JPM International Market Intelligence | Morning Briefing

20 SECONDS: AI safety concerns are genuine, but most see broader strategic benefits and doubt spending will fall. Equities can absorb 10Y yields of 5.6–5.7%. Updates on Brazil election and the US midterms.

• US/EU futures and Asian equities are mixed. AI/Tech is rebounding after Trump rejected AI guardrails and dismissed existential fears as a “hoax”.

• The 10Y UST yield jumped > 5%, while oil extended gains as a key Saudi pipeline remains offline; repairs could take weeks.

• USD/JPY positioning has already reset materially and is now reacting to Japan considering raising defence spending to 3.5% of GDP.

• Amodei’s essay has sparked lively debate. Most view the safety concerns as genuine but also see strategic benefits—shaping regulation, curbing open weights, supporting pre-IPO marketing and boosting margins. Ultimately, there is scepticism that AI spending will fall.

• Some of yesterday’s moves were hard to square—for example, EU semi-cap names fell more than short-cycle names, while Chinese LLMs also declined.

• We still expect broader, more dispersed Tech leadership.

• Yields remain in focus. Two fundamental frameworks put fair value for the 10Y UST at 4.7–5.5% but given mid-cycle backdrop 6% could be reached before the cycle ends.

• JPM’s Dubravko says equity investors should not worry too much. Even above 5%, the market can absorb 10Y yields of 5.6–5.7%, given 12-month EPS growth and an 18x valuation (charts below).

• A timely Research note on Brazil’s election shows polls within the margin of error. Rising odds of a Bolsonaro win have helped Brazil outperform this month (EWZ +4.7% vs MSCI ACWI -1.2% MTD), reinforcing the case for elevated volatility around the vote. Policy risk is high given the difficult macro backdrop, yet equity volatility looks inexpensive relative to potential fundamental moves. Trade ideas include long EWZ into the election, with Financials the key transmission channel from politics to policy and credit.

• US Market Intel updates midterm election seasonality: does the pattern still hold after a strong pre-election rally? Yes—see charts below.