The data cliff fear - Our Weekly Cross-Asset Views

After celebrating the end of the longest US shutdown of history early this week, markets have turned risk off the end of the week with US leading the reversal move. WTD, US equity indices consolidate, with techs and small caps down, European  equities outperform (SX5E reached a new all-time highs after 3 daily gains of 1%+), credit spreads are stable, gold surges again and US dollar is down 0.5% across the board.   No specific trigger to this risk-off move, but the view that we are now in a truly confusing spot: US data should start to flow in as both the Fed dilemma (weaker job market vs high inflation) and as tech valuation fears remain strong.  With Fed hawks more vocal this week, the equity/bond correlation stays in the black: yesterday, both US bond and equity markets sold off (NDX -2%, SPX -1,7%, +5bps for the 10y UST), and rate-sensitive small caps took a hit (RTY: -2.8%). The market implied probability for a Fed December rate cut has consolidated to ~50%. The reversal in cross-asset volatilities is another clear sign of the confusing spot, with the MOVE up 5pts this week, and the VIX spiking this morning to almost 22%. The key focus will be US data of course: the re-opening of the US government could bring the release of some delayed economic data next week, including the September jobs report. Nvidia report, next Wednesday will be another key event next week.