This week kicks off with crude oil retreating sharply on Middle East peace hopes, and AI enablers roaring on news that Muse AI – Meta’s latest personal AI agent – has risen to the top of mobile app charts, reshuffling the cards in favour of the AI trade. Muse AI – capable of drawing data across Meta’s apps, connecting with third-party services and completing tasks on a user’s behalf – fuelled AI demand expectations across the supply chain, as agents could require significantly more computing power than general-purpose chatbots.

Looking beyond: Muse AI is the first one, and others will likely follow, though this expansion into third-party services won’t be a walk in the park. Amazon already blocked Muse AI from accessing its services – it doesn’t want Meta bots to spy around its own ecosystem – and it’s certainly a matter of time before Amazon-powered (and other) AI agents hit the web. What a time to be alive!

With this, Meta jumped more than 11% – we can clearly see technical breakout match the Muse AI’s coming out on the price chart: Meta has clearly broken above the bearish trend building since its summer 2025 peak.

Philadelphia’s semiconductor index rallied more than 4% – with CPU makers leading the rally, as Muse AI – and the likes – would create stronger inference demand, without yet telling us whether that will require significantly more GPUs, HBM or data-centre capacity than what is already being built.

As such, AMD rallied around 10% to reach a $1 trillion valuation. Intel jumped 12%. The Taiwanese TAIEX rallied nearly 2%, while Korea’s memory-chip-heavy KOSPI is up, but less than 1% at the time of recording. Over in China, Tencent and Alibaba rose: the former on a new AI image-generation model and also on hopes that the company could come up with an AI agent similar to Muse AI on its WeChat – an app that is home to so many apps – and the latter after revealing the “most powerful AI chip” in China, to compete with Nvidia.

More broadly, the Nasdaq 100 jumped nearly 3% past the 30K mark. A retreat in oil prices helped pull global yields lower and gave a further tailwind to the latest AI optimism.

A further retreat in the energy complex could improve risk appetite through the week, which is set to be quiet from a data perspective. Investors will be digesting the latest rate hikes from major central banks, the fact that easing energy prices won’t automatically pull refined-product prices lower, that shipping costs have been rising and that the trade war is still running in the background, though trade headlines are losing attention given their unpredictable and childish nature. Still, US-China talks this week are reportedly going well, ahead of the Xi-Trump summit due Thursday.

Data watch

Flash manufacturing PMI figures will give a hint about how global economies dealt with rising energy prices in the first half of September. But to be fair, September hasn’t been a great month from a macroeconomic perspective: rising energy prices pushed global yields higher, three major central banks hiked rates in September – the European Central Bank (ECB), for the second time since summer; the Federal Reserve (Fed), for the first time in three years; and the Bank of Japan (BoJ), for the second time in three months – and further rate hikes are expected as central banks continue fighting rising inflationary pressures.

In the wake of BoJ hike

Last Friday’s 25bp hike from the BoJ was ultimately not accompanied by the decisively hawkish guidance markets wanted. Governor Ueda explicitly opened the door to consecutive hikes and even larger moves if inflation warrants them. Alas, the lack of sufficiently forceful forward guidance, plus the two dissenters, disappointed FX markets. The USDJPY spiked to 158 as yen bears flocked back in, and we can see the upside momentum building slowly.

The latter is bad news for all those who hoped that the early-September reversal in the USDJPY marked the beginning of a broader, longer-lasting yen appreciation. It is also uncomfortable news for the US Treasury. It appears that Scott Bessent was less “the house” than he thought he would be. He needed the BoJ to play along – to raise rates sufficiently AND SOUND HAWKISH to stop the bleeding in the Japanese yen and reduce the need for repeated FX intervention.

Alas, today, we’re back to square one – and maybe worse. Yen bears are eyeing 160 again. If the BoJ can’t adjust rates to inflation expectations – and toward where markets think they should be – fast enough, bearish yen positions could continue to build. The fact that the Fed may have started a tightening cycle could also widen the policy divergence between the Fed and the BoJ, potentially widening the yield differential and putting further downward pressure on the yen.

And this vicious circle remains worrying. Renewed yen weakness increases the risk of another intervention. Financing these FX interventions through reserve assets could put additional pressure on the Treasury market – although Japan now has mechanisms, including the Fed’s FIMA repo facility, that could reduce the need for outright Treasury sales. On the other hand, weaker demand for US Treasuries from other major holders is already putting upward pressure on US yields through a different channel – really not helping. As a result, potentially higher US yields could widen the US-Japan rate differential and reinforce the incentive to sell the yen. And the circle begins again.

The cleanest way out of this infernal circle is therefore faster BoJ normalisation. Until markets become convinced that Japanese rates are moving sufficiently toward neutral, the weakening-yen/FX-intervention loop risks remaining with us – and traders will probably continue trading that loop until something finally breaks it.