DB Early Morning Reid Macro Strategy

Early Morning Reid - Macro Strategy

Key Market Data (Index @ Close // Change) (S&P 500 @ 7812 // +0.59%) (STOXX Europe 600 @ 632 // +0.97%) (iTraxx Crossover @ 309 // -7) (Brent Oil^ @ 103.35 // -0.33%) (10yr Treasury^ @ 5.24 // 1 bp) (10yr Bund @ 3.48 // -1 bp) (Dollar Index^ @ 102.17 // +0.07%) (Further Fed hikes/cuts priced for 2026 @ 25 // 0 bp) (Further ECB hikes/cuts priced for 2026 @ 22 // 1 bp) ^ - Change from previous day's 4:30 GMT to 04:30 GMT

I have a new iPhone to play with today but for once its not my own. For the first time in recorded history my wife will have a superior model to mine as for her birthday today I have upgraded her but have decided for now to hold fire on my upgrade! It will be totally wasted on her as she is to technology what I am to artistic swimming. If it weren't for the camera option she'd be content with an old Nokia 3310, and not even know snake was on there or have any interest in it if she knew!

This week's game of snake will involve navigating the latest complex geopolitical news and the US inflation data, with September CPI on Wednesday and PPI on Thursday, the final readings before the Fed’s October 28 meeting, alongside a broader US activity pulse from retail sales (Thursday) and industrial production (Friday). After Columbus Day today where US bond markets will be closed but equities open, Q3 US earnings season also gets properly under way tomorrow, led by the big US banks, while across the globe ASML (Wednesday) and TSMC (Thursday) should provide another useful read on the AI capex cycle. Elsewhere, China has September inflation and trade data on Wednesday, UK monthly GDP is due Thursday, and the IMF/World Bank meetings run through the week, with the IMF’s latest World Economic Outlook out tomorrow and a long list of central-bank speakers.

The big geopolitical/energy story over the weekend is the continued complexity of the Middle East and Russia/Ukraine conflicts. Trump announced yesterday that Russia and Ukraine had agreed to an immediate “energy ceasefire”, but overnight developments underline how fragile that claim is. Zelenskyy said Ukraine supports a ceasefire if Russia does too and is awaiting details from Washington, while Moscow had still not publicly confirmed it. Zelenskyy also said Russia subsequently struck a thermal power plant in Kharkiv and other Ukrainian energy infrastructure. So for now this looks more like an untested US proposal than a functioning ceasefire, particularly after a similar arrangement last month failed to endure.

The proposed ceasefire is closely linked to the extraordinary US pivot on Russian diesel. Ukrainian refinery strikes had forced Moscow to restrict fuel exports, tightening an already constrained products market.

Trump’s deal with Putin would allow around 13.5 million barrels of Russian diesel back into global markets this month via a temporary US sanctions waiver, potentially including the first US imports since March 2022. Zelenskyy has criticised the move, while Reuters reported that Washington threatened to cut intelligence sharing and weapons procurement support unless Kyiv halted refinery strikes. Russian barrels returning would be bearish for diesel cracks, but the overnight strikes make the ceasefire increasingly uncertain and highlight strains between Washington and Kyiv.

Meanwhile, Middle East energy risk has moved sharply in the other direction. Riyadh’s King Khalid International Airport was hit again on Sunday after repeated attacks over the past week. Saudi Arabia said the latest strike killed one person and injured 11, after Saturday’s attack killed 12 and wounded more than 300. The escalation comes as Saudi-backed Yemeni government forces counter recent Houthi gains near Bab el-Mandeb, the crucial Red Sea shipping chokepoint. Repeated strikes disrupting flights in Riyadh also underline how difficult the Houthi threat may be for Saudi Arabia to suppress.

That leaves a meaningful risk of wider regional escalation. Saudi Arabia has intensified air strikes in Yemen, while Trump said the US “may” join strikes against the Houthis after an American was among those killed on Saturday. Overnight, Iran denied directing the Houthis and…