Monday's Final Takeaways: China ADRs Outperform U.S., Russia & Ukraine Energy Pausing Strikes

Marley Kayden (0:01)

Welcome back to Market on Close. I'm Marley Kayden here in Chicago alongside Sam Vadas at the New York Stock Exchange. We'll close out our show with our final thoughts on this session. Oil prices pulling back off of session highs after President Trump said that Russia and Ukraine have agreed not to target each other's energy infrastructure. While the broader market Middle East conflict continues to threaten global supplies, we saw Brent crude jump to around $108 a barrel, while WTI was above $103 for much of the morning after attacks on Saudi energy infrastructure and shipping in the region added to supply concerns. Now, the agreement does appear to be tenuous and tentative based on commentary from President Vladimir Zelenskyy.

But it could, if it holds, help ease some pressure on the energy markets. But traders remain focused on these disruptions around the Strait of Hormuz and around Bob L. Mendeb where a prolonged supply shock could keep oil prices elevated. The oil spike also adding to inflation concerns just as investors are bracing for this week's FOMC decision, with markets now pricing in a 92 percent probability of a rate hike. WTI right now is just below $102 while Brent is just north of 106

AI safety fears took center stage today after Anthropic CEO Dario Amadei published an essay calling for an industry-wide slowdown in the development of frontier AI capabilities. In a somewhat surprising twist, competitors like OpenAI Sam Altman, Elon Musk, Google and Microsoft all seem to be in agreement with the need for quote-unquote pacing in model development. The open letter seems to be in response to a researcher at Anthropic, who also previously worked for OpenAI, saying that he resigned last week out of concern that Anthropic and OpenAI are quote gambling with our lives. That was then followed by an Anthropic safety researcher saying that he believes there is a greater than 10 percent chance that AI will quote kill all humans within the next decade. In reaction to all of that, we saw a global sell-off today, particularly among the chip makers and hyperscalers, along with names usually tied to AI disruption fears like software and cybersecurity moving sharply higher. Certainly a very interesting day in the markets, Sam, we'll cut your eye during the session.

Sam Vadas (2:12)

Well, more of that and just broadening out that conversation. I mean, all this talk of an AI slowdown is really fueling the debate today, Marley, about the pace of the race with China. I mean, you had officials in Beijing pushing back on the calls from industry bosses overnight, calling it fear-mongering. Even as we've got to remember, the country itself is looking to regulate its own domestic industry. You've got what's called the CAC, China's Cybersecurity Administration over there, which is particularly active in compliance boundaries, content and controls and AI enforcement. As the Chinese prepare for basically some of the same risks as we're seeing here, but Chinese ADRs outperform the market today. Barber, PDD, JD, all up. The FXI was higher than the EWY, which was down, mirroring the rotation that we saw in the Asian session overnight out of South Korea into Hong Kong. But speaking of Asia, we also had Japan's Kioxia now reportedly planning a US listing. We had news of that today from Bloomberg. The memory maker has been apparently in talks with the banks about an ADR offering potentially next year. The company would join a number of other AI related firms looking to cash in on US investor appetite right now like SK Hynex, which went for that US listing over the summer.

The plan to sell ADRs may also reportedly allow Kioxia to join a chip focused index. Now that stock has rallied in triple digits this year and actually briefly leapfrogged Toyota by market cap which was seen as bullish for the Japanese market. So we could be watching that one coming down the pike, but heading into tomorrow, Marley, what are you going to be looking out for?

Marley Kayden (3:45)

I'm sure you can guess the FOMC meeting kicking off tomorrow. We've got the odds of a 25 basis point rate hike pretty much baked in now. The likelihood of a hold currently sits at just north of 7%. Now we won't get that decision until Wednesday at 2 Eastern, but the Fed is focused this week. You know, as Wall Street waits for any details that could give us clues on that path forward, if this is a one-off, if we do get that hike or if it's part of a broader cycle here amid an uncertain backdrop in a midterm election year. But Sam, what will you be watching?

Sam Vadas (4:16)