Market News

US Stocks Drift Ahead of Key Data – Dow down 0.26%

US equity markets finished modestly lower on Tuesday as investors continued to assess geopolitical developments and expectations for further interest-rate increases ahead of some key data releases this week. The Dow Jones declined 0.26% to close at 51,349, while the S&P 500 fell 0.17% to 7,670. The Nasdaq recorded a smaller loss of 0.09%, ending the session at 26,797.

US Treasury yields were mixed across the curve. The policy-sensitive 2-year yield retreated from recent highs, falling 5.4 basis points to 4.877%, while the benchmark 10-year yield was unchanged at 5.236%. Longer-dated bonds remained under pressure, with the 30-year Treasury yield reaching its highest level since…

Central bank meetings are among the most important events on the market calendar, but traders do not listen to policymakers only when they announce an interest rate decision. Speeches, interviews and comments from individual central bank members can move markets just as sharply because the market is forward-looking.

Markets are constantly trying to anticipate what central banks will do next, and any comment that changes those expectations can trigger an immediate repricing that impacts bonds, currencies, equities, commodities and cryptocurrencies.

Yesterday's reaction to Federal Reserve Bank of New York President John Williams is a good example. Before his comments, markets were pricing roughly a 70% probability of another Fed rate hike in…

• Germany September unemployment change 12k vs 1k expected
• Prior 4k
• Germany September unemployment rate 6.4% vs 6.4% expected
• Prior 6.4%

The breakdownMore to follow...

What does the data measure?The unemployment change tracks the monthly change in Germany's seasonally adjusted number of unemployed people, while the unemployment rate measures unemployment as a share of the labour force.

Why does it matter to markets?The figures provide a timely gauge of labour-market health and household income prospects. A weakening jobs market can signal softer consumption and growth ahead.

How does this fit the broader economic picture?Germany's economy has recently shown some improvement, with business sentiment and activity indicators firming, but the labour…

• Eurostoxx +0.6%
• Germany DAX +0.8%
• France CAC 40 +0.4%
• UK FTSE +0.8%
• Spain IBEX +0.8%
• Italy FTSE MIB +0.7%

It is a solid start across Europe as the gains are fairly broad-based with Germany and Spain among the stronger performers.

The backdrop is also a little more supportive today as bond yields come off the boil. 10-year Treasury yields have now eased lower to 5.20%, down from the overnight peak of 5.29%. So, that is giving stocks some breathing room after the recent pressure from rising borrowing costs.

That being said, I wouldn't call this an all-clear just yet. The bond market remains the key risk and after the sharp selloff we have seen recently, it would not take much for yields to kick higher again and put equities back under pressure.

So,…

• France September preliminary CPI +3.0% vs +2.8% y/y expected
• Prior +2.4%
• France September preliminary HICP +3.4% vs +3.1% y/y expected
• Prior +2.6%

The breakdownThe pickup in French inflation was fairly broad, although energy remains the standout driver. Energy prices accelerated to +21.2% y/y from +16.7% in August, reflecting higher petroleum-product and gas prices.

Services inflation also picked up to from 1.9% to 2.2% in September, while food inflation rose to from 1.1% to 1.5% on the month. All of this is likely to push up the core inflation estimate, which we will only get with the final report. But for now, the key takeaway is the jump in HICP to from 2.6% to 3.4% in September, above expectations and adding to inflation concerns ahead of…

• Germany August retail sales +1.3% vs +1.5% m/m expected
• Prior -3.4%

The breakdownThe rebound here is notable, even if it misses on forecasts by a little. It at least substantiates that the drop in July ties much to a heavy decline in petrol station sales, following the end of the fuel discount that was in effect during May and June.

Having said that, petrol station sales were flat in August. Instead, non-food (+1.6%) and online spending (+3.7%) lead the recovery.

Despite the rebound, the overall data still points to a rather uneven picture for German household spending heading into the latter part of Q3 as real sales are still down 0.4% compared to a year earlier.

So, this doesn't really change much for the ECB outlook with the main focus…

• Germany August import prices +1.0% vs +0.7% m/m expected
• Prior +0.2%
• Germany August import prices +8.3% vs +8.0% y/y expected
• Prior +6.8%

The breakdownImport prices rose another 1.0% on the month in August, pushing the annual rate up sharply to 8.3% from 6.8%. This marks the strongest annual increase since December 2022.

Energy remains the main driver, with import energy prices up 43.0% y/y. But intermediate goods prices also rose 11.0%, suggesting upstream price pressures are broadening beyond energy alone.

The stronger rise keeps upstream inflation pressures firmly in focus, particularly with elevated energy and intermediate-goods costs still feeding through the German economy.

The main concern here is how much will this continue to feed into…