Beyond Bulls & Bears


Notes from the Trading Desk – Europe

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what our professional traders and analysts are watching in the markets. As part of Templeton Global Equity Group, the European equity desk is manned by a team of professionals based in Edinburgh, Scotland, whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The digest

The first week of the fourth quarter started off on a brighter note amidst some chatter of “peak tightening” from central banks, but this optimism faded as the week progressed. Several hawkish US Federal Reserve (Fed) speakers and stronger US employment data brought hope that the Fed may pivot soon. Last week, the MSCI World Index was up 1.6%, the STOXX Europe 600 Index was up 1%, the S&P 500 Index was up 1.5% and the MSCI Asia Pacific Index was up 2.7%. 1

The week in review


Last week, European equities were choppy following a painful end to the third quarter. The STOXX Europe 600 Index bounced off multi-year lows to end the week higher, its first weekly gain in four weeks. In contrast to recent weeks, events from further afield drove European indices. Early in the week there was some brief optimism on the back of softer macro data from the United States and a smaller-than-expected Reserve Bank of Australia (RBA) rate hike, with the suggestion these were possible harbingers of an easing from centrals bank hawks. This was short-lived. By the end of the week, stronger-than-expected September US nonfarm payroll numbers and further hawkish Fed commentary dampened hopes of the ever-elusive pivot.

Sector-wise, European energy names saw strong gains as West Texas Intermediate crude oil rose 16% after OPEC+ announced cuts of two million barrels per day (b/d). Several banks are now predicting prices at US$100 per barrel again next year. Meanwhile, real estate stocks—the worst-performing sector in the region this year—fell again last week.

Looking at fund flows, European equities are on their longest run of outflows since 2016, with outflows for 34 weeks (US$0.6 billion).2

Credit Suisse was a talking point as its share price hit an all-time low, with credit default swaps blowing out early in the week over recapitalisation fears. The stock did recover a little ground later in the week as it proposed a tender offer to repurchase CHF3 billion of its own debt to help the bank manage its overall liability composition and enhance its interest expense. Media reports convey a shortlist of bidders for at least part of the CSGN SW Securitized Products Unit.

United Kingdom: Last week, UK assets stabilised a little after last week’s Bank of England (BoE) intervention, with the pound trading ~1.10 vs the US dollar and gilt yields still tighter than the prior week’s levels. Interestingly, the BoE only bought £5 billion, around 12% of the total it had the potential to buy, as it staved off what was described as a “self-reinforcing spiral” in financial markets. This morning, the BoE has increased the amount it can buy to £10 billon a day ahead of the scheme termination at the end of the week. The central bank also revealed it will operate a collateral repo facility beyond the end of this week that would ease longer-term liquidity concerns.

That said, pressures on the UK consumer remain front and centre. There is a focus on the extreme moves in mortgage rates and the potential impact this will have on the housing market and consumer spending. Elsewhere, the government tried to shore up support for its fiscal plans and Prime Minister Liz Truss spoke about an anti-growth coalition. The government has brought forward its fiscal statement to 31 October in order to shore up market confidence.

Ratings agency Fitch joined S&P in putting the United Kingdom on negative watch.

United States

US equities also saw a strong start to last week, only to fade a bit into the weekend, although the S&P 500, Dow Jones Industrial Average, Nasdaq 100 and Russell 2000 indices all closed higher.

A weaker US Institute of Supply Management (ISM) number and a big drop in the US JOLTS data (Job openings) helped fuel early week optimism, as markets followed a “bad news is good news” narrative. In addition, the RBA hiked rates 25 basis points (bps), which was less than anticipated, fuelling hopes central banks could be poised to pivot. However, a slew of Fed speakers reiterated the hawkish stance throughout the week, with some comments that inflation still remains too high to back down from the tightening cycle.

Finally, on Friday, the September US employment report continued to show the US labour market remains tight, with the headline nonfarm payrolls number showing 263,000 jobs added in September, higher than many observers had anticipated. Average hourly wages fell marginally from 5.2% to 5% but remain at an elevated level.

The S&P 500 Index fell 2.8% on Friday in reaction to the jobs data.

The surge higher in oil prices was the other focus for the week, as OPEC+ defied pressure from US President Joe Biden and announced a two million b/d production cut. This saw the energy sector surge. In response to this, the United States released further supply from its Strategic Petroleum Reserve.


Last week was quiet for Asian markets in the way of a number of holidays, including Golden Week in China, wherein the Shanghai market was closed for the whole week. Looking at what was open, it was a stronger week for Hong Kong’s market, as well as Japanese and South Korean equities.

The main talking point was the RBA’s decision on Tuesday to lift interest rates by 25 bps to 2.6%, which was less than anticipated. Australian assets traded higher afterward, with the country’s benchmark index showing its strongest week since October 2020.

The week ahead

It looks like a quiet start to the week, as the US bond market is closed for Columbus Day/Indigenous People’s Day, meaning volumes will likely be quieter in the equity market. Later in the week, US earnings season kicks off. Expectations for the coming earnings season are gloomy and will likely be important in setting the tone going into year end.

Macro highlights this week include gross domestic product (GDP) data in the United Kingdom, and in the United States, focus mid-week will likely be on the release of the September Fed minutes and then Consumer Price Index (CPI) data on Thursday.

Tuesday, 11 October 2022

Macro: Italy industrial production; Japan balance of payments current account; UK jobless claims/unemployment; International Monetary Fund publishes its World Economic Outlook and Global Financial Stability Report.

Wednesday, 12 October 2022

Macro: Eurozone industrial production; Japan machinery orders; UK industrial production; UK trade data; UK monthly GDP; US Producer Price Index (PPI); US mortgage applications; US Federal Open Market Committee September minutes; OPEC Monthly Oil Market Report is published; and EU energy ministers meet in Prague, with winter supply shortages on the agenda.

Thursday, 13 October 2022

Macro: CPI Germany; CPI United States; PPI Japan; US initial jobless claims; EIA oil inventory report; G-20 finance ministers and central bankers meet in Washington.

Friday, 14 October 2022

US Earnings: Citigroup Inc. (C US); First Republic Bank/CA (FRC US); JP Morgan Chase & Co. (JPM US); Morgan Stanley (MS US); PNC Financial Services Group I (PNC US); US Bancorp (USB US); UnitedHealth Group Inc. (UNH US); Wells Fargo & Co. (WFC US)

Macro: CPI China; CPI France; CPI Spain; PPI China; China trade data; UK RICS home prices; US retail sales; US business inventories; US University of Michigan consumer sentiment.

Views you can use

Brazil elections: Brace for volatility but look for opportunities

Brazilian equity markets may remain volatile following the country’s inconclusive presidential elections. However, Franklin Templeton’s Marcus Weyerer and Dina Ting see long-term investor opportunities—such as renewable energy—arising in Latin America’s largest economy even as the dust settles. Read more. 

Quick thoughts: Arugula is the new popcorn—a conversation on food innovation

Feeding a growing global population requires innovation in food and agricultural technologies. Learn about how investors have a role to play. Read more.

Will Italy still have ECB support in wake of elections?

Our Head of European Fixed Income, David Zahn, weighs in on the potential market implications of the outcome of the recent Italian elections. Read more. 

Quick thoughts: Why the US dollar matters

Why is the US dollar so strong? And what does the strengthening dollar mean for investors, the global economy and inflation? Stephen Dover, Head of Franklin Templeton Institute, explains. Read more. 

Municipal markets continue to feel the pressure this year, yet fundamentals remain stable

The municipal bond market has not been immune to bouts of volatility hitting the markets this year, but there are still pockets of opportunity, according to Franklin Templeton Fixed Income’s Director of Municipal Bonds, Ben Barber. He points to improving technical conditions, stable fundamentals and inexpensive valuations that make the asset class look compelling.  Read more. 

China’s long-term prospects and catalysts 

China’s equity market has had a volatile year, but Dina Ting, Head of Global Index Portfolio Management, Franklin Templeton Exchange-Traded Funds, finds reasons for long-term optimism. Read more. 


All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

Past performance is not an indicator or guarantee of future performance. There is no assurance that any estimate, forecast or projection will be realised.

Links to External Sites

Franklin Templeton is not responsible for the content of external websites.

The inclusion of a link to an external website should not be understood to be an endorsement of that website or the site’s owners (or their products/services).

Links can take you to third-party sites/media with information and services not reviewed or endorsed by us. We urge you to review the privacy, security, terms of use, and other policies of each site you visit as we have no control over, and assume no responsibility or liability for them.


This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realised. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Issued in the U.S. by Franklin Distributors, LLC, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, – Franklin Distributors, LLC, member FINRA/SIPC, is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.


1. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or guarantee of future results.

2. Source: BofA Global Investment Strategy, EPFR.

Get Content Alerts in My Inbox

Receive email alerts when a new blog is posted.