(Oct 15): Is an October Fed hike back on the table? The release of hot headline and core September US inflation figures sent markets into a tailspin on Wednesday, with futures markets at one point showing as much as a ​50-50 chance that the Federal Reserve may raise interest rates again this month.

Even if the central bank is able to sidestep another hike just days before ‌the US midterm elections, some think the Fed could hike rates in December by as much as 50 basis points. Fed Chair Kevin Warsh will be in the spotlight on the issue when he speaks early tomorrow at the IMF meeting in Bangkok.

I’ll get into all that and more below.

But first, check out my latest column on the worrying weakness in the US if you strip away the AI boom.

The latest inflation and rates ​jolt relit the fuse on this week’s AI stock selloff, with notable declines in the debt and equity of data center builder CoreWeave as ⁠well as Oracle. Chip and tech stocks fell more broadly, pushing the S&P 500 down by more than 1%.

That selloff ripped through Asian equities again today, with South Korea’s Kospi tanking ​more than 7% and the Nikkei falling 5%.

For bonds, an interesting dynamic is now playing out. Treasury yields spiked initially on the inflation news and rethink of a potential October Fed hike. ​But yields then retreated sharply as the AI complex came under fire, reflecting a "flight to safety" amid fears of a big stock market correction.

Yesterday was another down day for the big US banks, as their sweep of disappointing earnings, this week added to the broad market pressure.

And if you were hoping for any serious relief from energy prices, then look away. Crude prices have eased slightly early on Thursday, with Brent now trading ​around $104 a barrel, as the Trump administration says it is considering easing sanctions on so-called shadow fleet vessels that have transported oil and refined products from countries including Russia, Iran and ​Venezuela.

But the geopolitical backdrop is only getting messier. Ukrainian President Volodymyr Zelenskiy spoke of "betrayal" on Thursday for what he perceives as the President Trump's favoritism toward Russia.

Ukrainian officials have complained that they had not received ‌any US ⁠early-warning alerts in recent days of incoming Russian ballistic missiles, and they said the military version of Elon Musk's Starlink satellite communications service had been slowed across the country.

Ukraine resumed hitting Russian refineries as a result, likely quashing any hopes that Donald Trump’s sanctions waiver on Russian diesel exports will lower prices much before next month’s US elections. European Union leaders meeting in Brussels today will consider their response.

Meanwhile, the Iran war rages on, as a container ship was sunk by a mine in the Strait of Hormuz on Wednesday and Yemen's Iran-aligned Houthis struck the headquarters of ​Saudi Aramco.

Tech stocks went into ​another tailspin over the past 24 hours ⁠as disappointment over AI firms’ revenue growth, Federal Reserve rate rise jitters after another hot inflation update, and midterm election speculation saw the most indebted AI-linked firms under fire.

Data center builder CoreWeave and cloud giant Oracle were in the eye of the storm, as some investors looked ​to hedge exposure to the AI complex via the credit default swaps of the most leveraged players in the AI investment frenzy. ​The stock of those ⁠two dropped 15% and 10% respectively on Wall Street on Wednesday, but their soaring CDS rates have blown out even further. CoreWeave CDS topped 600 bps on Wednesday and soared above 1,000 basis points early today.

Uploaded by Siow Chen Ming