Oil and the Russia-Ukraine energy pause
Oil pulled back from session highs after President Trump said Russia and Ukraine agreed to stop hitting each other's energy sites. Earlier, attacks on Saudi energy sites and shipping in the region pushed Brent crude to about $108 a barrel, while WTI held above $103 for much of the morning. By close, WTI sat just below $102 and Brent just above $106.
The truce looks weak and uncertain, based on comments from President Volodymyr Zelensky. If it holds, it could ease pressure on energy markets. Traders stay focused on supply risks at the Strait of Hormuz and Bab-el-Mandeb, where a long supply shock could keep prices high. The oil spike also raised inflation worries right before this week's Fed decision.
AI safety fears and the sell-off
Anthropic CEO Dario Amodei published an essay calling for an industry-wide slowdown in building frontier AI. Competitors agreed on the need for "pacing" in model work, including OpenAI's Sam Altman, Elon Musk, Google, and Microsoft.
The open letter appears to answer a researcher at Anthropic, who earlier worked at OpenAI, and who resigned last week saying Anthropic and OpenAI are "gambling with our lives." An Anthropic safety researcher then said he thinks there is a greater than 10% chance AI will "kill all humans" within the next decade.
Markets sold off globally in response, hitting chipmakers and hyperscalers hardest, along with names tied to AI disruption. Software and cybersecurity stocks moved sharply higher.
China race and the CAC
The slowdown talk fueled debate about the pace of the AI race with China. Beijing officials pushed back on the industry calls overnight, calling them fear-mongering. At the same time, China is moving to regulate its own domestic industry through the CAC, its Cyberspace Administration, which is active on compliance, boundaries, content, controls, and AI enforcement, preparing for many of the same risks seen in the U.S.
Markets: China ADRs outperform
Chinese ADRs beat the market. Baidu (BIDU), PDD (PDD), and JD (JD) all rose. The China large-cap ETF FXI climbed, while the South Korea ETF EWY fell, matching the overnight Asian-session rotation out of South Korea into Hong Kong.
Japan's Kioxia reportedly plans a U.S. listing, per Bloomberg. The memory maker has been in talks with banks about an ADR offering, possibly next year. It would join other AI-related firms chasing U.S. investor demand, like SK Hynix (SKH), which took a U.S. listing over the summer. Selling ADRs may also let Kioxia join a chip-focused index. The stock has rallied in triple digits this year and briefly passed Toyota (TM) by market value, seen as bullish for the Japanese market.
Ahead: the Fed and China data
The FOMC meeting starts tomorrow. A 25 basis point rate hike is nearly fully priced in, with the odds of a hold at just above 7%. Market pricing put the hike probability at 92%. The decision comes Wednesday at 2 p.m. Eastern. The open question is whether this is a one-off hike or part of a broader cycle, set against an uncertain backdrop in a midterm election year.
Also on watch: soft U.S. data and hard China data. The New York Fed business survey is due, after the Empire State reading jumped in August, so any easing matters. China releases a large data batch tonight - industrial output, retail sales, and fixed asset investment - which shapes views on Chinese markets, stimulus, and rates.
