Daily Market Outlook, September 28, 2026

Daily Market Outlook, September 28, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Crude & Curves Clip Confidence

Bonds and equities started the week on the defensive as renewed US-Iran tensions pushed oil higher and forced markets to reassess the rates outlook. Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz, while Tehran maintained its conditions, although both sides remained open to further talks. The result is a familiar but uncomfortable macro mix: higher energy prices, higher yields, a firmer Dollar and weaker risk appetite.

Shorter-dated Treasuries led the latest losses, with the US two-year yield rising around 5 bps to 4.90%, while the 10-year yield advanced roughly 4 bps. The front-end move is important because it shows markets are not merely pricing a term-premium shock. They are increasingly treating the oil spike as a policy-rate problem. If energy prices remain elevated, central banks have less room to ease and more reason to keep inflation risks at the forefront. The average yield on a global bond gauge has now climbed above 4% for the first time since 2007, underlining the scale of the global rates reset. This is no longer just a US story. Higher oil, sticky inflation expectations, resilient activity and heavy sovereign financing needs are combining to push global discount rates higher. That is a difficult backdrop for duration, credit and equity valuations.

Brent crude rose more than 2% toward $107/bbl after Iran said it would not soften its conditions for reopening the Strait of Hormuz. The move followed Trump’s rejection of Tehran’s seven-day proposal, which would have included easing restrictions on Iranian oil in exchange for reopening the waterway and restarting nuclear talks. The failure to secure a quick diplomatic off-ramp has put the geopolitical risk premium back into the front of the crude curve.Brent’s prompt spread widened sharply, signalling concern over near-term supply tightness. That is the key detail for central banks and inflation markets. A higher outright oil price is problematic, but a tightening prompt spread suggests physical market stress rather than purely speculative demand. If supply disruption fears persist, the inflation impulse could broaden through transport, logistics, industrial inputs and consumer energy bills.

The Dollar strengthened against most major currencies as higher US yields and safe-haven demand supported the greenback. In the current environment, the Dollar benefits from both sides of the macro story: if oil keeps inflation sticky, the Fed remains hawkish; if geopolitical risk intensifies, investors still seek liquidity and safety. That leaves most other currencies vulnerable unless domestic central banks respond with equally hawkish signals.Gold and silver declined as rising yields weighed on non-yielding assets. The move may look counterintuitive given the geopolitical backdrop, but it reflects the dominance of real-rate pressure. Precious metals continue to carry support from fiscal concerns and geopolitical uncertainty, but when front-end yields rise and the Dollar firms, the opportunity cost of holding bullion becomes harder to ignore.

Asian equities weakened, with MSCI’s Asia-Pacific index falling around 0.6%, while Nasdaq 100 futures also retreated. The equity market is again being forced to weigh solid structural themes, especially AI and semiconductors, against the immediate pressure from higher yields and energy costs. Growth stocks are particularly exposed when the rates market shifts toward higher-for-longer, while cyclical sectors face the risk that higher oil acts like a tax on demand. There was some offset from US-China trade news, with Washington outlining plans to reduce tariffs on roughly $30bn of imports on each side following talks between Trump and Xi. That is constructive at the margin and should help sentiment in export-sensitive sectors. But tariff relief is being overshadowed by the renewed Middle East escalation. In market terms, a partial trade détente helps reduce one supply-side friction, while an oil shock raises a much larger and more immediate inflation risk.

The Pound steadied, but UK markets now face an increasingly complex mix of global energy pressure, Bank of England tightening risk and domestic fiscal uncertainty. It is exactly one month until the UK Budget, and the starting point is uncomfortable. The net effect of revisions to the economic and financial-market inputs used by the OBR is likely to be adverse for the fiscal forecast, putting upward pressure on the government’s financing requirement across the forecast horizon. A resilient economic performance should limit some of the deterioration, but higher debt-servicing costs from elevated inflation and gilt yields are likely to dominate. That matters because fiscal arithmetic has become increasingly sensitive to the long end of the gilt curve. Even after the BoE’s QT overhaul reduced some pressure on long-dated supply, the broader issue remains: higher nominal yields raise the cost of carrying debt and reduce fiscal room for manoeuvre.

The government is unlikely to fully offset the near-term upward pressure on borrowing projections. However, to rebuild headroom at the 2029-30 fiscal-rule horizon, some tightening in policy looks likely. Tax increases appear more probable than spending cuts, given the political and delivery constraints around departmental budgets. Depending on where the OBR forecast lands, the Budget may combine some tax rises with a lower headroom target than the £23.6bn pencilled in at the Spring Forecast. The important point for gilt investors is that the Budget may not be the only, or even the main, fiscal event before year-end. The Prime Minister’s ten-year plan, defence spending announcements, welfare decisions and social-care reform could all carry more significant medium-term implications. That means markets may treat the 28 October Budget as one step in a broader fiscal repricing rather than a definitive clearing event.

This week’s data calendar is heavy and will determine whether the latest rates selloff extends. In the UK, money and credit data arrive Tuesday, followed by the Lloyds Business Barometer, final Q2 GDP and Q2 current account on Wednesday. The week concludes with the Decision Maker Panel on Friday, which is crucial for the Bank of England because it provides direct evidence on firms’ wage and price expectations. The DMP matters more than usual because the MPC is already leaning more hawkishly. Recent comments from Breeden and Lombardelli emphasised upside inflation risks, while the rebound in consumer confidence and resilient activity data reduce the perceived cost of another hike. If the DMP shows sticky wage intentions or stronger expected price growth, November hike pricing should build further.

In Europe, preliminary September CPI releases begin with Spain on Tuesday, followed by France, Italy and German state and national readings on Wednesday, before the Eurozone aggregate on Friday. Headline HICP should rise because of energy. The key question for the ECB is whether the shock is bleeding into core and services inflation. If core and services remain contained, the Governing Council can frame the move as an energy-driven relative-price shock. If they firm, the case for another hike before year-end strengthens materially. The euro area also receives final manufacturing PMIs and unemployment data on Thursday. With recent ECB survey evidence pointing to upward wage pressure linked to the Middle East conflict, labour-market data remain central. A still-tight labour market would reinforce concerns that energy shocks could feed into wage-setting behaviour.

The US calendar carries the greatest market risk. It begins with Dallas Fed manufacturing on Monday, followed by JOLTS and Conference Board confidence on Tuesday. Wednesday brings August PCE, the third reading of Q2 GDP and advance trade data. Thursday includes Challenger job cuts, jobless claims and ISM manufacturing, before Friday’s September non-farm payrolls report. Payrolls are the main event. Consensus looks for a gain of around 90k, with unemployment expected to tick up to 4.2%. That would be a modest move from 4.14%, especially if participation improves. The critical question is breadth. If job creation remains broad, wage growth stays firm and unemployment only edges higher for benign reasons, the Fed will have little incentive to push back against tighter market pricing. PCE is equally important for the near-term rate debate. After the recent jump in oil and strong PMI data, markets need to see whether underlying inflation is still cooling or beginning to reaccelerate. A firm PCE print alongside resilient labour data would validate expectations for further Fed tightening and keep pressure on both equities and bonds.

Elsewhere, the RBA is expected to hike again on Tuesday. The decision itself is largely expected, so the guidance will matter more. Markets have only one additional quarter-point increase fully priced beyond this week, leaving scope for the curve to move if the Board sounds more concerned about inflation persistence. Australian CPI on Wednesday will provide a fresh check on whether that concern is justified. China’s RatingDog and NBS PMIs are both scheduled for Wednesday. These will be watched for signs that domestic activity is stabilising, especially after tariff-related news improved at the margin but Chinese equities remained sensitive to global risk-off pressure. Japan’s Q3 Tankan survey on Thursday is also important for the BoJ after its recent hike, while Tokyo CPI on Friday will help shape expectations for the next stage of policy normalisation.

Central-bank communication will be active. In the UK, Ramsden speaks on QT on Monday, Taylor addresses NIESR on Tuesday, Bailey opens the LSE/Bank Future of Money conference on Thursday and Mann also speaks Thursday. In Europe, Lagarde speaks Monday and Thursday, making her the key voice for ECB guidance. From the Fed, Williams speaks Tuesday, Cook appears Wednesday and Thursday, and Logan speaks Thursday.

Macro to Micro, markets are back to trading the inflation shock rather than the growth story. US-China tariff relief is helpful, but it is not enough to offset a renewed oil surge and a global bond-yield gauge above 4%. The key issue is whether Brent near $107/bbl forces central banks to lean harder against inflation just as bond markets are already under pressure from supply and term premia. For traders, watch Brent, the US two-year yield, the US 10-year near 5.20%, the Dollar and Friday’s payrolls. If oil keeps rising and the data stay resilient, higher-for-longer will become higher-again. If diplomacy resumes and crude retreats, risk assets may get another chance to stabilise.

Overnight Headlines

• Trump Expects Iran Talks This Week After Rejecting Tehran’s Hormuz Proposal

• Iran Says It Won’t Soften Demands After Trump Rejects Hormuz Offer

• Oil Rises As Iran Says It Won’t Soften Strait Of Hormuz Demands

• Bond Sell-Off Resumes As Oil Rises After Trump Spurns Iran Offer

• Dollar Firms As US-Iran Tensions Lift Oil And Hawkish Fed Bets

• US And China Agree To Trim Tariffs And Start AI Dialogue

• US Releases Details On $30B Of Goods With Tariff Cuts

• BoJ Debated Need For Faster Rate Hikes, July Minutes Show

• Japan’s Corporate Services Inflation Hits Two-Year High

• RBA Set To Resume Raising Key Rate As Patience On Prices Erodes

• China’s Industrial Profit Growth Slows For Fourth Straight Month

• EU Countries Consider NATO-Style Joint Responses To Russian Hybrid Attacks

• North Korea Tests Swarm Attacks Mixing Drones And Missiles

• China May Allow ByteDance And Alibaba To Buy New Nvidia Chips

• Traders Make Biggest Bets Against Sterling Since Brexit Vote

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

• EUR/USD: 1.1400 (EU4.04b), 1.1500 (EU2.8b), 1.1350 (EU1.73b) 

• USD/JPY: 160.50 ($1.23b), 156.75 ($1.2b), 158.25 ($824.6m) 

• USD/BRL: 5.2200 ($503.3m), 5.2000 ($363.7m) 

• AUD/USD: 0.7100 (AUD1.08b), 0.7300 (AUD564.5m), 0.6700 (AUD396m) 

• GBP/USD: 1.3300 (GBP840m) 

• USD/CAD: 1.4180 ($528.2m), 1.4140 ($372.5m), 1.3865 ($370m) 

• USD/CNY: 6.8320 ($599.6m), 6.7000 ($347m), 6.6850 ($300m) 

• USD/MXN: 17.50 ($325m)

CFTC Positions as of 25/9/26

• In a recent market update, equity fund speculators have ramped up their S&P 500 CME net short position, adding a hefty 66,665 contracts to reach a total of 355,121. Meanwhile, equity fund managers have also been active, boosting their S&P 500 CME net long position by 35,280 contracts, bringing their total to an impressive 934,913.

• On the Treasury front, speculators have made some adjustments as well. They've reduced their net short position in CBOT US 5-year Treasury futures by 116,513 contracts, now standing at 880,853. Similarly, they've trimmed their CBOT US 10-year Treasury futures net short position by 9,484 contracts, which now totals 811,752. However, the CBOT US 2-year Treasury futures net short position has increased by 51,712 contracts, now standing at 907,065.

• In other adjustments, speculators have cut their CBOT US UltraBond Treasury futures net short position by 8,478 contracts, bringing it down to 336,725. They've also reduced the net short position in CBOT US Treasury bonds futures by 47,352 contracts, now totaling 155,805.

• Shifting gears to cryptocurrency, the Bitcoin market shows a net long position of 2,756 contracts. Meanwhile, several currencies are experiencing net short positions: the Swiss franc sits at -26,752 contracts, the British pound at -82,568 contracts, and the euro at -52,334 contracts. On a brighter note for the Japanese yen, it boasts a net long position of 71,982 contracts.

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