Fed Hawk Talk Triggers Sell-Off, US Stocks Post Biggest Drop in a Month

Market Overview

Yesterday, hawkish comments from Federal Reserve officials fueled doubts about the prospect of a December rate cut, leading to rising risk aversion and a large-scale sell-off in US stocks. All three major indices recorded their biggest single-day decline in a month, with the Nasdaq index falling over 2%, and the S&P and Dow each dropping over 1%. Tech stocks led the decline, with Disney and Tesla—which had disappointing quarterly revenue—leading the component stocks; chip stocks and AI concept stocks were also hit hard, with Nvidia and AMD both falling over 3%. In response, US Treasury prices retreated, and the yield on the 10-year Treasury note moved up from a two-week low. In the foreign exchange market, the US dollar index fell to a two-week low, while the offshore Chinese Yuan (CNH) rose past 7.10, hitting a two-week high. The cryptocurrency market entered a bear market, with Bitcoin falling below the $100,000 mark and Ethereum briefly dropping over 10%. In commodities, crude oil prices rebounded slightly, while gold, after hitting a three-week high during the session, turned lower.

Upcoming Highlights

US House Passes Stopgap Funding Bill: The US House of Representatives passed a temporary federal funding bill, a decisive step toward ending the longest government shutdown in US history. The government faces a lengthy restart process after the shutdown ends, with a return to normal operations possibly taking several days or more than a week. The Congressional Budget Office estimates the six-week shutdown will reduce Q4 GDP by 1.5 percentage points, resulting in a net loss of approximately $11 billion.

Gold Rebounds Sharply! Citi Calls for $6,000: Citi believes that in a bull-case scenario, the price of gold will rise to $6,000 by 2027. The core logic is the huge mismatch between global wealth and the small physical gold market. The report estimates that a mere 1.5% increase in global household wealth allocation to gold would consume 18 years of mine supply, a supply-demand imbalance that can only be resolved by a price surge. Furthermore, the main driver of the current rally is US investors, not central banks, with their ETF inflows contributing to most of the global increment.

Key Focus (GMT+8)

18:00 EU Eurozone Q3 GDP Annualized Revision

22:20 US Speech by Raphael Bostic, President of the Federal Reserve Bank of Atlanta and 2018 FOMC voting member

23:05 US Speech on Economic Outlook and Monetary Policy by Esther George (Schmid), President of the Federal Reserve Bank of Kansas City and 2025 FOMC voting member

Overnight

03:30 US Lorie Logan, President of the Federal Reserve Bank of Dallas and 2026 FOMC voting member, participates in a fireside chat

04:20 US Raphael Bostic, President of the Federal Reserve Bank of Atlanta and 2027 FOMC voting member, attends a conference and participates in a dialogue