Daily Briefing | 2026-10-10: High Interest Rates Test AI Investment and Policy Support

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Today's main theme

The common thread over the past 24 hours has been that high energy prices and high financing costs are beginning to force governments, businesses, and investors to reprioritize. Global stock markets are still supported by large-cap tech stocks, but the yield on 10-year U.S. Treasury bonds remains above 5%, and fiscal risks in France continue to push up the risk premium in Europe. The massive capital requirements for AI infrastructure therefore face stricter scrutiny of returns. China's 550 billion yuan local government debt outstanding limit to supplement grassroots financial resources and ongoing projects indicates that stabilizing growth is shifting from policy statements to the implementation of funds. Meanwhile, SpaceX's purchase of low-frequency spectrum has impacted the valuation of traditional telecommunications companies, while the Russia-US diesel arrangement directly links inflation, sanctions, and electoral politics. The market remains willing to take risks, but its demands for cash flow, policy credibility, and supply security have increased significantly.

Five key news items

I. Global stock markets rebounded, but high interest rates and oil prices continued to squeeze valuation space.

On October 9, global stock markets rose ahead of the start of earnings season for major U.S. banks: the S&P 500 and Nasdaq Composite both closed up about 0.6%, the European STOXX 600 rose 1%, and Asia-Pacific stock indices also generally strengthened. However, the rise in risky assets has not eliminated the pressure on capital costs. The yield on the 10-year U.S. Treasury note rose 2.8 basis points to 5.261% on the day, after hitting a 24-year high earlier this week. The spread between French 10-year government bonds and German bonds is about 138 basis points, reflecting that investors are still demanding higher compensation for fiscal deficits, public debt, and political uncertainty. Brent crude oil closed at around $104 a barrel, gold rose about 1.5% to $4,193, and the euro fell for the fifth consecutive week. The rise in the stock market while bonds and gold remain priced at high risk indicates that funds prefer large technology companies with guaranteed profitability rather than a recovery in overall risk appetite. Next, we need to see whether US inflation data, the Federal Reserve meeting on October 27-28, and the third-quarter results of companies such as JPMorgan Chase, Goldman Sachs, and Wells Fargo can support the current valuation.Source: Reuters

II. China utilizes 550 billion yuan of local government debt outstanding quota to accelerate the implementation of fiscal support.

On October 9, China's Ministry of Finance allocated a 550 billion yuan local government debt balance limit, equivalent to approximately US$82 billion, to replenish local financial resources and expand effective investment. Of this, 300 billion yuan will be used to support the daily operation of grassroots governments in counties and districts, while the remaining 250 billion yuan will be focused on projects under construction and eligible infrastructure in major economic provinces. The Ministry of Finance released policy information on its official website on the same day; Reuters points out that this scale exceeds similar arrangements at the end of 2024 and 2025, against the backdrop of weak consumption and investment, a continued real estate adjustment, and pressure on economic growth to target 4.5% to 5% for the whole year. The direct effects of the policy are twofold: firstly, to alleviate cash flow constraints on grassroots finance and reduce the risk of overdue payments and project shutdowns; Second, we will enable existing projects to generate physical work more quickly and avoid excessively long approval cycles for new projects. It is not a comprehensive stimulus, nor will it automatically solve the problems of insufficient resident demand or real estate companies' balance sheets. Therefore, the market should observe the speed of fund allocation, local government supporting financing, whether infrastructure construction has started and private investment has rebounded, and whether policies can improve rather than continue to squeeze the sustainability of local government debt.Source: Ministry of Finance｜Additional reporting: Reuters

III. Firmus withdraws $5 billion IPO, AI infrastructure enters "return review" phase

Firmus, an Australian AI data center operator backed by Nvidia, Blackstone, and Coatue, withdrew its planned $5 billion IPO on October 9, instead seeking private equity funding and reserving the possibility of listing in other international markets in the future. This deal was originally set to become the second largest IPO in Australian history, with a proposed offering price corresponding to an equity valuation of approximately US$30.6 billion, nearly three times the company's August funding valuation of US$10.5 billion. Analysts estimate its debt at about $30 billion and its corporate value at about $60 billion. Investor concerns stem not only from high valuations, but also from limited construction records, a partner's withdrawal from a 1.6-gigawatt project, and more lenient lock-up arrangements for existing shareholders. The company currently has only two leased and operated data centers in Melbourne and Singapore, but plans to build five more in the Asia-Pacific region and expects to generate $5 billion in annual revenue within five years. The significance of this event lies in the fact that the capital market has not denied the demand for AI, but has begun to distinguish between chip orders, data center capacity, customer contracts, and realizable cash flow. The subsequent variables are whether private equity firms can replenish funds, whether debt costs will continue to rise, whether the capacity under construction can be launched on schedule, and whether the needs of clients such as OpenAI can be translated into long-term returns.Source: Reuters

IV. SpaceX spends approximately $8 billion to acquire low-frequency spectrum, impacting the valuations of traditional telecommunications companies.

SpaceX has agreed to acquire an 800 MHz low-frequency spectrum license covering approximately 14 MHz across the United States from Grain Management for a deal valued at approximately $8 billion. The goal is to enable Starlink Mobile to combine satellites with terrestrial networks to provide Mobile services that directly connect to terminals. Low-frequency spectrum has longer coverage distances and stronger building penetration capabilities, making it an important resource for traditional operators to build nationwide networks. Therefore, the news quickly triggered valuation repricing: T-Mobile US fell 13.2%, Verizon fell about 10%, Deutsche Telekom fell 7.9%, and the Eurotelecom index fell by more than 2.9%. Conversely, the three U.S. tower companies rose 6.5% to 13.3% as hybrid networks may still require rooftops, small base stations, and towers. The deal is still pending approval from the U.S. Federal Communications Commission, and SpaceX also needs ground deployment, roaming arrangements, and service quality verification. It will not completely replace cellular networks in the short term. But it pushes satellite communications from a supplementary service in remote areas to mainstream mobile competition, potentially changing spectrum auctions, operator capital expenditures, and cooperative bargaining. Going forward, attention should be paid to FCC review, Starlink terminal compatibility, city capacity performance, and whether traditional operators will respond with alliances, price reductions, or accelerated satellite cooperation.Source: Reuters

V. The United States eases restrictions on the import of Russian diesel, creating tension between energy inflation and sanctions policies.

On October 9, US President Trump said that Russia agreed to immediately supply more than 300,000 tons of diesel to the US and global markets, with another 500,000 tons to be supplied in November, followed by an increase of 1 million tons. The U.S. Treasury Department also issued a general license allowing the import of Russian diesel until April 7, 2027. When the arrangement was announced, the average price of diesel in the United States had risen to $6.28 per gallon on October 8, an increase of about 70% since the US-Israel war against Iran began on February 28, putting direct pressure on agriculture, transportation, heating and commodity prices. Following the announcement, U.S. diesel futures fell by more than 4.8% to $4.64 per gallon. The first batch of 300,000 tons is equivalent to approximately 2.25 million barrels, while the United States itself exports about 1.5 million barrels per day. Therefore, analysts believe that its effect on continuously lowering prices is limited. More importantly, it has created policy tension with the energy sanctions imposed by the United States due to the Russia-Ukraine war, which has also drawn criticism from Ukrainian President Zelensky. The incident shows that pre-election cost-of-living pressures are changing the boundaries of energy diplomacy. Going forward, it remains to be seen whether the actual supply capacity of the Russian refinery after the attack, settlement and transportation arrangements, whether the United States will further waive sanctions, and whether the new supply can reduce the price spread of refined oil cracking products rather than just causing temporary fluctuations.Source: Reuters

Market Correlation and Today's Observation

Today's asset pricing presents a combination of "strong stocks, stressed bonds, high gold prices, and high oil prices". On the interest rate side, the US 10-year yield is around 5.26%, which means that all forward cash flows must be measured using a higher discount rate. Firmus's withdrawal of its IPO is a real case of AI valuation shifting from narrative to financing capabilities. If U.S. inflation exceeds expectations next week, tech stocks may still face valuation compression even with earnings growth. On the exchange rate side, the euro weakened for the fifth consecutive week. The divergence between French fiscal risks and the resilience of US growth remains positive for the dollar, but the rise in gold prices indicates that investors are also hedging against policy and geopolitical risks. On the commodity side, Brent crude oil prices are still above $100, and Russian diesel can only alleviate local shortages of refined oil products, but it is difficult to eliminate the supply risks of Middle Eastern shipping and refineries. In terms of risk appetite, the index's rise mainly relied on large-cap technology stocks, while telecommunications stocks fell sharply due to SpaceX spectrum trading, indicating that funds were not indiscriminately chasing the rise. In China, the 550 billion yuan local government bond quota will help support infrastructure and grassroots finance. If faster spending occurs in the future, it will improve industrial demand and RMB expectations. However, its sustainable effects still depend on household consumption, real estate recovery, and private investment. Today, we will focus on observing US inflation expectations, whether long-term bond yields will hit new highs, the credit quality in bank financial reports, and the actual pace of China's fiscal release.

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