Risk off. No more, no less. Main European stock markets lose over 3% with financials and travel stocks leading the decline. The international consortium of investigative journalists’ report on global banks defying US crackdowns by serving oligarchs, criminals and terrorists (“FinCEN Files”) hurt the former, while the latter suffer under a new Corona-panic attack. The number of infections is accelerating again in Europe with global deaths expected to pass the one million mark later this week. Fears increase of imposing fresh lockdowns which would badly hurt the economy with monetary and fiscal stimulus probably providing less of support compared to the first ones in spring/summer. Traditional correlations worked in today’s risk aversion. Core bonds profited. Both the US and German yield curve bull flattened with yields shedding up to 5.5 bps in the US (30-yr) and 4.9 bps in Germany (30-yr). 10-yr yield spreads vs Germany widen by up to 5 bps for Italy and Greece. The move is related to the risk climate and not on this weekend’s FT story on an upcoming PEPP-review by the ECB (Oct 29 policy meeting). The Belgian debt agency raised €2bn, the maximum amount on offer, via OLO74 (€0.6bn 0.8% Jun2025), OLO75 (€0.805bn 1% Jun2031) and OLO86 (€0.608bn 1.25% Apr2033). The combined auction bid cover was a solid 2.59. The Belgian debt agency now completed over 85% of this year’s €46.5bn OLO funding need.

• The Japanese yen was today’s star performer on the FX market. USD/JPY currently changes hands just north of the 104 big figure. A break lower would pave the way to the 100-area. The US dollar ranked a strong second today. The trade-weighted dollar rose towards the 93.50 area, but holds within the sideways consolidation range since August (92-94). The same technical conditions apply to EUR/USD which dips towards 1.1754/38 intermediate support, the final hurdle before the sideways bottom channel of 1.1696. Sterling traditionally underperforms other majors in current market conditions, but manages to stand its ground against the single currency. An attempt to retake the EUR/GBP 0.9180 battle ground failed, with the pair currently near opening levels at 0.9150. Less liquid currencies get the biggest bruising today with CEE-currencies being notable underperformers in this latter category. EUR/HUF rose to the highest level since April (363) with the all-time high at 370 next on the technical charts. EUR/PLN tests 4.50 resistance, which is the topside of the sideways trading range since June. EUR/CZK breaches the 27 mark for the first time since May. The Hungarian and Czech central banks both meet this week. On commodity markets, gold can’t cash on its haven status with the stronger dollar and declining inflation expectations (primary driver of yields today) winning the argument. Gold prices fall to $1925/ounce. Brent crude reverses part of last week’s rebound, losing $1/b and exchanging in the low $42 area.

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News Headlines

Belgian consumer confidence recovered sharply in September, improving from -26 to -16, the best level since March. In this respect the indicator also wiped out the turbulence from August. The renewed confidence fed through to all components. Expectations for the next 12 months on the economic situation, on households’ financial situation and on households’ savings all improved. Belgian consumers for the first time since the health crisis, also gave less unfavourable opinion on the outlook for unemployment after deteriorating sharply the last few months.

China issued guidelines to boost new types of consumption, including online shopping and payments. New forms of consumption are important for China’s economic recovery. However, according to the State council the transition is hampered by inadequate infrastructure, weak service capacity and lagging regulations. China aims to support model cities and leading companies on new types of consumption. Qualified firms in the new consumption sector will be allowed to raise funds by issuing stocks and bonds. Banks have to reduce fees for consumers and firms.


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