Fed Inspector General Report Clears Powell of Criminal Liability; Hang Seng Falls Below 24,000, Down 2.6%; Broadcom Leads $60 Billion AI Financing

Fed Inspector General Report Clears Powell of Criminal Liability; Hang Seng Loses 24,000; Broadcom Leads $60 Billion AI Compute Financing

Fed Inspector General Report: Renovation Mismanaged, but No Wrongdoing Found by Powell

The Federal Reserve's independent watchdog concluded that the headquarters renovation project had major management deficiencies, but found no administrative misconduct and no grounds to refer anyone for criminal prosecution. According to a recent Wall Street Journal report, the 120-page report released Wednesday by the Fed's Office of Inspector General was the last formal obstacle facing the Trump administration in potential legal action against Powell. ^[1]

The report showed that the renovation cost had ballooned from an estimated $1.3 billion in 2020 to about $2.4 billion, but investigators also noted that the 'extravagant and wasteful' designs cited by critics were not the main reason for the overrun. The report also criticized the Fed's project management on several counts, including that existing governance and oversight frameworks were insufficient for a project of this scale and complexity, that the Board did not receive updated cost estimates from the construction manager until January this year, and that no cost cap was set for the project. ^[1]

Hours after the report was released, Trump posted on social media demanding that Powell resign from his position as a Fed governor, and said he had asked Attorney General Todd Blanche to review the report and decide on next steps. Trump said that if Powell refused to leave, the government would sue him on grounds of 'corruption or dereliction of duty.' ^[1]

The renovation controversy originated from a congressional hearing in June 2025. In July 2025, Powell voluntarily asked Inspector General Michael Horowitz to review the project's planning, budgeting, and management. In January this year, the office of then-Washington federal prosecutor Jeanine Pirro issued two subpoenas to the Fed as part of a criminal investigation into Powell's congressional testimony; in March, a federal judge quashed the subpoenas; in April, the Justice Department announced it was closing the criminal investigation into Powell, but told Senator Thom Tillis that the case could be reopened only if the Fed inspector general made a criminal referral. Current Chair Warsh formally took office in May this year. ^[1]

Nonfarm Payrolls Preview: September Job Growth Expected to Slow to 90,000; Focus on Whether August Will Be Revised Down

The U.S. September nonfarm payrolls report will be released on Friday, Oct. 2, the last employment data before the Fed's Oct. 28 policy meeting. The Wall Street median forecast is for 90,000 new jobs, a sharp pullback from 162,000 in August; private payrolls are expected at +81,000 (previous +127,000), the unemployment rate is expected at 4.1%, and average hourly earnings are expected at +0.3% month over month and +3.2% year over year. ^[2]

The market is closely watching whether August data will be revised down sharply. Barclays estimates that if August data were readjusted using this year's seasonal factors, the 'strong' gain of 162,000 would turn into a decline of 74,000, implying a serious overstatement in the August figure. Forecasts from 80 Wall Street institutions range from +50,000 at Barclays to +130,000 at Nomura. ^[2]

On policy expectations, on Monday this week the market priced about a 70% chance of an October rate hike, but after New York Fed President Williams said he was 'not in a hurry to hike' and August core PCE came in mild, the probability of an October hike had fallen to about 25% by Thursday's close, and Goldman Sachs pushed its next rate-hike forecast to December. For the market, the real risk may not be at the front end of rates but in long-end bonds: Goldman Sachs data show that CTA trend-following funds currently hold about $390 billion in global bond shorts, with short positions in 10-year Treasuries at 99% of their historical maximum and 30-year at 100%. ^[2]

Hong Kong Stocks: Hang Seng Loses 24,000, Biggest One-Day Drop Since March 23

On Oct. 2, A-shares were closed for the National Day holiday, while Hong Kong stocks weakened under pressure from continuously rising U.S. Treasury yields. The Hang Seng Index closed down 2.6%, losing the 24,000 level, the biggest one-day drop since March 23; the Hang Seng Tech Index fell 2.26%. HSBC Holdings plunged more than 5%, the biggest drag on the index, with its Hong Kong shares posting their largest drop since June 10; AIA Group and BeiGene fell nearly 6%, leading blue-chip declines, while drops in Alibaba and Tencent further weighed on the Hang Seng Index. ^[5]

By sector, autos and tech stocks were weak, with Li Auto, Bilibili, Xiaomi Group, NetEase, and XPeng leading declines; consumer and optical module shares were relatively strong, with ASMPT up more than 8%. Mainland Chinese markets were closed for the holiday, and the absence of potential southbound capital buying support further exacerbated market volatility. Homin Lee, macro strategist at Lombard Odier in Singapore, said the Hang Seng Index also faces additional headwinds from the Hong Kong dollar's linked exchange rate system transmitting the U.S. interest rate cycle. ^[5]

Among individual stocks, Seres' Hong Kong shares at one point extended gains to 15% on news that Huawei and Seres reached a new five-year cooperation to jointly upgrade the AITO business. Huanchuang Technology, a physical AI concept stock that just listed on the Hong Kong Stock Exchange on Sept. 30, closed down 47.49% on Oct. 2 at HK$113 per share; it closed up 265.68% on its first trading day at HK$215.2 per share. ^[5]

McKinsey Raises 2030 Semiconductor Market Forecast to $2.3 Trillion, with Growth Mainly from Price Increases

McKinsey's latest research raised its baseline forecast for the global semiconductor market in 2030 from $1.6 trillion in autumn 2025 to $2.3 trillion, an increase of about 44%; over the same period, global wafer shipments are expected to maintain average annual growth of about 7%, broadly in line with previous forecasts, while its market CAGR forecast was raised from 13% to 19%. ^[3]

Revenue growth and shipment growth are now 'clearly decoupling.' McKinsey expects server and data center chip revenue to rise from $330 billion in 2025 to $1.2 trillion in 2030, a CAGR of 29%; wireless communications chips are expected to add about $205 billion in revenue, with a CAGR of 10%. On advanced nodes, 3nm and 5nm wafer ASPs are rising at 2% or more per year, reversing the historical pattern in which ASPs continued to decline in the first two years after a product launch. DRAM prices have risen sixfold cumulatively, with memory contributing $560 billion in incremental revenue. ^[3]

Another China Pharma BD Deal: Abogen Biosciences and Novartis Sign $7.8 Billion mRNA Licensing Agreement

Chinese mRNA biotech company Abogen Biosciences and Swiss pharmaceutical giant Novartis reached a licensing and cooperation agreement worth up to $7.8 billion. Under the agreement, Novartis will pay $575 million upfront to obtain an exclusive license to Abogen's experimental drug ABO2203, and will have options on other potential programs from Abogen's RNA technology platform; if subsequent development progresses smoothly and receives regulatory approval, Abogen could receive up to an additional $7.2 billion in milestone payments and may also receive royalties on future product sales. ^[4]

According to Bloomberg, ABO2203 is an mRNA-encoded T-cell engager that works by prompting patients to produce therapeutic molecules themselves to target and eliminate B cells that drive autoimmune diseases, with potential indications including lupus and rheumatoid arthritis. The deal is a microcosm of the recent wave of multinational pharmaceutical companies making intensive moves into Chinese innovative drugs: this week Novo Nordisk paid $2.6 billion for rights to an early-stage oral obesity drug under Jiangsu Hengrui Pharmaceuticals; AstraZeneca invested $2 billion in Summit Therapeutics to jointly develop a cancer drug originating from Akeso. ^[4]

Broadcom Teams Up with Blackstone to Raise $60 Billion, Building Compute Capacity for AI Firms Like Anthropic

Broadcom is leading the arrangement of a $60 billion debt financing aimed at providing funding for AI companies such as Anthropic to buy chips and build data centers. Bloomberg, citing people familiar with the matter, reported that $42 billion is planned to be issued as Class A senior secured notes, to be distributed to investors by a bank syndicate; the other $18 billion is Class B subordinated debt, led by Blackstone Group, with $9 billion of proprietary capital from its funds as an anchor investment. The financing has been in the works for several weeks and has not yet been officially announced. ^[6]

Debt financing for AI infrastructure has cumulatively reached hundreds of billions of dollars, most of which has flowed to data centers. In August this year, Nvidia announced partnerships with six major financial institutions including Blackstone, planning to mobilize more than $500 billion to support the AI industry. ^[6]