Global equities ended higher, with the S&P approaching record highs ahead of Q3 earnings season. The US dollar extended its advance to a fourth consecutive week, although most G10 moves were modest

Global equities ended last week on a constructive note, while moves across other markets were modest. The S&P 500 gained 0.6% in a broad-based rally, with nine of eleven sectors higher, led by consumer discretionary and financials. Major European indices also posted solid gains. Sentiment remains buoyant despite elevated yields and ongoing geopolitical risks, leaving the S&P 500 close to record highs ahead of Q3 earnings, with several major US banks reporting this week. Sovereign bond markets were relatively subdued, while Brent crude rebounded above US$104 per barrel.

President Trump said he is working with President Putin to release Russian diesel supplies into global markets, aiming to curb soaring fuel prices ahead of the US midterm elections. Planned cargoes total around 13.5 million barrels from this month, with Russia indicating it is prepared to supply the volumes. However, doubts remain over whether the barrels will be released and materially ease market tightness. US November diesel futures fell on the news, although most of the near-4% decline occurred earlier in the session.

University of Michigan consumer sentiment fell to 46.3 in October from 48.1 in September, with higher fuel prices adding to concerns about persistent inflation and the cost of living. Price growth has recently outpaced wage gains, placing further pressure on household budgets. However, spending has remained resilient despite historically weak sentiment, and the expectations index, which is more closely associated with spending, rose to 47.3 from 46.3, its first increase since July. Year-ahead inflation expectations increased to 4.7%, while the five-year measure rose to 3.5%, its highest since May.

Market pricing for the October FOMC was little changed and continues to imply around a 20% chance of a rate hike, while a full 25bp increase is priced by December. Treasury yields edged higher, with front-end price action largely tracking the move in oil. The 10-year Treasury yield reached an intraday high of 5.28% before retracing to 5.24% by the close, broadly in line with levels prevailing during Asian trading. European sovereign bond yields declined modestly. The France-Germany 10-year spread narrowed to 137bp but remains close to its recent peak of 141bp.

The US dollar index rose modestly, extending its advance to a fourth consecutive week, the longest winning streak since early 2025. Moves across most G10 currencies were modest, with the NZD and AUD little changed from the NZ close. The Canadian dollar underperformed after a weaker-than-expected labour market report reduced Bank of Canada tightening expectations. September employment fell by 68,300, the largest monthly decline since February, driving Canadian two-year yields to a one-month low and pushing the CAD to the lowest level in close to a year.

The CFTC futures positioning report revealed the aggregate speculative USD long increased by around US$10bn as of last Tuesday. The most notable development was further selling of the euro, pushing speculative positioning to its largest net short since 2020 amid increasing sovereign risk highlighted by French fiscal concerns. Commodity-linked currencies also remained under pressure, with investors adding to bearish AUD and NZD positions, consistent with the broader preference for USD exposure.

NZ fixed income closed lower in yield and flatter in the local session on Friday. With few domestic catalysts, the decline in yields reflected moves in offshore markets. 2-year swap rates closed 2bp lower at 4.01%, having traded in a narrow range through last week. The longer end of the curve outperformed – 10-year rates fell 5bp to 4.76%. The government curve matched the move in swaps with the May 2036 maturity closing at 5.05%.

There are no domestic or international releases in the day ahead and US cash Treasury markets are closed for Columbus Day. It is a quiet week for NZ data, with September inflation partials and the manufacturing PMI not due until Friday. Globally, the key releases are September US CPI and Australian labour market data. IMF/World Bank Annual Meetings run throughout the week in Bangkok, with G20 finance ministers and central bank governors meeting Thursday.

Stuart Ritson is a senior Strategist at BNZ Markets.