Market News

• Eurostoxx +0.8%
• Germany DAX +0.6%
• France CAC 40 +0.5%
• UK FTSE 100 +0.5%
• Spain IBEX +0.8%
• Italy FTSE MIB +1.0%

European stocks are bouncing at the open today, but I would be careful about reading too much into the early moves just yet.

This looks more like a relief bounce after yesterday’s pressure than the start of any cleaner risk-on move. Oil prices are easing a little again, which takes some of the immediate pressure off the inflation story. So, that is giving equities a bit more breathing room. WTI crude is down 1.3% to $93.55 on the day.

The bigger problem though, is still the bond market. 10-year Treasury yields surged towards 5.20% yesterday, its highest level since 2007, while 30-year Treasury yields hit 5.50% for the first time since…

FUNDAMENTAL OVERVIEW

USD:

The US dollar has been under some pressure at the start of the week as the sharp decline in oil prices on expectations of a de-escalation and an earlier end to the conflict increased going into the UN General Assembly.

However, those expectations faded after the UN General Assembly, where Trump reiterated that the US would make a deal with Iran after the November elections. His remarks reduced optimism over a near-term resolution and contributed to a renewed rise in oil prices.

Risk sentiment subsequently deteriorated, with the greenback strengthening across the board and then extending the gains on Wednesday after the US Flash PMIscame out much…

Risk management. It's not something talked about very often, especially in a fast-paced and profit-focused profession such as trading. But for me, it is one of the more important things that I like to always emphasise to any trader.

I know. It's not a sexy topic. There's no dollar signs to it. It's simply just not flashy. But what it is though, is something that could make or break your trading at the end of the day.

One of the biggest misconceptions in trading is that success often comes from learning how to predict markets better. Of course, having a good read on price action helps. However, I would argue that learning how to manage what happens when you are wrong is just as important, if not more so.

And that is really what risk…

• Germany October GfK consumer climate -30.6 vs -27.4 expected
• Prior -26.6; revised to -26.8

The breakdownThat is a notable miss on estimates as German consumer sentiment weakens more sharply than expected heading into October.

The main culprit is rising energy prices and that is weighing on purchasing power of households especially. Besides that, the sub-index for income expectations also fell sharply from 1.7 to -15.0 in the latest survey. That marks the lowest level since April, shortly before a fuel discount was introduced.

Meanwhile, the sub-index measuring households' willingness to save also shot up from 15.5 to 21.5 - its highest level since the 2008 financial crisis. The survey notes that consumers are seen responding to elevated…

There is arguably just one key expiry level to take note of on the day, as highlighted in bold below.

That being for EUR/USD at the 1.1400 level, with the spot price sitting roughly 30 pips just below the strike. If price action stays relatively contained and just below the figure level, the expiry could help keep the currency pair gravitating around the 1.1400 area.

Just keep in mind though that dollar sentiment remains the bigger fundamental factor at the moment, driven largely by the selloff in the bond market. As Treasury yields continue to break higher, that is continuing to keep the dollar underpinned and put downside pressure on EUR/USD.

If yields are to continue to push up, that could drag the spot price lower in the session ahead…

And so the Trump-Xi summit this week delivered what markets probably needed most. That being no fresh escalation between the two largest economies in the world. But beyond that, there wasn't much of any breakthrough either.

The clearest takeaway is the extension of the existing US-China trade truce by another two months to 10 January. That keeps the existing tariffs regime in place and gives both sides more time to negotiate what Bessent has described as a potentially broader agreement.

So for now though, the difficult issues haven't really gone anywhere.

The US still wants China to step up agricultural purchases and to meet its commitments, while also raising concerns that China's rare earth deliveries have fallen short. And honestly, that…

The selloff in the bond market isn't showing much sign of letting up.

10-year Treasury yields have pushed up to 5.18%, extending the breakout above 5% and putting another important technical area firmly into view. The next major hurdle on the chart sits around the 5.25% to 5.30% region, roughly where yields topped out during 2006-07.

So, what's next from here?

Well, if the 2006-07 highs give way, I reckon the conversation around 6% Treasury yields will then start becoming a lot less theoretical. It's a level that is in the back of everyone's mind right now but how plausible is it really?

The way I look at it is that it is important to be reminded of the fact that the fundamental forces responsible for the break above 5% haven't really gone…

• Nikkei gains 1.2% as chip stocks and dividend buying lift Tokyo, SoftBank slips on Oracle
• Goldman stays bullish on AI as cloud giants' spending heads towards $1.2 trillion
• Katayama says Trump raised weak yen concerns with Takaichi, USD/JPY eases below 158.50
• Recession signal flashes on Oxford Economics' US indicator, but spending shows no sign of cracking
• Tether confirms funds stuck at troubled offshore bank EQIBank, says exposure is tiny
• Bitget hack: attackers faked transfers, not keys, as CEO points to North Korea
• Goldman cuts USD/JPY forecasts, sees 150 in a year as BOJ tightening boosts yen case
• Tokenised deposits, stablecoins and CBDCs: three kinds of digital money explained
• Bitget loses $351.6 million to hackers, so why is BGB barely…

With China, Korea and Taiwan shut, Tokyo is the main venue in Asia for chip and AI trades today, which can amplify moves in names like Tokyo Electron and Advantest. The dividend-driven buying has a set expiry: once Monday's deadline passes, the shares typically go ex-dividend and lose that support. The market is treating the Oracle power delay as a problem for one company, not the whole sector. Chip equipment makers rallied while SoftBank took the hit, but repeated energy bottlenecks could change that view quickly. When Korean and Taiwanese markets reopen, they may catch up to Tokyo's chip gains, or unwind them if sentiment turns. A firm Nikkei alongside a weak yen also supports the view that rate hikes are not yet hurting Japanese…

The note speaks most directly to Asia's AI hardware markets, such as Taiwan and South Korea (both are shut for a holiday today, along with mainland China). 

Those markets rely heavily on cloud spending plans holding up while bond yields keep rising. A forecast of spending climbing to $1.2 trillion by 2027 gives investors a reason to buy dips rather than cut exposure on rate-driven sell-offs. The most useful point in the note may be the timing: volatility into early November, then a possible year-end rally. It lines up with the midterms, Tuesday's White House AI meeting and a week without Chinese market participation.

Along with Morgan Stanley's barbell call and UBS's constructive stance, it adds to a broad consensus among major banks that…

Concern about the yen from a US president changes how traders should think about intervention risk. Joint or US-backed action is easier to justify when Washington has openly flagged the weak yen. That makes chasing USD/JPY above 159 and towards 160 riskier, even though the rate gap still favours the dollar. The modest 30-pip dip suggests traders want action, not words, before committing to yen longs. Katayama's refusal to rule out rate checks leaves that risk hanging over the market. For AUD/JPY and other yen crosses, carry positions look more exposed to a sudden reversal if Tokyo moves.

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The weak yen now has critics in both Tokyo and Washington. Katayama's account of the Trump-Takaichi summit, and her refusal to discuss rate checks,…

A recession signal against a backdrop of strong data makes it a useful counterpoint for bond markets. It gives Treasury bulls an argument just as 10-year yields sit above 5.2% and Fed hike odds are rising. Markets are unlikely to react much for now, because Oxford itself plays down the signal and current data points the other way. The warning matters more as a sign of what could go wrong if energy prices stay high and borrowing costs keep rising. Any softening in spending data would give it far more weight quickly.

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Oxford Economics' US indicator says recession, but consumers and AI spending say otherwise. It's a reminder that energy costs and a shrinking labour pool are building pressure beneath some very strong headline data.

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