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This week, international markets experienced significant turbulence, with tensions in the Middle East remaining elevated and volatility in the AI sector intensifying.

US equities rose across the board, with the Dow Jones Industrial Average gaining 0.93% for the week, the Nasdaq up 0.64%, and the S&P 500 advancing 1.15%. Europe's three major indices were mixed, with the UK's FTSE 100 up 0.86% for the week, Germany's DAX 30 down 0.57%, and France's CAC 40 falling 1.19%.

Looking ahead to next week, there is much to watch, with the biggest focus being US inflation data, as investors widely expect the Federal Reserve may raise rates again before the end of the year. In Europe, final September inflation figures for the eurozone and UK August economic growth data will be released.

Investors will also be watching speeches from Bank of Japan officials and the latest meeting minutes from the Reserve Bank of Australia. Recently, government bond yields in several major developed economies have climbed to multi-year highs, and bond market movements continue to grip investor attention, with France receiving particular scrutiny due to budget concerns. The World Bank and IMF annual meetings will be held in Thailand, with the latest economic forecasts in focus. US earnings season is underway, and whether it can lift US stocks is a key point of interest.

Key Inflation Data on Tap

US September Consumer Price Index (CPI) data will be released next Wednesday (the 14th), giving investors a basis to gauge the timing of the Federal Reserve's next rate hike. According to LSEG data, recent weak US employment data combined with multiple Fed officials stating there is still time to pause and observe before another rate hike have led money markets to currently price in only a 19% probability of a rate increase on October 28, down from a peak pricing of 70%. However, markets have fully priced in a 25 basis point Fed rate hike in December.

ING economist James Knightley said in a research note: "Only a significantly stronger-than-expected CPI report would change market expectations for rates to remain unchanged in October. Gasoline and airfare prices have risen sharply, and this scenario is not entirely impossible. Even so, we still believe the Fed will wait until December to raise rates."

Additionally, the subsequently released September Producer Price Index will reflect the degree to which upstream inflation pressures have intensified amid the recent surge in energy prices. Other notable indicators include September retail sales and September industrial production data.

Third-quarter earnings season officially kicks off next week, with major banks including Wells Fargo, Goldman Sachs, Citigroup, JPMorgan Chase, Bank of America, and Morgan Stanley set to report results in succession. LSEG data shows analysts expect overall earnings for S&P 500 constituents to grow 30.6% year-over-year for the July-September period; the energy sector is expected to post the highest earnings growth at 123% year-over-year, followed by the technology sector at 66.5%.

Crude Oil and Gold

International oil prices edged higher as the market continued to assess the outlook for the Middle East situation. The front-month WTI crude contract rose 0.81% for the week to $91.85 per barrel, while the front-month Brent crude contract gained 2.42% to $104.72 per barrel. Several analysts expect crude supply disruptions to persist into early 2027.

According to Kpler data, recent attacks caused a sharp drop in crude oil shipping flows this week: total confirmed crude flows through the Strait of Hormuz plunged from 12.26 million barrels per day on October 4 to 2.72 million barrels per day on October 7. In the US, a hurricane forced several major oil and gas producers to shut down capacity along the Gulf of Mexico coast, putting core refineries in the region at risk and potentially adding further pressure to an already tight refined products market.

Precious metals markets rebounded, with COMEX gold futures for October delivery rising 1.39% for the week to $4,191.00 per ounce, and COMEX silver futures up 1.16% to $60.67 per ounce. StoneX market analysis head Rhona O'Connell said: "The gold price rise stems from bargain hunting at lower levels, with a support base forming around $4,000. It's fair to say the market has priced in the possibility of one more Fed rate hike, while also factoring in expectations of continued net official sector gold purchases. Absent a black swan event, I think it will be difficult for gold prices to form a convincing breakout rally."

The US 10-year Treasury yield retreated from the more-than-two-decade high reached on Wednesday. In a high interest rate environment, the appeal of non-yielding assets like gold typically diminishes relative to interest-bearing assets. Bybit chief market analyst Han Tan noted: "Next week's upcoming CPI data could serve as the catalyst for gold's next major move... If inflation remains stubborn and forces the Fed to embark on a more aggressive rate hike cycle, spot gold could once again test the $4,000 psychological threshold."

Can the French Bond Market Stabilize?

Eurozone August retail sales grew only 0.1%, a slight improvement but very weak in momentum, with real household consumption squeezed by high energy bills, real household income recovering slowly, domestic demand showing no clear rebound, and the consumer recovery remaining highly sluggish. Next week, final September CPI figures for the eurozone and individual economies will be released in succession, and the data may have a significant impact on the ECB's future policy path.

Meanwhile, French government bonds continue to face market scrutiny. Concerns that France will struggle to pass its latest budget proposal through parliament have pushed the French 10-year sovereign bond yield to its highest level since 2002. Analysts at Landesbank Baden-Wuerttemberg wrote in a report: "Investors will continue to closely monitor news related to France's 2027 budget plan."

UK September manufacturing PMI edged up slightly but remained in contraction territory, while services PMI stayed in expansion but slowed at the margin. Services remain the pillar of economic growth, but corporate costs have once again been hit by higher fuel and energy prices, manufacturing orders remain weak, and overseas demand is lackluster. In corporate surveys, future price expectations moved higher, reflecting that energy costs are beginning to pass through to downstream prices. UK August GDP data will be released next week to assess whether the UK's recent strong economic performance can be sustained, especially as high energy costs may soon deal a blow to the economy.

Investec economist Philip Shaw said: "The UK economy performed reasonably well this summer, and the hot, sunny weather likely provided a boost. Considering the conflict around Iran has now entered its eighth month, the UK economy has shown notable resilience."

What to Watch Next Week

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