1. Macroeconomic events and risks
In the US, nonfarm payrolls surged by 254,000 in September, with unemployment edging down to 4.1%. Wages grew 0.4% monthly and 4.0% annually, beating forecasts. US Treasury yields spiked after the report, as markets increased bets on rate cuts in November and December, signaling healthy labor market momentum. Meanwhile, US CPI inflation hit 2.4% in September, with core CPI rising 3.3%—both slightly higher than expected.
In Europe, the ECB followed through on its anticipated 25 basis point cut, lowering its deposit facility rate to 3.25% at the October 17 meeting. The ECB’s dovish stance reflects easing inflation risks and slow economic growth. Markets are pricing an additional 25 basis point reduction in December, which could lower the rate to 3.0%.
Oil prices have been volatile. After surging in early October due to Iran's attack on Israel, prices fell as fears of a wider conflict abated. Brent crude sits at $75, up 2% for the month, while US crude remains flat at $71. The geopolitical risk premium has partially unwound, but tensions in the Middle East keep the oil outlook highly uncertain.
2. Geopolitical events and risks
The situation in the Middle East remains fluid. Following Iran’s rocket attack on Israel, tensions have risen, though an attack on Iran’s oil infrastructure seems unlikely at this stage. Israel’s plans remain unclear, but the possibility of a broader conflict continues to loom. A direct confrontation could drive up oil prices, although for now, geopolitical risks are largely priced in without dramatic market moves.
3. Market trends and potential risks
US equities have continued to climb, with the S&P 500 up 3.5% and the Dow Jones gaining 3.4% over the past month, driven by optimism around potential Fed rate cuts. European equities have also risen, with Germany’s DAX up 4.1%. Emerging market equities have been mixed, with Hong Kong’s Hang Seng Index rising 15.1% due to Chinese stimulus but later retreating.
US bond yields have risen sharply due to inflation fears tied to the ongoing oil uncertainty. The US 10-year Treasury yield now stands at 4.03%, while the 2-year yield is at 3.95%.
4. Currency trends
The US dollar index strengthened by 2.6% over the past month, appreciating versus the euro by 2%. The dollar also gained 1.2% against the Canadian dollar and 4.8% against the yen.
