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London Quick Take - 5 Things to Know in Markets Today - 19 Oct
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5 things to know in markets today
1. European stocks slide as French unrest rattles sentiment
Weekend riots have created fresh problems for French OATs, with yields up about 7bps today as the unrest adds to concerns about the political and fiscal troubles in France. It underscores how hard it will be for a government to enact the kind of spending restraint required to get the deficit down. The pressure on French bond yields has seen spreads widen again after they’d notched a bit of a recovery over the last week, whilst the CAC 40 tumbled over 1% in early trade on Monday. European shares were broadly weaker but France and Italy are getting the worst of it, with the BTP-Bunds spread also opening up in recent days. The FTSE 100 was down around 0.8% but has had a decent run against the tide that saw equities hit last week. The euro felt the blowback and trades below $1.12, while it’s near a year-and-a-half low against the pound.
2.Oil backs off 5-month high and Treasury yields lower
Treasury yields have backed off a bit despite US inflation data running hot, which has sent the dollar lower more broadly, while oil prices are down after hitting 5-month highs on Friday. Brent crude fell nearly 3% on Monday to below $107 having hit $110 on Friday before the market closed for the weekend after US president Trump waived some specific sanctions relating to Russian energy, which is likely to improve the flow of fuel exports into global markets. Vladimir Putin has reportedly proposed a summit with the US and China to agree a deal to end the war with Ukraine.
3.US stocks up after tough week
US stocks suffered hard last week because tech was a total wreck. There are lots of reasons for the pullback in the AI trade, inevitable in many ways after such a strong run. The Nasdaq closed down another 2% on Friday to notch its worst week since June. Tech was down more than 6% and semiconductors more than 11% lower. CoreWeave slumped 25% as the worst proxy of the AI trade. Apple though hit a $5tn market cap – which is more important? The AI export boom is helping China. Q3 GDP grew at 4.5% as exports, driven by AI, rose 36% in dollar terms on the year before. US futures are indicating a more positive tone to start the week despite the losses for Europe.
4.Meta leads the earnings calendar
Earnings this week will be crucial to broader risk sentiment. In particular, Meta is in focus as the first of the five major hyperscalers to report earnings this quarter. The stock has surged about 30% from its mid-August lows after launching its Muse AI agent, which it followed up with its frontier model Muse Wonder. CEO Mark Zuckerberg also pledged to maintain AI capital spending at scale. Earnings will be dissected for spending commitments but also – critically now - signs of monetisation of AI. Lately that story got a run out with news Meta is teaming up with Apple to enable Muse to be used on its computers. Also reporting this week are Lam Research, Texas Instruments and Netflix.
5.UK inflation data ahead
For the UK the focus is on the inflation data. September’s inflation data will be a crucial piece of the puzzle for whether the Bank of England will raise interest rates in November. Recent comments from a number of Monetary Policy Committee members suggest they are starting to fret over the persistence of higher energy prices feeding second order inflation risks. Stronger GDP data suggests the economy is more resilient than the extremely weak labour market indicates. Recent remarks by governor Andrew Bailey suggest he’s keeping his options open. With the MPC evenly split, he in effect has a casting vote.