📆 Friday, October 11
► European stocks are slightly lower as traders digested hotter-than-expected US inflation data, as well as higher-than-expected jobless claims data and braced for the beginning of earnings season. The Stoxx 600 index is down 0.1%, while France’s 10-year bond yield dropped after a budget announcement focused on reducing public debt. In addition, the inflation rate in Germany fell to 1.6% in September (in line with expectations), further affecting market sentiment and putting pressure on the ECB to maintain its monetary easing stance. We are seeing more and more the scenario that our chief analyst has been predicting for the last 3-6 months: The ECB is likely to loosen monetary policy faster than the Fed. The market has expected (or still hopes) that the Fed will move ahead with rapid rate cuts. Meanwhile, UK GDP rose by 1% in August, below the expected 1.4%, with monthly GDP rising by 0.2%. The growing trade deficit also put pressure on the economy as imports outpaced exports.
► US markets declined slightly, with S&P 500 and Nasdaq futures down ~0.1%, ahead of the unofficial start of the earnings season with major banks like JPMorgan, Wells Fargo, and Bank of New York Mellon. Hotter-than-expected US inflation data and rising unemployment benefits sparked further debate on the Federal Reserve’s next rate move. While Fed officials appear unfazed by the inflation numbers, swaps market pricing reflects an 85% chance of a 25 basis-point rate cut in November (15% chance for a rate pause). Investors are closely monitoring today’s US producer-price data (especially after yesterday's hot CPI data) and third-quarter bank earnings for insights into the economic outlook.
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