In focus today
The data front remains relatively quiet; however, keep an eye on the UK CPI inflation data for September, which will likely determine whether a Bank of England rate cut will be considered in November.
Economic and market news
What happened overnight
In the Ukraine war, a summit between US President Trump and Russian President Putin was cancelled, following productive talks between US secretary of state Rubio and Russian foreign minister Lavrov. The summit was expected to further talks on ending the war.
In Japan, September exports rebounded to 4.2% y/y after four months of contraction. However, this fell slightly short of market expectations of 4.6%, despite support from the weak yen. Imports also climbed back in the positives to 3.3%, severely overshooting consensus expectations of just 0.6%. While the Japanese economy does appear to be regaining its footing, US tariffs continue to weigh on the economy.
What happened yesterday
In Canada, September’s CPI figures slightly exceeded expectations, reaching 2.4% y/y (cons: 2.3%), largely driven by rising food prices. The Bank of Canada’s core measure climbed to 2.8% y/y from 2.6% y/y and may be a deciding factor ahead of the monetary policy meeting one week from now.
In Hungary, the central bank decided to maintain interest rates at 6.50% as expected.
Equities: Equity markets ended marginally higher yesterday, led by gains in the Far East, while Europe and the US were largely unchanged. There was a modest tilt toward cyclicals, but it was not a macro-driven session, rather, another day where earnings dictated sector moves. With few macro or geopolitical headlines, earnings are now firmly in the driver’s seat, and dispersion across sectors is being dictated by micro fundamentals. From our perspective, it was encouraging to see both healthcare and industrials deliver strong earnings and solid performance yesterday. That said, the real story yesterday came from the commodity space, where gold and silver both suffered heavy losses, gold down almost 6%, silver more than 7%. This hit sentiment in the broader materials complex. In the US yesterday, Dow +0.5%, S&P 500 +0.00%, Nasdaq -0.2% and Russell 2000 -0.5%. This morning with a mixed picture in Asia, while European futures are lower and US futures are marginally higher.
FI and FX: The positive risk appetite took a breather, with precious metals notably lower, while front-end US yields were largely unchanged. The bullish flattening trend continued, as long-end US yields declined further, with the 10-year Treasury yield down 2bp. EUR/USD is consolidating around 1.16 in another session dominated by a broadly stronger dollar, while USD/JPY trades near 152 following continued JPY weakness. Both EUR/SEK and EUR/NOK extended their declines.
