AI fizzes and banks are buoyant

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 a 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&P 500 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.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.* 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.Chart of the dayChina'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.