Following a sideways day on Wall Street yesterday – the S&P 500 moved just 7 points, and the NASDAQ similarly unresponsive – Asian markets fell overnight. European stock futures are broadly flat.
The spectre hanging over global markets is the inflation print from the US, the Core PCE Price Index (personal consumption expenditure) which is expected to come in at 2.8%. The previous print for August year on year was 2.91%.
Why does it matter? Those all-important interest rates, and the upcoming decision from the Fed committee next week. If the inflation print is hotter than expected, that could mean that the Fed holds rates – which would be bad news for stock markets. If inflation comes in as expected or – even better – below 2.8% that paves the way for a cut.
Interest rates moves – or even rhetoric around one – have played puppet master to global markets in 2025, particularly in recent months. Thanks to the US government shutdown, the longest in history at 43 days, there were concerns the Federal Reserve would lack the requisite data to make a decision at the key committee meeting this month. That alone was enough to send stocks into a tailspin. A cut next week is fully priced into markets, and expectations are that there are two more cuts in 2026 from the Fed.
And it is not just US rates moving markets this morning. The Japanese Yen rose against the dollar overnight as markets expect the Bank of Japan to raise interest rates later this month. Japanese interest rates have been low for decades, in negative territory from 2016 to 2024. Three hikes since February 2024 have only taken the rate to 0.5%. Why does this matter to global markets? Borrowing cheaply in Yen to invest elsewhere in global markets, often US dollars – known as the Yen carry trade – has been a popular arbitrage strategy for decades. Higher rates and a higher Yen mean this will no longer be as profitable a strategy and could impact global investor demand.
Warner Brothers goes exclusive with Netflix
Bloomberg is reporting that Warner Brothers is now in exclusive talks with Netflix to sell part of its business – two months after rejecting an offer from rival Paramount. In October, Warner Brothers rejected a bid from Paramount but then put itself up for sale, inviting bids from NBC, Netflix and Paramount. Paramount say this process has not been fair, and that Warner Brothers has favoured Netflix all along, despite the fact that Paramount is offering to buy the whole business and Netflix only part of Warner Brothers – the studios and HBO Max streaming service, but not the cable networks.
Paramount originally upped its offer, including a substantial break-up fee, and publicly insisted that any deal is fair and independent. Now reports are suggesting Netflix has offered a similar break-up fee of $5 billion – the amount paid to Warner if the deal falls through.
Expect the antitrust regulator to review the deal carefully – whoever wins – as it creates a mega player in global broadcast entertainment. And this review could take some time and drag on valuations.
As often is the case for acquirer and acquired, Warner Brothers stock is up to a 53-week high of $24.54. Paramount shares fell after they made a deal, as have Netflix shares over the past week.
Metaverse is scrapped
Mark Zuckerberg has abandoned the Metaverse, after poor performance, instead pivoting to double-down on AI, which is delivering productivity for the company. The metaverse concept is one of a virtual reality, for Facebook-parent company Meta that means virtual reality headsets, glasses, and the world you inhabit when wearing them – which has been losing up to $15 billion a year.
Hargreaves Lansdown senior equity analyst Matt Britzman said that this move was simply ‘markets rewarding discipline’.
Yesterday, he reported: “For years, Meta’s ambitious spending plans, particularly around the Metaverse (and more recently AI), have been met with scepticism. For the Metaverse, investors rightly questioned the lack of visible returns or clear path to monetisation.
The reported major cuts to Metaverse investment signal a strategic pivot, but this isn’t about shrinking ambition – it’s about reallocating resources to areas with tangible outcomes. AI is the obvious beneficiary. Unlike the Metaverse, AI is already delivering measurable improvements across Meta’s core platforms, from ad targeting to user engagement, and it’s central to future monetisation opportunities.
By Emma Wall, Chief Investment Strategist at Hargreaves Lansdown
