US index futures are lower this morning, set to give back some of Tuesday’s 1.6% sharp rally as technology giants’ earnings and outlook disappointed investors, stoking concerns about the industry’s profitability and raising new doubts over whether this year’s $5.5 trillion selloff is nearing a bottom.

S&P 500 futures dropped as much as 1.2%, and were down 0.7% at 7:30am while Treasuries extended gains, with the 10-year yield falling to around 4.05%. Nasdaq 100 fell more than 1.5% as megacap stocks tumbled in premarket trading after Alphabet's 3Q miss and disappointing outlook from Microsoft and Texas Instruments weighed on the cohort, which is set to lose approximately $300 billion in market value if losses hold at open.  The combined weight of the three companies amounts to more than 19% of the Nasdaq 100.

“Google and Microsoft reversed the joyful Tuesday sentiment,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. She added that “there is nothing official pointing at a potential softening tone from the Fed just yet. Hence, the recent fall in the US dollar, and rebound in equities may not last.”

S&P 500 futures had rallied 1.6% on Tuesday, closing at the highest in over a month as yields pulled back amid growing speculation the Treasury will anounce buybacks soon. The dollar and the yield on 10-year Treasuries fell for a second day after a report that US home-price growth slowed by the most on record as a doubling of borrowing costs saps demand. The Bloomberg dollar index tumbled for a second day to its lowest level in three weeks...

... following apparent massive intervention by state banks in China seeking to stabilize the plunging yuan which surged by a record 1.8% against the dollar. Alas just like Japan, expect this intervention to fizzle soon as absent a Fed pibot, the yield differentials remain just too strong to swim against the strong USD current.

It wasn't just the yuan that bounced: a near 5% rebound in a gauge of US-listed Chinese stocks on Tuesday helped claw back some of the record loss suffered in the wake of President Xi Jinping breaking with China’s collective leadership. Hong Kong’s tech gauge made strong gains for a second day but was still short of recouping Monday’s near 10% slide.

Meanwhile, the British pound held an advance against the greenback after the government said a much-anticipated fiscal statement will be delayed until November. Sterling rallied earlier after New Prime Minister Rishi Sunak named an experienced Cabinet to lead the UK through what he called a “profound economic crisis.”

In premarket trading, megacap stocks tumbled after disappointing quarterly updates from Alphabet (which missed across the board) and Microsoft (which had a lackluster forecast for sales growth in its Azure cloud-computing services business) wiped out about $295 billion in market value from the biggest US companies. Meanwhile, Twitter is set to open at the closest to Elon Musk’s offer since he launched his takeover bid in April. Among other tech stocks falling in sympathy: Apple -0.8%, Amazon.com -3.8%, Meta Platforms -3.9%, Adobe -1.3%, Oracle +0.8%, ServiceNow -6.7%, Workday -1.2%, Intuit -0.8%, Datadog -6.2%, Snowflake -5.7%. On the other end, bank stocks are mostly higher in premarket trading putting them on track to gain for a fourth straight session. In corporate news, Barclays traders beat estimates in the third quarter, offsetting steep declines for its investment bankers. Meanwhile, Goldman Sachs’s China-focused stock hedge fund clients had their second-worst trading day this year during Monday’s sell-off. Here are the most notable premarket movers:

• Alphabet shares are down 6% in premarket trading after the tech juggernaut’s search-based ads business, which had largely dodged the digital-ad slowdown that hit rivals earlier this year, no longer seemed immune to macro headwinds. Among other megacaps Amazon -3.6%, Apple -0.6%, Tesla -1.2%, Meta -3%
• Microsoft falls 6% after the software company reported its weakest quarterly sales growth in five years and gave a lackluster forecast for sales growth in its Azure cloud-computing services business.
• Enphase Energy’s rises 5.6% as the solar firm’s quarterly results were strong and analysts retain confidence the company can continue to deliver robust growth and margins.
• Texas Instruments falls 4.2% after the chipmaker’s fourth-quarter outlook signaled that the semiconductor industry’s slump is spreading beyond PCs and smartphones to the once-healthy industrial segment.
• Chip stocks drop in US premarket trading after a disappointing quarterly forecast from Texas Instruments. Nvidia -2.4%, Qualcomm -0.8%, Advanced Micro Devices -1.9%, Intel -0.6%
• Twitter is set to open at the closest to Elon Musk’s offer since he launched a bid in April, with shares trading as high as $53.18 against the offer price of $54.20, signaling investors’ confidence to see a deal get over the line on time is growing.
• Skechers (SKX US) slumps 14% after the footwear brand reported weak 3Q EPS as well as 4Q profit and sales outlook. Morgan Stanley said “unique” pressures from freight and logistics offset the company’s top-line strength.
• Invesco (IVZ US) falls 1.5% as Credit Suisse downgrades to underperform from neutral following the company’s third- quarter earnings, saying there are “too many adverse moving parts.”
• Mattel (MAT US) slid 5.5% in US postmarket trading on Tuesday after the toymaker cut its adjusted EPS guidance for the year citing a “challenging macroeconomic environment.”
• Juniper Networks (JNPR US) analysts were encouraged by the internet infrastructure company’s results and outlook for the fourth quarter. Juniper’s shares rose more than 4% in US afterhours

Stocks had been buoyed in recent days by mostly solid earnings and speculation the Federal Reserve may curb the pace of rate increases amid evidence its aggressive tightening is starting to weigh on the economy.  About a quarter of S&P 500 companies have reported third-quarter results, with more than two-thirds beating (sharply lowered) analysts’ estimates despite the big-tech setback. But concern is mounting that slowing output will dent corporate profits in coming months.

“Yes we’re seeing earnings beats at the moment,” Mike Ingram, a senior market strategist at ActivTrades, said on Bloomberg TV. “But where I do start to have a bit of a problem at this juncture is that some earnings expectations going into next year are looking still a bit punchy.”

Goldman strategists said conditions for a trough in US equities are not visible yet as the asset class doesn’t fully reflect the latest rise in real yields and odds of a recession. None of the US assets tracked by Goldman are fully pricing in a recession, with equities factoring in the lowest odds of a “severe hawkish scenario,” the strategists wrote.

While the recent US data haven’t changed expectations that the Fed will hike interest rates by 75 basis points next month, they’re fueling speculation that an end to aggressive tightening may come next year. Analysts are also projecting challenges for now in Europe, with a jumbo hike of 75 basis points expected from the European Central Bank on Thursday. That’s even as many economists now reckon a recession has begun in the euro region.

“Sentiment’s still incredibly fragile. We do expect to see further market volatility,” Catherine Yeung, investment director at Fidelity International, said on Bloomberg Radio. “All eyes are still on the rate cycle globally speaking as well as where inflation does go. I think going into the end of the year, again, it’s going to be volatile.”

In Europe, the Stoxx Europe 600 index fluctuated and pared losses amid a raft of mostly positive earnings from heavyweights including Barclays Plc, Deutsche Bank and Mercedes-Benz. The technology sector dropped more than 1%, weighing on the benchmark, while brewer Heineken NV plunged after missing analysts’ estimates for volume growth; construction and miners leading while food and beverages, personal care and tech lag. Here are the biggest European movers:

• UniCredit climbed as much as 4.2% after the Italian lender boosted its guidance for a second quarter, which Intesa analysts said could lead to an increase in consensus estimates.
• Assa Abloy rises as much as 3.8% after 3Q Ebit and sales came in ahead of consensus owing to strong demand across all of the Swedish lockmaker’s geographies, further fueled by a sharp recovery for Global Technologies.
• BASF rises as much as 2.2% as 3Q results contain few surprises following its pre-release and the share response is likely to be subdued, analysts say.
• Skanska rises as much as 6.0% as co. saw a big beat on profitability in the third quarter, with stronger construction helping to offset weaker residential, Morgan Stanley writes.
• ASM International’s shares slump as much as 10% after the semiconductor-equipment firm warned that the impact of sanctions on China could hurt more than 40% of its sales in that country. Peer ASML also declines.
• Reckitt shares drop as much as 5.0%, underperforming the FTSE 100 Index, after a decline in 3Q sales volumes in the consumer goods company’s hygiene business -- which had previously benefited from the increased focus on cleanliness during the pandemic -- overshadowed a beat in total like-for-like sales.
• Heineken falls as much as 11%, the most since March 2020, after reporting 3Q organic beer volume that missed estimates and as the brewer noted greater reasons to be cautious on the macroeconomic outlook
• Santander shares declined as much as 5.0%, the most in a month as analysts flagged higher-than-expected costs and growing non-performing loans in Brazil and the US, which outweighed earnings that beat estimates.

Earlier in the session, Asian stocks climbed for a second day, as Chinese authorities sought to boost investor confidence and the dollar fell alongside Treasury yields. The MSCI Asia Pacific Index rose as much as 1.3%, with most markets advancing in the region as local currencies strengthened versus the dollar. Tech stocks were among the top sectoral gainers, bolstered by a slide in benchmark borrowing costs.  Stocks in Hong Kong and China rebounded following a rout earlier in the week, as Chinese authorities said late Tuesday that they would ensure a healthy development of financial markets. The gauges pared gains as a lockdown in one of Wuhan city’s central districts reinforced investor concerns about China’s strict Covid Zero policy.   The earnings season also gave a boost to tech stocks, including heavyweight chip shares. SK Hynix shares climbed even after an earnings miss, as traders reacted positively to the Korean firm’s announcement of a cut in capital expenditure. Samsung SDI’s quarterly profit beat estimates on robust electric-vehicle battery sales. 

“We are likely going into a period when very bad earnings in Asia may be good news for some ‘optically cheap’ stocks as it might imply that earnings expectations also get washed out completely - on top of already low valuations,” said Chetan Seth, Asia Pacific equity strategist at Nomura Holdings Inc. “Low earnings expectations and low valuations is a good sign for eventual bottoming out in some of these stocks,” he added.  More than 200 of the MSCI Asia index members tracked by Bloomberg have reported earnings so far, as analysts watch for the impact of China’s Covid lockdowns and the dollar’s strength on corporate profits. India markets are closed Wednesday.  Overall, the Asian gauge remains down for the month and has lost almost 30% this year, hammered by risks including China’s slowdown and global monetary tightening.  

Japanese stocks climbed for the third day, following a rise in the US cash market overnight as investors continued to monitor the flow of corporate earnings coming out this week.  The Topix Index rose 0.6% to 1,918.21 as of market close Tokyo time, while the Nikkei advanced 0.7% to 27,431.84. Daiichi Sankyo Co. contributed the most to the Topix Index gain, increasing 2.9%. Out of 2,166 stocks in the index, 1,402 rose and 661 fell, while 103 were unchanged. The S&P 500 Index rallied for the third session through Tuesday. US futures slid during Asian trading hours on Wednesday, however, as post-market earnings from tech giants Microsoft and Alphabet disappointed.  “Stock prices tend to settle down when actual earnings seasons begin, once a number of companies that gave out warnings show results that exceed their original forecasts,” said Hideyuki Suzuki, general manager at SBI Securities. “Japanese companies’ earnings will be the key focus this week and early next week as they will be in full swing.”  

Australian stocks also gained for a third day as inflation accelerated. The S&P/ASX 200 index edged up 0.2% to close at 6,810.90, extending gains to a 3rd day and marking the highest close in almost three weeks. The property and utility sectors led the increase. The benchmark index pared some of its earlier gains after Australia’s annual headline inflation accelerated to a 32-year high in the third quarter, validating the Reserve Bank’s rapid policy tightening. Inflation is “public enemy number one” in Australia’s economy, Treasurer Jim Chalmers said.

In rates, Treasury futures were off best levels of the day, although they remain richer by up to 6bp across long-end of the curve which bull flattens. US 10-year yields dropped as low as 4.02%, and were last around 4.055%, close to bottom of Tuesday session range and outperform bunds and gilts by 6.5bp and 7.5bp on the day; long-end led gains flattens 5s30s spread by almost 4bp on the day while 20s outperform further out with 10s20s30s fly richer by 2.4bp. Gains were seen overnight in Treasuries as stocks pared back portion of Tuesday rally following soft earnings from tech giants including Microsoft, Alphabet and Texas Instruments. Auction cycle resumes with $43b five-year at 1pm, follows Tuesday’s soft two-year sale which tailed by 1.2bp -- auctions conclude with $35b seven-year Thursday. US session focused on five-year auction while Bank of Canada rate decision is at 10am New York. Bunds and gilts 10-year yields trim gains, back to unchanged on the day.

In FX, the dollar tumbled for a second day, providing relief across currencies. The pound surges to $1.16; the euro trades above parity against USD, while the yen rises to around 146.71/dollar. Offshore yuan gains 1.7% to 7.1831 per dollar. However, dollar weakness wasn’t able to lift US futures as S&P 500 falls 0.5% while Nasdaq 100 slips 1.4% on disappointing mega tech earnings.

• The Pound rallied more than 1% to as high as $1.162 as it gained for a second day.
• Euro advanced past parity with the US dollar for the first time since Sept. 20; overnight volatility in the euro shows traders are preparing for a relatively wide intraday range into the European Central Bank decision.
• Australia’s dollar advanced, eventually finding traction as short-covering increased on expectation that local yields will recover after third-quarter CPI hit a 32-year high, putting the spotlight back on Reserve Bank pricing.

The yen jumped to 147 per dollar ahead of the Bank of Japan’s policy decision Friday, when monetary settings are expected to be kept unchanged. Meanwhile, the central bank boosted purchases of longer-dated government bonds as rising yields threatened to loosen its grip on the yield curve.

In commodities, oil was steady as an industry report showed a rise in US crude stockpiles and investors fretted about weaker demand amid slowing growth. Crude benchmarks were modestly firmer on the session despite initial downbeat performance in wake of readacross from US after-market earnings and on fresh COVID updates in China alongside the below Private Inventory release. WTI and Brent Dec’22 contracts reside at the top-end of 1.50/bbl parameters though remain capped by USD 86/bbl and USD 94/bbl respectively, buoyed by the USD's pullback. Metals are similarly USD driven, spot gold has surpassed the 10- & 21-DMAs with base metals similarly buoyed. Spot gold rises roughly $20 to trade near $1,673/oz.

Looking to the day ahead, economic data releases will include wholesale and retail inventories, new home sales and advance goods trade balance in the US and consumer confidence in France. In earnings, results will be due from Meta, Thermo Fisher Scientific, Bristol-Myers Squibb, Boeing, Iberdrola, Boston Scientific, Mercedes-Benz, Heineken, Ford, Kraft Heinz, Santander, BASF, Barclays, Telenor and Puma.

Market Snapshot

• S&P 500 futures down 0.6% to 3,847.75
• STOXX Europe 600 up 0.2% to 408.51
• MXAP up 1.2% to 137.05
• MXAPJ up 1.2% to 436.97
• Nikkei up 0.7% to 27,431.84
• Topix up 0.6% to 1,918.21
• Hang Seng Index up 1.0% to 15,317.67
• Shanghai Composite up 0.8% to 2,999.50
• Sensex down 0.5% to 59,543.96
• Australia S&P/ASX 200 up 0.2% to 6,810.87
• Kospi up 0.6% to 2,249.56
• German 10Y yield down 0.4% at 2.16%
• Euro up 0.7% to $1.0038
• Brent Futures up 0.2% to $93.68/bbl
• Gold spot up 1.1% to $1,670.70
• U.S. Dollar Index down 0.67% to 110.20

Top Overnight News from Bloomberg

• UK Prime Minister Rishi Sunak may delay an economic plan scheduled for Oct. 31 to give him time to square it with his agenda, Foreign Secretary James Cleverly said.
• Hedge funds have cut portfolio leverage this year in a conservative turn that has sucked borrowed money from global markets, adding selling pressure to stocks and bonds.
• Five trillion euros of liquidity is eroding the bridge between European interest-rate policy and borrowing costs in money markets, spurring debate over the kind of toolkit needed to stop the dislocation warping the cost of funding in the wider economy.
• Australia faces mounting debt and deficits in the years ahead even as Treasurer Jim Chalmers scrimped and saved in his first budget to hold down spending and avoid further fueling inflation.
• US Treasury Secretary Janet Yellen respects Tokyo’s decision not to disclose whether it has intervened in foreign exchange markets, according to Japan’s top currency official.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pacific stocks equities traded higher across the board following the positive lead from Wall Street. ASX 200 opened firmer following the Aussie budget, but gains were capped by hotter-than-expected Australian CPI data which resulted in a modest uptick in RBA pricing for a 50bps hike at the next meeting. Nikkei 225 topped 27,500 with gains led by the pharma and manufacturing sectors. KOSPI held onto mild gains whilst chipmaker SK Hynix missed earnings expectations and cut its 2023 capex by over 50% vs 2022. Hang Seng and Shanghai Comp opened firmer as the bourses conformed to the gains across global peers, while the PBoC also injected CNY 280bln via reverse repo, with the former eventually outperforming.

Top Asian News

• China's Hanyang district (900k population) in Wuhan city, entered a five-day temporary lockdown until October 30th, according to Chinese press.
• Universal Studios in Beijing temporarily closed amid COVID measures, according to a notice cited by Reuters.
• PBoC injected CNY 280bln via 7-day reverse repos at a maintained rate 2.00% for a daily injection of CNY 278bln.
• BoJ raised the purchase amounts for 10-25yr and 25yr+ JGB maturities in a bid to curb the surge in yields, via Reuters.
• Japan's Top FX Diplomat Kanda reiterated that they will continue to take bold steps against excessive FX moves, and are in close contact with G7 everyday, including on FX and geopolitics.
• Japan Chief Cabinet Secretary says it is important to keep enough FX reserves to support its own currency in case of sharp, excessive market volatility, via Reuters.
• Japanese life insurers' investment plans show a preference to cut holdings of foreign debt, mainly US Treasury bonds, in the second half of the fiscal year ending March amid elevated FX hedging costs, according to Nikkei citing investment plan release.
• Hong Kong Futures Exchange has temporarily suspended the volatility control mechanism for futures products in derivatives market; halt due to external vendor software issues.
• Japan is set to lower electricity bills by around 20% in early 2023 under a new package amid accelerating inflation, according to Kyodo News sources.
• SK Hynix (000660 KS) Q3 2022 (KRW): Revenue 10.98tln (exp. 11.1tln). Operating Profit 1.66tln (exp. 1.87tln). Net Profit 1.1tln (exp. 1.37tln), Q3 average DRAM and NAND selling prices -20%; cuts 2023 investment spending by over 50% vs 2022.
• Australian Treasurer Chalmers expects inflation to peak at the end of the year.

European bourses are mixed and yet to make much ground either side of the unchanged mark, Euro Stoxx 50 -0.2%; amid numerous European updates and the US tech headwind. Sectors, feature Tech as the main underperformer as such with the broader picture in-fitting with bourses and mixed overall. Stateside, the NQ -1.7% is weighed on by GOOGL and MSFT post-earnings and ahead of further large-cap updates including META after-hours.

Top European News

• UK medium-term fiscal plan has been delayed until November 17th, via BBC; upgraded to a full Autumn Statement. Subsequently confirmed by Chancellor Hunt
• Sunak is to meet Chancellor Hunt on Wednesday to discuss proposals to increase taxes and cut public spending, according to The Times.
• Heineken Warns of Softer Demand as Inflation Hits Drinkers
• UniCredit CEO Committed to Disengage, Reduce Russia Exposure
• WPP Raises Sales Forecast After Ad Budgets Prove Resilient
• European Stock Rally Moderates as Investors Weigh Earnings, ECB
• Heathrow Ramps Up Hiring, Says It Will Take Years to Recover
• Traders Price Less Than 150 Bps of BOE Rate Hikes By Year-End
• Barclays Traders Beat Estimates as Uncertainty Freezes Deals
• Storebrand Falls After 3Q Solvency II Misses Estimates
• Major Banks Upbeat on UK House Price Growth Despite Rising Rates

Fixed Income

• Initial modest upside has waned and been replaced by an incremental negative bias, Gilts are lagging slightly and back below 101.00 post a sub-par 7yr sale and as the UK's fiscal update has been delayed.
• Amidst this, both Bunds and USTs have slipped though latter remain bid overall in a slight role reversal from recent performance; stateside, the curve is slightly flatter.
• Finally, within the periphery BTPs have slipped ahead of a Senate vote but the BTP-Bund spread remains relatively narrow and sub-220bp after yesterday's House performance from Meloni.

Commodities

• Crude benchmarks are modestly firmer on the session despite initial downbeat performance in wake of readacross from US after-market earnings and on fresh COVID updates in China alongside the below Private Inventory release.
• WTI and Brent Dec’22 contracts reside at the top-end of USD 1.50/bbl parameters though remain capped by USD 86/bbl and USD 94/bbl respectively, buoyed by the USD's pullback.
• Metals are similarly USD driven, spot gold has surpassed the 10- & 21-DMAs with base metals similarly buoyed.
• US Energy Inventory Data (bbls): Crude +4.5mln (exp. +1.0mln), Cushing +0.7mln, Gasoline -2.3mln (exp. -0.8mln), Distillate +0.6mln (exp. -1.1mln).

FX

• Scramble to cover Sterling shorts inflicts more pain for the Buck as Cable tops 1.1600 and DXY sinks below 110.000.
• Euro back above parity vs Greenback, but may be hampered by decent option expiry interest at the strike.
• Kiwi and Aussie make more headway against their US rival through 0.5800 and towards 0.6500 respectively.
• Yen probes 147.00 vs Dollar without thrust of obvious intervention and Loonie eyes 1.3500 ahead of BoC amidst split opinions on 50 or 75 bp rate hike.
• Yuan relieved Buck retreat, stronger than spot PBoC CNY fix and reports of major Chinese bank buying late yesterday.
• PBoC set USD/CNY mid-point at 7.1638 vs exp. 7.1983 (prev. 7.1668)
• Major Chinese state-owned banks sold USD in both onshore and offshore markets in late trade on Tuesday to prop up the weakening yuan, according to Reuters sources

Geopolitics

• Japan's Vice Foreign Minister intends to further deepen trilateral cooperation between Japan, South Korea, and the US.
• German foreign ministry, in internal paper, said Cosco stake in German ports disproportionately strengthens China's influence on Germany and in Europe, via Reuters.

US Event Calendar

• 07:00: Oct. MBA Mortgage Applications -1.7%, prior -4.5%
• 08:30: Sept. Advance Goods Trade Balance, est. -$87.5b, prior -$87.3b
• 08:30: Sept. Retail Inventories MoM, est. 1.2%, prior 1.4%
  • Wholesale Inventories MoM, est. 1.0%, prior 1.3%
• 10:00: Sept. New Home Sales MoM, est. -15.3%, prior 28.8%
  • New Home Sales, est. 580,000, prior 685,000

DB's Jim Reid concludes the overnight wrap

Morning from NY. I say morning but I flagged after writing about the weak late US tech earnings below. Jet lag hit so I’m passing this onto Galina to finish off and send in the London morning. Indeed the weaker tech earnings have slightly ruined the joint bond and equity rally that's been in place for several days now.

More specifically, I’m not sure if anyone else is playing this game but we continue to try to work out whether Friday’s WSJ article by Nick Timiraos marks the start of the 6th attempt at a sustained Fed pivot narrative over the last 12 months. If you want to examine the previous 5, see Henry's note earlier this month here for more. After a bit of push / pull on rates after the immediate Timiraos-led move, yesterday saw a fresh rates (and equity) rally on the back of obviously weaker economic data. Before we delve into that remember that from last night, 20% of the S&P 500 report in 48 hours across just 5 mega cap tech stocks. Last night, Alphabet fell -6.7% in after hours after both revenue and earnings missed estimates and the company said it was focusing on costs and constraining hiring. For Microsoft, despite beats on both revenue and net income, disappointing growth forecasts for Azure, its cloud platform, as well as strong dollar, European energy costs and falling demand for PCs weighed on the share price. In after-hours trading the stock also traded -6.7%. Elsewhere, Texas Instruments, which "only" has a market cap of c.$150bn to Alphabets' $1.36tn and Microsoft's $1.87tn, also disappointed the market after-hours due to a soft outlook for the current quarter with the stock -5.2% in extended trading. With its chips used across a variety of goods, the CEO’s comments about weakness in both personal electronics and industrial sectors is telling about demand in the broader economy. This morning we have also heard demand concerns from SK Hynix, a South Korean chipmaker. All this has cast a shadow on futures this morning with S&P 500 and Nasdaq 100 contracts -0.90% and -1.90%, respectively. Watch out for Meta earnings after hours tonight and Apple and Amazon tomorrow.

Back now to that weaker data that created the rates rally and helped tech along the way in normal trading hours. Markets are getting increasingly sensitive to housing at the moment and thus the news that the FHFA house price index surprised on the downside, falling by -0.7% MoM vs -0.6% expected seemed to be the rates catalyst yesterday. This was the lowest reading and the first back-to-back monthly decline since 2011. The S&P CoreLogic Case-Schiller index also fell for a second month with the 20 largest cities falling -1.3% MoM. We also saw consumer confidence miss, coming in at 102.5, falling from 108.0 in September and by more than expected (105.9), with both present situation and expectations declining. Lastly, a miss on the Richmond Fed manufacturing index (-10 vs -5) added to a downbeat message from the data.

As discussed, this softness weighed on US yields, with the 10y dropping by -14.0bps but with 2yrs only -2.8bps lower. Moves in Europe were almost a mirror image with Bunds (-16.0bps) and OATs (-16.1bps) sharply lower and with peripheral yields continuing to outperform (BTPs -20.8bps). Like the US, the front end saw milder moves (Germany 2y -2.6bps, France 2y +1.0bps). These declines in turn translated into around 2-5bps being taken out of both the Fed and the ECB pricing for next year meetings. This morning longer-end US yields continue to trend lower, with 10y down by -1.2bps and the 2y unchanged.

Before the after-hours fall, US tech stocks rejoiced on the back of those rates moves, with the Nasdaq jumping +2.25%, ahead of the S&P 500 (+1.63%). Sector-wise, of the 10 top level ones only energy (-0.05%) fell despite slight upward moves in oil (WTI +0.87%). Outside of the big tech reports mentioned at the top, notable large-cap earnings beats included Coca Cola (which also had an upward guidance revision), General Motors and UPS. So aside from Fed pivot pricing there was also the fundamentals story feeding into the day time rally.

Over in Europe, it was a quieter day with not much economic data released yesterday. The Ifo survey surprised on the upside on key metrics like business climate (84.3 vs 83.5 expected), current assessment (94.1 vs 92.5) and expectations (75.6 vs 75.0). Combined with falling yields, this turbocharged the Stoxx 600 (+1.44%) for another day of a more than a 1% gain amid gains in real estate (+5.06%), IT (+3.80%) and consumer discretionary (+2.47%) stocks. Undoubtedly, sub-100 euro gas prices (for a second day +0.84%) in Europe on the back of stories about potential LNG glut in the region and falling futures prices have helped.

In the UK, moves were milder as much of the action post-Sunak’s victory already happened yesterday and today’s official ceremonies and cabinet reshuffle didn’t move the markets much. The 2y gilt yield declined by -1.2bps and the 10y yield was down by -10.9bps. GBP rallied +1.72% though most of the move coincided with a big fall in the dollar index at the same time. It ended -0.93%.

Overnight in Asia, major bourses are defying the sell-off in US futures, with the Nikkei (+1.08%) and the KOSPI (+0.79%) in the green. Chinese stocks are having an even bigger rally, with the Hang Seng (+2.17%) and the Shanghai Composite (+1.42%) marching higher after closing in the red yesterday despite gains earlier in the day. In data, we got services PPI from Japan this morning which was in line with expectations at 2.1% (1.9% in August).

To the day ahead now and economic data releases will include wholesale and retail inventories, new home sales and advance goods trade balance in the US and consumer confidence in France. In earnings, results will be due from Meta, Thermo Fisher Scientific, Bristol-Myers Squibb, Boeing, Iberdrola, Boston Scientific, Mercedes-Benz, Heineken, Ford, Kraft Heinz, Santander, BASF, Barclays, Telenor and Puma.