Written Commentary
STOCK INDEX FUTURES
Stock index futures are little changed ahead of a wave of major earnings reports. GM reported before the bell and raised its full year outlook while Coca-Cola beat earnings estimates. Netflix will report after the bell and investors will monitor its results from its ad business. The US reached an agreement for key minerals supply with Australia ahead of President Trump’s meeting with Chinese counterpart Xi Jinping, limiting the risk of US shortages for a group of rare earths.
Stocks surged Monday on optimism around upcoming earnings and easing trade tensions with China. The S&P 500 and Dow rose nearly 1%, while the Nasdaq 100 gained 1.5% to a record close, boosted by strong performances from banks and a 4.5% rally in Apple on robust iPhone 17 sales.
Inflation data out Friday for September will be the mainstay of data this week out of the US, given that the shutdown continues to delay the release of economic data. PMI data on US services and manufacturing activity will also be released on Friday. Markets will watch for clues on the labor market and how the shutdown has impacted demand from consumers.
CURRENCY FUTURES
US DOLLAR: The USD index is higher, drawing support from a weaker yen and euro. The dollar strengthened on Monday, supported by a surge in stocks and improving risk sentiment as President Trump said he expects to reach a trade deal with China. Meanwhile, Secretary Scott Bessent and Chinese Vice Premier He Lifeng are set to meet this week in an effort to defuse tensions ahead of a Trump-Xi meeting later this month in South Korea. Friday’s inflation data for September will grab market attention given the ongoing data blackout due to the shutdown. Inflation is expected to rise 0.3% in September to an annualized rate of 3.1%. Fed Funds futures are pricing a 97.8% chance that the Fed will cut rates this month and nearly a 98% chance of an additional cut in December.
EURO: The euro fell against the dollar despite easing political tensions in France as investors turn their attention to speeches from several European Central Bank policy members. The ECB will enter its pre-meeting blackout period on Thursday, ahead of next week’s rate-setting decision. Markets have fully priced in a rate cut by the ECB for its July 2026 meeting. In recent weeks, political developments in France have caused the euro to slide, and markets appear reluctant to fully price out risk from France as budget talks appear fragile. S&P cut France’s sovereign rating to A+ from AA-, citing heightened fiscal risks and continued uncertainty surrounding government finances, despite the submission of the 2026 draft budget to parliament. PMI data for October from Germany, France, and the eurozone are scheduled for release Thursday and will be the highlight of the week on the European economic calendar.
BRITISH POUND: The pound slipped against the dollar following data the showed the UK’s borrowing in the first half of the year was the highest since the pandemic. Government borrowing in the first six months of the tax year totaled 99.8 billion pounds ($133.94 billion), up 13% from a year earlier. The increase in borrowing adds to pressure on finance minister Rachel Reeves to increase taxes in next month’s budget. Recent comments from Bank of England Governor Andrew Bailey have also weighed on the Sterling. Bailey recently warned that the UK’s economy is operating below potential and that the labor market is showing signs of softening. Bailey did note that the timing of future policy moves remains uncertain. Markets have fully priced in a rate cut from the BoE in February, while placing the chance of a cut in December at less than 50%. Looking ahead, Wednesday’s CPI inflation data for September will be closely watched, with inflation expected to tick higher, potentially bringing annualized inflation above 4.0%. The BoE has said it expects inflation to peak in September. PPI inflation data will also be released Wednesday. Elsewhere, PMI data on services and manufacturing activity will be out on Friday along with retail sales data.
JAPANESE YEN: The yen fell to a six-day low as Sanae Takaichi was officially elected as Prime Minister. Investors believe her policies will bring greater fiscal spending and cloud the monetary policy outlook for the Bank of Japan. Earlier on Tuesday, local media reported that Takaichi had finalized a plan to appoint Satsuki Katayama, a former regional revitalization minister, as finance minister. Katayama signaled her preference for a stronger yen. Her appointment could give markets cause to rethink the idea of pushing the yen too low. Still,
Takaichi’s support for increased fiscal spending and looser monetary policy have pressured Japanese bonds and the yen in recent weeks increased fiscal spending and looser policy has kept markets on edge. Inflation data out Friday is expected to show that price pressures remain elevated, with consumer prices excluding fresh food expected to rise 2.9% in September. Trade figures for September out Wednesday will also grab attention as markets wait to see how the export-driven economy performs under tariffs.
AUSTRALIAN DOLLAR: The Australian dollar fell despite optimism regarding a newly signed critical minerals partnership with the US. Market attention remains focused on US Secretary Scott Bessent’s meeting with Chinese Vice Premier He Lifeng this week. Optimism over US-China trade talks could see an increase in risk sentiment and move the Aussie higher, while a lack of progress may offer some headwinds. Elsewhere, focus will center around comments from officials at the Reserve Bank of Australia. Recent data showed that unemployment jumped to 4.5% in September, adding pressure on the RBA to lower its official cash rate. Governor Michele Bullock is scheduled to speak on Friday and will be a key focus for markets in a relatively light week on the economic calendar.
INTEREST RATE MARKET FUTURES
Futures are higher across the curve as Treasurys are moderately bid in a quiet trade as markets await Friday’s CPI inflation data for September. On the macro front, President Trump confirmed that he will meet with China’s President Xi Jinping later this month. Secretary Bessent suggested that moving the November deadline to reach a deal with China was possible. The Supreme Court’s ruling on the legality of President Trump’s tariffs, along with trade uncertainty and the government shutdown, has the potential to keep uncertainty high and lead to volatility in yields. On the central bank front, markets are nearly fully priced for a rate cut from the Fed later this month and for another cut following in December. Treasurys were moderately bid on Monday, with yields edging lower and trading held within tight ranges amid improving risk sentiment as the China trade outlook appeared less dire than it did a week earlier.
The spread between the two- and 10-year yields fell to 51.20 bps from 53.60 bps on Monday, while the 2-year yield, which reflects interest rate expectations, edged lower to 3.451%.
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