Fed Holds With Two Dissents for a Hike as Alphabet Revives AI Doubts
Thursday, 29 October 2026 — The Fed held its target range at 3.75% to 4% yesterday in a 10-2 vote, with two officials preferring a hike.
Our four themes for the day:
The Fed held its target range at 3.75% to 4% in a 10-2 vote, and both dissenters wanted a hike. Chairman Kevin Warsh offered no guidance but said "It's our responsibility to get inflation down", while the statement upgraded growth to "a strong pace". Markets price an 82% probability of a rate rise in December. In our view, today's data decide how firm that is: core PCE, the Fed's preferred inflation gauge, is expected to accelerate to 0.3% m/m in September, with the annual rate rising to 3.1% from 3.0%.
Second, AI. Disappointing results from Samsung and Alphabet revived concerns over the billions being poured into the technology. Alphabet fell 10% in late trading after its sales and search advertising missed forecasts and free cash flow turned negative for a second quarter. Samsung slid about 5% in Seoul after its chip profit missed lofty expectations and investors were left waiting until January for details on its shareholder returns. Nasdaq 100 futures fell 0.9%. To be sure, Microsoft rose 2.9% after hours on solid cloud sales, and Google Cloud itself beat estimates, which points to a market sorting the winners from the spenders rather than leaving AI altogether. Amazon's results after the US close are the next test.
Third, oil. Brent fell 1.2% to $113.94 a barrel as fresh diplomatic efforts raised hopes of averting renewed US strikes on Iran. Tehran said it was still giving diplomacy a chance, while the Wall Street Journal reported that Vice President JD Vance reached out to a top Iranian security official. US officials have nonetheless told Gulf allies to prepare for possible strikes after the 3 November midterms.
Last but not least, the ECB decides at 14:15 CET. It is expected to keep its deposit rate at 2.5%, and markets price only a 2% probability of a rate rise today but 22 basis points of tightening by December. In our view, President Lagarde's guidance on December, and anything she says about French bond yields, could matter more for the euro than the decision itself.
In brief
The Fed held rates in a 10-2 vote with two dissents for a hike, and Chairman Warsh kept a December increase on the table.
Alphabet fell after hours as its sales and search advertising missed forecasts, reviving doubts over AI spending.
Samsung fell after its chip profit missed lofty expectations and it delayed details of its shareholder returns until January.
Oil fell as fresh diplomatic efforts raised hopes of averting renewed US strikes on Iran.
The Bank of Canada raised rates for the first time since 2023 and said further increases may be needed.
The ECB is expected to hold today, with its guidance on December and French bond yields in focus.
Today's Macro Roadmap: US GDP, core PCE inflation and jobless claims are due at 13:30 CET, the ECB decides at 14:15 CET, ECB President Christine Lagarde holds her press conference at 14:45 CET, and Amazon reports after the US close.
The full briefing
The Fed held its target range at 3.75% to 4% yesterday in a 10-2 vote, with two officials preferring a hike, and Chairman Kevin Warsh kept a December increase on the table without saying so (BBG). Disappointing results from Alphabet and Samsung revived doubts over the billions being poured into AI, and Nasdaq 100 futures fell 0.9% to 29,697 after sliding as much as 1.7% earlier (BBG). S&P 500 futures fell 0.2% to 7,765, while Dow Jones futures rose 0.5% to 52,934. Brent fell 1.2% to $113.94 a barrel as fresh diplomatic efforts raised hopes of averting renewed US strikes on Iran (BBG). The ECB decides at 14:15 CET and is expected to hold (Reuters).
Stocks
Alphabet slumped 10% in late trading after third-quarter sales of $111.2 billion fell short of projections, search advertising grew at the slowest pace in five quarters, and free cash flow was negative for a second quarter; Google Cloud beat with sales of $30.7 billion (BBG). Microsoft rose 2.9% after hours on solid cloud sales, and Oracle had surged 11% after a long-term cash-flow outlook (BBG). Samsung Electronics fell about 5% in Seoul after its chip-division profit missed estimates and it withheld details of its shareholder returns until January, even as it plans to lift capital spending more than 60% to 84.4 trillion won (BBG). SK Hynix rose 4.6%, and the Kospi recovered from a drop of as much as 3.2% to trade 0.7% lower (BBG). China's STAR 50 Index dropped as much as 4.6% even after Moore Threads reported sales up nearly 1,800% (BBG), and CSI 300 futures fell 0.9% to 4,017. Nikkei 225 futures rose 0.3% to 64,720, Hang Seng futures rose 0.1% to 23,100, and the MSCI Emerging Markets Index fell 1.3% to 1,599. More than 400 Latin American equity funds have disappeared, and Lula's re-election sparked a rout in Brazilian stocks (BBG). Toyota's global sales fell 2.9% in September as its China sales dropped for an eighth month (BBG). Fitch said US banks are better placed to absorb unrealised losses as rates rise (Fitchratings).
The central banks
The Fed's statement upgraded activity to expanding "at a strong pace", and Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favour of a quarter-point hike (BBG). Warsh said "It's our responsibility to get inflation down" and he was unwilling to call financial conditions tight (BBG). He added the FOMC will vote at seven of its eight meetings next year (BBG) (Nbcnews). Treasury Secretary Scott Bessent said a further Fed hike would "not necessarily" be a mistake (BBG). The ECB is expected to keep its deposit rate at 2.5% today while signalling that a December increase remains likely, with French bond yields and President Christine Lagarde's future in focus (Reuters) (LS). The Bank of Canada raised its policy rate by 25 basis points to 2.5%, its first increase since July 2023, and lifted its 2027 inflation forecast to 3.1% from 2.0% (Reuters) (BoC). Governor Tiff Macklem warned that US deficits are not on a sustainable track (BBG) (Cbc). RBNZ Governor Anna Breman said the chances of a December hike are high (BBG). RBA Governor Michele Bullock said inflation will likely be higher than the RBA's August base case (RBA), after which one of Australia's big four banks moved to forecast a November hike to 4.85% (Com). The BoJ is expected to hold at 1.25% on Friday and may say underlying inflation has reached its 2% target (BBG).
What's priced for central banks?
Currently, short-term interest rate (STIR) traders price an 82% probability of a Fed rate rise in December and 20 basis points of tightening by then. For the ECB, they price a 2% probability of a rate rise today and 22 basis points by December, and for the BoJ a 1% probability on Friday and 21 basis points by December. They price a 98% probability of a BoE rate rise in November and 36 basis points by December, an 81% probability of an RBA rate rise on 3 November and 25 basis points by December, and a 52% probability of a Bank of Canada rate rise in December. For the RBNZ, they price an 86% probability of a rate rise in December, and for the SNB a 28% probability in December and 7 basis points of tightening.
Currencies
The dollar index was little changed at 102.24, while the euro eased 0.1% to 1.1138 dollars and sterling 0.1% to 1.3314 dollars. The yen was little changed at 157.83 per dollar, the Australian dollar eased 0.1% to 0.7049 US dollars, and the New Zealand dollar fell 0.2% to 0.5616 US dollars. The Korean won strengthened 0.4% to 1,336.91 per dollar, and a Bank of Korea board member said its gains have been faster than expected (Reuters). The chief economist of a Chinese investment bank urged Beijing to make the yuan more flexible after a 4.8% gain against the dollar this year (BBG).
Bonds
The Treasury curve steepened after Warsh's press conference, with the gap between two- and ten-year yields widening to as much as 34.1 basis points as the long end sold off (Reuters). In Asian trading, the ten-year Treasury yield fell 1.4 basis points to 5.00% and the two-year 1.3 basis points to 4.69%. Japan's two-year auction drew the strongest demand since June with a bid-to-cover of 4.03 (BBG), foreign fund managers are adding long-dated JGBs (BBG), and Japanese corporate credit-default swaps widened by the most since September 2022 (BBG). The UK will sell an extra 4.4 billion pounds of gilts this year but cut long-dated issuance to the lowest share since 1990 (Reuters), after a budget that eases taxes now and raises them later (BBG). The Office for Budget Responsibility raised its borrowing forecasts for the coming years (Co), and Chancellor John Healey said UK inflation is forecast to stay well above target in 2027 (Co). A 2024 BIS study argues that negative swap spreads reflect strain in absorbing government debt (BIS).
Commodities
Brent fell 1.2% to $113.94 a barrel and WTI 1.4% to $101.37. Iran said it was still giving diplomacy a chance (Straitstimes), and the Wall Street Journal reported that Vice President JD Vance reached out to a top Iranian security official (BBG). Trump said the outreach was about medical supplies (BBG) (Washingtonpost), while US officials told Gulf allies to prepare for possible strikes after the 3 November midterms (AP). Canadian heavy crude's discount to WTI widened to $31, the most since October 2022 (BBG). Gold fell 1.0% to $4,028 an ounce, and copper eased 0.3% even as China's import premium hit a record (BBG). Iron ore below $90 a ton leaves up to 170 million tons of supply loss-making, according to one bank (BBG). Bitcoin fell 1.3% to $80,169 ahead of an $11 billion options expiry (BBG), and Ether fell 1.5% to $2,323.
Corporate news
Marvell Technology is in advanced talks to buy Lumentum, Deutsche Telekom's plan to combine with T-Mobile US has hit a snag, and Hyundai Motor's third-quarter earnings beat expectations (BBG).
Data and the day ahead
Data and the day ahead: New Zealand business confidence rose to 52.5 in October from 51.9 (Reuters). Australia's import prices fell 1.1% q/q in the third quarter after rising 5.7%, and export prices rose 1.4% after 1.1%. Japan's consumer confidence slipped to 35.0 in October from 35.4, against a 35.1 consensus. Still to come: Swedish retail sales at 08:00 CET, UK mortgage approvals at 10:30 CET (consensus 54.0k) and euro-area consumer confidence at 11:00 CET. At 13:30 CET the US releases third-quarter GDP, with consensus at 3.2% from 2.2%, and September core PCE inflation, the Fed's preferred gauge, which is expected to accelerate to 0.3% m/m from 0.2% and to 3.1% y/y from 3.0%. Jobless claims are due at the same time, with consensus at 198k from 194k. The ECB decides at 14:15 CET, and President Lagarde speaks at 14:45 CET (see our preview here). The SNB's Petra Tschudin speaks at a money-market event in Geneva at 18:00 CET. Amazon, Eli Lilly, Mastercard and Intel report today, and the BoJ decides on Friday (BBG).
Time Stamp: 29 October 2026, 07:02 CET
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Yesterday's Briefing: SK Hynix Revives the AI Trade as the RBNZ Surprises With a Hold
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Tags: Fed, Core PCE, Alphabet earnings, Samsung earnings, AI spending, Oil and Iran, ECB, Bank of Canada hike