Slightly higher opening in European markets (Eurostoxx futures +0.3%, S&P +0.1% and Nasdaq -0.1%) with a momentary relief after Moody's maintained France's rating on Friday (Aa3, with negative outlook, thus remaining one notch above S&P and Fitch, which downgraded in autumn 2025), allowing for a minimal relaxation of French debt (10-year yield -6 bp to 5% and spread vs Germany at 167 bp vs a maximum of 178 bp last week and 85 bp at the beginning of September), although the underlying problem persists (2027 budget pending approval -probably by decree-, extreme political division and strong social rejection).
In terms of energy, tensions also remain. Although Brent is down today -2% to 115 usd/b amid rumours of Iran-Saudi Arabia-Pakistan-Turkey contacts, it hit six-month highs above 117 usd/b on Friday, while Trump says it is “time to decide” on Iran. And, what is more concerning, European gas TTF continues its upward trend and exceeds 95 eur/Mwh, the highest since 2022, which maintains the risk for the monetary policies of central banks.
In Brazil, Lula wins the second round of elections by a narrow margin (51.8% vs 48.2%) and Bolsonaro calls for the elections to be annulled. This will be Lula's fourth term, and the surprise (after Bolsonaro's victory in the first round) could be reflected in declines as the expectation of public account recovery loses strength.
This week will be dominated by meetings of the main central banks, Fed (Wednesday), ECB (Thursday) and Bank of Japan (Friday), with expectations of a “hawkish pause” in intervention rate hikes following the increases in September, but likely pointing to new hikes towards the end of the year.
Fed (28 October). Rates are at 3.75%-4.00% after the 25 bp increase on 16 September, adopted unanimously. The market discounts only a 10% probability of a 25 bp increase at Wednesday's meeting, especially after the latest statements from Warsh (positive about the impact of AI and awaiting new price references). From R4 we believe the Fed will pause in October, although it could raise 25 bp at the meeting on 9 December (c. 75% probability), in line with the "dot plot" presented in September, which places rates at 4.0%-4.25% by the end of 2026. The market also discounts two additional hikes in 2027 up to 4.5%, although these moves will be entirely dependent on the evolution of inflation and employment.
ECB (29 October). The deposit rate is at 2.50% after the 25 bp increase on 10 September, the second of the year after the one in June. The market assigns an almost negligible probability of a hike at next week's meeting due to the worsening situation in France. From R4 we believe the ECB will pause in October, although we do not rule out +25 bp at the meeting on 17 December (c. 75% probability), entirely dependent on the evolution of energy costs and second-round effects on inflation. The two additional hikes that the market discounts for 2027, up to 3%, seem excessive in light of the risks to growth and to France.
BoJ (30 October). The reference rate is at 1.25% after the 25 bp increase on 18 September, with a vote of 7 to 2. The market discounts assigns an almost negligible probability of a hike at this meeting. From R4 we believe the BoJ will pause in October and will raise +25 bp at the meeting on 18 December (c. 75% probability). The market discounts two additional hikes in 2027 up to 2.0%, with the yen at 157 vs usd as a catalyst.
In China, the Fifth Plenary Session of the XX Central Committee will take place (26-29 October), a more political than economic event, and therefore we do not expect stimuli despite the weakness shown by the giant economy, conditioned by weak consumption, the real estate crisis and local debt.
On the corporate front, we will be attentive to new Q3 2026 earnings releases, highlighting in the United States the quarterly figures of big techs Alphabet, Microsoft and Amazon among others, which will be followed with particular interest after the recent declines amid doubts about the AI theme. The Q3 2026 earnings season for the S&P 500 continues to show mixed figures compared to expectations. Although the percentage of S&P 500 companies exceeding EPS estimates is above recent averages, the magnitude of these surprises is below the average. Since September, upward revisions of expected EPS in the energy sector have been offset by negative surprises seen in the communication services sector and downward revisions in healthcare companies. So far, 24% of S&P 500 companies have reported, of which 83% have exceeded EPS (vs 78% 5-year average and 77% 10-year average) by +2.1% vs estimates (+7.5% 5-year average and +8% 10-year average), and 66% in revenues (vs 70% 5-year average and 68% 10-year average) by +1.2% (vs +1.8% 5-year average and +1.6% 10-year average). So far, the EPS of the S&P 500 shows an increase of +29.5% (vs +29.2% last week), a pace that, if maintained, would represent the third consecutive quarter of growth >25% and the eighth consecutive quarter with double-digit growth. This week, 179 S&P 500 companies are expected to report.
In Spain, the campaign accelerates as we await the bulk of Ibex companies to report, mainly banks, energy companies and infrastructure firms, while Puig celebrates its Investor Day.
Additionally, on the macro front, we are attentive to the release in the United States of the September core personal consumption deflator, the Fed's preferred inflation measure (+3.1%e vs +3.0% prior) and Q3 GDP (+3.2%e vs +2.2% prior), with private consumption (+3.4%e vs +3.8% prior). In Europe, attention will be on the Q3 GDP of the Eurozone (+0.2%e quarterly and +1%e y.o.y vs +0.6% and +1.2% prior), Germany, France and Spain, and on the preliminary CPI figures for October from Germany, France and Spain, following the strong rebound seen in the September figures.
We have presented our updated Market Outlook (for more details, see here). Looking ahead to the coming weeks, we will monitor: 1) Q3 earnings, with big techs between 28 October and 2 November and Nvidia on 17 November, where both the return of capex and its financing will be important; 2) central banks, with meetings from 28 to 30 October and a pause expected while awaiting new data, especially on inflation; 3) the “midterms” on 3 November in the US, where Democrats would start as favourites for the House, with a 90% probability, and with a more open Senate, at 63%; 4) France, with the budget vote and S&P rating reviews (27 November); and 5) the general elections in Spain on 29 November.
