Early Morning Reid Macro Strategy

Early Morning Reid - Macro Strategy

Key Market Data (Index @ Close // Change) (S&P 500 @ 7674 // -0.58%) (STOXX Europe 600 @ 650 // -0.05%) (iTraxx Crossover @ 251 // +1) (Brent Oil^ @ 99.09 // +2.25%) (10yr Treasury^ @ 4.79 // 1 bp) (10yr Bund @ 3.37 // -2 bp) (Dollar Index^ @ 98.74 // -0.08%) (Further Fed hikes/cuts priced for 2026 @ 36 // 2 bp) (Further ECB hikes/cuts priced for 2026 @ 47 // 0 bp) ^ - Change from previous day's 4:30 GMT to 04:30 GMT

*** I published my new Chartbook yesterday on the Deutsche Bank Research Institute site here, where it is open to all. Titled " The Home Straight ", it examines the key market themes as we enter the final stretch of the year.***

Today is the day when I work out whether the thing that's truly been missing from my life over the last few years, or even decades, is a foldable phone. I usually go into an Apple launch event day saying that this time my vast collection of Apple products is finally now stable and mature. That said, I usually come out the other side with 10 timers set so as not to miss the eventual first order point for the new products.

As we await "iFold”, markets seem to be treading water this week as increases in energy prices dampen risk appetite, as Brent crude is nearing the $100 level last seen six weeks ago. While Brent did give some of its initial gains yesterday to settle +0.95% at $97.92/bbl, news late in the US session of new strikes in the Gulf have left it another +1.45% higher at $99.34/bbl this morning after touching $99.67/bbl earlier in the session. And with inflationary pressures still mounting, that kept the pressure on other asset classes too. Indeed, the S&P 500 (-0.58%) posted a fresh decline as US markets returned after Labor Day, whilst the 5yr Treasury yield (+1.8bps) closed at a 19-month high of 4.56%.

The initial catalyst for the fresh increase in oil came just as we were going to press yesterday, as Saudi Arabia halted operations at multiple energy sites after they were attacked. The Houthis claimed responsibility shortly after. And while oil prices fell back late in the European session, they then spiked again amid news of explosions near Kharg Island, which houses Iran’s main oil export facilities. US Central Command announced later that US forces destroyed five Iranian tankers in response to attempts to hit a US Navy warship with ballistic missiles. In response to the strikes, Iranian state TV cited an IRGC warning to tankers in the vicinity of Bahraini and Kuwaiti piers to evacuate their vessels “as they will be targeted”. Iran also launched missiles towards an air base in Jordan overnight.

So all that has left investors growing more concerned about further disruption and pricing a longer period of high energy prices. In fact, the 6-month Brent future (+1.52%) closed at its highest level since mid-June, at $84.78/bbl. It is another +1.45% higher this morning. So there is growing scepticism that oil prices will meaningfully revert over the coming months.

In the meantime, the relentless rise in European natural gas prices also continued yesterday. For instance, the front-end future rose +3.46% to €75.80/MWh, its highest since January 2023, so the inflationary pressures were clear in multiple directions. The latest move comes as Europe is seeking to fill up its storage, but it’s still only 67% full, which is lower than it’s normally been at this time of year. Indeed, storage was 79% full in 2025, and was 93% full in 2024, so that’s added to concerns ahead of the winter heating season. The refilling shortfall has been concentrated in some of the northern continental countries, including Germany (55% full) and Netherlands (50% full). Given all that, investors were pricing in higher inflation too, with the 1yr Euro inflation swap (+2.9bps) moving back up to 3.40%, its highest since May. The ECB's comments on the latest developments at their policy meeting tomorrow will be fascinating.

That backdrop meant it was a more challenging day for equities, with fresh losses on both sides of the Atlantic. In the US, the S&P 500 (-0.58%) fell back as part of a broad-based decline, with more than 70% of the index lower on the day. The Nasdaq (-0.32%) and the…