Markets React to Rate Policy and Escalating Energy Crisis
European markets firmed as policymakers pushed back against aggressive rate-hike pricing, even as the energy shock intensified. UK 10-year gilts led the rally, with tens 4bp lower at 5.40% after the Bank of England’s Pill questioned the four 25bp increases priced over the next year, while US Treasuries held near extremes with the 10-year at 5.215% and the 2-year at 4.776%. Brent traded back above $106 after Saudi Aramco confirmed a Houthi strike on its Dhahran headquarters; in the Strait of Hormuz, 24 vessels were attacked in the two weeks through 11 October, with shipping flows estimated at 2.9M bpd that day versus a September peak of 15.5M bpd, and supertanker earnings reported at a record $805K per day on 9 October. European TTF gas hovered near €87/MWh with storage below 74% versus a seasonal norm near 90%, as the IEA Governing Board prepared to meet on 15 October.
Corporate Earnings, Credit Stress, and Policy Developments
ASML lifted its 2026 revenue outlook to €44B-45B and said even a 30% 2027 capacity expansion in low-NA EUV and DUV immersion will still leave demand unmet in 2027-28; Q3 EPS was €12.95 versus €11.14 expected on €11.66B revenue, with net income €4.96B and gross margin 57.5% as installed-base management rose to €3.29B and system sales to 113 from 86. In the US, credit stress in AI infrastructure resurfaced as CoreWeave unsecured spreads widened 130-150bp to about 1,000bp over Treasuries, with 2032 notes near 15% versus 9.625% at issue and $52B of debt and lease obligations at end-June. Anthropic prepared to meet institutions as bankers floated a $1.8-2tn valuation versus a $965bn May mark; its prospectus showed 2025 revenue of $4.6B, an operating loss above $8B, future obligations of about $518B (around 80% non-cancellable), and a $42B net loss including roughly $34B of financing charges, while 47% of revenue flowed via two cloud channels. In Europe, Christine Lagarde said there were no second-round effects yet and stressed national responsibility for budgets, as France’s Assembly voted on Article 1 of the 2027 plan with a 5.4% of GDP deficit, while Germany’s final September HICP was 3.3% and China’s trade surplus widened to $133.5bn on exports up 36.3% and imports up 31%.
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