Market News

• Prior 51.7

Key findings:

• Growth rate of UK manufacturing output eases slightly in September
• Output growth slows for second month in a row
• Input cost and output price inflation both increased

Comment:

Rob Dobson, Director at S&P Global Market Intelligence, said:

“A disappointing September PMI saw the rate of increase in UK manufacturing production slow further. Output growth was its weakest seen over the past six months, with orders and exports growing only modestly. Slower demand growth was to be expected given the higher energy prices seen during the month.

"The big shift in September was in the survey's price measures, which switched from signalling a decline in inflationary pressures to a renewed uplift. After hitting conflict-driven…

• Eurozone September final manufacturing PMI 52.9 vs 52.7 prelim
• Prior 52.7

The breakdownEurozone manufacturing ended the third quarter on a stronger footing, with the headline PMI rising to 52.9 in September from 52.7 in August - marking its highest level in more than four years.

Of note, production and new orders both increased at their fastest rates since early 2022 with new order growth reaching its strongest since March 2022.

However, the less comfortable part of the report was inflation. Input cost and output price inflation both accelerated in September, marking the first time in four months that both measures increased at a faster pace.

Meanwhile, supply pressures also remained evident as supplier delivery times continued to lengthen…

FUNDAMENTAL OVERVIEW

Gold spiked to the upside yesterday following the softer than expected US PCE data but eventually gave back all the gains and extended the losses in the US session close.

There was no catalyst for the bearish move but frankly speaking, there wasn’t even one for the bullish one as the PCE data surprised to the downside mainly due to BEA's annual methodological update and revisions.

In fact, the BEA changed how some prices are constructed. There was enough uncertainty around these changes that economists had warned beforehand that the revisions could materially lower reported core PCE. All in all, it wasn’t a game changer.

In the short-term, the price action…

• France September final manufacturing PMI 50.6 vs 50.3 prelim
• Prior 51.1

The breakdownMore to follow...

What does the data measure?The manufacturing PMI surveys businesses across areas including output, new orders, employment, supplier delivery times and inventories. A reading above 50 indicates expansion from the previous month, while below 50 signals contraction.

Why does it matter to markets?France is the euro area's second-largest economy, so its PMI provides an early indication of industrial momentum. Markets will be particularly interested in whether the final reading confirms that manufacturing remains above the 50 threshold.

How does this fit the broader economic picture?The French economy has been sending somewhat mixed signals.…

• Prior 49.6

Key findings:

• Modest reductions in output and new orders
• Inflationary pressures intensify, but deterioration in supply chain performance eases
• Job creation sustained as outlook remains bright

Comment:

Eleanor Dennison, Economist at S&P Global Market Intelligence, said:

"The Italian manufacturing sector ended the third quarter on more stable footing. The demand environment remained fragile, but the downturn with respect to new orders was noticeably less severe than in August.

"The year-ahead outlook remained bright as both output expectations and hiring activity were above trend. There was, however, an underlying feeling of uncertainty across the sector as the war in the Middle East continued to play its role in pushing up costs…

• Spain September manufacturing PMI 51.0 vs 50.1 expected
• Prior 49.5

Spain's manufacturing economy returned to growth territory in September, although the sector’s underlying performance remained subdued.

The details show that production increased but overall new work continued to decline amid ongoing uncertainty and rising prices, especially for energy. Of note, new order inflows fell for a fifth successive month, although the pace of contraction was only marginal. Firms cited ongoing uncertainty and the negative impact on demand of rising prices, which were reported by manufacturers to be again increasing steeply.

Meanwhile, both input and output prices increased at accelerated and above trend rates in September. So, that just adds to…

• Eurostoxx -0.5%
• Germany DAX -0.6%
• France CAC 40 -0.7%
• UK FTSE -1.2%
• Spain IBEX -1.0%
• Italy FTSE MIB -0.7%

European stocks are starting the new month on the back foot, with losses stretching across all the board with benchmark indices in the UK and Spain seeing the heaviest declines early on.

The main problem remains the bond market. 10-year Treasury yields briefly touched 5.31% earlier today, the highest since 2007, and is keeping thereabouts now at around 5.30% as we get into the session. That leaves borrowing costs at uncomfortable levels for equities after Treasuries suffered their worst quarter since 1994.

As such, that is making it difficult for European stocks to take much comfort amid the latest broader market developments.

Oil prices were…

• Switzerland September CPI 0.0% vs 0.0% m/m expected
• Prior +0.4%
• Switzerland September CPI +1.0% vs +1.0% y/y expected
• Prior +0.8%
• Switzerland September core CPI +0.5% y/y
• Prior +0.4%

The breakdownThe readings for September fall within expectations, with headline annual inflation increasing to 1.0% while the monthly figure comes in flat.

Once again, energy was the main culprit with prices for heating oil, petrol and diesel seen rising further in September. That is somewhat offset by a decline in prices for international package holidays, car rentals, hotels and accommodation.

Core annual inflation, which is the more important metric, is seen nudging higher to 0.5%. The SNB continues to place more emphasis on this estimate as it excludes the more…

• UK September Nationwide house prices -0.2% vs 0.0% m/m expected
• Prior +0.2%
• UK September Nationwide house prices +0.8% vs +1.3% y/y expected
• Prior +1.6%

The breakdownIt's a softer report across the board. Annual house price growth halved to 0.8%, its weakest pace since December 2025, while prices also slipped 0.2% on the month.

Nationwide notes that activity remains subdued amid economic uncertainty and higher interest rates are feeding through to mortgage pricing. While affordability has improved as wage growth has outpaced house prices, higher mortgage rates have offset some of that benefit.

For the BOE, the housing slowdown adds to evidence that higher borrowing costs are restraining demand. But at this stage, inflation and wage developments…

There are a couple of expiry levels to take note of on the day, as highlighted in bold below.

They are for USD/JPY at the 158.00 and 158.25 levels, with the spot price sitting relatively nearby within 30 pips of the former and less than 10 pips of the latter strike.

That creates a fairly dense pocket of options between the 158.00 and 158.25 region, which could help anchor price action around the area heading towards the cut. That is assuming there isn't any strong fundamental catalyst in the session ahead.

Adding to that is technical resistance in the form of the 200-day moving average at 158.46, so that could keep a lid on any upside price extensions in European trading. The near-term chart is now favouring buyers, with price action…

For years, 2027 has loomed over the Taiwan story as the point by which China wants its military to be capable of taking the island by force. However, the latest US assessment suggests that doesn't necessarily mean an invasion is just around the corner.

The latest report from Reuters today says US officials are increasingly seeing a Chinese invasion of Taiwan before 2028 as being unlikely. And that is despite China president, Xi Jinping, having instructed the People’s Liberation Army (PLA) to have the necessary capabilities in place by 2027 if required.

Delays to military readiness amid China’s anti-corruption campaign are reportedly one factor, while Beijing is also watching Taiwan’s 2028 presidential election closely.

Now, the 2027 date has…