What moved
- US (closed): The S&P 500 ended 0.28% higher at 7,743.98, the Nasdaq rose 0.27% and the Dow 0.19%. The cash market shut before most of the big-tech results were digested, so futures are the only live read. S&P 500 futures are 0.31% lower and Nasdaq 100 futures are down 1.2%.
- Europe (closed): The FTSE 100 finished 0.07% higher at 10,694.5, the DAX added 0.44%, the CAC 40 was flat and the Euro Stoxx 50 rose 0.05%.
- Asia: The Nikkei closed 1.1% higher. Kospi ended 1.24% lower and Taiwan 1.42% lower. The Hang Seng is trading 0.26% down and the Shanghai Composite 0.82% down, while Shenzhen's Component index has fallen 2.92%, the sharpest drop on the board.
Why
The overnight story is a split verdict on AI spending. Microsoft and Alphabet both reported after Wednesday's close. Microsoft beat forecasts and its shares rose in extended trading. Alphabet's revenue disappointed and its shares fell sharply, reviving the question of whether the vast sums going into AI infrastructure will pay back. Because Alphabet is one of the heaviest weights in the Nasdaq 100, that alone explains much of the gap between Nasdaq and S&P futures. It also carried into Seoul and Taipei, the markets most exposed to AI hardware. In Korea, Samsung Electronics fell even after strong results because its shareholder-return plan disappointed. Shenzhen's slide has no clean single explanation that we could find.
The Fed held its policy rate at 3.75–4% by a 10–2 vote. Governor Cook and the Cleveland Fed's Hammack both wanted a hike. The statement upgraded growth from 'solid' to 'strong' and dropped its commitment to a particular path, which reads hawkish. Futures now price roughly an 85% chance of a quarter-point hike in December. Long yields rose: the 10-year closed 5.2bp higher at 5.045% and the 30-year 5.6bp higher. Higher long yields matter for growth stocks because they reduce the present value of profits that sit years in the future.
In London, Wednesday's Budget hit housebuilders. Taylor Wimpey ended 7.26% lower at 78.64p, Persimmon fell 6.89% and Barratt Redrow 6.57%. The new first-time buyer scheme disappointed on funding, timing and developer fees. Brent is trading 4% lower at $110.66, again without a single clear catalyst, although it remains far above where it stood before the Iran war began in February.
Sentiment & risk appetite
The mood is wary rather than fearful. The VIX is at 17.15, little changed, and rates volatility eased, with the MOVE index down 3.32 points to 94.55. Wednesday's US tape was led by technology: tech rose 0.8% while utilities fell 0.84% and real estate 0.73%, the rate-sensitive end losing as yields climbed. PrimerIQ's breadth count across our US universe was only mildly positive, at 3,273 advancers to 2,769 decliners. In the UK, decliners edged ahead, 409 to 380. The haven trade is muted: gold is 0.18% lower at $4,044.30, while the dollar index, at 102.24, sits within 0.7% of its 52-week high.
Economic calendar
No major ONS release was scheduled for this morning. The domestic backdrop is still the Budget, which also doubles the bank corporation-tax surcharge from 3% to 6% for 15 months.
The afternoon is crowded. At 12:30 GMT (08:30 ET) the US publishes the first estimate of third-quarter GDP, September PCE inflation, personal income and weekly jobless claims. PCE is the Fed's preferred inflation gauge, so after Wednesday's hawkish hold it carries more weight than usual. The ECB announces its decision at 13:15 GMT and President Lagarde speaks afterwards. Eurozone economic sentiment for October is also due. The Bank of Japan concludes its meeting on Friday.
Earnings
Lloyds reported third-quarter pre-tax profit of £2.3bn at 07:00, in line with forecasts. It said it is on track for all of its full-year targets, and the higher bank surcharge was smaller than some lenders had feared. Overnight, the market rewarded Microsoft's beat and punished Alphabet's revenue miss, and that split is setting the tone for today's US results.