The equities collapse that wiped out this year’s gains for U.S. stocks has spread to Asia as concerns mounted that corporate profits and economic growth are peaking amid rising borrowing costs. The yen climbed on demand for haven assets, while Treasuries held gains and the dollar nudged lower. Sentiment has been tested in October, with stocks poised for their worst month in more than six years as the effects of trade tensions, geopolitics and rising Federal Reserve interest rates begin to bite. Investors remain apprehensive as a flood of earnings, while mostly stellar, have come with warnings about the future impact of tariffs and rising costs.
In Europe, politics remained in focus, with Italian Prime Minister Giuseppe Conte doubling down on his government’s budget proposal and U.K. Prime Minister Theresa May’s cabinet descending into conflict. The pound held losses. Oil declined. Ahead today is the key ECB monetary policy decision and President Draghi’s speech at the press conference. Markets brace for downside risks to the EUR, as Draghi could highlight the European political turbulence and weaker fundamentals. However, the ECB is likely to maintain its stance on the conclusion of QE later this year.
Apart from the ECB event, the German Ifo survey will be eyed for near-term trading impetus. The UK docket remains absolutely data-dry. In the US session, the US weekly jobless claims, durable goods, goods trade balance and pending home sales data will be reported ahead of the speech by the FOMC members Clarida and Mester. Earnings season rolls on with notable highlights including Twitter, UBS and Total.