U.S. Indexes closed higher on Monday, owing a large part of the gains to a strategic partnership announced between NVIDIA and OpenAI. The deal is to see NVDA invest up to USD 100 billion in OpenAI, deploying 10GW of AI centres, first to deploy in 2026. NVDA (+3.9%) saw upside on the news alongside a boost to the semiconductors and the tech sector, as well as equity indices. Meanwhile, Communications was the clear laggard amid lacklustre trade in Alphabet (GOOGL, -0.9%) and Meta (META, -1.7%). Macro updates were largely contained to central bank speakers. At the Fed, caution was argued from Musalem (2025 voter) and Bostic (2027 voter), the latter citing concerns over inflation. Meanwhile, Hammack (2026 voter) revealed herself as being in the upper end of estimates for neutral. Governor Miran further explained his dissent, reiterating his softer outlook on inflation amid immigration and fiscal policies. In FX, the Dollar Index traded lower due to strength in both Sterling and the Euro. Despite the numerous Fed speakers on the calendar, moves in the FX and Treasuries were muted in the wake of the remarks. T-Notes settled marginally lower ahead of the 2-year supply on Tuesday and S&P Global’s Flash PMI (Sept). Fed Chair Powell will be the key event on Tuesday, where he is due to speak on the economic outlook; Bowman (voter, dove) and Bostic (2027 voter, Hawk) will speak. Separately, crude prices were little changed following light newsflow. Energy developments included reports that Iraq is to sign a deal with oil firms to resume Kurdish exports, likely bringing back 230k BPD to international markets. Elsewhere, Gold prices benefitted from the softer dollar, continuing its ascent to new record highs, now trading a touch below USD 3,750/oz. In EMs, the ARS surged after US Treasury Secretary Bessent announced “all options are on the table” for the US to support Argentina’s government. Fed Governor Miran (voter), in his remarks explaining his dissent at last week’s FOMC (where he voted for a larger 50bps rate reduction), said he sees policy as ‘considerably restrictive’ and a threat to momentum, and he favours a quicker move to neutral. He argued that it was better to vote for what he believes in, rather than trying to support consensus, adding that unless something changes, he will continue to press for rate cuts, and is willing to dissent again. He believes the appropriate funds rate is mid-2%, and that restrictive rates would risk layoffs and higher unemployment. Miran said his focus was on lowering inflation and supporting the labour market; he remains committed to 2% inflation and anticipates rent inflation falling from 3.5% to 1.5% by 2027. Miran argues forecasters have underappreciated the impact of immigration policy on rent inflation and notes that net zero immigration would imply 1ppt lower rent inflation per year. Fed Member Hammack (2026 voter) said last week’s rate cut reflected a changing balance of risks. She warned the Fed should be cautious in removing policy restrictions, noting her estimate of the neutral rate is relatively high versus the rest of the Committee, and she thinks that current policy is only modestly restrictive. Hammack cautioned that easing too quickly could fuel inflation and risk overheating the economy. On inflation, Hammack expects pressures to persist, driven by both goods and services. On the labour market, she said headline payrolls show some softening, but unemployment at 4.3% remains healthy. Hiring is cautious, with businesses reluctant to expand, but indicators such as the openings-to-unemployed ratio suggest a robust market. She expects unemployment to rise slightly but is not seeing significant layoffs. The Fed’s Bostic -2027 voter – confirmed to the Wall Street Journal his position on the September 2025 dot plot, seeing no further rate cuts as of now, a view he has held for some time (he previously argued for one cut this year). Bostic cited inflation concerns behind his hesitation to support further easing in October, even though economic risks have shifted in recent months toward greater worries about employment. However, Bostic said the dot plot submissions were filled out “with a very light pencil”, highlighting Chair Powell’s remarks post-FOMC last week, that the projections do not indicate a set path for rates, but a lens of probabilities. The Atlanta Fed President named the current moment as “one of the most difficult” periods for policymakers because “both risks are rising”. Bostic does not believe that the labour market is in crisis right now. “It’s an open question about exactly how weak it is”. Ahead, he sees core inflation at 3.1% by year-end (prev. said 2.9% in July) and the unemployment rate at 4.5%. He does not expect inflation to return to the 2% goal until 2027. On tariffs, Bostic said tariff-driven cost increases have been more muted than initially projected in part because businesses have used various strategies that are spreading out or delaying the pass-through to consumers. “Those buffers could be exhausted over the coming months”. In that case, the economy might avoid a much-feared immediate run-up in prices but instead endure a longer period of moderate price pressures. Bostic estimates that workforce supply constraints explain around one-third of the recent slowdown in hiring. He expects those pressures to increase because of an approximately one-year lag starting from when people immigrate and when they receive work permits. This means immigrants who legally entered the country last year could still be moving into the workforce. “The supply challenge is going to get more acute.” Elsewhere, Oil closed flat following a volatile trading session while Gold surged a further 1.65%, closing at a new all-time high at $3745.
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