Market drivers and catalysts
Equities: Banks lifted the Dow while tech hit the Nasdaq, Europe slipped as autos/miners lagged, Asia fell with Japan, Hong Kong, and China lower
Volatility: VIX climbs to ~21, short-term vols high, earnings and trade risks dominate
Digital Assets: BTC steady at $112k, ETHA outflows deepen, IBIT defies trend with inflows
Fixed Income: US treasury yields remain at multi-month lows. France OATs rally on hopes for government stability
Currencies: JPY rallies and USD weakens
Commodities: Gold posts new record high, silver still volatile near recent highs
Macro events: US Oct. Empire Manufacturing, US Fed Beige Book
Macro headlines
US Fed Chair Powell noted a weakening labor market, reinforcing expectations for an imminent rate cut. The federal government shutdown has restricted key economic data releases, leaving near-term growth signals unclear and shifting focus to policy developments.
US President Trump is contemplating halting cooking oil and other imports from China in response to China's intentional avoidance of buying US soybeans. Despite noting a good but occasionally tense relationship with President Xi, Trump is reportedly discussing with officials ways to convey that the US seeks to ease trade tensions with China, according to WSJ sources.
The NFIB US Small Business Optimism Index dropped to 98.8 in September 2025 from 100.8 in August, below forecasts of 100.5. Optimism waned due to supply chain disruptions and inflation. Inflation was the main issue for 14% of owners, while 64% faced supply chain challenges. Earnings hit their highest since December 2021. Despite this, NFIB Chief Economist Bill Dunkelberg stated that businesses remain resilient amid inflation, sales, and labor market challenges.
Ahead of a confidence vote tomorrow, re-appointed French Prime Minister Lecornu suspended President Macron’s pension reforms until after the 2027 election in a bid to put together a budget for next year. The Socialist Party said yesterday that it would not vote to topple the government, meaning that Lecornu would survive the vote tomorrow.
Macro calendar highlights (times in GMT)
US Government data are impacted by shutdowns and are likely to be delayed
0900 – Eurozone Aug. Industrial Production
1230 – Canada Aug. Manufacturing Sales
1230 – US Oct. Empire Manufacturing
1330 – US Fed’s Miran to speak
1630 – US Fed’s Miran to speak
1700 – US Fed’s Waller to speak
1800 – US Fed releases Beige Book
1945 – Australia RBA’s Bullock hosts fireside chat.
0030 – Australia Sep. Employment Change and Unemployment Rate
Earnings this week
Today: ASML, Bank of America, Morgan Stanley, Abbott Laboratories, Progressive, United Airlines
Thursday: TSMC, Charles Schwab, Interactive Brokers, ABB, CSX Corporation
Friday: American Express, Reliance Industries, Volvo
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
USA: S&P 500 −0.2%, Nasdaq 100 −0.8%, Dow +0.4%. Banks rallied after strong Q3 prints and Powell signaled QT may pause with another rate cut in view, while semis fell as U.S.–China maritime sanctions escalated. Wells Fargo +7.1% on a beat and a higher ROTCE after the asset-cap removal; Citigroup +3.9% on broad revenue gains; Nvidia −4.4% and Broadcom −3.5% as enthusiasm cooled after Monday’s surge. Focus now on the Oct 28–29 FOMC and mega-cap earnings.
Europe: STOXX 50 −0.3% and STOXX 600 −0.4%; FTSE 100 +0.1%. Trade-exposed autos and miners lagged after Beijing blacklisted U.S.-linked Hanwha Ocean units; defensives outperformed. Michelin −8.9% on a profit warning tied to weak North America demand, while Ericsson +18.0% after a stronger-than-expected Q3 and cash boost from the Iconectiv sale. French risk eased at the margin as PM Lecornu moved to suspend the 2023 pension law.
Asia: Region weaker into China data and amid U.S.–China shipping frictions. Nikkei 225 −2.6% on political jitters and a firmer yen; Hang Seng −1.7% to 25,441; CSI 300 −1.2%. Tech and property led losses in Hong Kong, with SMIC −9.2% and Kuaishou −6.7%, while SoftBank −6.1% in Tokyo.
Volatility
Volatility rose sharply on Tuesday, with the VIX closing at 20.81 (+9.35%), its highest close since late May. Short-term measures (VIX1D +20.83%, VIX9D +13.1%) also surged, pointing to elevated concern about earnings, U.S.–China trade tensions, and geopolitical risk. Despite a modest rebound in futures, sentiment remains fragile. Traders appear focused more on micro-level risks—costs, margin guidance, layoffs—than macro surprises.
The expected move for the S&P 500 today (based on ATM options pricing) is roughly ±47 points (~0.71%), reflecting continued uncertainty around earnings and policy signals.
VIX futures remain slightly inverted, suggesting near-term event risk outweighs longer-term volatility expectations. Traders should watch today’s earnings reports from Bank of America, Morgan Stanley, and ASML for potential volatility triggers.
Digital Assets
Crypto markets stabilized after recent turbulence, with Bitcoin hovering near $112,000 and Ethereum at $4,081, as risk sentiment balanced between renewed U.S.–China trade worries and rising bets on a Fed rate cut. Short-term tone remains reactive to equity momentum and policy headlines.
IBIT lost $1.90 (-2.9%) while ETHA dropped 3.42%, reflecting continued outflows in spot ETFs after Friday’s liquidation wave. However, BlackRock’s IBIT stood out with $60.36M of inflows, bucking the broader trend. ETHA's AUM sits around $16.4B, though NAV dipped recently as ETH lagged BTC.
Crypto related stocks and altcoins were mixed: MARA +9.88%, CLSK +9.68%, and CIFR +2.70% outperformed, while COIN −4.33% and MSTR −4.69% extended declines. A key dynamic to monitor is liquidity rotation—into altcoins on upswings, and back into BTC/ETH on dips.
Fixed Income
US treasuries at the front end of the curve stayed firm and the benchmark 2-year treasury yield stayed below 3.50, trading right on post-April lows below 3.47% this morning after Fed Chair Powell yesterday described the US labor market as weak. A 25-bp rate cut at the October and December FOMC meetings is almost fully priced. The benchmark 10-year treasury yield remains pinned near the key 4.00% level.
European sovereign bonds rallied yesterday, particularly French OATs on the news that the Socialist Party will not vote to topple the revived Lecornu government because Macron has suspended his pension reforms until after the 2027 election, which aggravates the risk that France’s fiscal deficits stay large, but mitigates the risk of political chaos in the nearer term. The Germany-France sovereign 10-year yield spread dropped five basis points yesterday to below 79 basis points, the lowest in over five weeks.
- US high yield credit spreads fell back slightly on improved risk sentiment, with the Bloomberg measure of high yield credit spreads to US treasuries dropping six basis points to 298 bps.
Commodities
- In precious metals, gold hit a new record high above 4,190 overnight, but the main focus for now is the silver squeeze which is softening somewhat as trading conditions improve (lower spreads and lower overnight roll costs) but won’t normalize until we have an announcement on whether US Section 232 tariffs will apply to silver as London needs silver from Comex which it will only get in proper size if no tariff is applied.
- Crude oil bounced off new multi-month lows since early June, but the rebound was feeble. December Brent trades near 62.25 after yesterday’s 61.50 low and November WTI trades at 58.60 this morning after yesterday’s 57.68 low.
Currencies
The Japanese yen rallied further, with USDJPY falling as low as 151.00 before rebounding slightly as traders contemplate whether DPP opposition leader Tamaki has a chance to become the next Japanese PM. The pivotal area on the USDJPY chart extends from 151.00 down to 150.00.
The US dollar was broadly weaker, perhaps on Fed Chair Powell’s dovish comments on the weakening US labor market. EURUSD rebounded back above 1.1600, trading 1.1625 this morning, while AUDUSD rebounded back above 0.6500.
