Major global financial headlines overnight and this morning include: Trump defends Russian diesel deal after bipartisan criticism, saying "I made the right choice"; UK Prime Minister says Iran's Revolutionary Guard directly commanded the attempted attack on an air base; Meta releases new Muse Wonder model with executives claiming cutting-edge industry performance; LVMH's weak sales cast a shadow over the fragile recovery of the luxury goods sector; Fed's Hammack says higher rates may be needed as "inflation mentality" risks rise; and the US considering canceling 20-year Treasury bonds, with Wall Street debating whether Bessent has another surprise in store.
Trump defends Russian diesel deal after bipartisan criticism: "I made the right choice"
US President Trump defended on Monday his decision last week to temporarily ease restrictions on Russian diesel exports, a move that had drawn bipartisan criticism. Trump accused the media of hypocrisy, saying they refuse to report on the EU's past purchases of Russian energy. "The EU paid $250 billion to Russia for energy, and the fake news media doesn't want to touch that story," Trump wrote. While Trump did not specify, his figure roughly aligns with some estimates of how much the EU has spent on Russian fossil fuel imports since the 2022 Russia-Ukraine conflict. The European Commission has launched a plan to gradually end its dependence on Russian energy. "I made the right choice for the American people — always, America First!" Trump wrote in a social media post.
UK Prime Minister says Iran's Revolutionary Guard directly commanded attempted attack on air base
UK Prime Minister Burnham said it is "almost certain" that Iran's Revolutionary Guard was responsible for an attempted terrorist attack on a domestic air base used by US forces. "I can confirm our assessment that this was highly likely coordinated by Iran, and almost certainly commanded by the IRGC," Burnham said Monday in the House of Commons. He added: "We will not tolerate these threats on our soil. We will use every means at our disposal to combat Iran's exploitation of criminal networks, to counter them and their financing channels here."
Meta releases new Muse Wonder model, executives say performance ranks at industry frontier
Meta Platforms released its highly anticipated artificial intelligence model Muse Wonder on Monday. This is the most capable model the company has launched since Meta CEO Mark Zuckerberg restructured its AI division and brought in new leadership, internally codenamed "Watermelon." Meta says the new model represents a significant leap over its predecessor, with "frontier capabilities." Company management stated that in programming and handling financial or legal issues, Muse Wonder's capabilities are comparable to OpenAI's ChatGPT and Anthropic's Claude. Direct comparisons between AI models are difficult because different models excel in different areas, and benchmark parameters can be artificially manipulated and may not reflect real-world performance. However, if Meta's claims withstand external testing and Muse Wonder gains acceptance from researchers and developers, it would mark a successful comeback for Meta after its models received a poor reception in Silicon Valley last year.
LVMH's weak sales cast a shadow over the fragile recovery of the luxury goods sector
Paris-based LVMH, which owns a portfolio of fashion, jewelry, and champagne brands, is a bellwether for the entire luxury goods industry. The company disclosed on Monday that it achieved sales of 18.5 billion euros ($20.72 billion) in the July-September quarter, with organic year-over-year growth of just 1%, down from the 3% recorded in the second quarter. According to research firm Visible Alpha, overall results were broadly in line with analyst expectations. However, revenue in the group's pillar fashion division, which houses the Louis Vuitton and Dior brands, fell 5% year-over-year to 8.245 billion euros, missing market forecasts. LVMH's stalling sales growth has cast a pall over the entire luxury goods industry, which had hoped to bid farewell to a difficult period. Bank of America analysts recently noted that investors are likely to remain on the sidelines on luxury stocks until there is clear acceleration in revenue across major brands.
Fed's Hammack: higher rates may be needed as "inflation mentality" risks rise
Cleveland Federal Reserve President Beth Hammack said Monday that monetary policy may need to be tightened to bring down inflation, and that the central bank should adjust swiftly and gradually. "Where feasible, I generally believe that smaller adjustments made relatively quickly are better than waiting and risking the need for larger corrections," Hammack said in prepared remarks delivered during the National Association for Business Economics annual meeting. Hammack is a voting member of the Fed's policy-setting committee. "Given all the inputs affecting my reaction function, a restrictive monetary policy stance is appropriate to ensure a timely return to 2% inflation," Hammack added. Hammack's remarks suggest more rate hikes may be coming. Fed officials in their September meeting minutes hinted they could vote to raise rates again — but did not specify when such a decision would be made.
US considering canceling 20-year Treasury bonds? Wall Street debates whether Bessent has another surprise
Exactly 25 years ago this month, the US Treasury stunned investors by discontinuing the 30-year Treasury bond. Now, Wall Street is abuzz with discussion about whether the 20-year bond will meet a similar fate. Deutsche Bank strategist George Saravelos, after recently visiting clients in New York, said "there are rumors that 20-year Treasury issuance will be suspended." A counterpart at Citigroup went further, advising clients to position for the 20-year bond to outperform the 10-year, preparing for "reduced or canceled 20-year bond issuance." Citigroup expects Bessent may cut US long-bond auctions or even cancel 20-year issuance next month. Like the logic behind canceling 30-year Treasury issuance in 2001, the rationale here is also to lower the US Treasury's borrowing costs.