5 things to know in markets today

1. European stocks edge higher as bonds and oil remain key risks

European stock markets made steady gains early Wednesday while US stock futures rose ahead of the US CPI inflation report, which is regarded as the key risk event of the week ahead of the Federal Reserve’s late October policy meeting. This is a tentative rally after a similar move yesterday ended flat, with the Stoxx 600 finishing –0.1% lower and the FTSE 100 was flat after rallying 1% at one point. Sentiment remains precarious amid a six-day selloff in semiconductor stocks and recent surge in bond yields.

The benchmark US Treasury 10yr bond largely held Tuesday’s gains with the yield below 5.2%, while UK gilt yields are backing off about 5bps on the 10yr on a report in the FT that the Chancellor, John Healey, will avoid extra borrowing and ‘stick to the fiscal rules’ in the Budget later this month. The worry is not that it’s not fully costed, but that spending cuts and tax rises are backloaded to the end of the parliament – ie the can kicked forever into the distance. Meanwhile there was some relief across the gilt curve with Bank of England chief economist Huw Pill, an arch hawk who has been voting for hikes all year, signalling he didn't think the 4 hikes implied by markets would be needed.

Oil prices remain a weight on risk with Brent trading above $106 even as OPEC reported that September production rose by almost 1 mb/d to 25.1 mb/d, approaching pre-war levels, as higher output from Saudi Arabia and Iraq more than offset declines elsewhere. However, physical market tightness persists and barrels for immediate delivery are commanding a significant premium.

2. Memory selloff slows as ASML points to strong demand

A selloff in chipmakers waned, also helping sentiment. Microsoft rose to a record as the Nasdaq 100 finished just 0.3% lower for the day, with some dovish comments from the New York Fed’s John Williams supporting. Micron was down another –3.6% and Western Digital –1.6% lower with the damage concentrated around memory names.

Asian stocks initially pushed higher overnight before paring gains, the MSCI Asia-Pacific index (ex Japan) rallied 0.5% before ending flat, while the Kospi rallied +1.6% at one point before finishing down almost half a percent. SK Hynix finished down –1.6% having rallied as much as +2% at one point, while Samsung Electronics ended flat after an earlier gain of +2.8%.

This morning, Dutch semiconductor equipment maker ASML reported robust earnings growth and noted some customers are “expressing an interest” in placing orders with the company in 2029 and 2030, indicating a sustainable demand dynamic over the coming quarters. The company, which also raised the lower end of its sales forecast for 2026, cited supply constraints as the bigger factor.

3. US CPI takes centre stage as markets weigh another Fed hike

The key risk event of the week, September consumer prices land at 14:30 CET. Consensus looks for headline inflation to accelerate to 3.6% y/y from 3.4% and core up 0.2% m/m to 2.5% y/y from 2.4%, with higher energy costs cited. The Cleveland Fed inflation nowcasting model places September CPI at +0.5% MoM and +3.6% YoY, whilst core CPI is forecast at +0.2% MoM and +2.4% YoY.

If that holds with the actual data, it would mean the monthly core pace slowing from +0.3% in August to below the 'Waller Line' at +0.2%, which might just be enough for the Fed to wait until its December meeting to raise rates again.

Putting a bit of a floor under the market yesterday, NY Fed President John Williams said he still sees one more hike as appropriate this year, but currently doesn’t believe it will be necessary to lift rates again in 2027. On those remarks the S&P 500 finished unchanged, approximately 20pts off its lows of the day. The Dow Jones slid –0.3% on bank weakness.

4. Banking on earnings growth as Wall Street sets a high bar

Bank earnings showed there is a very high bar to clear this quarter. JPMorgan served up a rare double-miss, but the Wall Street giant also raised its net interest income guidance to $106.2 billion for 2026 versus the $105.4bn estimated. Goldman Sachs delivered a monster revenue beat. The firm’s $18.68 billion in net revenue is nearly $2 billion more than the LSEG estimate. Equities revenue jumped 72% from a year earlier, while investment banking fees rose 21% to $3.22 billion, but fixed income trading was down.

Both ended down on the day, while Citigroup was punished –5% for a 13% decline investment banking fees, while Wells Fargo slipped –3% on a 5% drop in investment banking revenues. UnitedHealth ended almost flat after its Q3 health check beat analyst expectations, while Johnson & Johnson was down –5% on weaker medical technology sales. Applied Materials tumbled after the chip-equipment maker gave an investor day forecast that was light on specifics. Bank of America shares fell –2% after-hours after it was fined more than $1.21 billion for money laundering and sanctions violations by US regulators. BofA and Morgan Stanley report today.

5. Can earnings do all the work?

Per Citadel, the bulk of Q3 reporting is ahead, and the calendar is unusually concentrated. Almost half (47%) of S&P 500 index weight and one-third of expected earnings growth will report during the five sessions from 28 October through 3 November. That happens to be the period between the Fed’s October meeting decision and UK Budget (both 28 October) and the US midterm elections (3 Nov). In other words, there is a lot going on for UK investors in a relatively short space of time.

The question is how much stocks can handle exceptionally high earnings expectations (~30% EPS growth for the S&P 500 this quarter) against persistent macroeconomic challenges. Will stocks continue to climb the wall of worry? Will the Midterms act as a clearing event that paves the way for the seasonal strength to drive stocks higher into the end of the year? Or will a Blue Wave upset expectations for key sectors that drive earnings growth and momentum?

The earnings momentum is highly concentrated in Memory, Semiconductors, and Energy. Again, from Citadel, Micron and Nvidia account for 36% of expected S&P 500 earnings growth. And the ten largest contributors make up roughly two-thirds of expected growth; excluding those same ten companies, expected earnings growth falls to ~11%.