This is a roundup of market developments and the week's monetary policy outlook. Stocks generally advanced on Monday as investors regained confidence in AI and awaited more Big Tech earnings later this week. Lower oil prices also supported investors' willingness to take risks. Technology and AI shares led a substantial Wall Street recovery.
Anthropic filed for a US IPO on Monday. The offering could give Anthropic a record valuation of $1.5 trillion or more. Meta announced plans to raise $95 billion through an equity offering, which would also set a record. SpaceX said the company had reached a $40 billion agreement with Apollo Global Management to finance AI chips.
Columnist Jamie McGeever argues that the enormous financing requirements for AI infrastructure have begun to weaken the AI boom. However, investors temporarily put those concerns aside on Monday. Competition to attract investors' capital is intensifying.
Brazil's financial assets plunged on Monday after left-wing incumbent President Luiz Inacio Lula da Silva unexpectedly won Sunday's presidential election. Lula became the first candidate to win the decisive second round after losing the first round. The victory gives Lula an unprecedented fourth term. Lula turns 81 on Tuesday.
McGeever argues that Brazil faces substantial fiscal and economic difficulties, but Monday's asset-price declines will probably reverse to some extent. McGeever attributes part of the selloff to investors being unprepared for Lula's victory. Prediction markets still assigned Senator Flavio Bolsonaro an 80% probability of victory as late as Sunday. McGeever argues that Bolsonaro's support in Congress will restrict Lula's ability to implement policies that investors fear.
Half of the G10 central banks are scheduled to make interest-rate decisions this week, making the week unusually busy for developed-economy monetary policy. New Zealand's and Canada's monetary authorities are widely expected to increase rates by 25 basis points. Monetary authorities in the US, euro zone and Japan are expected to leave rates unchanged while indicating that increases could follow in December.
Inflation remains persistently high in many countries. Oil and global energy prices remain elevated as war continues to restrict Middle East supply routes. Policymakers worry that higher energy costs will spread into core inflation and become incorporated into inflation expectations.
McGeever examines whether the US may face increasing stagflation pressures. McGeever argues that a deflating AI bubble puts downward pressure on Wall Street and broader economic growth, while recovering oil and energy prices increase inflationary pressure. McGeever warns that an AI downturn could also weaken consumer confidence and investor sentiment, further complicating decisions for investors and central banks, including the Federal Reserve.
AI Infrastructure Financing and Brazil Election Impact Markets
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Summary
Stocks climbed Monday as the fear and greed index showed renewed investor appetite for AI-driven growth. Anthropic filed for a $1.5 trillion IPO, and Meta announced a $95 billion equity offering. Brazil’s markets tumbled after Lula da Silva’s election win. Half of G10 central banks will act on interest rates this week, with New Zealand and Canada likely to raise rates.
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