Global Markets Brace for Key PMI Data Amid Rising Oil Prices and Geopolitical Tensions

Economic Focus Today

• In the euro area, the flash PMIs for October are set to be a key driver for markets. Having shown improvement in recent months, these indicators are expected to reflect stabilization with minor declines. The composite PMI is projected to ease slightly to 52.7 from 53.1—a still-robust reading suggesting moderate economic growth. Particular attention will be paid to price components, which began rising again last month amid higher energy costs.
• In the U.S., the S&P Global Flash PMIs for October will provide insight into business conditions. Both manufacturing and services sectors demonstrated strong performance in September, and investors will watch for any signs of continued momentum or emerging pressures.
• In Denmark, the business sentiment indicator is due for release. Confidence among businesses has trended upward and currently stands at its highest level since April 2022, defying subdued consumer sentiment. This strength is broad-based across industries, though retail has played a particularly prominent role. Additionally, September retail sales data will offer further clues, with recent card spending trends indicating potential softness.

Economic and Market Developments

Overnight Highlights

In commodities, Brent crude surged past $114 per barrel yesterday and continued climbing on Friday, reaching a five-month high. Escalating Houthi attacks on Saudi facilities and speculation about renewed U.S. strikes on Iranian oil infrastructure have heightened concerns over Middle Eastern supply disruptions. Adding to market strain, shipping costs have spiked, with tanker rates from the Middle East Gulf to Asia exceeding $37 per barrel. Military sources suggest both U.S. and Israeli forces may be planning targeted actions post-midterms, potentially focusing on Iran’s energy sector.

In Japan, September inflation data came in slightly above expectations. The core CPI measure favored by the Bank of Japan (excluding fresh food) rose to 2.1% year-on-year, up from 1.7% in August—marking its first ascent above 2% this year. Underlying inflation also edged higher, climbing to 2.4% when energy is excluded. Meanwhile, October PMI figures painted a mixed yet resilient picture: services activity accelerated, offsetting slower growth in manufacturing. The composite index held steady at 52.3, reinforcing the view that Japan’s economy remains on solid footing. These developments support arguments for gradual monetary tightening, though no immediate action is expected next week.

Yesterday’s Market Moves

In the euro area, October consumer confidence dropped to -17.9, worse than anticipated and down from -16.8 in September. This marks the lowest reading since May, raising concerns over household spending in Q4. However, earlier consumption data revealed that actual spending in Q2 remained buoyant even amid declining sentiment, suggesting some disconnect between confidence indices and real-world behavior.

In Norway, the manufacturing confidence index advanced to 3.4 in Q3, extending a modest upward trajectory that began late last year. Supporting this trend were stronger new order volumes—the highest in four years—and easing input price pressures.

In labor markets, Norway’s unemployment rate held steady at 4.6% in September. Nonetheless, wage growth appears to lag behind Norges Bank projections, with preliminary estimates showing annual increases of just 3.8% in September. While manufacturing shows signs of renewed vigor, there is little evidence so far of accelerating wage pressures.

In Denmark, consumer confidence slipped to -17.2 in October from -13.7 the previous month, reversing summer gains. Households expressed growing pessimism regarding national economic prospects and personal financial situations, citing energy cost anxieties and geopolitical uncertainty as primary factors.

Equities: Global equity markets experienced broad-based losses yesterday, with the S&P 500 declining 1.2% and the Nasdaq falling 2.6%. Investor scrutiny intensified around sustainability of AI-driven earnings and consumer resilience amid rising energy prices. Tech stocks bore the brunt of the sell-off, while bond markets told a contrasting story—U.S. 10-year Treasury yields fell sharply by 17 basis points, dipping below 5% for the first time in a month. Asian markets followed suit overnight, with South Korea’s Kospi down nearly 1% and U.S. futures edging lower this morning.

FI and FX: Renewed energy price hikes lent support to commodity-linked currencies. EUR/NOK slipped below 10.50, reflecting NOK strength, while EUR/CHF eased alongside renewed eurozone risk aversion. EUR/USD briefly traded under $1.12 before stabilizing. Across fixed-income markets, yields declined globally, with both U.S. Treasuries and German bunds seeing notable drops across the curve.

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