| Good morning. A lack of further Chinese stimulus disappoints, Fed officials see a more gradual rate-cut path and Samsung apologizes. Here's what's moving markets. — Sam Unsted Five Things will publish its last edition this Friday, October 11. To keep you up to speed, you will automatically begin receiving the new, more expansive subscriber-only Markets Daily newsletter starting October 14. Not a Bloomberg.com subscriber yet? You'll get a complimentary trial of Markets Daily. Joe Weisenthal will continue writing regularly over on the new daily Odd Lots newsletter. Chinese markets returned from a weeklong holiday and the country said it was confident that it will hit its economic targets this year, but stopped short of unleashing more stimulus measures which have powered gains in domestic stocks in recent weeks. That disappointed investors and though Chinese stocks kicked off the day with a bang, the rally cooled, with an index of Chinese stocks in Hong Kong plunging. That fueled risk-off sentiment in stock markets in Europe, with indexes sinking as those sectors most exposed to China — particularly miners and luxury goods names — slid. US futures, however, have skirted the declines and are marginally positive, albeit that comes after both the S&P 500 and Nasdaq 100 sunk on Monday. Treasuries are rallying, having also sold off the prior day, and the dollar is little changed. The selloff in US stocks and Treasuries was driven in part by a continued paring back of bets on the speed and depth of interest-rate cuts to come from the Federal Reserve. The Fed's Adriana Kugler earlier called for a "balanced approach" to future cuts, while Alberto Musalem said that while he supported the 50-basis-point cut last month, he'd prefer a gradual path from here. Raphael Bostic and Susan Collins are both due to speak later in the day. The disappointment around the lack of further stimulus measures from China is also filtering through to commodities markets. Metals have slumped pretty much across the board, with iron ore sliding from a five-year high as enthusiasm about a boost to Chinese demand waned, while copper hit a two-week low. Oil prices, buoyed significantly in the past week by geopolitical concerns in the Middle East, have also dipped, snapping a five-day rally. Samsung Electronics has made a rare apology to investors for a disappointing set of results, admitting that it is grappling with a potential crisis . In an unusually frank statement, the head of the Korean giant's core semiconductor business pledged an overhaul, as profit and revenue fell below expectations. The group also confessed to delays in delivering a key type of chip used with Nvidia processors which has allowed rival SK Hynix to steal a march. This is what's caught our eye over the past 24 hours. Mortgage rates have gone in a virtual straight line up since that Fed decision in mid-September. I wrote about this back in August, ahead of the rate decision, saying there was no guarantee that the formal cut to Fed overnight rates would lead to a reduction in the rates that consumers pay to borrow for things like homes. It feels almost cliche to say it at this point, but markets are forward looking. In fact it was the anticipation of lower inflation, and lower rates that caused the big drop in mortgage costs from late 2023 to now. In other words, we already had gotten a big cut in mortgage costs, even before the Fed actually acted. Markets are forward looking. They're based on the projected path of future policy. Since the Fed decision we've seen generally robust economic activity, most notably that huge jobs report last Friday. All things equal, such data makes future rate cuts less likely. I wrote about this yesterday, but again, there's already a small, but growing, possibility in the market that they don't cut at all in November. If mortgage rates are going to continue the downward trend that we started about a year ago, we'll have to see persistent, sustained, further disinflation, beyond what we already got. And we probably need to see more concern about the state of the labor market. When the Fed cut rates by 50 basis points in September, it was about sending a message that further labor market weakness would not be desired. And so the move was to cut off that left tail. If labor market strength continues to come in better than expected, then there's no reason for the Fed to act as aggressively as it might have anticipated a few weeks ago. Obviously in addition to watching rates themselves, real estate is something to watch. Something you heard back during the days of peak inflation is that some players in the industry would rather see a hard landing — prompting aggressive rate cuts — than a continued good economy implying robust end demand for the space.
A reminder, it's my last week in this particular space. But I'd love to keep writing for your inbox, so if you want to catch me starting next week, I'll be at the Odd Lots newsletter, which you can subscribe to here. Follow Bloomberg's Joe Weisenthal on X @TheStalwart | 
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