Written by: Senior Analyst at Jashin Group, Jerry Chen

On September CPI in the United States, U.S. corporate earnings reports, and geopolitical situations became the three main themes of this week's market.

As the selling pressure in the U.S. debt market temporarily eased, major global stock markets saw gains last week, with the Nasdaq and the S&P 500 both setting new record highs. While the dollar continued to remain strong, spot gold first declined and then rose over the week, closing near the $4,200 mark. The euro fell for five consecutive weeks, hitting a new low in 17 months.

This Week's Focus

• US September CPI data and Fed interest rate prospects
• The Impact of Geopolitical Situations and Oil Prices on the Market

This week's important economic data includes the U.S. CPI, PPI, and retail sales, among others. The market's speculation regarding the Federal Reserve's policy path for the year has entered a critical phase. China's CPI and Australia's employment data are also worth paying attention to. Meanwhile, bank stocks will kick off the third-quarter earnings season. In addition, the situation in the Middle East and oil prices remain important factors driving the market.

Focus 1: United States, September CPI – Wednesday 20:30

The market generally expects that the U.S. CPI annual rate will accelerate from 3.4% to 3.7% in September, and the core CPI is expected to rise from 2.4% to 2.5%. Inflation is currently the economic data that Fed members are most concerned about, and these figures may set the tone for the interest rate policy at the end of the month.

Before the release of key inflation data, the probability of the Federal Reserve raising interest rates in October, as bet by the interest rate market, had dropped below 20%. Recent speeches by several heavyweight voting members also revealed a stance of "cautious wait-and-see" in the short term.

If inflation data exceeds expectations, it may reinforce market pricing for interest rate hikes; if it falls short of expectations, it may weaken such expectations. The actual performance of various assets will depend on the discrepancy between the data and market expectations, which carries a significant degree of uncertainty.

In addition to CPI, other U.S. economic data this week include PPI on Thursday and retail sales data. Furthermore, China's CPI and Australia's employment data are also worth paying attention to.

Focus Two: Geopolitical Situation and Turmoil in the Bond Market

Trump stated last week that he would not launch attacks on Iran before the U.S. midterms. However, after Houthi militants attacked a Saudi airport and caused significant casualties, he said, "The United States will consider whether to join Saudi attacks against the Houthi militants."

The instability in the Middle East and persistently high oil prices have exacerbated inflation risks, which is one of the reasons why global bond yields have been rising steadily over the past few weeks. Other contributing factors include central banks' interest rate hike cycles and poor fiscal conditions in various countries, with France's situation being particularly severe (leading to the euro falling to a 17-month low).

However, there are also some positives in the energy market. As diesel prices in the United States reached record highs ahead of the elections, the U.S. announced on Friday last week a suspension of sanctions on Russian diesel exports. Following this, Trump declared on Sunday that "a ceasefire on energy issues between Russia and Ukraine" had been reached (warning Ukraine not to attack Russian refineries).

WTI Crude oil futures prices fell to around $90 after the opening of this week, while Brent crude oil saw a slight increase and continued to remain above $103.

As shown in the figure below, the correlation between oil prices and the yield of 10-year U.S. Treasury bonds is 0.31, but it is as high as -0.65 with the NASDAQ index. This indicates that the rise in oil prices still exerts a significant pressure on the bond market (where price and yield are inversely proportional) and the stock market.

Focus Three: U.S. Stock Earnings Season

Starting this week, the third-quarter financial reports of U.S. stocks will be released one after another.

Leading the way once again were bank stocks, including JPMorgan Chase, Goldman Sachs, Citibank, and Wells Fargo on Tuesday, as well as Bank of America and Morgan Stanley on Wednesday. Investors will be closely watching the impact of rising U.S. Treasury yields on banks' trading and lending activities. Bank stock prices tumbled significantly after the Federal Reserve raised interest rates in September, while during the same period, the S&P 500 set new record highs.

For the broader U.S. stock market, LSEG's latest forecast shows that the S&P 500 index's earnings for the third quarter are expected to grow by 31% year-on-year. However, it is worth noting that most of this year's earnings growth in the U.S. stock market has been contributed by technology stocks. Clearly, the technology theme and AI narrative still hold true, and high earnings growth rates can to some extent offset the negative impact of high interest rates (financing costs). This also explains why the S&P and the Nasdaq have repeatedly set new highs recently. Therefore, the performance of technology stocks in the coming weeks will become an important window to assess the rationality of current U.S. stock market valuations and the AI investment logic.

XAUUSD Gold 4-Hour Technical Pattern Record

After two consecutive weeks of decline, gold has broken through the downward channel since August. On the 1H chart, EMA20 and EMA50 form a golden cross; on the 4H chart, 4175 is a technical level of interest to the market, while 4238 and 4100-4110 correspond to the upper and lower reference areas, respectively. The above is merely an objective record of technical patterns and does not represent future performance, nor does it constitute any trading advice; the subsequent trend will depend on changes in the US dollar, yield rates, and policy expectations, with significant uncertainties involved.

If it falls under pressure and breaks below 4,175, gold prices may once again test the 4,100-4,110 range for support.

Responsible Editor: Zhu Henan