5 Things You Need to Know to Start Your Day

Good morning. Hedge funds get their timing wrong, Wall Street’s top bosses are descending on Hong Kong and Elon Musk reveals his own AI bot. [View in browser]( [Bloomberg]( Good morning. Hedge funds get their timing wrong, Wall Street’s top bosses are descending on Hong Kong and Elon Musk reveals his own AI bot. Here’s what’s moving markets.  —[David Goodman]( Bad Timing Hedge funds extended short positions on Treasuries to a record at the [worst moment last week]( — just before smaller-than-expected US bond sales and weaker jobs data spurred a rally. Leveraged funds ramped up net short Treasury futures positions to the most in data going back to 2006, according to an aggregate of the latest Commodity Futures Trading Commission figures as of Oct. 31. “It feels like short US Treasuries positioning was at an extreme last week, which was an accident waiting to happen,” said Gareth Berry, strategist at Macquarie Group. Hong Kong Summit Wall Street’s top bosses are [descending on Hong Kong](, as the de-facto central bank of the Chinese territory is this week holds its global finance summit for a second year in a row. The Nov. 6-8 summit’s rubric is “Living With Complexity,’’ and about 300 executives are expected to attend, including heavyweights such as Citadel’s Ken Griffin, Goldman Sachs Group Inc.’s David Solomon and Morgan Stanley’s James Gorman. Musk AI Bot Elon Musk revealed his [own artificial intelligence bot]( to challenge ChatGPT, claiming the prototype is already superior to ChatGPT 3.5 across several benchmarks. Dubbed Grok, it’s the first product of Musk’s xAI company and is now in testing with a limited group of US users. Grok is being developed with data from Musk’s X, formerly Twitter, and is thus better informed on the latest developments than alternative bots with static datasets, the company’s website said. It’s also designed to answer “with a bit of wit and has a rebellious streak,” according to the announcement. Stocks Edge Higher Shares [edged higher]( after last week’s rally amid optimism central-bank interest rates are near their peak. Crude oil climbed 1%. Futures contracts on the S&P 500 and Nasdaq 100 indexes rose about 0.2% on Monday as of 6 a.m. in New York, after both benchmarks staged Wall Street’s biggest rally of the year last week. Oil climbed after Saudi Arabia and Russia reaffirmed they will stick with supply curbs of more than 1 million barrels a day through year-end. Coming Up… A quiet day on the economics front sees no top tier data and just a solitary Fed speaker — Lisa Cook talking about financial stability. On the earnings front,  BioNTech is the main event. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Bloomberg Economics says the UK is [already in recession](. - The far right is [on the rise in Germany]( and Scholz is at a loss. - Short-selling ban sparks [best Korea stocks rally since 2020](. - Prive credit giants are butting heads over a [hot new market](. - [Israel Latest](: Gaza City encircled as Blinken visits Turkey. - The price of money is going up, and it’s [not only because of the Fed.]( - How New York sees a [guerrilla bike marathon]( before the runners start. And finally, here's what Joe’s interested in this morning Last week was when the talk of Fed rate cuts really started to become real. While the Fed didn't make any formal policy changes at its meeting on Wednesday, the Powell press conference was widely seen as having a dovish tone to it. He talked about the risks in the economy becoming more balanced. He talked up progress that we've seen towards returning to the inflation goal. He talked down a jump in inflation expectations that was seen in the most recent UMich sentiment report. Meanwhile, the economic data for the most part all came in on the cool side. Friday's jobs report wasn't terrible. But the number of new jobs created did come in lower than expected. And there were downward revisions to the prior two months. The monthly wage growth number came in lower than expected. And the unemployment rate ticked up to 3.9%. We also saw mediocre numbers in other measures last week, including ISM manufacturing, in which the employment sub-index fell into contraction territory. In a note to clients yesterday, [Tim Duy of SGH Macro Advisors]( wrote, "With it increasingly clear that the Fed reached the peak of this cycle back in July, we can begin wargaming the first rate cut of the cycle." If we are going to get rate cuts sometime in the coming year, then the interesting question now is whether such cuts will be effective, and whether the Fed can foam the runway just enough to make the landing smooth and soft. Obviously that's TBD. But alongside all of the macro news, the market clearly liked what it saw and heard. The S&P 500 rallied nearly 6% over the last 5 days. 10-year yields, which briefly broke through 5% in the middle of October are down to 4.6%. Put it together, and the Bloomberg 60/40 Index (measuring your generic diversified portfolio of 60% stocks and 40% bonds) just had its best week since November 2022. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Like getting this newsletter? 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