In focus today
China will release key trade and inflation data overnight, with exports expected to demonstrate continued momentum. External shipments have acted as a robust growth driver, rising approximately 25% year-over-year in value terms in recent months, supported by exports of chips, electronics, and automobiles. However, higher export prices—driven by chip costs and commodity prices—have lifted export prices by 15% year-over-year, reducing real export growth to around 10% in real terms. September’s PPI inflation is projected to climb above 4% from August’s 3.8%, again buoyed by microchip and commodity price gains. CPI inflation is anticipated to increase from 0.8% to 1.0% year-over-year, primarily reflecting elevated input costs rather than stronger consumer demand.
From the US, the NFIB small business sentiment survey will be closely watched, with attention turning to companies’ pricing outlook and assessments of labor market tightness beyond the headline figure.
Economic and market news
What happened overnight
In commodities, Brent crude traded near USD 105 per barrel in early morning trade, down from around USD 107 per barrel the previous evening, as markets assessed the potential increase in Russian diesel supplies. Geopolitical tensions capped the decline, with Ukrainian President Volodymyr Zelenskyy confirming Kyiv will maintain strikes on Russian targets as Moscow continues targeting Ukraine’s energy infrastructure. In the Middle East, Riyadh airport remains closed until Saturday following additional Houthi attacks, with several airlines canceling flights to the Saudi capital.
What happened yesterday
On the wires, Fed Governor Christopher waller signaled a hawkish stance, emphasizing the need for continued interest rate increases to rein in demand and maintain inflation expectations. He advocated for smaller, more frequent policy adjustments over delayed, larger corrections, while stopping short of explicitly endorsing a rate hike at the October meeting.
In Denmark, September inflation exceeded expectations, rising to 2.2% from August’s 2.0%. Escalating energy costs—including electricity, natural gas, and fuel—pushed the headline rate higher, while the typical autumn boost from summer house rentals was less pronounced than usual. Food prices continued to ease, suggesting lingering downward pressure, and underlying inflation remains relatively tame.
Equities: Global equities ended largely flat on Monday, though the surface stability masked significant sector rotation as investors reduced exposure to artificial intelligence stocks, particularly semiconductor companies that have outperformed this year. European markets and defensive sectors outperformed, with consumer staples posting the strongest returns. Despite a slight dip in the S&P 500, 321 stocks rose versus 179 that fell, marking the seventh positive session in eight and underscoring continued strength in equal-weighted indices. This performance challenges the narrative that narrow US market leadership signals an impending broad correction.
Analysts caution that recent gains stem largely from significantly stronger earnings growth rather than expanding valuation multiples—a critical distinction when evaluating vulnerability. Rotation away from AI-related stocks, especially semiconductors, persisted into early morning trade, with Korea’s KOSPI declining around 7%. European and US futures showed mixed movements, with defensive sectors providing support while AI and semiconductor names remained under scrutiny.
FI and FX: Fixed income markets were subdued, with the US observing Columbus Day and a relatively light European economic calendar, but rising energy prices reinforced the hawkish case for interest rate decisions. EUR curves exhibited twist-flatten dynamics, while France-Germany spreads widened slightly amid ongoing budget negotiation sensitivity. In foreign exchange, EUR/USD slipped as the dollar strengthened broadly, bolstered by softer risk sentiment and dovish-to-hawkish rhetoric from Fed officials. In Scandinavia, SEK remained steady, while NOK extended gains versus EUR on elevated oil prices, though broad USD strength kept NOK constrained against the greenback.
