Five Things to Know in Markets Today

Five Things to Know in Markets Today

1. The euro is getting some relief today as French bond yields fall. If Andy Burnham worries Britain is “in hock” to bond markets, pity the poor French, who risk being “strangled by rising interest rates”, according to the country’s central bank chief, Emmanuel Moulin. The surge in bond yields as a global phenomenon is widening cracks where the debt is the highest and fiscal positions are weakest- France is at 119% to GDP…the surge in yields is hitting the most profligate the hardest and France faces a double problem – fiscal profligacy coupled with a dysfunctional political system that is drifting to populism. France is proving that deficits don’t really matter until they matter. Franco-German spreads have come in a bit the last two sessions though, which has given the euro some bid after it touched a 17-month low. There has been a dose of relief this morning as 10yr French OAT yield dropped ~11bps this morning to 4.75%

2. But the UK too is squeezed – if not strangled – by higher bond yields. So much so that a proper commitment to spend more on defence is likely to be delayed until the autumn. A lack of a credible commitment to spend 3% on defence will be viewed dimly by our allies, particularly the US. UK defence names were weaker – Babcock and BAE Systems among the handful of fallers on the FTSE 100 early Tuesday, along with BP as oil dipped back below $100, while the likes of Chemring and QinetiQ also dipped.

3. Markets are seeing some signs of dislocation. Bond yields at quarter-century highs, Nasdaq at a record high…high yields are not pulling down on long duration growth stocks because the yields are a derivative of the AI buildout story that is driven by the companies and which is driving stock prices higher. Treasury yields rose as data showed the US services sector continued to expand in September, albeit the pace slowed a touch. The ISM Services PMI slipped to 54.9 from 55.4, marking the 27th consecutive month of expansion. The US 10yr rose to fresh 2002 high to start the week, touching 5.349% at one stage yesterday, last at 5.3% early Tuesday. The US 30yr yield also breached 5.7% for the first time in 24 years.

4. Oil drops below $100. Yields rose despite oil prices cooling off a touch – French OATs are the latest driver for macro. Brent has dipped back below $100, towards the lower end of the range it’s traded within for the last month. Numerous data and tracking sources show MidEast supplies have basically recovered but there is still a geopolitical risk premium from the ongoing escalation worry, combined with the knowledge it could take months if not years to rebuild global stockpiles.

5. Record high for the Nasdaq. The Nasdaq Composite rallied 1% with concentration in megacap tech. Nvidia led, up 2% to a record $238.90, taking its market value close to $6 trillion. Anything AI related rallied with SpaceX +7% on the day, while Tesla, Meta and Microsoft rose 1.5%-2%. The S&P 500 rose 0.66% to 7,773.95, closing near its all-time high, while the Dow Jones added +0.2%.

Market snapshot: European equities opened higher, with Informa shares opening down then turning higher as the company announced the acquisition of events organiser Clarion from private equity group Blackstone for £2.24bn. It plans to raise around £940mn through a share placing to part fund the deal. It came as the company also announced plans to separate its Academic business, Taylor & Francis, to focus the group on its core B2B events business. Shares moved down initially but investors have warmed to the growth story here. Telecom Plus rose 4% to near the top of the FTSE 250 on strong organic customer acquisition at annualised run rate of 11%, ahead of forecast 10%. Clarkson was however the top riser on the midcap index after lifting its full-year profit outlook following a very strong August and September as ongoing geopolitical complexity has resulted in record freight rates in some areas. Management says it now expects underlying profit before tax for the full year to 31 December 2026 to be not less than £135mn, citing a particularly good showing by its Broking division, while the Financial division also performed well above expectations.