(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

Oct 16 - What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

A combination of ongoing optimism over the AI boom, impressive

U.S. bank earnings and an upturn in U.S. business surveys all

boosted world stock markets despite U.S.-China trade tensions

and the U.S. government shutdown.

After Dutch chip equipment giant ASML's beat on Wednesday,

Taiwan's TSMC forecast fourth-quarter revenue up by as much as

24% on Thursday and said "the AI megatrend is strengthening".

The updates follow a flurry of huge deals between AI firms and

chipmakers in the past month, notably by OpenAI with Nvidia,

Advanced Micro Devices and Broadcom to build $1 trillion or more

in data center capacity. An investment consortium including

BlackRock, Microsoft and Nvidia said on Wednesday it will buy

one of the world's biggest data center operators in a $40

billion deal.

The tech optimism comes after string of upbeat results from U.S.

banks this week, with Morgan Stanley and Bank of America shares

gaining more than 4% each on Wednesday and the S&P500 index

advancing 0.4%. Stock futures were higher again ahead of today's

open, with European stocks rising too - led by a 9% surge in the

world's largest packaged food firm Nestle on its latest results

and big job-cutting plan.

Even as Federal Reserve officials continue to sound dovish

about further easing and estimates of the economic cost of the

government shutdown emerge, the stock market optimism was

underlined by an unexpected upturn in the New York Fed's latest

business survey for October. Treasury yields held steady and the

dollar weakened, with more hawkish soundings from the Bank of

Japan lifting the yen despite the political hiatus in Tokyo.

There was little sign of a breakthrough in the latest trade row

between Washington and Beijing. French Prime Minister Sebastien

Lecornu survived the first of two no-confidence votes in

parliament, after winning crucial backing from the Socialist

Party thanks to his pledge to suspend President Emmanuel

Macron's contested pension reform. French stocks and the euro

were higher.

Gold continued to set new record highs.

* While President Trump declared the U.S. is "in a trade

war,"

Treasury Secretary Scott Bessent signaled Washington does not

seek escalation and left the door open to extend tariff

reprieves, with a potential Trump-Xi meeting in South Korea

later this month. Markets split the difference: AI optimism

lifted semis and Asia tech, gold hit new highs, and the dollar

drifted as rare earths and port-fee salvos kept nerves taut.

* A U.S. district judge in California halted the

administration's

plan to lay off thousands of federal workers during the

shutdown, after unions argued the move was unlawful. The ruling

stems from reports that more than 4,100 notices had already gone

out and that cuts could surpass 10,000, limiting immediate drag

from government payrolls but prolonging policy uncertainty.

* Japan's yen firmed and its government yield curve

flattened even

as Liberal Democratic Party leader Sanae Takaichi looked set to

secure support to become the country's next prime minister.

Hawkish Bank of Japan board member Naoki Tamura said interest

rates should rise and Japan's finance minister Katsunobu Kato

told G7 counterparts that policymakers must be vigilant against

excessive yen moves.

In today's column, I discuss why a dovish Fed and talk of an

early end to quantitative tightening don't jibe with the signals

coming from banks and why this risks exacerbating already loose

financial conditions.

Today's Market Minute

* TSMC, the world's biggest producer of advanced AI

chips, forecast fourth-quarter revenue up by as much as 24% as

it rides an AI boom that saw it post its sixth consecutive

quarter of double-digit profit growth, beating estimates.

* Chinese state media on Thursday issued a seven-point rebuttal

to U.S. calls for Beijing to wind back its rare earth controls,

as both sides struggle to move beyond a volley of barbs and

accusations of blindsiding the other.

* The two-week-old federal government shutdown may cost the U.S.

economy as much as $15 billion a week in lost output, a Treasury

official said late on Wednesday, correcting an earlier statement

from Treasury Secretary Scott Bessent that put the cost at up to

$15 billion per day.

* U.S. President Donald Trump said on Wednesday that Indian

Prime Minister Narendra Modi has pledged to stop buying oil from

Russia, and Trump said he would next try to get China to do the

same as Washington intensifies efforts to cut off Moscow's

energy revenues.

* The International Energy Agency continues to forecast a

significant supply glut in the oil market, but uncertainty over

the whereabouts of almost 1.5 million barrels per day of crude

oil is throwing this projection into doubt. Read the latest from

ROI energy columnist Ron Bousso.

* After years-long beat-downs, several U.S.-listed clean energy

stocks are on a tear and are handily outperforming most

established energy majors despite U.S. President Donald Trump's

policy push away from clean energy since retaking office, writes

ROI global energy transition columnist Gavin Maguire.

Chart of the day

China's economy likely grew at its weakest pace in a year in

the third quarter, with the slowdown set to deepen and threaten

the official growth target, a Reuters poll showed, raising

pressure for fresh stimulus as a trade war with the U.S. saps

confidence.

Today's events to watch

* Philadelphia Federal Reserve's October business survey

(8:30 AM EDT) NAHB October housing market survey (10:00 AM EDT)

* Federal Reserve Board Governors Christopher Waller,

Stephen Miran and Michael Barr and Fed Vice Chair Michelle

Bowman all speak; Minneapolis Fed President Neel Kashkari and

Richmond Fed boss Thomas Barkin also speak; Bank of Canada

Governor Tiff Macklem speaks

* International Monetary Fund and World Bank meetings in

Washington, with G20 finance chiefs meeting on the sidelines.

Speakers include European Central Bank President Christine

Lagarde and ECB chief economist Philip Lane

* U.S. corporate earnings: Bank of New York Mellon, M&T Bank,

Travelers, US Bancorp, Charles Schwab, Interactive Brokers,

Snap-On, Marsh & McLennan, CSX, KeyCorp

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Opinions expressed are those of the author. They do not reflect

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