This year’s final quarter began on a pessimistic note, with the US stock market losing more than 1.5 percent on Friday, cementing short-term risk aversion and bearish sentiment. Risk assets picked up the baton on Monday and extended the bearish trend. European markets sank by more than half a percent, the S&P 500 futures struggle to defend the foothold at 3600 points. The dollar, after pulling back from multi-year highs, moved into consolidation (111.70-112.50 on DXY), the key factor of the USD parabolic rally – Treasury market sell-off, somewhat weakened its influence, as bond yields after rebounding from key levels (4% on a 10-year bond) remain range-bound:

Oil prices climbed 4% after rumors emerged that oil exporter group OPEC+ could announce a 1 million bpd output cut on Wednesday. On the one hand, the balance of supply and demand should move into equilibrium with higher prices, which, in fact, the market is now pricing in, on the other hand, there is a more subtle consequence of such a statement – a signal that the alliance may be worried about a slowdown, and perhaps even a decrease in global demand for oil, and therefore forced to announce output tweaks. Undoubtedly, in terms of medium-term expectations, this statement will likely have negative rather than positive implications for the demand for risk as commodity market trends are tied to business cycle swings.

In the short term, the OPEC+ decision may lend a bullish impetus for CAD and NOK, which have fallen 5% and 8% against the dollar since the beginning of September, but whether these currencies will be able to hold gains remains in question, since they usually rise along with demand for risk assets in general:

Investor confidence in the Pound, and more specifically in Britain’s sovereign debt, continues to recover gradually after the UK government was forced to make a U-turn on the most controversial measure in the new fiscal stimulus package – tax cut for UK’s top-earners. Nevertheless, it is not clear whether it was enough to address investors’ concerns, because, firstly, the Bank of England is trying to restore confidence in Gilts market, conducting bond purchases, which distorts pricing and deters sales, and secondly, the U-turn reduces the cost of the fiscal package by only 2 billion pounds. The final reaction will be clear after the CB’s interventions are over, the announced deadline is October 20. In the short term, the risks for the pound sterling are likely to be skewed to the upside, given that since the beginning of September, sterling has fallen by 11% and then recovered just 6.5%, the BoE continues to support the bond market, and the government is willing to compromise and may be expected to deliver more to soothe market concerns.