Macro Monday: October 27-31, 2025

RECAPPING LAST WEEK
U.S. equity indices ascended to new all-time highs after the delayed September inflation report came in slightly lower than expectations. The S&P500, Nasdaq Composite, and Russell 2000 indices gained between 1.9% and 2.5%. Only the defensive utilities and consumer staples sectors ended lower, while technology was the biggest gainer. Crude oil futures soared more than 7% after the U.S. imposed sanctions on Russia’s two largest producers, causing India and China to sharply cut their crude imports from Moscow. The action threatened to push up global oil prices as Russia’s two largest customers were forced to seek alternative supplies. Gold futures stabilized after their biggest drop in more than a decade on Tuesday, ending the week lower by 3.5%. Investors were generally upbeat even as the U.S. government shutdown extended into a third week and trade tensions with China showed little signs of abating. The much-anticipated September CPI reading showed a monthly increase of 0.3%, putting the annual inflation rate at 3%. Since both numbers came in a touch below forecasts, investors were reassured that the Federal Reserve would remain focused on the softening labor market, and therefore likely to lower interest rates despite core inflation that remains above the Fed’s target. U.S. Treasury yields ended the week modestly lower, with a 10-year yield weekly close below 4% for the first time since late March. Turning to the limited economic releases available, U.S. business activity brightened in October with S&P Global’s flash composite PMI rising to 54.8 from 53.9. The services sector accounted for most of the improvement, but the overall outlook dimmed as price pressures remained high. The final consumer sentiment index for this month slipped to 53.6, underlining the persistent disconnect between sentiment surveys and hard data. The gauge for current conditions fell to the lowest level since August 2022 as consumers remained frustrated by high prices. One-year inflation expectations ticked down slightly to 4.6% but the long-term view rose to 3.9% from 3.7%. In housing news, existing home sales rose 1.5% MoM in September with a median sales price of $415,200—the 27th straight month of annual gains. Overseas, Japanese stocks reached record highs and the yen slumped after conservative Sanae Takaichi was elected as prime minister. The country’s core CPI rose to 2.9% last month from 2.7%, but investors remained uncertain whether rising inflation would lead to rate hikes given the new government’s potential dovish views on fiscal policy. In Europe, Germany’s strong private-sector growth more than made up for France’s struggles, lifting Eurozone PMIs to the highest levels since May 2023. Additional rate cuts this year from the Bank of England looked doubtful after CPI remained at 3.8% YoY and retail sales increased for a fourth consecutive month. Last of all, China’s industrial production and export boom continued to drive solid GDP growth of 4.8% in Q3, but slowing retail sales pointed to a concerning lack of domestic consumption.

THE WEEK AHEAD
Regardless of whether the government shutdown ends this week or not, the Federal Reserve will be forced to make its decision on interest rates with an incomplete picture of the U.S. economy. It may be difficult for market observers to square a resilient economy—evidenced by solid Q3 GDP estimates and stocks at all-time highs—with a softening labor market. However, the contrast is unlikely to prevent the Fed from cutting rates on Wednesday. Several important economic reports that were due to be released after the Fed decision will likely not be—including that first estimate of Q3 GDP and September’s core PCE price index. The continued lack of new data will put even more emphasis on this week’s earnings announcements, with nearly 45% of the Nasdaq-100’s and 25% of the S&P500’s respective market values due to report—including Meta, Microsoft, and Alphabet on Wednesday, followed by Apple and Amazon on Thursday. Investors will be digging into what these companies say about artificial intelligence, given the technology’s outsized influence on equity valuations. On the international calendar, central banks will be in focus. The Bank of Canada is expected to cut rates by 25 basis points, while the European Central Bank and Bank of Japan are predicted to hold rates steady. Inflation updates from Australia and the Eurozone are also on the docket. Finally, President Trump’s visit to Asia—culminating in a scheduled meeting with Chinese President Xi on Thursday in South Korea—is a potential source of market volatility as the two countries aim to manage disagreements and improve relations.

CHART OF THE WEEK
Oil finds support
Crude oil has spent much of this year range-bound between $60 and $70 per barrel, or $340 and $380 on the S&P GSCI Crude Oil Index ($SPGSCL), which tracks the price of crude oil futures. The index broke support just below $340 in early October over concerns of slowing global demand and record domestic crude production. Tensions in the Middle East seemed to be easing as well, supporting stable supply and lower prices. After falling to 2025 lows near $310, last week’s sweeping sanctions on Russian oil giants Rosneft and Lukoil sent oil prices rocketing back above the technical support that had only recently been breached. These two companies account for nearly half of Russia’s crude exports, so supply affects could be felt globally, though it’s important to remember that Russia has been successful in circumventing the impact of sanctions in the past. Whether an uptrend develops will largely depend on whether these supply disruptions are real or whether the sanctioned barrels end up making their way to market through other avenues.


Source: thinkpipes
 
Source: Charles Schwab Corporation
 
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