Daily Briefing | October 9, 2026: Fed Tightening and Middle East Negotiations Affect Global Assets

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Today's main theme

Over the past 24 hours, two forces in global asset pricing have clashed again: U.S. inflationary pressures and high long-term interest rates have suppressed tech stock valuations, while signals from Middle East negotiations have temporarily eased the worst-case scenario of oil supply disruptions. Federal Reserve officials emphasized the possibility of continuing interest rate hikes, but retained flexibility in the pace; AI infrastructure companies need to raise huge sums of money and are facing stricter market scrutiny due to rising financing costs. At the same time, the People's Bank of China clarified its stance on the RMB exchange rate, responded to pressure from Europe regarding trade imbalances, and emphasized market supply and demand and expanding domestic demand. The Russia-Ukraine conflict serves as a reminder to investors that the costs of protecting energy facilities and livelihood infrastructure will not disappear with a single diplomatic statement. The common theme today is not a single "safe haven" or "easing," but rather a simultaneous reassessment of the price of funds through policy, war, and capital expenditure: bond yields, oil prices, exchange rates, and corporate cash flows together determine the direction of risky assets. The focus should be on whether the negotiations translate into actual shipping improvements, and whether monetary policy and technology investment can remain resilient in a high-cost environment.

Five key news items

1. Federal Reserve Waller argues that interest rate hikes are still necessary, but the October meeting allows for flexibility.

On October 8, Federal Reserve Governor Christopher Waller said that in order to bring inflation back to the 2% target, policy interest rates may need to be raised in the future, but this does not mean that interest rates must be raised continuously at every meeting. His speech at a central bank forum in Istanbul left room for the October meeting to temporarily hold rates steady and also allowed markets to shift their focus to subsequent data rather than a single official statement. The Federal Reserve raised interest rates by 25 basis points in September, bringing the current policy interest rate range to 3.75%-4%. Officials' judgment on whether to raise interest rates again before the end of the year is influenced by energy prices, demand resilience, and inflation expectations.ReutersThe report also mentioned that geopolitics and investment demand in artificial intelligence could increase price pressures. Its importance lies in the fact that "pausing" does not equate to "shifting to interest rate cuts": if oil prices remain high, long-term bond yields and corporate financing costs may continue to remain high. Going forward, we should observe U.S. inflation, employment, wages, and statements from other Federal Reserve officials regarding the October and December meetings, especially distinguishing between short-term policy expectations and changes in the maturity premium of long-term Treasury bonds.

2. Nvidia-backed Firmus cancels IPO, AI infrastructure faces financing test

On October 9, Firmus, an Australian AI data center operator, announced the shelving of its initial public offering (IPO), which aimed to raise approximately $5 billion, and instead sought private market financing. Firmus, backed by investors such as Nvidia, originally planned to issue at AU$11 per share, corresponding to an equity valuation of approximately AU$30.6 billion, almost three times the valuation after the August financing. Investors expressed concerns about the size of the debt, the ability to implement the project, and the news that a development partner had withdrawn from the cooperation.ReutersAccording to reports, potential buyers withdrew their subscription intentions during the bookkeeping process. This does not mean that the demand for computing power has peaked, but it does show that the market is beginning to demand huge AI capital expenditures corresponding to verifiable contracts, power generation and heat dissipation capabilities, and stable cash flow. Another articleReuters Market AnalysisAccording to Morgan Stanley estimates, AI infrastructure may require approximately $1.5 trillion in external financing by 2028. If long-term bond yields remain high, the financing costs and payback periods for large-scale data centers will become more sensitive. Going forward, we need to track the progress of Firmus's alternative financing, cloud service order fulfillment, and the financing spreads and balance sheets of our peers.

3. The People's Bank of China clarifies its RMB policy and responds to the European trade imbalance controversy.

On October 8, the People's Bank of China released its RMB exchange rate policy stance, reiterating the implementation of a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies, and emphasizing that China has neither the need nor the intention to gain a competitive advantage in trade through RMB depreciation. The central bank also pointed out that exchange rates are affected by multiple factors such as growth, monetary policy, and geopolitical risks, and do not have a simple linear relationship with the current account.Policy stance of the People's Bank of China (reprinted by the Shanghai Municipal Financial Regulatory Authority)Contains a complete description,Xinhua NewsThe news was also released on the 8th. European officials continue to focus on the trade deficit with China, with the EU's goods trade deficit with China expected to reach approximately €360.6 billion in 2025, a 15% increase from the previous year.ReutersIt was pointed out that RMB policy has become the focus of Sino-European economic and trade discussions. This statement places exchange rate stability, industrial competitiveness, and expanding domestic demand within the same policy framework, and also opposes attributing trade imbalances solely to exchange rates. Going forward, it remains to be seen whether the two-way fluctuations in the RMB, European trade measures, China's export and import data, and policies to expand domestic demand can improve the growth structure.

4. The US has postponed military action against Iran; oil prices have fallen, but risks in the Strait have not disappeared.

On October 8, US President Trump stated that he would not launch a new military strike against Iran before the US midterm elections on November 3, and said that negotiations between the two sides had made some progress. The relevant statements have eased market concerns about a short-term escalation of the conflict, but no formal ceasefire or agreement on the full resumption of navigation in the Strait of Hormuz has yet been reached, and the two sides still have differences on conditions such as the nuclear issue.ReutersThe background of the negotiations and the domestic political pressure in the United States are reported. During Asian trading on October 9, Brent crude oil futures fell by about 92 cents to $103.36 a barrel, while WTI futures fell by about 75 cents to $90.74.ReutersIt was pointed out that shipping security, sanctions, and supply across the Strait remain key variables. Diplomatic détente can temporarily lower the oil price risk premium, but it cannot immediately eliminate freight and insurance costs. Going forward, attention should be paid to whether the negotiations translate into verifiable shipping arrangements, actual tanker throughput, and changes in supply from oil-producing countries. We cannot judge the end of the energy crisis solely based on political statements.

5. Ukraine reinforces gas stations to prepare for winter, making energy facilities the focus of a war of attrition.

On October 9, Ukraine's state-owned oil company Ukrnafta introduced protective measures for gas stations: installing sand blast barriers, concrete shelters, backup diesel generators, and imported fuel reserves to reduce the impact of Russian airstrikes on civilian energy supplies during the winter. Companies say they expect fuel demand to increase by about 10% to 15% during the winter; Ukraine's energy minister says more than 300 gas stations have been damaged in the past six months.ReutersAccording to reports, Ukrnafta operates approximately 660 gas stations and is installing protective facilities at some of them. Damaged stations can sometimes resume operations within days. Russia denies deliberately attacking civilian infrastructure, but the damage to its energy system caused by the war continues to expand. The economic implications of this are not only short-term fuel shortages, but also that wartime logistics, power generation, and repair costs are constantly eroding fiscal space, forcing Ukraine and its European partners to increase long-term aid. Going forward, the frequency of winter attacks, fuel inventory and import capacity, power supply stability, and the speed of international aid delivery should be observed. These variables may also influence regional risk appetite through European energy markets and defense budgets.

Market Correlation and Today's Observation

From a cross-asset perspective, the most alarming thing today is the coexistence of "short-term oil price decline" and "high long-term funding costs". The Federal Reserve may pause interest rate hikes in October, but officials still emphasize that inflation has not reached its target, meaning that the dollar and U.S. Treasury yields may not continue to decline in the same direction. If inflation rises again, the US dollar may receive support from interest rate differentials, while long-term yields will continue to suppress stock valuations. On the energy side, Iran negotiations allowed Brent crude to give back some of its gains from the previous day, but the risk of Hormuz shipping has not disappeared, and oil prices may still affect the bond market through transportation costs and inflation expectations. On the technology side, the demand for AI computing power is still growing, but the match between debt financing, data center power, and commercial cash flow will determine whether highly valued companies can afford high interest rates. On the Chinese side, the central bank emphasized that it should not compete for export advantages through devaluation, which means that observing the RMB cannot only be based on the US dollar index, but also takes into account Sino-European trade frictions, domestic demand, and cross-border capital flows. The continued attacks on Russian and Ukrainian energy facilities have put structural pressure on European finances, energy insurance, and defense spending. Next, US inflation and US Treasury auctions, actual crude oil shipments, RMB trends, technology company financial reports, and European security spending should be placed in the same risk monitoring table to avoid misinterpreting a single market rebound as a complete elimination of risk.

Cover image:Val Vesa / Unsplash