Spreading Riots in Europe, Elevated Energy Costs, Better-than-Expected Chinese Data, and T-Minus 15 Days to U.S. Midterms
October 19, 2026
(117) The weighted DXY dollar index is steady. Changes versus individual currencies range from a 0.5% decline against the Australian dollar to gains of 0.2% and 0.1% against the yen and euro.
The WTI and Brent prices of crude oil have risen 0.6% and 1.4% above their pre-weekend closing levels to $100.84 and $108.29 per barrel.
A fresh reason for rising sovereign debt yields has arisen. Reserve Bank of Australia Assistant Governor Chris Kent opined that the neutral central bank interest rate level is creeping higher, requiring more elevated nominal central bank interest rates to achieve the same economic effect as before. Today’s biggest rise in 10-year government debt yields have occurred in France (+9 basis points), Canada (+6 bps), Italy and Greece (each up 5 bps). The U.S. 10-year Treasury yield is 3 basis points firmer.
Street riots have been increasingly violent in France and have spread into other members of the euro area such as Spain and Belgium. The continent’s political climate has become even more polarized and extreme left and extreme right groups are gaining traction. Uneasiness over domestic fiscal policies, immigration, and the needed response to the war in Ukraine are feeding the unrest, and regional stock markets are on the run on this 39th anniversary of the global stock market crash that came to be known as as Black Monday. On Monday, October 19, 1987, the DJIA plunged 22.6% (508 points). Today, stock markets have dropped so far by 1.9% in Spain, 1.8% in Italy, 1.6% in France, 1.4% in Germany and 1.3% in Great Britain.
Three U.S. stock markets have opened higher, led by a rebound in the tech sector following last week’s difficulties. The Nasdaq, Russell 2000 and SPX 500 currently sport gains of 0.9%, 0.6% and 0.5%, but the DOW is down 0.2%. In the Pacific Rim, share prices fell 3.6% in Indonesia, 1.2% in India, 0.8% in Malaysia and 0.6% in Japan but rose 0.4% in China and Australia. Hong Kong observed a 3-day weekend marking the Chung Yeung Festival.
Bitcoin and silver prices are higher, while gold is flat.
While opinion polls are pointing to Democratic gains in midterm elections set for two weeks from tomorrow, few folks are counting their chickens. Along with the massive spending for Republican candidates and closeness of many contests, support for President Trump in past elections has appeared to exceeded pre-vote polls in a systematic way in the past. The outcome of the November 3rd election has enormous implications for both U.S. and global geopolitics and economic policies. Choppy and nervous market behavior is to be expected in the period just ahead.
Today’s economic data calendar is dominated by a raft of Chinese releases.
- Industrial production and retail sales each posted six-month year-on-year highs in September and outperformed analyst forecasts. Production went up 0.6% on month and 5.5% on year in the latest month. For January-September, the rise was 5.3%.
- Retail sales grew 0.4% on month and 1.1% on year. The year-to-date rise was also 1.1%, down from a 2.7% rise in 2025.
- Real GDP in the third quarter expanded by a slightly faster-than-expected 1.2% after the second quarter’s slowdown to 0.9%. On-year economic growth of 4.5% was also at a 2-quarter high and close to the year-to-date pace of 4.6%. Still, that’s down from calendar year increases of 5.0% in both 2024 and 2025, and it leaves the government’s 4.5-5.0% objective in some jeopardy.
- The year-to-date drop in Chinese fixed asset investment (-7.2%) was not quite as deep as anticipated but almost twice as much as the decline of 3.8% in full-2025.
- Unemployment slipped back to a 2-month low of 5.2% instead of matching the market consensus of holding steady at 5.3%.
- Capacity utilization ticked up 0.1 percentage point to 73.1% last quarter after falling by 0.6 percentage points in the second quarter to a 21-quarter low.
- House prices in China, a particularly depressed sector of the economy, have posted monthly dips since May 2025, but September’s drop was only 0.1% for a fourth straight time. The 12-month rate of decrease (-2.8%) had not been that low in nine months.
The U.S. housing sector has also suffered for a variety of reasons such as deportation fears among many of its workers, elevated borrowing costs, and the federal government’s tariff policies that boost input costs and stir up lots of uncertainty. The National Association of Home Builders housing index slid three further points in October to its lowest reading in 172 months.
Treasury-compiled net U.S. capital movements for August reported late yesterday revealed large inflows of $179 billion involving long-term capital and $200 billion including net short-term flows as well.
Unlike in its southern neighbor, Canadian consumer price inflation in September undershot market expectations with a reading of 3.1% versus 3.0% in both July and August but still below May’s 20-month high of 3.2%. The energy component accelerated almost four percentage points to 19.0%. However, food price inflation slowed to a 19-month low of 2.2%. Core CPI, excluding food and energy, printed lower too at 2.2%, and the Trimmed Mean measure dipped to 1.8% from 1.9% in the three prior months.
Other price data today included Moldovan producer prices, which were unchanged in September from August and up only 0.3% year-on-year. Malaysian CPI inflation of 1.8% was below 2% for a fourth straight time.
Japan’s tertiary index of service sector activity edged 0.1% lower on month and recorded its smallest year-on-year increase (1.4%) in three months. Expectations of a sooner-rather-than-later next interest rate hike were encouraged by BOJ Governor Ueda who claimed that core inflation now appears quite close to meeting the target of sustainable 2.0%.
New Zealand’s service sector purchasing managers survey held slightly above the 50 neutral level for a fourth consecutive month at 50.9 in September.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Canadian CPI, Chinese GDP and retail sales, French riots
ShareThis
