The week wraps up with US consumer sentiment and inflation outlook

In focus today

• In the US, the University of Michigan's preliminary October consumer sentiment survey is set for release this afternoon, with focus on consumers' inflation expectations. In September, 1-year inflation expectations remained elevated at 4.8%, while 5-year expectations rose to 3.9%, both exceeding the Fed's target. Amid delays in other economic data due to the government shutdown, today's release will provide key insights to markets. If inflation expectations remain elevated, it could support the case for a more cautious and gradual approach to monetary policy adjustments.
• In Sweden, key economic indicators will be released today at 8.00am, including flash estimates for GDP, production (PVI), and the consumption indicator for August. Retail sales have improved, suggesting a somewhat positive consumption figure, despite occasional discrepancies between the measures. Monthly GDP is highly volatile, whereas production and consumption data tend to provide a more reliable guide.
• In Norway, we get the inflation figures for September where we believe the core inflation (CPI-ATE) was unchanged at 3.1 %, in line with consensus but marginally lower than Norges Bank expected in the September MPR at 3.2 %.

Economic and market news

What happened overnight

In the FX space, the US Treasury has finalised a $20 bn currency swap framework with Argentina and begun purchasing pesos in the open market, fulfilling President Trump's pledge to support the struggling country. Following the breakdown of Bretton Woods, such interventions have occurred only four times since 1996, according to the New York Fed. The announcement modestly strengthened the peso and sent Argentine dollar bonds higher.

What happened yesterday

In the Israel-Palestine conflict, Israel's cabinet approved the first phase of Trump's 20-point plan to end the Gaza war in the early hours of Friday, marking the formal confirmation from both Israel and Hamas. The ceasefire is set to take effect within 24 hours of the deal's signing, and hostages are expected to be released within 72 hours. The greater challenge now lies in implementing the second phase, as Israel has not committed to a full troop withdrawal or a definitive end to the conflict. On the other side, Hamas has agreed not to govern Gaza but seeks further negotiations on disarmament, troop redeployment, and the role of an international stabilisation force.

Equities: Equities edged slightly lower yesterday, with defensive sectors outperforming in what was otherwise a calm session. 

We've entered a classic wait-and-see mode ahead of the upcoming U.S. data flow and the reopening of U.S. markets after the holiday. The Q3 earnings season will kick off in earnest next Tuesday, which is likely to re-energize sentiment.

In the US yesterday, Dow -0.5%, S&P 500 -0.3%), Nasdaq -0.1%, and Russell 2000 -0.6%.

In Asia this morning, equities trade modestly lower after a strong run earlier in the week. South Korea stands out as an exception, rising after reopening from its Golden Week holidays. 

U.S. futures are marginally higher, while European futures are broadly unchanged.

FI and FX: Markets are adopting a more optimistic stance on France, as reflected in the tightening of the 10Y Oat-Bund spread during yesterday's session. Despite this positive sentiment on France, EURUSD continued its downward trajectory, potentially influenced by the somewhat dovish ECB minutes released yesterday. Today our focus is on Norway's inflation release and several key economic indicators out of Sweden.