Headlines:
- Solana underperforms as US spot Solana ETFs record net outflows, ending a 14-week inflow streak
- Long global semiconductors remains the most crowded trade followed by short US Treasuries, according to Bank of America
- Oil prices retreat despite persistent Middle East tensions and stalled US-Iran negotiations. What’s next?
- Connecting the dots: How the AI boom could turn into the Fed’s next inflation headache
- Bitcoin recovers losses as oil prices ease: focus turns to US CPI as next key catalyst
- Chart of the day: EUR/CHF bounces this week but French bond spreads warn euro risks aren’t over
- Oil price volatility takes gold for a ride as focus turns to US CPI next. What to watch?
- European stock market open: Stocks edge higher but gains remain tentative ahead of US CPI
- What are the main events for today?
- FX option expiries for 13 October 10am New York cut
- Germany September final CPI +3.3% vs +3.3% y/y prelim
- Why a few bad trades can undo weeks of trading profits
Markets:
- WTI crude oil down -1.97% to $91.91
- Gold up +0.30% to $4183
- NZD leads, USD lags
- S&P 500 down -0.08% to 7852
- US 10y Treasury yield down 6 bps to 5.18%
- Bitcoin up +2.17% to $83,481
There’s been an improvement in risk sentiment as oil prices eased, but the macro or geopolitical picture hasn’t changed one bit. We haven’t got any catalyst to trigger the reversal in crude oil, so the current relief might be just a pullback. The Houthis continue to attack Saudi Arabia and the US-Iran negotiations remain at a stalemate.
This week is also a bit empty on the economic data front, with the main event being the US CPI report tomorrow. We could see some rangebound price action heading into the release or even some weakness in risk assets as traders hedge into potentially hot data.
Higher than expected core inflation could raise the probabilities for an October rate hike, while soft data will seal a pause. In the bigger picture, it won’t change the inflationary pressures from the higher energy prices but it could lead to a short-term relief.
The focus is also increasingly shifting to the US midterm elections on November 3. According to the Bank of America Fund Manager Survey, majority of investors are expecting a Democratic House and Republican Senate, while 31% expect a Democratic sweep. In the latter scenario, 32% expect bond yields to rise and equities to fall, while 22% anticipate a fall in yields and stocks. A Democratic sweep has certainly become more likely given the mess caused by Trump since last year.
Keep in mind that even a Democratic sweep wouldn’t change much as Trump would retain the power to continue the Iran war or impose tariffs. It could reduce fiscal fears though, supporting long-term bonds and leading to a fall in Treasury yields. The stock market might react positively initially if Treasury yields fall, but going forward, the US-Iran war and deteriorating growth expectations could drag it down to new lows.
This article was written by Giuseppe Dellamotta at investinglive.com.