Chip bounce fails to inspire Asia and France weighs on Europe

Preview: US chips rebound, but Europe and Asia slide; oil firms on Gulf supply fears. 

US stocks rebound on chips and China

Risk caught a bid on Monday, buoyed by better-than-expected Chinese Q3 26 GDP growth and a rebound in chipmakers. US equity benchmarks recovered most of Friday’s lost ground, with the S&P 500 touching gloves with the underside of its 50-day SMA around 7,705 and the Nasdaq 100 leading the way, adding 1.2%.

The push higher came despite rising US Treasury yields, reflecting growing concerns about interest rates and their impact on sectors heavily reliant on capital spending, such as technology. 

Europe slips on France and Asia trades lower

European bourses, by contrast, finished the session underwater on unrest in France and its fiscal situation; the French CAC 40 shed 1.1%, opening the door to a sell-on-rally scenario in what has been a meaningful downward trend since August. 

Overnight in Asia, regional indices are negative, particularly Japan’s Nikkei and South Korea’s KOSPI, down 1.5% and 4.2%, respectively, as of writing.  

FX: Euro pressured, CAD steady, Yen capped

In FX, the USD index wrapped up the session off its worst levels, bolstered by daily support around 101.81. The euro took a hit – once again eyeballing May 2025 lows of US$1.1065 – amid the situation in France. 

The CAD barely flinched at the September Canadian CPI report. YY headline reached 3.1%, up from August’s prior reading of 3.0%, but below the market consensus of 3.2%. The BoC’s preferred measures – CPI median and trim – reported 1.9% (easing from 2.0% prior and in line with expectations) and 1.8% (cooling from 1.9% prior and also defying market consensus of 1.9%), respectively. However, investors increased their rate-hike bets, with odds of 73% for this month’s meeting versus 33% prior to the release.

USD/JPY remains contained between the underside of its 200-day SMA at ¥158.57 and long-term support around ¥157.89. I am still of the opinion that this pair remains vulnerable to the downside amid intervention risks, and any breakout north of the said SMA could be short-lived and provide sellers an opportunity to get involved. ¥160 remains my line in the sand. 

Commodities: Oil firms on Gulf supply fears

In the commodities complex, oil benchmarks recovered earlier losses yesterday and are positive this morning. WTI is trading back above US$98/barrel, while Brent is eyeing US$110. The bid reflects renewed supply fears in the Persian Gulf after weekend reports of tanker incidents in the Strait of Hormuz and continued Houthi attacks on Saudi Arabia, though positioning looks stretched and technical resistance near US$112 on Brent could cap gains. 

Day ahead

The August UK labour market report headlines early European trading, with economists forecasting the unemployment rate to tick higher to 5% from 4.9% in August. The focus will also be on earnings growth and payrolls. With markets expecting the BoE to hike four times, sticky wage growth would reinforce those bets and lend support to sterling, while a softer print could see some of that tightening priced out. 

Later in the day, US earnings take centre stage, with RTX and GM reporting before the open and Netflix expected after the close.