In focus today
In the UK, August GDP-data is released. After a strong Q1, the economy has slowed, which is bad news for the Labour government ahead of the November budget, where the fiscal wiggle room is very limited.
In France, Premier Lecornu will face two votes of no confidence in parliament starting at 9:00 CET called by the far-right and far-left, respectively. It is expected that he survives due to backing from the Socialists and Republican Party.
Economic and market news
What happened yesterday
In the US, a federal judge temporarily blocked mass layoffs of federal workers during the government shutdown, citing alleged political motivations behind the cuts. The Trump administration had planned to lay off over 10,000 workers, with 4,100 already notified. The case, brought by unions, challenges the legality of such layoffs during the shutdown.
In Sweden, final September inflation data confirmed earlier estimates, with CPIF at 3.1% year-on-year and CPIF excluding energy at 2.7%. Rental car prices and package holidays declined as expected, reflecting seasonal adjustments, while food prices fell by 0.8% month-on-month. The release offers no surprises, aligning with the Riksbank’s signal of unchanged policy for now.
In China, credit data indicated aggregate financing beat expectations in September, but the credit impulse weakened, reflecting fading stimulus effects from earlier this year. Government issuance slowed, and private credit demand remained subdued.
In Norway, the government published the fiscal budget for 2026. The government expects to spend 2.8% of the value of the Petroleum Fund, exactly in line with Norges Bank’s assumption from the September MPR. The budget effect on the economy is expected to be slightly expansionary, at 0.1% of GDP. Overall, this should be neutral for monetary policy outlook. Keep in mind that the minority government is dependent on four other parties to get the budget through the Parliament.
In Japan, coalition negotiations for forming a new government are ongoing, with no agreement yet on a date for the prime ministerial vote, which is unlikely before next week. Uncertainty remains as discussions continue.
Equities: Equities were mostly higher on Thursday – an impressive performance given that investors are effectively flying blind amid the government shutdown and the resulting lack of macroeconomic data. Nevertheless, markets continue to find alternative sources of information, with banks emphasising continued consumer resilience and generally positive takeaways for ASML. Sector and style trends continue to indicate a solid appetite for risk: cyclicals are outperforming defensives this week and small caps are beating large caps. Yesterday, the Russell 2000 rose 1%, the S&P 500 gained 0.4%, and the Stoxx 600 advanced 0.6%. Notably, performance broadened to include yield-sensitive sectors such as real estate and utilities, while value cyclicals – including materials, industrials, and banks – saw some profit-taking. Futures are little changed this morning.
FI and FX: US equity indices closed in green after a choppy session. European government bond yields continue to decline from the long end while the 10Y OAT-Bund spread tightens as PM Lecornu is seen to survive the vote of confidence. EURUSD adds to gains and trades slightly north on 1.1650. EUR/Scandies have had a wobbly week so far, though EURNOK and EURSEK remain within familiar ranges after they edged higher yesterday.
