Daily Market Outlook, October 16, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive – "Black Thursday" to Recovery: Markets React to Inflation

Asian markets experienced dramatic swings overnight, particularly in South Korea, where the KOSPI index suffered a staggering 7.57% drop, marking a six-month low of 5,554. Trading was temporarily halted due to a circuit breaker, with major companies like Samsung and SK Hynix seeing declines of 9.5% and 11%, respectively. This turmoil was driven by persistent concerns over US inflation, highlighted by a Consumer Price Index (CPI) increase of 3.7% year-on-year and a Producer Price Index (PPI) surge of nearly 1% in September—the largest monthly jump in over four years—reviving speculation about potential Fed interest rate hikes. The Nikkei index also fell nearly 5%, while Shanghai and Hang Seng indices decreased by 1.6% and 1%, respectively. However, this morning brought some recovery for Seoul, with the KOSPI bouncing back by 1.8% and reaching approximately 5,700 by mid-morning, an overall increase of about 3%. Local retail investors seized the opportunity to buy the dip, even as foreign investors continued their selling spree.

The South Korean won weakened to around 1,341 per dollar, but the KOSDAQ also showed signs of recovery, climbing by about 1.5%. The shift in sentiment followed comments from Fed Chair Kevin Warsh, who indicated that tighter monetary policy may not be necessary, even in light of recent inflation data. Following Warsh’s address, traders reduced the implied probability of a Fed rate hike this month to just 15%, down from over 25% on Thursday. The MSCI Asia Pacific equities index rose by 1.6%, while S&P 500 futures turned around from earlier losses of up to 0.6% to gain 0.2%. Market sentiment improved as the selloff in chip stocks began to stabilize. Warsh pointed out the positive impact of artificial intelligence on the US economy, though he did not elaborate on specific monetary policy implications. Gold prices edged up by 0.1%, hovering around $4,175 per ounce. Despite the positive sentiment, Treasury yields remained lower throughout the day, following a broad rally across the yield curve in US trading. The recent decline in yields reflects a flight to safety as investors reassess risk exposure amid ongoing inflation concerns.

Warsh's guarded comments on the policy outlook contrasted with the more detailed discussions at the Jackson Hole Symposium, where he had previously provided insights into the economy. His cautious stance has been interpreted as a signal that the October meeting is unlikely to result in a rate hike, especially given the proximity of the midterms. The PPI final demand came in at 1.3% m/m, significantly above the 0.6% median forecast, indicating broader inflationary pressures beyond energy. Core PPI, excluding food and energy, printed at 0.7% m/m, highlighting the momentum of cost pressures moving through the production chain. This suggests that input cost pressures are indeed rising, which could lead to second-round effects if sustained.

Looking ahead, the upcoming week has a UK focus, with key labor market and wage data scheduled for Tuesday. Recent surveys, aside from the REC report, have indicated a mild contraction in hiring, which should be reflected in PAYE-linked figures. CPI and borrowing numbers on Wednesday will be crucial, particularly for identifying any evidence of second-round effects that could concern the MPC, especially as headline inflation is expected to rise due to higher regulated home energy costs. Retail sales data on Friday will provide additional context, showing the underlying trend amid recent volatility. The flash PMIs for October will also be released on Friday, offering insights into business sentiment across the main Eurozone countries and the US.

In Europe, ZEW and French business confidence data will be points of interest. The US calendar is relatively thin, with housing starts, building permits, leading index, and Kansas City Fed data due next week. Additionally, Chinese monthly activity numbers, including the first read of Q3 GDP, will be assessed, likely showing softness based on recent monthly data. The central bank side is light, with BoE officials Greene and Bailey scheduled to speak, while the ECB enters its quiet period. The Fed is also in a communications blackout.

Macro to Micro, markets are recovering from the turmoil of "Black Thursday." The KOSPI bounce and easing chip pressures are positive signs, but inflation remains a central concern. With Warsh’s comments reducing immediate rate hike expectations, traders will focus on upcoming inflation data, labor market indicators, and the potential for second-round effects. Key markers include the US CPI, retail sales, and the reactions of global equity indices to evolving economic signals.


Overnight Headlines

  • Trump Muses On Future Iran Strike With ‘Mother of All Bombs’

  • S.Korea Weighs Expanding Naval Mission To Gulf Of Oman

  • Russia’s Putin Vows Revenge For Ukraine's Energy Site Attacks

  • Ukraine Runs Out Of Patriot Interceptor Missiles As Zelensky, Trump Clash

  • Order To Limit Starshield For Ukraine Came From Inside White House

  • UK Sends Ukraine More Storm Shadow Missiles to Hit Russian Sites

  • Iran Tells Hezbollah To Increase Readiness, Prepare For Potential Conflict

  • Fed’s Warsh: He Would Deliver Price Stability, But Won’t Pre-Judge Meetings

  • Fed's Hammack Warns Inflation Exp. Deterioration Could Require Response

  • Lutnick Throws The Future Of US-Mexico Trade Talks Into Further Doubt

  • EU Begins Assessing Additional Sectors For China Trade Quotas

  • EU Open To Creating ‘Kill Switch’ To Kick Chinese Firms Out Of Market

  • France, Germany To Allow UK To Join EU Car Policy If It Aligns On China Tariffs

  • Japan’s Katayama Says Unable To Comment On Need For Additional Budget

  • Japan To Sidestep 3.5% Defence Spending Target Despite US Pressure

  • IEA Agrees To Release Of Outstanding 100 Million Barrels Of Oil

  • EIA Report US Crude Inventories Are Down By 8.6M Barrels

  • Investors Lower Anthropic IPO Valuation Expectations, On Rev. Concerns

  • Nvidia CEO Downplays CoreWeave Concerns, Bolstering Stock

  • Microsoft’s Mai-Base-2 Beat GPT 5.6 Sol Using A Quarter Of Compute Power

  • Tesla Unveils Next Generation Roadster Sports EV With SpaceX Thrusters

  • Google Demonstrates Quantum Computing Breakthrough, Cuts Errors 40-Fold

  • Italy's UniCredit Wins ECB Approval To Control Germany's Commerzbank

  • Anglo American Chief Says Tech Giants Show ‘Deep Interest’ In Mining Stakes

FX Options Expiries For 10am New York Cut 

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

  • EUR/USD: 1.1225 (EU1.75b), 1.1200 (EU1b), 1.1160 (EU710.6m)

  • USD/JPY: 156.00 ($2.05b), 152.00 ($969.9m), 158.00 ($910.1m)

  • AUD/USD: 0.6950 (AUD689.1m), 0.6900 (AUD500.5m), 0.7100 (AUD424.9m)

  • EUR/GBP: 0.8450 (EU749.4m)

  • GBP/USD: 1.3850 (GBP541.5m), 1.3220 (GBP461.6m), 1.3600 (GBP303.7m)

  • USD/CAD: 1.4175 ($320m)

  • USD/BRL: 5.0000 ($334m)

  • USD/CNY: 6.7040 ($400m)

CFTC Positions as of 9/10/26

  • Equity fund speculators increase S&P 500 CME net short position by 41,003 contracts to 396,700

  • Equity fund managers raise S&P 500 CME net long position by 3,101 contracts to 904,356

  • Speculators increase CBOT US 5-year Treasury futures net short position by 167,830 contracts to 1,163,531

  • Speculators trim CBOT US 10-year Treasury futures net short position by 4,134 contracts to 896,481

  • Speculators increase CBOT US 2-year Treasury futures net short position by 60,880 contracts to 852,904

  • Speculators trim CBOT US UltraBond Treasury futures net short position by 50,097 contracts to 276,339

  • Speculators trim CBOT US Treasury bonds futures net short position by 67,063 contracts to 119,812

  • Bitcoin net long position is 2,540 contracts

  • Swiss franc posts net short position of -23,740 contracts

  • British pound net short position is -97,611 contracts

  • Euro net short position is -99,332 contracts

  • Japanese yen net long position is 62,325 contracts

Technical & Trade Views

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