At Monday’s close, the Dow Jones (US30) Index was down 0.94%, while the S&P 500 (US500) Index fell by 0.96%. The NASDAQ Technology Index (US100) closed negative 1.18%. Lower expectations of a Fed rate cut drove bond yields higher and hurt stocks. 10-year T-note yields rose to a 2-month high amid bearish sentiment from last Friday when a stronger-than-expected US September payrolls report eliminated market odds of a 50bp Fed rate cut at next month’s FOMC meeting.

Hawkish comments from Minneapolis Fed President Kashkari on Monday proved bearish for stocks when he said the Fed still has to reduce the size of its balance sheet, but it will not return to Covid-era levels. Markets are awaiting news on US consumer prices on Thursday to see if the downward trend in prices will continue. The consensus expects the Consumer Price Index for September to decline to 2.3% y/y from 2.5% y/y in August. The CPI, excluding food and energy, is expected to be unchanged from August at 3.2% y/y. Markets rate the odds of a 25 bps rate cut at the November 6–7 FOMC meeting at 85% and a 50 bps rate cut at this meeting at 0%.

Amazon.com (AMZN) stock is down more than 3% after Wells Fargo Securities downgraded the stock to equal weight from overweight. Netflix (NFLX) shares closed down more than 2% after Barclays downgraded the stock to underweight from equal weight with a $550 price target.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) fell by 0.09%, France’s CAC 40 (FR40) closed higher by 0.46%, Spain’s IBEX 35 (ES35) gained 0.50%, and the UK’s FTSE 100 (UK100) closed positive 0.28%.

WTI crude oil prices fell to $75.6 per barrel on Tuesday, likely due to profit-taking after surging to the highest level in more than a month due to escalating conflict in the Middle East. Investors are closely watching Israel’s possible response to last week’s missile strike by Iran, with Iranian oil facilities seen as a possible target. However, President Biden recently urged against striking Iran’s oil fields, suggesting that alternative measures should be considered. In addition, OPEC’s spare capacity and the stability of global crude supplies are easing supply concerns.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) rose by 1.80%, China’s FTSE China A50 (CHA50) did not trade last week due to holidays, Hong Kong’s Hang Seng (HK50) rose by 1.60%, and Australia’s ASX 200 (AU200) gained 0.68% over yesterday.

Goldman Sachs raised its outlook on Chinese equities to “overweight,” predicting a 15-20% rise if Beijing follows through on promised policy measures.

Minutes from the Reserve Bank of Australia’s September meeting showed that monetary policy should remain fairly restrictive until bank officials are confident that inflation is moving toward the 2–3% target range. Policymakers also discussed global monetary easing but agreed that domestic money rates should not move in line with other economies, given the country’s stronger inflation and labor market conditions and less tight policy.