In focus today
In China, data will be released on trade and inflation overnight. On the trade front, exports are expected to show continued strength. External shipments have been a strong growth engine rising around 25% y/y in value terms for some months boosted by exports of chips, electronics and autos. Price increases on chips and commodity prices have lifted export prices to 15% y/y so in real terms export growth is lower around 10% y/y. PPI inflation for September is set to rise further to above 4% from 3.8% y/y in August also lifted by price increases on microchips and commodities. CPI inflation is expected to rise from 0.8% y/y to 1.0% y/y but mainly due to the higher input cost pressures, not stronger consumer demand.
From the US, we get the NFIB survey of small business sentiment. Beyond the headline sentiment, we will keep an eye on companies’ future pricing plans and how tight they assess the labour market to be.
Economic and market news
What happened overnight
In commodities, Brent crude traded around USD 105/bbl this morning, down from around USD 107/bbl last night, as markets weighed the prospect of more Russian diesel entering global markets. Geopolitical risks limited the decline, with Ukrainian President Volodymyr Zelenskyy saying Kyiv would continue strikes against Russian targets as Moscow keeps hitting Ukraine’s energy infrastructure. In the Middle East, Riyadh airport is set to remain shut until Saturday after further Houthi attacks, while several airlines cancelled services to the capital.
What happened yesterday
On the wires, Fed’s Hammack struck a hawkish tone, saying rates need to move higher to restrain demand and keep inflation expectations anchored. She argued that smaller, more frequent policy adjustments are preferable to waiting and risking a larger correction later but stopped short of explicitly backing a hike at the October meeting.
In Denmark, inflation rose more than we expected in September, increasing to 2.2% from 2.0% in August. Higher energy prices, including electricity, natural gas and fuel, pushed the headline rate higher, while the usual autumn drag from summer house rentals was smaller than normal. Food prices continued to decline, pointing to ongoing downward pressure, and underlying price pressures still appear muted.
Equities: Global equities finished broadly flat on Monday, but the headline concealed substantial rotation as investors cut AI exposure, particularly semiconductors, among this year’s strongest performers. Europe and defensives outperformed, with consumer staples leading sector returns. Despite the marginal decline in the S&P 500, 321 constituents advanced versus 179 that declined, marking the seventh session in eight with positive breadth and another day of outperformance for the equal weighted index. This challenges the persistent narrative that narrow US leadership necessarily foreshadows a broader correction.
We remain cautious about historical parallels: leadership has been driven predominantly by substantially stronger earnings growth rather than relative multiple expansion, an important distinction when assessing its vulnerability. The rotation away from AI and not least semiconductors continues this morning, with Korea’s KOSPI down around 7%. European and US futures are mixed, with defensive exposure providing support while AI and semiconductors remain under pressure.
FI and FX: Fixed income markets were quiet with the US out for Columbus Day and a light euro area calendar, but higher energy prices again became a key driver for the rates outlook. EUR rates twist-flattened, while France-Germany spreads widened modestly amid continued sensitivity to budget negotiations. In FX, EUR/USD moved lower as USD strengthened broadly, supported by softer risk sentiment and hawkish comments from the Fed’s Hammack. In Scandinavia, SEK traded quietly, while NOK gained against EUR on higher oil prices, though broad USD strength kept NOK range-bound versus USD.
