Squawk Box Europe Express

U.S. Treasury Secretary Scott Bessent and the Chinese Vice Premier He Lifeng agree to set up a “U.S.-China AI dialogue” for security incidents from artificial intelligence. This comes in the lead-up to this week’s Trump-Xi summit in Washington. Exit polls spell "disaster" for German Chancellor Friedrich Merz's CDU party after a drubbing in the weekend's state elections. Oil prices hit a one-week low despite weekend attacks by Houthi rebels on Riyadh, as markets hope diplomacy prevails when leaders meet on the sidelines of this week’s UN General Assembly.
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The bank of Japan delivers a quarter point hike, taking rates to the highest level since 1995. But two dissenting votes raise doubts around further normalization, driving the Yen and JGB yields lower. The Bank of England stands pat but warns rates will likely go up, with Governor Andrew Bailey flagging energy costs as a key threat. The S&P 500 sees its best day since early August as crude prices and treasury yields pull back, with tech stocks driving the charge on Wall Street. Researchers reportedly hack into OpenAI using Anthropic tools, as King Charles convenes AI leaders in Scotland to stress the importance of safety. Palantir CEO Alex Karp tells CNBC the technology must have “reasonable guidelines”.
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The Fed hikes for the first time in over 3 years, with the Dow shedding over 600 points while the 10-year Treasury yield holds stubbornly around the 5% mark. The rate hike provokes U.S. President Donald Trump, who once again demands looser monetary policy, calling the FOMC “hostile”. Across the pond the Bank of England looks poised to deliver a hold as long-term borrowing costs hover near their highest in nearly 30 years. And the EU's offer for Canada to become its first-ever associate member also draws the ire of President Trump, who threatens further trade restrictions on the bloc if those plans progress.
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All eyes are on the Federal Reserve decision today, as America’s central bank is all-but certain to have its first hike in over 3 years with the expected move will likely strain ties with U.S. President Donald Trump. Meta’s Mark Zuckaberg is weighing in on the AI safety debate, favoring independent evaluation rather than a slowdown in development, but Nvidia’s Jensen Huang and OpenAI CFO Sarah Friar come down on opposite sides of the conversation.
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Chip names sell off on both sides of the pond amid investor pullback after warnings from AI giants. Software stocks, however, catch a bid, putting the two baskets at a huge divergence. Trump intervenes, calling warnings over the technology a “sick” “hoax,” and telling AI leaders not to kill the “golden goose”, going as far as calling up Jensen Huang during a podcast recording. The 10-year Treasury yield hits its highest ever level in almost 20 years, with traders eyeing a near 95% chance of a Fed hike as the FOMC starts its two-day meeting today.
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