Cautious Europe as US midterm elections take focus

Headlines:

Markets:

• WTI crude oil rose +2.14% to $98.50
• Gold declined -1.10% to $3,902
• CAD outperforms, AUD underperforms
• S&P 500 fell -0.20% to 7560.25
• US 10y Treasury yield climbed 2 bps to 4.93%
• Bitcoin rose +0.35% to $76,930

The session was quiet, with little in the way of economic data or news. The sole data point of note came from Switzerland's CPI release. Headline inflation increased to 1.5% y/y from 1.0% previously, exceeding the 1.3% forecast and mainly due to higher energy prices. Core inflation, by contrast, held at 0.5%, suggesting underlying price pressures are still contained.

That backs the SNB's assessment that the recent rise is driven by energy, not a sign of lasting domestic inflation. Policymakers will keep an eye on the danger that firms pass on higher costs to consumers, but the latest numbers offer the SNB little cause to act quickly, giving it scope to stay on hold for now.

ECB's Radev struck a cautious but hawkish note, cautioning that conditions in the economy are growing more difficult and that the October pause should not be read as the close of the tightening cycle. He recognised that core inflation is steady and that higher energy costs have not yet made their way into wages, yet he argued the ECB ought to move pre-emptively instead of waiting for second-round inflation effects to appear.

On US-Iran negotiations, Qatar said Washington and Tehran are both still committed to mediation, and the two sides are now reviewing a proposal intended to move the talks forward. A spokesperson for the Qatari Foreign Ministry was cautiously optimistic, saying an agreement remains possible and could set conditions for future talks. Qatari mediators expect responses from Washington and Tehran on the latest proposal within 36 hours.