Newsquawk European Market Wrap - 14th October 2026

European bourses were firmer; US equity futures hit post-CPI. DXY soared alongside yields following a hotter-than-expected US CPI report; traders now fully price in two 25bps hikes by the end of January. Houthis warned of operations against Saudi airports/oil facilities in the coming days; attention also on a sunken ship after hitting a mine in Hormuz. EQUITIES European bourses held onto their earlier gains, however, off best levels as equities track their US peers lower following a hot CPI report (see more below). The SMI is set to finish as the outperformer, with all but two components in the green. Sectors still pointed positively. Optimised Personal Care topped the sector pile, with Food, Beverages & Tobacco and Health Care rounding out the sector gainers. The sector laggard was Banks, with Autos and Media closely behind. Key stories included: ASML +1.9%, Q3 figures topped estimates and lifted Q4/FY guidance; Airbus +2.5%, forecasted the aviation-services market to double by 2045, with passenger numbers expected to double to 10bln; Lonza +3.4%, saw 10-13% organic CER sales growth on average over time; SEB -5.7%, Sweden’s FI imposed a temporary add-on to Co.’s capital requirements. US cash equities opened lower, with the NDX continuing to underperform. The main downside driver was the hotter-than-expected inflation print. Headline CPI printed at 3.7% Y/Y (exp. 3.6%, prev. 3.4%) while the core figure also ticked higher to 2.6% (exp. 2.5%, prev. 2.4%). As a result, markets now price a near 50/50 chance of a hike in October, from a 78% chance of a hold pre-data. FX DXY started the London session flat; the Antipodeans initially outperformed following stronger-than-expected Chinese data. Thereafter, the USD soared following a hotter-than-expected US CPI report. In brief, both core and headline metrics rose from the prior; the core figures topped expectations, whilst headline M/M printed in-line, but Y/Y was also above consensus. Following the report, DXY jumped from 102.19 to a peak of 102.85; Fed market pricing also shifted hawkishly, and now price in a 40% chance of a hike in October, and fully price in two 25bps hikes by end-January. Given the strength in the USD, all G10s slumped and are set to end the London session towards the bottom end of their respective ranges. The Aussie fared a little better vs peers, whilst the EUR and CHF underperformed post-CPI. EUR/USD dipped back below the 1.1200 mark, and is set to end the afternoon at the bottom end of a 1.1115 to 1.1211 range. Some of the underperformance could partially be explained by the recent dovish repricing seen at the ECB, in the wake of the ongoing French fiscal situation; traders are not expecting policymakers to tighten monetary conditions, instead remaining cautious about potential contagion risks. FIXED A firmer start to the day for fixed income, with USTs initially in a narrow holding pattern into CPI, digesting the Fed commentary yesterday and with no real follow through to the updates from this morning pre-data. However, the situation changed significantly on the US CPI release. A series that was hot across the board and has sparked a hawkish reassessment of near-term Fed bets, with the likes of Pantheon now calling for a December hike (prev. hold), though they do not think the data is hot-enough to merit an October move. A series that weighed on global fixed income, sending USTs to a 103-29 session low, with downside of c. 25 ticks at most. Action that was seen elsewhere, with EGBs unwinding the initial modest bullish bias, and now set to end the European day lower by around 35 ticks. For the bloc, we primarily await the speech from French RN leader Le Pen on the French contribution to the EU’s budget. For Gilts, they continue to outperform. However, post US CPI, the magnitude of this has waned significantly, leaving Gilts lower by around 10 ticks vs earlier gains in excess of 50. Initially, the upside was a function of constructive pre-budget reporting in the FT and commentary from BoE’s Pill, who pushed back on end-2027 hawkish BoE pricing; though, his commentary was more pragmatic on the data-dependent and uncertainty points, rather than a dovish reassessment from the known hawk. Germany sold EUR 1.882bln vs Exp. EUR 2.5bln 3.40% 2047 and 2.90% 2056 Bund. The UK sold GBP 5bln 4.625% 2030 Gilt: b/c 3.41x (prev. 3.24x), average yield 4.945% (prev. 4.786%), tail 0.2bps (prev. 0.3bps). COMMODITIES Crude benchmarks initially started the European session slightly higher, and managed to hold onto those gains, extending to new session highs as the session progressed. Saudi-Houthi strikes remain a clear geopolitical risk, with the Yemeni Army Spokesperson urging civilians, workers and shipping companies to evacuate airports and firms as operations towards Saudi airports and oil facilities continue. In the Strait of Hormuz, strikes continue, with a container ship sinking after being hit by a projectile. In terms of price action, WTI rotated in a USD 93.97-95.99/bbl range, while Brent held onto the USD 105/bbl handle. Precious metals were relatively contained throughout the European morning, as markets awaited the US CPI report. In an immediate reaction, spot gold extended the lows of the USD 4135-4170/oz range, and found a trough at USD 4079/oz. In brief, headline CPI printed at 3.7% Y/Y (exp. 3.6%, prev. 3.4%) while the core figure also ticked higher to 2.6% (exp. 2.5%, prev. 2.4%). As a result, markets now price a near 50/50 chance of a hike in October, from a 78% chance of a hold pre-data. 3M LME Copper was rangebound, having rotated in a USD 14.5k-14.7k/t range. Outside of the downside following the US CPI, modest downside was also seen after BHP announced that its Escondida mine reached a preliminary agreement with the Union and a strike has been avoided. Kazakhstan's Energy Ministry said maintenance at the Karachaganak oil and gas field was completed on October 1st and production is currently stable. BHP's (BHP AT) Escondida mine has reportedly reached a preliminary agreement with Supervisor's Union and is to be ratified by members, with a strike being avoided, according to sources. European oil refinery margins have reportedly slumped, which increases the chance of output cuts, the FT reported. The EU Commission proposes a one-year delay to the implementation of specific provisions of the EU Methane Regulation related to importers. IEA OMR (Oct): Sees world oil demand falling by 2.6mln BPD in 2026 on Iran war disruption and rising prices (prev. 2.5mln BPD drop). Oil supply is projected to post an average annual decline of 5.8mln BPD to 100.7mln BPD. Japan's aluminium premium for Oct-Dec delivers set at USD 255/t, -35% Q/Q, according to sources. Italian PM Meloni said they see a deal with the EU being close on measures to cut the impact of gas costs on electricity prices. EUROPEAN DATA Spanish Core CPI Final (Sep YY) 3.1% (Prev. 2.9%). Spanish CPI Final (Sep MM) 0.3% vs. Exp. 0.3% (Prev. 0.7%). Spanish HICP Final (Sep MM) 0.6% vs. Exp. 0.6% (Prev. 0.7%). Spanish CPI Final (Sep YY) 4.9% vs. Exp. 4.9% (Prev. 4.3%). Spanish HICP Final (Sep YY) 5.0% vs. Exp. 5% (Prev. 4.6%). Swedish Household Consumption (Sep MM) 1.1% (Prev. 0.9%). Swedish CPIF Final (Sep MM) 0.9% vs. Exp. 0.9% (Prev. -0.3%). Swedish Household Consumption (Sep YY) 3.50% (Prev. 3.90%). Swedish CPIF Final (Sep YY) 1.5% vs. Exp. 1.5% (Prev. 0.7%). German Wholesale Prices (Sep YY) 8.7% (Prev. 6.8%). German Wholesale Prices (Sep MM) 1.9% vs. Exp. 0.7% (Prev. 0.9%). NOTABLE HEADLINES UK Chancellor Healey is reportedly making plans to cut the cost of hiring under-25-year-olds at the UK Budget, City AM reported citing sources. UK PM Burnham said we will bring down the welfare bill. German Economy Ministry said that the momentum of German economy likely to have temporarily slowed in Q3. Italy's economy expected to grow by 1% in 2026 (prev. 0.5%), but warns of a renewed slowdown in 2027, Confindustria reported. Germany's crypto taxation bill is scheduled for October 14th (today), WiWo reported. The reform would abolish the current one-year holding period exemption and make crypto gains taxable from the first euro and replace income tax with a flat capital gains tax of 26.375%. Spanish PM Sanchez is expected to hold an "intense" debate at the European Council over migration, Politico reported citing sources; Sanchez is expected to be combative with Italian PM Meloni on the issue. An approach that plays well for Sanchez, and potentially Meloni, domestically. French National Rally (RN) leader Le Pen sees the extraordinary political events of late-2026 and 2027 as ushering in significant European change, FT reported. Adds, EU Commission President von der Leyen no longer has the confidence of many EU governments. Describes the EU attempt to agree a 7yr budget before the French Presidential election as "deeply objectionable". Has the "will and conviction" to cut France's contribution to the EU budget. said the heavy European debt burden is more of a concern than any French-EU clash over fiscal contributions. Wants the ECB to be able to finance borrowing for priorities such as defence and the energy transition. TRADE/TARIFFS China's Premier Xi said they are willing to import additional high quality products, Xinhua reported; hope that additional nations lift restrictions. China bought 8-10 cargoes of US soybeans for December shipment, according to traders. Germany is reportedly set to push the EU to impose caps on additional Chinese imports. China's President Xi said they are willing to take action to safeguard global supply chains. UK Business Secretary said the UK will not put tariffs on Chinese vehicles and he will not change trade rules due to EU pressure, according to The Guardian. CENTRAL BANKS Traders now fully price in two Fed rate hikes by end of January, following the US CPI report. Bank of America expects three rate Fed hikes through June 2027. Fed's Bowman (Voter) said not seeing urgency on further action on rates; can wait to assess conditions before more action. ECB's Simkus said don't see a role for ECB intervention on France at present; Don't see evident second-round effects yet; French yields rising due to economic developments. BoE Chief Economist Pill said he is somewhat more sceptical of market pricing for four rate hikes over the next year. PBoC Governor reportedly to be meeting BoJ and BoJ counterparts on the sidelines of IMF annual meeting being held in Bangkok. GEOPOLITICS RUSSIA-UKRAINE A US official said the idea of cutting off intelligence-sharing with Ukraine is being discussed inside the White House, Semafor reported. The operations of SpaceX's (SPCX) Starlink terminals in Ukraine was restricted on 13th October 2026. MIDDLE EAST The spokesman for the IRGC said Iran now possesses more advanced weapons compared to those it used during the 40-day war, emphasizing his country's readiness to respond more forcefully to any new aggression, Saba reported. A Saudi Aramco HQ in Dhahran suffered extensive damage in the Houthi attack, with a fire spreading to several floors, according to sources. Aramco instructed employees to work from home, but operations are continuing normally. Israeli PM Netanyahu said he opposes a preemptive attack on Iran at this time before the elections: "I think it's not convenient for us". IEA OMR (Oct): Sees world oil demand falling by 2.6mln BPD in 2026 on Iran war disruption and rising prices (prev. 2.5mln BPD drop). Oil supply is projected to post an average annual decline of 5.8mln BPD to 100.7mln BPD. Oman Foreign Ministry said that discussions with Iran on Hormuz have concluded, adds that the finalisation depends on US-Iran talks. Israeli PM Netanyahu said Iran will try to resume its nuclear program, it will try to destroy Israel again, and it will rebuild Hezbollah and Hamas; "To eliminate this entire system, we must topple this regime". Container ship sinks near the Strait of Hormuz after being hit by a projectile, according to reported, citing sources. Dry bulk ship reported to be sinking after being hit by a projectile near the Strait of Hormuz in a separate incident. New Yemeni missile attack on Saudi Arabia, Tasnim reported. An officer in the Turkish occupation army was killed in northern Iraq as a result of a shooting incident, Sabreen reported. UKMTO receives a time-late report of an incident within the Strait of Hormuz, in which a container ship was struck by an unknown projectile on October 13th. Unidentified explosions reportedly heard within the Sulaymaniyah province of Iraq. IRGC said it is ready to respond to any aggression, more than ever before, Al Mayadeen reported. A source tells the Tehran Times that the assessment is that the US President Trump, under pressure from Israeli President Netanyahu, is seeking a new confrontation in the region, but does not have the capacity to expand or sustain this. IRGC Navy said that a container ship carrying 2,500 containers sank south of the Strait of Hormuz, Sepah News reported. "A container ship carrying 2,500 containers that was attempting to pass through the unauthorised and dangerous Strait of Hormuz exploded after hitting a naval mine and caught fire". This ship carrying more than 2,500 containers sank this morning in the southern waters of the Strait of Hormuz due to a severe fire. Yemeni Army Spokesperson said operations towards Saudi airports and oil facilities will continue in the coming days. Warns for global shipping Cos, civilians and workers to evacuate such airports/firms, as they are legitimate targets. Forces carried out a military operation targeting the Aramco company in Dhahran in the Eastern Province and King Khaled International Airport and the Aramco refinery in Riyadh with a large number of ballistic missiles. Arab coalition has intercepted a missile which was fired towards Riyadh, Al Arabiya reported. Tasnim reported that the "American enemy attack on Sirik fishermen leaves 3 injured". Danger has reportedly passed in Riyadh, reported suggest. Explosions have been heard in Riyadh, Sabereen reported. Sirens being sounded in Riyadh and Al-Kharj, Sabereen reported. Pakistan's Foreign Minister said they have discussed Bab el-Mandeb with Oman, further efforts need to be made to resolve the current situation. SNN reported that "severe explosions shake Jeddah, Saudi Arabia"; some reported suggest strikes have targeted the Aramco oil refinery in Jeddah. NOTABLE NORTH AMERICAN NEWS US NEC Director Hassett said top line inflation number was disappointing and inside the top line there is a lot of good news. Energy shock is really the headline story today. Strength of the economy is visible. Seeing almost healthy spending. See a very, very good holiday season coming. US PCE/Fed sell-side commentary after CPI: Pantheon now expects the Fed to hike by 25bps in December. Pantheon Macroeconomics. Provisionally implying a 0.30-to-0.35% rise in the core PCE deflator. "...think that core PCE inflation will hover just above 3% over the next six months, but then fall in the spring once pass-through of higher energy prices has been completed.". NORTH AMERICAN DATA US Core CPI (Sep YY) 2.6% vs. Exp. 2.5% (Prev. 2.4%). Core CPI Y/Y: 2.564% (prev. 2.446%). US Core CPI (Sep MM) 0.3% vs. Exp. 0.2% (Prev. 0.3%). Core CPI M/M: 0.335% (prev. 0.290%). US CPI (Sep YY) 3.7% vs. Exp. 3.6% (Prev. 3.4%);. Headline CPI Y/Y: 3.738% (prev. 3.397%). US CPI (Sep MM) 0.6% vs. Exp. 0.6% (Prev. 0.4%). Headline CPI M/M: 0.649% (prev. 0.396%).