British inflation fell drastically in September, dropping to 1.7% from 2.2% in August, the lowest level since April 2021, driven by lower airfares and petrol prices. It was more pronounced than economists had predicted, leading to an eventual decline in sterling against the dollar and euro. This ease has increased the likelihood of interest rate cuts by the Bank of England, with investors now anticipating two quarter-point cuts by year-end. Core inflation and services inflation, key indicators closely monitored by the Bank of England, also fell more than expected, further supporting the case for monetary policy easing. The inflation data provides a favourable backdrop for Finance Minister Rachel Reeves as she prepares to present her first budget on October 30, potentially offering more flexibility in addressing public services and infrastructure investments.

EQUITY
European chip and luxury stocks are in hot water after ASML's weak 2025 sales forecast triggered sell-offs in chip stocks globally, while LVMH reported its first quarterly sales decline since the pandemic. On Wall Street, major indexes closed lower, with the Nasdaq dropping 1% from the sell-offs and growing concerns over AI chip export restrictions. Defensive sectors like real estate, consumer staples, and utilities outperformed, while energy stocks settled lower.

GOLD

Gold prices are creeping towards its previous all-time high after they received a boost on Tuesday following weak US manufacturing data, which caused a slight dip in dollar and Treasury yields. Upcoming economic indicators, including US retail sales data and a speech from Fed Governor Waller, are expected to provide additional insights into potential interest rate adjustments. While gold continues to benefit from its safe-haven status, easing tensions in the Middle East could potentially limit its momentum.

OIL
Oil prices stabilised after around $70 a barrel after a sharp decline on Tuesday. Both OPEC and the International Energy Agency have cut their 2024 global oil demand growth forecasts, primarily due to downgrades in China's outlook, quoting fourth months of decline. Analysts expect U.S. crude stockpiles to have risen by about 1.8 million barrels in the week to October 11, with inventory data reports due later than usual due to a federal holiday.

CURRENCY

The U.S. dollar reached a two-month high, driven by increasing odds of a Donald Trump victory in the upcoming presidential election. Trump's potential trade policies, including tariffs, are seen as potentially inflationary and would influence the Fed's policy decisions. Meanwhile, the euro is edging lower as the European Central Bank is widely expected to cut interest rates, while the yen faces pressure due to cautious comments from a Bank of Japan official. The Australian and New Zealand dollars are also weakening, influenced by scepticism over economic stimulus measures from China, their top trading partner.