Oil price correction eased stagflationary pressure on Equity Indices

By JustMarkets 

On Monday, the U. stock indices closed higher. By the end of the day, the Dow Jones Index (US30) fell by 1.23%. The S&P 500 Index (US500) declined by 0.52%. The NASDAQ Technology Index (US100) rose by 0.82% yesterday. Markets advanced thanks to a rebound in artificial intelligence-related stocks after Anthropic filed for an IPO. The filing brings Anthropic (+%) closer to becoming the first company primarily focused on advanced artificial intelligence models to go public, providing a test of investor appetite for AI-related equities. Shares of semiconductor manufacturers rose, with Nvidia up 2.4%, Micron gaining 3%, and AMD advancing 2.8%. Tesla shares jumped 5.2% after Barclays upgraded its rating from “Equal Weight” to “Overweight.” Nevertheless, the market remains highly sensitive ahead of the Fed’s October meeting and the release of core PCE data.

The performance of the Mexican peso (MXN) in October vividly illustrates the paradox facing emerging-market currencies during the Fed’s restrictive monetary cycle. On the one hand, the peso’s short-term strengthening to 18.6 per US dollar is supported by the maintenance of a wide interest-rate differential (a spread of 250 basis points, with Banxico’s rate at 6.50% versus the Fed’s 3.75%-4.00% range) and hawkish expectations for the Mexican regulator’s November meeting. On the other hand, the fundamental trend of recent months reflects a large-scale unwinding of carry trades: the narrowing of the spread to historical lows, the global flight to safety, and the strengthening of the US dollar have left the peso near its weakest levels since mid-2025, having lost more than 9% since the beginning of September.

In Europe, by the close of trading on Friday, Germany’s DAX (DE40) gained 0.91%, France’s CAC 40 (FR40) rose 0.83%, Spain’s IBEX 35 (ES35) advanced 0.23%, and the UK’s FTSE 100 (UK100) finished the session 0.72% higher. The correction in oil prices toward $101.5 per barrel eased stagflationary pressure ahead of the ECB’s rate decision and the release of Eurozone GDP data. Stronger performance in industrial and transportation sectors supported the indices of Italy, Germany, and France, giving regional monetary authorities additional room for maneuver. However, the overall positive trend remains constrained by internal corporate divergence, leaving Spain’s IBEX 35 among the laggards.

The decline in platinum prices (XPT) below $1,530 per ounce to 11-month lows naturally completes the picture of deflationary pressure across illiquid and industrial precious metals. On the one hand, platinum became another victim of cross-asset sell-offs: with the Fed maintaining its key rate and the risk of another increase in December, the opportunity cost of holding non-yielding metals continues to rise. On the other hand, the market is facing increasingly bearish fundamental factors. The World Platinum Investment Council’s (WPIC) prediction of a transition to a surplus of 265 thousand ounces in 2026 after three years of deficits, a projected 18% decline in overall demand, and a 4% drop in automotive consumption are undermining the metal’s investment appeal.

Monday’s pullback in oil prices toward $101.5 per barrel reflects a rapid unwinding of the most acute geopolitical risk premium. The visit of Saudi Arabia’s defense minister to Tehran and his direct talks with Iran’s president, with mediation from Pakistan and Turkey, raised hopes of a de-escalation in attacks on Saudi infrastructure. Another factor contributing to the temporary cooling of the market was the US decision to release 400 thousand barrels from the Strategic Petroleum Reserve (SPR) to support refineries in Louisiana. Nevertheless, the fundamental supply squeeze remains intact: US shale producers are in no rush to increase capital expenditures, while markets remain highly sensitive ahead of upcoming Fed decisions.

In Asia, Japan’s Nikkei 225 (JP225) fell by 0.80%, China’s FTSE China 50 edged up 0.02%, Hong Kong’s Hang Seng (HK50) gained 0.51%, and Australia’s ASX 200 (AU200) closed 0.17% higher on Monday.

The Australian dollar’s (AUD) ability to hold above the $0.70 mark near four-week highs clearly highlights its divergence from other G10 currencies: while the Fed, ECB, and Bank of England are preparing to pause, the Reserve Bank of Australia remains compelled to maintain an exclusively hawkish trajectory. The key driver for AUD/USD is the upcoming Q3 CPI report, with trimmed mean inflation expected to rise by 1.0% q/q, exceeding the RBA’s own July-August projections of 0.8%. With annual inflation running at 3.6%, comfortably above the central bank’s 2-3% target range, and with the CPI release closely linked to Michele Bullock’s testimony before the Senate committee on Wednesday, the potential for market volatility remains elevated.

S&P 500 (US500) 7,676.77 +53.09 (+0.70%)

Dow Jones (US30) 52,361.58 +146.42 (+0.28%)

DAX (DE40) 25,410.84 +229.19 (+0.91%)

FTSE 100 (UK100) 10,767.33 +76.97 (+0.72%)

USD Index 102.01 +0.20 (+0.19%)

News feed for: 2026.10.27

• US Durable Goods Orders (m/m) at 14:30 (GMT+2) – USD (MED)
• US CB Consumer Confidence (m/m) at 16:00 (GMT+2) – USD (MED)

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.