The oil price finally took notice but only regained levels seen in late August. The Chinese monetary stimulus is worth $560Bn according to Bank of America, hopefully enough (but possibly not) to stabilise their economy (or bailout their disastrous property overcapacity), which otherwise risks heightened internal tensions and potential, although now structurally reduced, consequences for global supply chains. Post their Golden Week, markets are already expressing disappointment that there is no fiscal stimulus follow up.

Fedspeak following their cut has gone into overdrive. Powell, Bostic and others pushed back against the next cut being another 50bp and then a very strong Non Farm Payrolls report put the cat amongst the pigeons moving the concept of a soft landing to no landing, causing some to speculate that the Fed were actually ahead of the curve (!). Inflation fears have not quite gone away and the US Treasury curve bear flattened as the 10 Year regained 4%, from 3.60% just a couple of weeks ago; the market reassessing the pace and depth of this cutting cycle. We have only a few weeks until the US election, the result of which might determine whether Jay Powell is still Chairman at the FOMC’s next meeting (3 days later).

The Eurozone’s PMI’s remain weak and contractionary the overall picture is of weak core economies. The ECB’s focus has shifted from persistent inflation worries to disinflation and stagnation, they duly cut another 25bp at their October meeting. A shift in some analyst’s forecasts now has cuts at every meeting until the middle of next year, reaching a terminal rate of 2%. The Parisian Investment Banking party looks to be over as new PM Michel Barnier gears up to disproportionately tax those that were unfortunate enough to make the move.

The Bank of England is in no great hurry to cut but two 25bp cuts are priced in and a recent inflation print of 1.7%, the first to be below the 2% target for three years, gives them plenty of room to manoeuvre. Bear in the mind that whatever measures are put in place in the imminent Labour Budget they will not be enough to plug many holes in our finances, whatever their size, and certainly not enough to fund prospective spending plans, especially the more crass environmental ones. Therefore, the strain, once again, will fall on the Gilt market, making long end yields especially vulnerable, and again the size of the Gilt funding remit is likely to be extended.
Issuance across all currencies remains healthy and spreads are still stable. Sterling spreads in particular have had a good run of outperformance.

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