When the chips are down. The Fed cuts and the Bank of Japan keeps rates at record lows...

The Dow Jones blue-chip index $Dow Jones Industrial Average (.DJI.US)$ hit a brand-new record high of 42,063. The big 30 US stocks index was the only index with a gain, in a league of its own as global stocks bowed down despite the Fed cutting interest rates. Global stocks fell as options expiry hit markets, along with end-of-quarter rebalancing. Adding to weak sentiment, the US is said to be planning rules to ban Chinese hardware and software for connected vehicles, as soon as Monday.The S&P500 $S&P 500 Index (.SPX.US)$ fell 0.2%, and the Euro Stoxx 50 sank 1.5%. We do need to be mindful that end-of-portfolio rebalancing may possibly cause ripple effects and could see volatility pick up in markets this week as investment managers look to cut losses, square off winners, and get ready to buy into stocks they want to hold for the year-end and into 2025.

But when the chips are down, the Fed began cutting rates, and the Bank of Japan signals it’s not in a rush to rise rates from 0.25%, naturally M&A talk and activity will pick up. So too will expansion plans. Qualcomm $Qualcomm (QCOM.US)$ reportedly approached Intel $Intel (INTC.US)$ with a potential takeover offer. Meanwhile, TSMC $Taiwan Semiconductor (TSM.US)$ and Samsung $Samsung CSI China Dragon Internet ETF (02812.HK)$ are talking about building a new potential US$100 billion chip hub in the UAE. Given the setup of cheaper credit, you might expect M&A and expansion plans to continue.

Today, equity futures suggest Australia's ASX 200 $S&P/ASX 200 (.XJO.AU)$ could fall 0.8% at the open with commodities to cause a drag. Fresh data showed Chinese governments cut spending, its jobless rate rose to its highest level this year, yet China's central bank decided not to cut rates, which disappointed the market. This weighed on commodities, which China is the biggest customer of, with iron ore prices cratering to their lowest level since August 2023 before recovering a touch. Still, miners will have a grim day as iron ore prices are down 3.4% today, and aluminum is 2.2% lower. Restocking in October could see demand lift and boost their prices though. But let's see.