VOLATILITY IS BACK!

Macroeconomic environment US : CPI surprised on the downside in September, headline inflation slowing by 0.4pp to 2.3% (consensus: 2.4%), while core inflation was unchanged at 2.2% (consensus: 2.3%). As a result, real weekly earnings recorded a stronger than expected increase, up 0.2% mom. France : inflation as measured by the HICP confirmed at 2.5% for September (final estimate). The national index, on the other hand, slowed to 2.2% (final estimate) from 2.3% in the two previous months. This is the last publi cation of the “Strategic Daily” From Monday, all our daily analyses will appear in the “Natixis Morning Line” Equities European equities underperformed (Stoxx 600 lost 1.95%), dragged lower by energy stocks (-2. 9 3%) and financials (-2.57%). In the US, the S&P 500 lost 2% . Even so the index stayed in the red for the 6 th consecutive sessions, down 2%; the VIX touched 28% intraday but closed at 25%. MSCI EM was down 3.1% yesterday. Market relief this morning with most Asian indices up and US et European futures back into the black. Bond markets / Derivatives Bull market configuration for core and soft core in the wake of US Treasuries yesterday . The yield for 10-year Bund eased by 3.5bp to 0.52%, the 2Y-10Y segment of the German curve flattening by 2bp. Sovereign spreads widened, by 1.5bp to 35bp in the case of the 10-year OAT-Bund, more significantly by 10.5bp, back above 300bp, in the case of the 10-year BTP-Bund spread. Italian yields rose by 7bp at 10 years against 10bp at 2 years, with the 2-year now at 1.50%. In the US , the 10-year T Note eased by just 1bp, with signs it wants to stabilise around 3.15%. Money markets / Central banks Money markets : unsurprisingly, Eurodollar contract s rose on Thursday, with an outperformance by blues and greens. Short £ and Euribor contracts followed suit. All benefited from the selloff in the equity markets, with Donald Trump blaming the Federal Reserve for this situation. The US 3-month Libor-OIS spread was stable around 17bp. The SOFR fixed at 2.15%. The EFFR remained 2bp below the IOER. FX The US dollar extended its slide, notably against the Swedish krona, which was bolstered by stronger-than-expected inflation data. The Norwegian krone and Canadian dollar, two oil currencies, weakened against the greenback in the wake of crude oil prices. The EUR/USD tested 1.16, but failed to break out above. Finally, most emerging currencies were on the rise, taking advantage of a weak US dollar and of the downturn of US long interest rates. JPY and CHF are down this morning with the market relief. Commodities Despite the US dollar being relatively stable, prices for precious metals increased sharply, whereas crude oil prices slumped. The bear run on the equity markets and increasing uncertainties over the global economy triggered a flight to safety , to the benefit of precious metals. Brent is up 1.1% this morning.