Research Digest — last 24h

Verdict

Buy Brazil equities and BRL; upgrade to OW.

Analysis

Flávio Bolsonaro won 47.1% of valid votes vs Lula's 45.1%, more than 4pp above the poll-of-polls, sending the race to an October 25 runoff (P011). USDBRL fell 450bps and Ibovespa opened close to 10% higher (P011). JPM upgraded Brazil to OW, expecting MSCI Brazil to gain 12% short-term and 20% (P027). UBS recommends short USDBRL with a 4.75 target and 5.11 stop (P038). The BRL appreciation could pave the way for faster Selic cuts, and a November move is live (P027).

Tension

Brazilian activity turned down in September and growth is still decelerating with deteriorating credit and falling earnings (P017, P027).

What changed

First-round result exceeded polls, shifting the probability of a market-friendly policy outcome.

Desk views

GS: USDBRL 450bps lower, biggest one-day move since 2022/2018; Ibovespa +10%.

Evidence IDs · P011

UBS: short USDBRL, target 4.75, stop 5.11; BRL to benefit from market-friendly policy outcome.

Evidence IDs · P038

Investor implication

Overweight Brazil equities and BRL; underweight Chile (downgraded to Neutral by JPM). Watch October 25 runoff and fiscal/rate-cut path.

Trade expression

Long Brazil equities (EWZ), short USDBRL.

Invalidation

Second-round outcome less market-friendly; further deterioration in global risk sentiment; further rise in US long-term rates (P038).

Verdict

Curve steepener; rate-sensitive equities face headwind.

Analysis

September NFP came in at +29k vs ~90k consensus, with -60k net two-month revisions and unemployment rising to 4.2% (P023). Core PCE was cooler at +0.2% m/m, 3.0% y/y (P023). Combined, October FOMC hike probabilities fell from 64% to sub-25%, with short-end yields dipping while 10Y/30Y hit ~24-year highs before pulling back (P023). GS Econ removed the October hike and now expect December (P023). The 10-year Treasury yield is 5.3% today, forecast to ease to 4.4% by end-2027 (P022). Higher long rates tighten financial conditions and weigh on rate-sensitive GDP components (P022).

Tension

Higher long yields challenge equity multiples even as earnings remain strong; GS sees higher rates as a headwind but not a wrecking ball (P013).

What changed

October hike odds collapsed; GS pushed hike to December.

Desk views

GS: soft NFP +29k vs ~90k; core PCE +0.2% m/m; October hike odds 64% to sub-25%.

Evidence IDs · P023

GS: 10Y yield 5.3% today, forecast 4.4% by end-2027; higher rates to subtract ~2pp from residential investment.

Evidence IDs · P022

Investor implication

Steepener bias; underweight rate-sensitive equities; quality bonds offer opportunities as yields rise (P039).

Trade expression

Curve steepener; underweight rate-sensitive equities.

Invalidation

Stronger-than-expected inflation or growth data that revives hike odds.

Verdict

Short EUR/USD; watch OAT spreads.

Analysis

French budget turbulence is building a fiscal premium, unwinding ECB rate hike expectations and pressuring EUR/USD (P025). The OAT-Bund spread narrowed to around 136bps yesterday but remains elevated (P032). ING says risks remain firmly on the downside for EUR/USD (P025). Markets are awaiting details from Marine Le Pen on a counter-budget (P025). The euro fell to its lowest level since May 2025 (P044).

Tension

French debt showed tentative signs of stabilising yesterday, with a clear outperformance (P007).

What changed

French fiscal anxiety is bleeding into the currency and ECB pricing.

Desk views

ING: French risk keeps harming ECB hawks; risks remain firmly on the downside for EUR/USD.

Evidence IDs · P025

Natixis: OAT-Bund spread narrowed to around 136bps; divergence between bonds and stocks pronounced.

Evidence IDs · P032

Investor implication

Underweight EUR; watch OAT-Bund spread and Le Pen counter-budget.

Trade expression

Short EUR/USD.

Invalidation

Credible French fiscal path; OAT spread narrowing sustainably.

Verdict

Buy TSMC; AI capex cycle intact.

Analysis

TSMC will host its 3Q26 analyst meeting on 15 October. The analyst forecasts 2026E/2027E revenue growth of 42.0%/36.9% YoY (USD terms), with GM at 67.2%/67.5% (P036). 2027E/2028E CapEx forecasts raised to US$85bn/US$98bn (vs. US$78bn/US$82bn previously) (P036). Stronger CPU demand driven by agentic AI represents a key change over the past year (P036). TSMC +3% in Taiwan, clean breakout to a new all time high (P002). JPM notes potential collaboration with Tesla for US fab, with TSMC keeping process and technology ownership (P028).

Tension

N2 ramp dilution modest; GM edging down to 67.5%/67.3% in 3Q26E/4Q26E vs. 67.7% in 2Q26 (P036).

What changed

2027E/2028E CapEx forecasts raised; TP lifted to NT$3,300.

Desk views

Analyst: 2026E/2027E revenue growth 42.0%/36.9% YoY; CapEx raised to US$85bn/US$98bn; TP NT$3,300.

Evidence IDs · P036

GS: TSMC +3% in Taiwan, clean breakout to a new all time high; hard to ask for a cleaner signal from the AI complex.

Evidence IDs · P002

Investor implication

Overweight TSMC and AI compute supply chain; read-through to semis, Taiwan index.

Trade expression

Long TSMC (2330.TW / TSM).

Invalidation

AI capex slowdown; weaker-than-expected demand; margin compression.

Verdict

Upbeat on regional banks into 3Q26 EPS.

Analysis

Regional bank stocks are coming in on the lows, down ~12% since last reporting and 11% since 8/1, underperforming the market by >1,000bps (P005). Concerns include rate hikes (1 in September, market pricing ~3 more by mid-2027), higher LT rates (~5.20% today; peak ~5.3%, up ~70bps QoQ), deposit competition, and agentic AI impact on profitability (P005). Despite this, the analyst expects solid earnings with continued loan growth, deposit costs rising at a lower level than priced, and relatively upbeat 4Q outlooks (P005). Stocks trading at <10x 2027E (P005).

Tension

Macro and micro concerns weighing on stocks; deposit competition and rate-hike drag.

What changed

Stocks de-rated into print; expectations reset lower.

Desk views

Analyst: upbeat on regional banks into 3Q26 EPS; stocks on lows, <10x 2027E; expect solid earnings and upbeat 4Q outlooks.

Evidence IDs · P005

Investor implication

Overweight regional banks into 3Q26 EPS; watch deposit costs and loan growth.

Trade expression

Long regional banks (KRE).

Invalidation

Weaker-than-expected loan growth; higher deposit costs; macro deterioration.

Verdict

AI capex supports European growth; hyperscaler issuance weighs on tech.

Analysis

Global AI investment exceeds $1tn this year, with positive growth spillovers into Europe partly offsetting energy headwinds (P015). GS estimates global AI capex will add 0.10pp-0.15pp to European growth in 2026 (P015). However, new bond issuance by hyperscalers is likely to weigh on the technology sector going forward, with an idiosyncratic effect on tech only (P042). We expect some EUR 20bn in new issues by hyperscalers until the end of this year (P042).

Tension

AI capex supports growth but hyperscaler issuance pressures tech relative performance.

What changed

AI capex spillovers quantified; hyperscaler issuance identified as tech headwind.

Desk views

GS: global AI investment exceeding $1tn this year; AI capex to add 0.10pp-0.15pp to European growth in 2026.

Evidence IDs · P015

UniCredit: new bond issuance by hyperscalers likely to weigh on technology sector; EUR 20bn expected until end of year.

Evidence IDs · P042

Investor implication

AI capex supports European growth; underweight tech relative to market due to hyperscaler issuance.

Trade expression

Underweight European tech relative to market.

Invalidation

Stronger-than-expected tech earnings; lower-than-expected issuance.

Verdict

TMT positioning crowded; semis de-risking noted.

Analysis

Hedge funds rotated into TMT stocks in September, while nearly every other sector was net sold (P004). JPM notes semis de-risking (P029). The 63-day correlation of Technology to SPX is 1.0, indicating high correlation (P004). Q3 2026 earnings season kicks off week of October 12; consensus expects S&P 500 year/year EPS growth of 27% in Q3, with AI infrastructure beneficiaries accounting for over 50% of S&P 500 EPS growth alongside hyperscaler capex growth of 116% (P004).

Tension

Crowded TMT positioning vs. strong earnings expectations.

What changed

HF positioning rotated into TMT; semis de-risking noted.

Desk views

GS: HFs rotated into TMT stocks in September, while nearly every other sector was net sold.

Evidence IDs · P004

JPM: Bond rout draws record dip-buyers; Semis de-risking; Managed Money sells commodities.

Evidence IDs · P029

Investor implication

Monitor TMT positioning for crowding; semis de-risking may present opportunity.

Trade expression

Monitor TMT positioning; consider semis de-risking.

Invalidation

Stronger-than-expected semis earnings; positioning unwinds.

Verdict

Buy Netflix; engagement concerns overdone.

Analysis

Netflix reports Q3 2026 earnings. 12m price target $90.00, price $67.06, upside 34.2% (P033). Since last earnings report on 7/16, shares are down 10% vs. S&P 500 +3%, reflecting increasing investor scrutiny around engagement metrics (P033). The analyst frames key investor debates and analyzes current industry data on user growth and engagement (P033).

Tension

Engagement metrics scrutiny; mixed 3rd party data.

What changed

Shares underperformed into print; expectations reset lower.

Desk views

Analyst: 12m price target $90.00, upside 34.2%; shares down 10% since last earnings vs. S&P 500 +3%.

Evidence IDs · P033

Investor implication

Overweight Netflix into Q3 earnings; watch engagement metrics.

Trade expression

Long Netflix (NFLX).

Invalidation

Weaker-than-expected engagement; subscriber losses.