Sunrise Market Commentary

Markets

• Energy markets captured most of the attention yesterday. Markets had to balance a number of oil related reports – from Houthi attacks on Saudi Arabia to the US-Russia diesel deal and Trump announcing an energy ceasefire between Ukraine and Russia. The diesel deal had some moderating impact on (European) prices in a daily perspective. But Brent rose to as high as $107.3 after Saudi Arabia said it faced a new drone and missile attack and Ukraine accused Russia of already violating the energy truce. European gas prices closed at their highest level of the last couple of years (€84.35/MWh). Higher energy prices triggered some bear flattening of the German yield curve. The 2-yr yield added almost 3 bps, long-term maturities finished unchanged (10-yr) to slightly lower (1 bp at the 30-yr). The US bond market was closed for Columbus Day. Treasuries open higher in Asian trading this morning, building on last week’s momentum. Some consolidation could be in the making. It’s energy that weighed on the euro this time around, taking over from the fiscal narrative that dominated last week. Although we need to note another grind higher in French and Belgian swap spreads towards the recent multiyear highs. EUR/USD lost the 1.12 to close at 1.1155, a new year-to-date low. Euro weakness prevailed in EUR/GBP as well with the pair slipping through the 2026 troughs to 0.8446. EUR in both cases suffers from a deteriorating technical picture. Stock markets in Europe finished in green though off the highs. Wall Street ended mixed near their all-time highs.
• The calendar in terms of economic data keeps us waiting for the single most important release: the US CPI on Wednesday. We do get a lot of central bank appearances happening in the margin of the IMF & World Bank annual meetings in Bangkok. Bank of England’s Greene already hit the wires on a hawkish note. She said that faster-than-expected growth and a resilient jobs market are evidence that the central bank isn’t doing enough. Greene has called for a hike at the previous policy meetings and brushes off the argument that markets are doing the job for them. “I don’t believe in this notion a strategy can be to rely on premia to do your work for you. I think the central bank actually needs to develop a strategy.” Greene argues to take pre-emptive action against second round effects, pointing out that successive inflationary shocks change people’s behaviour. The likes of Greene will most likely secure their rate hike (to 4%) at the November meeting after the Bank of England paved the way for such a move at the September policy gathering. Her colleague and biggest BoE dove Dhingra is scheduled to speak later today. Fed speakers include Waller, Goolsbee, Barkin and Collins.

News & Views

• The IMF points out that global economic activity has proven resilient once again in its latest World Economic Outlook. The technology upturn, buffers, and adaptations have helped mitigate the damage from geopolitics-driven disruptions. Global growth is projected to slow to 3.1% in 2026 and rebound to 3.4% in 2027. Risks are skewed to the downside as the IMF fears limits of resilience. The WEO singles out four risk categories: persistent conflicts, cyber threats & extreme weather events, reassessment of AI-related expectations, financial market stress & fiscal vulnerabilities and renewed trade tensions. Global headline inflation is projected to rise notably to 4.7% in 2026 before easing to 4.1% in 2027. Core inflation is expected to return to 2% only gradually in several major economies: by the end of 2027 in Japan and the UK and by mid-2028 in the EMU and the US. Inflation in China is expected to rise from low levels. Energy-importing economies outside the technology value chain face the most difficult outlook.
• The UK Residential Market Survey showed macroeconomic headwinds weighing on the near-term outlook in September with interest rate expectations moving higher. Measures of buyer demand and sales activity turned marginally weaker, but latest readings remain less downbeat than the lows recorded earlier in the year. The 12-month outlook remains that the market will stabilize further ahead. The RICS survey continues to signal that house prices are softening at the aggregate level. Near-term house price expectations at the national level remain consistent with further downward pressure over the coming three months with a broadly flat trend seen over 12 months. Across the UK rental market, tenant demand growth accelerated for a third consecutive month.