We head into a new week with bond markets having enjoyed their best five-day stretch since before the Iran war, while stocks experience rotation and dispersion. The big slide in Treasury yields comes even as inflation data continues to come in hot. We wrote about this last week, highlighting a possible rounding top in the 10-year US Treasury yield. It seems that investors are starting to find value in long-dated Treasuries and see them as a hedge against a correction in the AI trade. Were the tech sell-off to gain momentum, that Treasury buying would likely cause more dovish Fed pricing and hurt the greenback.

That said, it may be too soon for a prolonged dollar downturn. But stocks look likely set for more volatility after the tech-laden Nasdaq suffered its worst week since June, while the Dow closed in the green. Credit spreads in neocloud companies like Coreweave have become a focus. This has sparked a debate about whether these types of firms are the canary in the tech-bubble coal mine or just enduring a classic market overshoot due to overcrowded positioning. We also now move into the ‘meaty’ part of earnings season, as we shift from big banks to consumer, EV and tech giants. We hear from heavyweight favourites like Meta and Tesla this week, plus Procter & Gamble, GE, Texas Instruments and Phillip Morris. We will be watching for signals around demand outlook, pricing policies and guidance.

We got little from Fed Chair Warsh on Friday as the Fed goes into blackout mode regarding communications, ahead of its FOMC meeting at the end of the month. The lack of comment on policy was seen by markets as an endorsement of current market pricing that implies only a small chance of a hike in October. The probability of a move in a few weeks time fell from 30% to 15%. Warsh’s explanation for the lack of guidance was that he doesn’t “pre-judge meetings”. That underlines the potential for surprises ahead under this new Fed regime, with us now all becoming hugely data dependent. A December rate hike is still very likely but the pricing of hikes in 2027 potentially looks overdone. Influential New York Fed President Williams recently said as much.

The pound continues to hold its ground as firmer UK data keeps expectations of further BoE tightening alive. Sterling is broadly unchanged against the US dollar since the end of June, with only the energy-sensitive Canadian dollar and Norwegian krone doing better. Ultimately, it is being supported by improving sentiment and signs that the UK economy is proving more resilient than expected. Recent data has added to that sense, with the focus turning to this week’s top tier jobs and CPI reports ahead of the Budget at the end of October. Regarding inflation, energy bills are going to become a squeeze as the OFGEM price cap rose 4% this month and is set for a larger increase in January. That could support the pound in the near-term, though weigh further out, especially if data over the next few months show that higher borrowing costs are finally wearing down the economy’s recent resilience that has surprised many in the City.

In Brief: Major Data Releases of the Week

Monday, 19 October 2026

China data: Q3 GDP is forecast at 4.4% y/y, similar to the prior 4.3%. Export strength is likely to be offset by weak consumer activity and domestic business activity. Retail sales are expected to improve but remain soft, while industrial production is seen recovering modestly. Subdued data could see more stimulus.

Tuesday, 20 October 2026

UK Jobs: Expectations are for the jobless rate to tick up one-tenth to 5.0% while private sector pay growth – a key gauge of domestic inflation pressure – is trending down, nearing a six-year low at 2,9%. With the fewest vacancies since 2014 excluding Covid, labour market conditions have been easing gradually.

Wednesday, 21 October 2026

UK CPI: Consensus predicts the September headline rate will rise to 3.3% from the five-month high at 3.1%. Core is seen at 2.7% from 2.6% and all-important services around 3.7%, with the BoE projection at 3.8%. Sharp price increases for petrol and diesel, plus higher airfares will all contribute. Domestic energy bills, which track global market prices with a lag, are set to rise further in the months ahead.  

Friday, 23 October 2026

Global PMIs: Manufacturing activity is likely to continue to show surprising resilience, despite higher energy costs due to the ongoing uncertainty in energy markets. Consumers are proving robust too, keeping services activity well above 50. US figures are still being boost by tech infrastructure investment.