stocks over the next 10-15 years.Weekly Highlights

1. The Fed is expected to slow down the pace of rate cuts, and U.S. Treasury yields soar

This week, several high-ranking Federal Reserve officials spoke on the outlook for monetary policy, supporting a cautious, gradual, and slow approach to rate cuts. They believe that in the face of high economic uncertainty, it is prudent to act with caution, and they expect interest rates to be "significantly higher" than the levels seen in the decade before the pandemic. The latest Fed Beige Book indicates that economic activity in most parts of the United States has seen little growth since early September, with multiple districts reporting a slowdown in wage growth.

The 2025 FOMC voter and President of the Kansas City Fed, Esther George, stated a preference for a relatively aggressive balance sheet reduction strategy and called for a gradual and cautious approach to rate cuts due to the uncertainty in the economic environment. Neel Kashkari, President of the Minneapolis Fed, said that the neutral interest rate might be higher than in the past, and if the labor market weakens, a faster rate cut might be necessary. Dallas Fed President Lorie Logan believes that money market rates should be close to or slightly above the reserve balance rate. Cleveland Fed President Loretta Mester stated that progress in reducing inflation is good, but it is still above the target level.

According to CME's "FedWatch," the probability of a 25 basis point rate cut by the Fed in November is 96.3%.

Stimulated by the dovish stance of the Fed and strong U.S. economic data, which increases concerns about the budget deficit, U.S. Treasuries have seen a decline comparable to the Greenspan era of 1995 since the Fed's rate cut in September, with the 10-year U.S. Treasury yield returning to above 4.2% this week.

Recently, mortgage rates have soared, leading to a drop in U.S. home purchase and refinancing applications to the lowest level since August last week, and September's existing home sales fell to a near 14-year low. Amid doubts about the pace of the Fed's rate cuts, the asset size of U.S. money market funds has also risen to a record high of $6.51 trillion.

Demand for the Fed's overnight reverse repurchase agreement is approaching a drop below $200 billion, close to the lowest level in three and a half years. Wall Street estimates that once the usage of the reverse repurchase agreement approaches zero, central banks will have to stop quantitative tightening.2. Ueda Kazuo Implies No Interest Rate Hike Next Week

The Bank of Japan is set to make its latest policy decision on October 31st, with investors looking for clues on the timing of another interest rate hike. Bank of Japan Governor Ueda Kazuo stated this week that there is ample time to carefully examine the risks facing the economy when deciding when to raise interest rates again. He indicated that the market remains unstable, with implied volatility still "quite high," suggesting that the central bank is not letting its guard down against the risks of renewed volatility.

Looking at the data, the initial Japanese PMI reading shows economic weakness at the beginning of the fourth quarter, with confidence in the outlook for the next 12 months diminishing to the lowest level since August 2020.

Regarding the yen, Ueda Kazuo said, "Part of the recent decline in the yen is due to the warming optimism about the U.S. economy." Japanese Finance Minister Kato Katsunobu warned that he will "closely monitor the foreign exchange market with a stronger sense of urgency, including the surveillance of speculative transactions."

Additionally, the Bank of Japan stated in its latest "Financial System Report" that the activity level in the Japanese stock market has been higher than the historical trend level this year, but valuations have not been significantly overheated, with the price-to-earnings ratio consistently remaining at the historical average level.

3. Central Bank Conducts First Swap Facility Operation!

The People's Bank of China has conducted the first swap facility operation for securities, fund, and insurance companies, with an amount of 50 billion yuan, using a bidding fee rate method. Twenty institutions participated in the bidding, with the highest bid fee rate at 50 basis points and the lowest at 10 basis points, and the winning bid fee rate at 20 basis points.

This week, securities firms have successively completed the first pledged repurchase transaction across the market, the first government bond exchange transaction, and the first batch of government bond pledged repurchase transactions. CICC secured the first pledged repurchase transaction on Monday; on Tuesday and Wednesday, Guotai Junan Securities successively completed the first government bond exchange transaction and the first batch of government bond pledged repurchase transactions across the market. In addition, CITIC Securities has completed the first batch of swap facility operations in the Shanghai and Shenzhen stock exchanges, and Caitong Securities has completed the pledged operation procedures related to the first transaction.

Several securities firms have indicated that they will actively use the swap facility to borrow funds to increase their stock holdings. It is reported that E Fund, Huaxia Fund, and Harvest Fund, the three leading public fund institutions, are also actively participating in the first batch of swap facility operations.4. The European Central Bank begins discussions on whether to lower interest rates below neutral levels

Money markets have increased their bets on the European Central Bank cutting interest rates this week, with the probability of a 50 basis point cut in December once estimated at 40%. Sources say that the European Central Bank has begun discussions on whether interest rates need to be lowered below neutral levels.

In the face of heightened risks to the economic outlook, more dovish officials such as ECB Governing Council member Centeno advocate for a more significant rate cut, stating the possibility of a substantial rate cut in December; others, including Austrian Central Bank Governor Holzmann and Dutch Central Bank Governor Knot, argue that current economic data does not justify a more significant rate cut, with the German Central Bank Governor even warning against hasty rate cuts and the need to maintain policy flexibility.

European Central Bank President Lagarde believes that the direction of interest rate cuts is clear, but the pace of rate cuts remains to be decided, and the possibility of taking more significant action is not ruled out. She also pointed out that the central bank has made very good progress in fighting inflation so far. Chief Economist Lane echoed a similar view, emphasizing that there are no signs of a sharp economic slowdown.

5. Bank of Canada cuts interest rates for the fourth consecutive time

The Bank of Canada cut interest rates by 50 basis points to 3.75% this week, stating that as inflation drops to around the 2% target, it decided to lower interest rates to support economic growth, and said that if economic development is roughly in line with expectations, it will further lower interest rates. This is the fourth consecutive rate cut by the bank. The Bank of Canada Governor stated that the current focus is to maintain low and stable inflation, and it is necessary to ensure a smooth economic landing.

6. Tesla's stock price erases full-year lossesTesla's latest quarterly profit exceeded expectations, with the company projecting a "slight increase" in vehicle deliveries for this year. Its stock price surged by 22% in a single day, ranking second in its history, which has turned its stock price positive for the year. Elon Musk's wealth increased by $33.5 billion overnight.

The financial report shows that Tesla's net profit for the third quarter was $2.167 billion, exceeding the expected $1.78 billion, with a gross margin of 19.8%, higher than the expected 17.3%. Revenue grew by 8% to $25.2 billion, slightly below the average expectation of $25.4 billion. In addition, Tesla's cost per vehicle sold dropped to its lowest historical level, around $35,100, and the Cybertruck achieved quarterly profitability for the first time. Tesla still expects mass-market vehicles to begin production in the first half of 2025.

This increase in Musk's wealth is the third-largest in his history, bringing his wealth to $270.3 billion, $61 billion more than Amazon founder Bezos, who ranks second. It is worth noting that this wealthy individual received a warning letter from the U.S. Department of Justice for claiming to distribute $1 million daily to American voters.

7. Blinken's 11th trip to the Middle East, ceasefire negotiations to resume next week

As U.S. Secretary of State Blinken arrived in the Middle East for the 11th time, Israel and Hezbollah continue to exchange fire. The Chief of General Staff of the Israeli military stated that Israel may soon end the conflict with Hezbollah, as it has fundamentally destroyed Hezbollah's high-level command system in Lebanon.

Blinken said that the United States completely rejects any move by Israel to re-occupy Gaza. It is crucial that Israel's response to Iran's attack on October 1 does not lead to a greater escalation. Iran's foreign minister stated that they are closely monitoring U.S. bases in the Middle East. The spokesperson for the Israel Defense Forces issued a statement in the early morning of the 26th local time, stating that they are conducting precise strikes on Iranian military targets in response to Iran's recent attacks on Israel. Israel also carried out air strikes on military facilities in southern and central Syria on the same day.

Additionally, the United States and Israel stated that representatives for a ceasefire in Gaza will meet next week. A senior Hamas official stated that the Hamas delegation went to Cairo to hear the proposed ceasefire agreement, but the organization's stance has not changed. The Governor of the Bank of Israel predicted that the country's operations on multiple fronts will continue until the first quarter of next year.

8. "BlackRock's massive purchase of Pinduoduo" turned out to be a misunderstanding.On Tuesday, Pinduoduo's stock price rose significantly during the trading session before falling back. In terms of news, a filing disclosed by BlackRock on Monday showed that its holdings in Pinduoduo increased dramatically from 29 million shares in the second quarter to over 132 million shares, equivalent to 9.5% of Pinduoduo's total share capital. BlackRock issued another announcement around Tuesday evening, reducing its holdings in Pinduoduo to approximately 33 million shares by dividing the number by 4, changing the shareholding ratio to 2.4%, as each ADS of Pinduoduo is equivalent to 4 Class A ordinary shares.