AI Trade Stumbles on Meta and Tesla as Oil Rises on Saudi Attacks
Thursday, 22 October 2026 — Stocks fell as the season's first megacap earnings failed to reassure investors about the rebound in the AI trade.
Our three themes for the day:
The first is the AI trade's earnings test. Meta beat on revenue and raised its spending plans, Tesla cut its capex, and neither reassured the wider market: Nasdaq 100 futures fell, the Kospi slid, and the CSI 300 is set for a bear market. The nonvoting share class says Meta expects to fund the build-out with equity as well as debt, and that is the part I would watch. With no megacap results until Microsoft and Alphabet next week, oil takes over as the driver.
The second is the bond market's split personality. Treasuries rallied on haven demand, with the 30-year yield at a one-month low, even as Brent climbed back above $110 on the Saudi attacks and strike planning after the midterms. Argentina shows the other side: the highest-beta credits are the first to go when US yields sit at multi-decade highs, and its domestic bid has thinned.
The third is a central bank week in waiting. The Bank of Korea held and talked up growth, New Zealand's inflation slowed, but the devil is in the detail as core measures firmed. Kazāks wants caution because the market has already tightened for the ECB, and the Bloomberg survey of BoJ watchers has moved to December. Next week's Fed, RBNZ, Bank of Canada, ECB and BoJ decisions will be judged against that backdrop.
Chart of the day
New Zealand CPI by component, y/y: headline 3.7% in the September quarter, tradables (imported) 4.3% and non-tradables (domestic) 3.3%. The domestic measure has settled above the top of the RBNZ’s 1-3% target band while the imported component swings with fuel. Source: Stats NZ, GGMA.
In brief
Meta beat on revenue and raised its AI spending plans but announced a nonvoting share class, and Tesla cut its capital-spending target, so Nasdaq 100 futures fell and Asian chip stocks slid.
China's CSI 300 was set for a bear market as the AI selloff met disappointment over stimulus and earnings, and the MSCI Asia Pacific Index fell with it.
Brent rose after deadly Houthi attacks in Saudi Arabia and a US order for non-emergency embassy staff to leave the kingdom, while the US and Israel allegedly drew up plans for strikes on Iran after the midterms.
The Bank of Korea held rates, raised its growth outlook and signalled more tightening, and the won firmed against the dollar.
New Zealand's inflation slowed more than expected in the third quarter, but firmer core measures keep an RBNZ rate rise next week on the table.
Most economists in a Bloomberg survey now expect the BoJ's next rate rise in December, and ECB Governing Council member Kazāks said more tightening may be needed but urged caution after the jump in yields.
Today's Macro Roadmap: the SNB publishes the summary of its September decision at 09:30 CET, ECB Governing Council member Martin Kocher speaks in Vienna at 11:30 CET, Procter & Gamble reports before the US open, US initial jobless claims are out at 14:30 CET, Riksbank Deputy Governor Per Jansson speaks at 15:00 CET, euro-area consumer confidence is out at 16:00 CET, ECB Governing Council member Fabio Panetta speaks in Turin at 16:15 CET, and ECB Governing Council members Álvaro Santos Pereira and José Luis Escrivá speak in Lisbon at 18:00 CET.
The full briefing
Stocks fell as the season's first megacap earnings failed to reassure investors about the rebound in the AI trade (BBG). Chinese equities neared a bear market, and escalating Middle East tensions drove oil prices higher (BBG). Nasdaq 100 futures fell 1.3% to 29,606 this morning, S&P 500 futures fell 0.7% to 7,746, and Dow Jones futures fell 0.3%, after Tesla and Meta Platforms delivered a split set of results (BBG). Yesterday, the Dow Jones Industrial Average rose 0.69%, the S&P 500 gained 0.58%, and the Nasdaq Composite climbed 1.05% as SpaceX's earnings eased concerns about the profitability of AI and lifted chipmakers (WSJ). The Nasdaq 100 lost 5.5% last week, its steepest weekly decline since April 2025, and the Philadelphia Semiconductor Index fell for eight consecutive sessions, its longest run of losses since October 2008 (BBG). Technology earnings go quiet until Microsoft and Alphabet report in the middle of next week (BBG).
Stocks
In stocks, the Kospi declined 3.3% as chip heavyweights Samsung Electronics and SK Hynix retreated and was set for its lowest close since April, China's CSI 300 fell 1.3% and was set for a bear market, and the MSCI Asia Pacific Index lost 1.5%, heading for its lowest close since the end of July (BBG). Nikkei 225 futures fell 2.0% to 63,480, and Hang Seng futures fell 2.8% to 22,986. The CSI 300 has lost 20% from its June high, dragged down by the absence of substantial fiscal stimulus and by earnings disappointment, with CATL down 12% on Wednesday after slower-than-expected profit growth, and the Star50 index has tumbled about 40% in the current half-year (BBG). Alibaba led Chinese e-commerce shares lower after the government called for quality control (BBG), and MSCI's Asia-Pacific index outside Japan is on track for a fourth straight weekly decline (Straitstimes). Equity-index futures indicate European shares will open about 0.8% lower (BBG), with Euro Stoxx 50 futures down 0.8% to 6,169, DAX futures down 0.5% to 25,628, and FTSE futures down 0.4% to 10,746. MSCI emerging-markets futures fell 2.1% to 1,590, ASX futures fell 0.4% to 8,813, and Russell 2000 futures fell 0.6%.
South Korea
In South Korea, the Bank of Korea left its seven-day repo rate at 3% in a unanimous decision, as all 24 economists surveyed by Bloomberg expected, after quarter-point rises in July and August, and said growth this year and next would be considerably higher than its August forecasts of 3.3% and 2.9% (BBG). Governor Shin Hyun Song said the consecutive hikes had given the bank policy room, that the tightening stance will be maintained until inflation converges to the 2% target, and that core inflation in 2027 looks slightly above the August forecast, while the six-month dot plot's median of 3.25% implies one more increase (BBG). He added that no country can avoid the global rise in long-term yields and that chip prices show no sign of falling (BBG). The three-year yield rose 2 basis points to 3.84% (BBG).
New Zealand
In New Zealand, third-quarter inflation slowed to 3.7% y/y from 4.1%, below the 3.8% consensus, with prices up 0.7% q/q against 0.8% expected, as petrol prices fell from the second quarter while staying well above a year earlier; non-tradeables prices rose 1.0% q/q against 1.2% expected, and tradeables prices rose 0.2%, as expected (BBG) (Reuters). Core inflation gauges rose in the quarter, and the report points to inflation staying outside the 1-3% target until late 2027, which keeps the pressure on the RBNZ to raise the cash rate at next Wednesday's review (BBG).
Japan
In Japan, 83% of the 53 economists in a Bloomberg survey expect the BoJ to raise rates from 1.25% at the 18 December meeting, up from 35% a month ago, and none expect a move at the meeting ending on 30 October; 67% expect hikes every three months, and the median terminal rate stays at 1.75% (BBG). About two thirds think Prime Minister Sanae Takaichi's government has softened its stance on rate rises after US Treasury Secretary Scott Bessent urged Japan to drop reflationary policies, and most economists say the October meeting's focus will be whether the bank judges underlying inflation to have reached 2% (BBG). The BoJ's balance sheet showed Japanese government bond holdings of ¥504 trillion on 20 October (BoJ).
The euro area
In the euro area, Governing Council member Mārtiņš Kazāks told Econostream, in an interview published on Wednesday, that some more policy tightening might be necessary if inflation stays well above target, but that caution is needed because the recent jump in bond yields adds tightening from markets that will slow growth, and he described the economy and the labour market as not strong enough to push wage demands to new highs (BBG). The ECB sets rates on 29 October, when investors overwhelmingly expect the deposit rate to stay at 2.5% (BBG). Chief Economist Philip Lane said in Shanghai that the euro area needs international liquidity lines because the ECB lends only to domestic counterparties, so euro funding stress abroad can disrupt the transmission of monetary policy, and he gave no signal on the rate path (ECB).
The UK
In the UK, Bank of England Governor Andrew Bailey said he was right to defend then-Fed Chair Jerome Powell from President Donald Trump's attacks and would do so again, and he steered clear of the policy debate ahead of the 5 November decision, at which economists and investors widely expect a quarter-point rise (BBG). Producer input prices rose 8.3% y/y in September, above the 7.6% forecast, after yesterday's 3.5% inflation print, and economists quoted by LiveSquawk see the energy pass-through lifting inflation to a peak of about 4.2% next year and the Bank of England raising rates by 25 basis points in November (LS).
The US
In the US, Fed officials are in their blackout period ahead of the 28 October decision, with traders pricing in less than a 20% chance of a rate rise (BBG). A Brookings paper by Chris Hughes argues the Fed could shrink its balance sheet from $6.8 trillion to about $4.5 trillion by changing its rate-control toolkit to supply liquidity on demand and easing the rules that make banks hold large cash buffers, cutting reserves from about $3 trillion to roughly $1 trillion, a path it says suits Chair Kevin Warsh's wish for a smaller balance sheet and his task force on the options (Investing) (Brookings). A US bank's asset-management arm warns that the K-shaped economy, in which higher earners hold most stock wealth, is unlikely to even out soon, calling it a metastable state that is durable but sensitive to shocks, with the greatest risk to the outlook being a misjudged balance between the two legs (BI).
What's priced for central banks?
Currently, STIR traders price a 15% probability of a Fed rate rise next week and 25 basis points of tightening by December; for the ECB a 6% probability of a rate rise next week and 25 basis points by December; for the BoJ a 4% probability of a rate rise on 30 October and 21 basis points by December; and for the BoE a 95% probability of a rate rise in November and 35 basis points by December. They price an 85% probability of an RBNZ rate rise next Wednesday and 39 basis points by December, an 85% probability of a Bank of Canada rate rise the same day and 36 basis points by December, and a 62% probability of an RBA rate rise on 3 November and 21 basis points by December.
Currencies
In currencies, the yen was the biggest gainer against the dollar among Group-of-10 currencies as S&P 500 futures dipped (BBG). The yen rose 0.3% to 157.7 per dollar, the dollar index fell 0.2% to 101.59, the euro rose 0.1% against the dollar to 1.1242, and sterling was little changed at 1.3396. The Australian dollar fell 0.2% to 0.7016, the New Zealand dollar fell 0.2% to 0.5689 after the inflation data (BBG), and the Mexican peso fell 0.4% to 18.7589 per dollar. The won firmed 0.2% to 1,323.91 per dollar after the Bank of Korea's hold (BBG).
Bonds
In bonds, Treasuries climbed across the curve, pushing long-end yields to the lowest in a month as doubts about the AI trade drove investors towards havens (BBG). The ten-year yield fell 3.3 basis points to 5.09%, the two-year fell 2.8 basis points to 4.78%, and the thirty-year fell 2.8 basis points to 5.38%, its lowest since 23 September (BBG). Yesterday, the Treasury's $13 billion sale of 20-year bonds drew a bid-to-cover ratio of 2.73, above the 2.64 average of the previous ten auctions (RTTNews). Japan's ten-year yield was little changed at 2.89% and the two-year at 1.91%, after the JGB curve flattened in early Tokyo trading as AI-related credit concerns improved demand for long-dated bonds globally, a strategist at a Japanese brokerage wrote, adding that steady BoJ rate increases and yen appreciation are needed for the move to last (WSJ). Australia's ten-year yield fell 2.9 basis points to 5.25%. Argentina's sovereign dollar bonds have been the worst performers in emerging markets over the past two months, with yields pushed to nearly 12% and spreads at their highest in more than a year, as a global EM pullback compounds doubts about President Javier Milei's re-election prospects and the roughly $25 billion of hard-currency debt payments due next year (BBG).
Commodities
In commodities, Brent rose 2.0% to $111.03 a barrel, and WTI traded near $98.88, after a drone strike on Saudi Aramco's Shaybah field killed two people, an attack on Dammam's King Fahd airport killed one, and the US ordered non-emergency embassy staff and their families out of Saudi Arabia because of the Houthi threat (BBG). US crude stocks fell 3.06 million barrels last week against an 820,000-barrel draw expected, distillate stocks rose 1.68 million barrels against a 1.16 million-barrel drop expected, and Kpler counted at least 18 attacks on shipping in two weeks (GoogleNews). The Energy Department will loan 315,000 barrels from the 1 million-barrel Northeast heating oil reserve, with diesel at about $6.32 a gallon according to AAA, a release unlikely to dent prices much (BBG), and a first tanker of Russian diesel, about 300,000 barrels, sails for the US today under the Moscow supply deal (BBG). The head of Kuwait Petroleum told the Dow Jones Energy Forum that the biggest bottleneck in global energy trade is no longer crude but refined fuel (Barrons), and Bloomberg's Javier Blas writes that sky-high freight costs are fragmenting the oil market, leaving the US with an oil bill below $100 a barrel while much of the world pays considerably more (BBG). An Australian iron ore miner warned of a production slowdown without a China deal (FT). Gold fell 1.3% to $4,088 an ounce as the flare-up in the Middle East raised inflation risks (BBG), copper fell 1.5%, and corn rose for a second day on dip-buying after a six-day run of losses (BBG). Bitcoin fell 2.3% to $82,688, and Ether fell 2.1% to $2,438.
Geopolitics
In geopolitics, the US and Israeli militaries have developed specific plans for renewed strikes on Iran after the 3 November midterm elections, a short but intensive operation against energy infrastructure, nuclear facilities and the missile and drone arsenal, although President Trump has repeatedly vetoed a return to major combat, including this month (Nytimes). Middle East mediators are scrambling to revive talks as the US moves a third aircraft carrier to the region, with around 20 warships there now (WSJ). Pakistan's army chief Asim Munir and Qatari diplomats travelled to Tehran, floating the release of frozen funds in exchange for nuclear concessions, but Iranian hard-liners shut the idea down, and Foreign Minister Abbas Araghchi wrote that Iran will negotiate only if the US gives up its military options (WSJ). Iran's floating oil storage off Malaysia and Singapore was fully depleted by mid-October under the US naval blockade, according to Kpler, with reserves that peaked at nearly 90 million barrels down to less than 1 million by 5 October, and US Central Command says the blockade has denied Tehran at least $25 billion of oil revenue (WSJ). Missiles struck Kyiv early on Thursday, wounding 15 people, and Ukraine sent 630 drones towards Moscow overnight, a day after President Volodymyr Zelenskyy said Ukraine supports the US proposal for three-way talks at negotiator level as soon as possible and the Kremlin said President Vladimir Putin has agreed to resume US-mediated talks as soon as next month (Reuters).
Corporate news
In corporate news, Meta Platforms' third-quarter revenue rose 26% to $64.6 billion, above the $63.3 billion estimate (BBG) (Ndtvprofit). It guided fourth-quarter revenue of $73 billion to $76 billion against $73.6 billion expected, and it raised the bottom of its 2026 capital spending range to $135 billion to $145 billion (BBG). It also announced a class of nonvoting shares, distributed as a stock dividend, effectively a two-for-one split, to fundraise, pay staff, and finance acquisitions (BBG), a move that suggests it will lean on share sales to fund the AI build-out (Semafor), and the shares rose 2.2% after hours (BBG). Tesla cut its 2026 capital-spending target to about $20 billion from more than $25 billion after third-quarter capex of $4.73 billion fell short of the $7.95 billion expected (BBG) (Ndtvprofit). Adjusted earnings of 48 cents a share beat the 44-cent estimate on revenue of $28.05 billion (BBG), and Elon Musk said Optimus faces supply-chain and design problems that will likely take until the end of 2027 to resolve (BBG). The shares fell 3.3% in extended trading (BBG). There is a push to announce a SpaceX-Tesla merger by the first half of 2027, combining companies worth around $3.7 trillion, so that it closes during the Trump administration, according to people familiar with the matter (BBG). Before the results, short sellers had positioned for a large Meta share sale, with short interest up more than 20% since mid-August (Nypost), and Meta was ordered to pay a $25 billion civil penalty in New Mexico after a jury found 26 of 29 statements on its data practices misleading (Ndtvprofit). Lam Research fell 7.4% in extended trading after a weaker-than-expected forecast (BBG). Texas Instruments gave a strong revenue forecast (BBG). Intel touted progress at its Arizona and Ohio plants, and DeepSeek raised about 100 billion yuan, or $15 billion, in one of China's largest-ever fundraising rounds (BBG). IBM's sales rose about 5% to $17.1 billion, ahead of estimates, as it recovered about two-thirds of the mainframe deals that slipped earlier in the year, and the shares gained about 5% in extended trading (Ndtvprofit). Government websites in Europe and elsewhere went offline on Wednesday after the disclosure of PHP vulnerabilities uncovered with AI, with Cloudflare seeing millions of exploit attempts and Mitsubishi UFJ suspending some internet services (Reuters). Bank chief financial officers are looking for ways to control the cost of AI adoption after surprise bills, with agentic AI the main driver because its computing demand is unpredictable (BBG).
Research trade ideas
BlackRock's Rick Rieder told CNBC that investors have a historic opportunity in high-quality credit, saying a diversified portfolio can yield more than 7% with under three years of duration and an average A- rating, that he favours hyperscaler bonds after Alphabet, Amazon, Meta and Oracle issued about $228.4 billion this year, and that he is cautious on data-centre debt not backed by the hyperscalers (CNBC). Strategists at RBC Capital Markets, State Street and HSBC say the Singapore dollar is replacing the yen as a carry-trade funding currency after the Monetary Authority of Singapore unexpectedly left policy unchanged last week, with the three-month forward-implied yield at about 1.65%, among the cheapest of 38 currencies, and three-month implied volatility down to 3.55% (BBG).
What I am reading
In other news, this article caught my eye: Money Managers Say There's Nowhere to Hide as Super El Niño Forms (BBG). Money managers are repositioning for what is forecast to be the strongest El Niño on record, with droughts and floods lifting food commodity prices and economists revising inflation and deficit estimates, and analysts have named Indonesia, Brazil and Colombia as the most vulnerable sovereigns (BBG).
Data and the day ahead
Data and the day ahead: Japan's weekly flows showed foreign investors sold a net ¥66.5 billion of Japanese stocks in the week to 16 October after net purchases of a revised ¥3,545.5 billion the week before, while they bought a net ¥1,454.2 billion of Japanese bonds, up from ¥1,080.2 billion, and Japanese investors sold a net ¥161.6 billion of foreign bonds. The yuan's share of global payments through Swift rose to 3.33% in September from 3.21%, and EU new car registrations rose 9.3% y/y in September after 4.5%. The FT asks how worried central bankers should be about AI and inflation (FT). Still to come: the SNB publishes the summary of its 24 September decision at 09:30 CET, ECB Governing Council member Martin Kocher speaks in Vienna at 11:30 CET, Procter & Gamble reports before the US open, US initial jobless claims are out at 14:30 CET, with consensus at 200k from 199k, and continuing claims at 1,710k, Canada's September industrial product prices are due at 14:30 CET, with consensus at 0.9% m/m from 1.3%, Riksbank Deputy Governor Per Jansson speaks at 15:00 CET, euro-area consumer confidence for October is out at 16:00 CET, with consensus at -17 from -16.5, the US leading index for September follows at the same time, with consensus at -0.1% m/m, as before, ECB Governing Council member Fabio Panetta speaks in Turin at 16:15 CET, the EIA natural gas storage report at 16:30 CET is expected to show an 81 bcf build after 67, and ECB Governing Council members Álvaro Santos Pereira and José Luis Escrivá speak in Lisbon at 18:00 CET. The Treasury sells $26 billion of five-year TIPS at 19:00 CET. Tomorrow, Japan's September inflation data are expected to show headline and core inflation picking up, and the flash PMIs for Japan follow at 02:30 CET. Next week, the Fed, the RBNZ and the Bank of Canada decide on Wednesday, the ECB on Thursday and the BoJ on Friday (BBG), the RBA meets on 3 November, and the Bank of England decides on 5 November (BBG).
Time Stamp: 22 October 2026, 07:15 CET
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Tags: Meta earnings Q3 2026, Tesla capex cut, Bank of Korea hold, New Zealand inflation, BoJ December rate hike, Brent oil Saudi attacks, Treasury yields haven demand, ECB tightening caution