Global conviction that US interest rates might rise further pushed the MSCI all-country equity index to a six-month low. European shares also opened 0.5% lower, while US futures followed a downward trend after the S&P 500 index hit a four-month low. Recent selloffs were largely influenced by robust US job data from Tuesday and numerous hawkish remarks from Federal Reserve officials. The market expects a strong likelihood of rate hikes in the coming months, fueled by this data and commentary.

In Europe, investors are on the lookout for services PMI data, especially after the region's weak manufacturing PMI data earlier this week. Germany and the Eurozone saw an increase in services PMI, while France saw a decline. Retail sales in the Eurozone fell well short of expectations, dropping by a dramatic -1.2% month-on-month (-0.3% was expected), reinforcing the picture of a weakening economy.

In the US, all major indexes closed in the red on Tuesday, led by a stronger-than-expected US jobs report that pushed Treasury yields upwards. BlackRock's chief Asia Pacific strategist, Ben Powell, hinted that the Federal Reserve might maintain its current stance. He emphasized that tightening in financial markets will persist, leading to potential negative repercussions. Currently US equity futures are trading lower after a negative and broad selling in the previous session.

The removal of Kevin McCarthy as Speaker of the U.S. House of Representatives plunged Congress into an internal power struggle as it faces key deadlines to avoid a government shutdown and approve aid to Ukraine - all as the country heads toward the presidential election. The Speaker's removal underscores the power of Republican hardliners (the right-wing faction within the Republicans). This adds to the chaos in the House of Representatives and (further) limits their ability to make decisions.

Global bond yields continue their ascent. Japan’s five-year borrowing costs achieved a decade high. German yields rose, reflecting European trends, reaching their highest since 2011.

There is speculation around Japanese intervention to stabilize the JPY emerged as the USD achieved a 10-month high against a basket of major currencies. The USD/JPY was unable to find enough support to move beyond 150.000. As long as the Bank of Japan is not changing it monetary stance, however, the JPY will remain weak.

In Asia, stocks also experienced declines. Japanese stocks were down sharply by 2.07% while showing a decline in September Services PMI (53.8 v.s. 54.3). Concerns about a long-needed change in monetary policy are weighing on Japanese equities. Hong Kong also saw a decline by 1.13%. 

US crude futures dropped below $89/barrel. Traders anticipate the outcomes of an upcoming OPEC+ meeting as it would greatly impact the direction of oil prices. Gold also saw a decline, trading at around $1,822/oz. The strong USD and concerns about more tightening and high rates for longer continue to weigh on risk assets including commodities.  

Key events today:

 JPY Jibun Bank Services & Composite PMI Final - 00:30 UTC+0 (released)

 EUR HCOB Services & Composite PMI - 07:50 UTC+0 (released)

 EUR HCOB Services & Composite PMI - 07:55 UTC+0 (released)

 EUR HCOB Services & Composite PMI - 08:00 UTC+0 (released)

 GBP S&P Global/CIPS Services & Composite PMI - 08:30 UTC+0 (released)

 EUR Retail Sales - 09:00 UTC+0 (released)

 US S&P Global Services and Composite PMI - 13:45 UTC+0

 US ISM Services PMI - 14:00 UTC+0

 US EIA Crude Oil Stock Change - 14:30 UTC+0

Key Earnings Reports:

 Tesco (TSCDY)