DB Early Morning Reid Macro Strategy

DB Early Morning Reid - Macro Strategy

Key Market Data (Index @ Close // Change) (S&P 500 @ 7657 // +0.86%) (STOXX Europe 600 @ 639 // +0.49%) (iTraxx Crossover @ 258 // -5) (Brent Oil^ @ 107.77 // -0.35%) (10yr Treasury^ @ 4.97 // 0 bp) (10yr Bund @ 3.50 // 0 bp) (Dollar Index^ @ 99.33 // +0.26%) (Further Fed hikes/cuts priced for 2026 @ 51 // 5 bp) (Further ECB hikes/cuts priced for 2026 @ 39 // -8 bp) ^ - Change from previous day's 4:30 GMT to 04:30 GMT

My new chartbook is on the Deutsche Bank Research Institute site here, where it is open to all. Titled " The Home Straight ", it examines the key market themes as we enter the final stretch of the year.

Welcome to a new week and one where I've started it with a severe case of manflu. My Whoop and Oura ring are flashing code red which was useful to show my wife as vague proof of my demise. While I coughed and spluttered, one of the more interesting developments over the weekend was a rare show of agreement amongst several of the most prominent AI leaders. The debate centred on whether frontier AI development is now moving so quickly that safety, oversight and our ability to fully understand the systems need more time to catch up. Whilst this falls a long way short of calling for a pause in development, it does represent one of the clearest acknowledgements yet from within the industry that there may be limits to how fast capabilities can responsibly advance. For markets, the key question is whether this is the first sign that the extraordinary AI investment cycle might eventually moderate. For now, that seems unlikely. The competitive race between companies and countries remains intense, and it's difficult to imagine firms voluntarily stepping back while rivals continue to push ahead. It is hard to see China standing still. Indeed, that's something President Trump said yesterday in response to the weekend news. He didn't seem in favour of any kind of pause.

I suppose another way of looking at it is that if leading executives are openly discussing the risks of increasingly powerful systems, it could be them trying to get across how transformative they believe the technology may become and help advertise the power of their product. So rather than signalling less spending, it could simply be that a greater share of AI investment is directed towards safety, monitoring and governance alongside the continued build-out of compute infrastructure. The debate may therefore alter the composition of AI capex more than its overall scale.

Markets in Asia have reacted negatively to the story with the KOSPI (-2.74%) emerging as the region's biggest underperformer. Chipmakers led the declines, with SK Hynix (-6.60%) and Samsung Electronics (- 4.01%) weighing heavily on the index. The Nikkei 225 (-1.01%) is also under pressure amid broader weakness

across the semiconductor sector. Major tech investor Softbank is -11.24% lower. Elsewhere, Chinese equities are mixed, with the CSI 300 (-0.32%) trading lower, while the Hang Seng (+0.35%) and the Shanghai Composite (+0.16%) are bucking the regional trend and remain in positive territory. S&P 500 (-0.50%) and NASDAQ 100 (-1.25%) futures are being notably impacted by the AI story, more than for Stoxx futures (- 0.33%). 10yr USTs are around +0.6bps higher at 4.97%. The AI story would have probably led to a rally, but Brent is back up +2.82% to $107.56/bbl.

This follows the precautionary shutdown of a major Saudi pipeline late on Friday following recent attacks, and the postponement of today's planned meeting between Iran and other Gulf states to discuss the creation of a temporary shipping corridor through the Strait of Hormuz. Several countries seem to have reservations about the plan. Meanwhile focus remains on the advances by the Iranian backed Houthis along the Red Sea around the Yemen coast, another important chokepoint.

Moving on, it's a bumper week for central bank decisions, with the Fed (Wednesday), BoE (Thursday) and BoJ (Friday) all meeting. Key data releases include US retail sales (Wednesday) and industrial production (Friday), UK inflation (Wednesday) and labour market data (Tuesday), economic activity in China (tomorrow), and inflation and…