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Goldman Sachs, JPMorgan, and Wells Fargo kicked off the third-quarter earnings season with results highlighting different sources of strength. Goldman outperformed expectations on revenue from equities trading and investment banking, while JPMorgan reported a 49% year-over-year increase in equities trading revenue and raised its 2026 net interest income outlook. Both banks showed weakness in fixed income. Wells Fargo, meanwhile, beat earnings expectations, supported by stronger interest income.

Our Take

Revenue diversification and resilient lending operations are helping major banks sustain earnings in a challenging financial environment. Strong equities trading performance at Goldman and JPMorgan, alongside improving results at Wells Fargo, provides support for the sector. However, weakness in fixed income and higher expenses and provisions at JPMorgan suggest that pressures remain.

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Germany's inflation rate accelerated to 3.3% year-over-year in September, up from 2.9% in August, reaching its highest level since December 2023 and confirming the preliminary estimate. Consumer prices rose 0.6% month-over-month, driven by energy prices, which surged 14.9% from a year earlier. Meanwhile, core inflation held steady at 2.4% for a third consecutive month.

Our Take

Higher energy prices are once again squeezing household purchasing power and raising business costs, complicating the economic recovery. The stability of core inflation suggests that the increase has not yet become broad-based. For the ECB, the key risk is that a prolonged energy shock eventually feeds through to other prices and inflation expectations.

U.S. small-business optimism fell to a three-month low in September. The NFIB index declined 0.8 points to 97.9, slightly below its long-term average of 98.0. The deterioration reflected weaker expectations for economic conditions and a reduced willingness to expand, while uncertainty increased. Labor shortages and inflation remained the leading concerns.

Our Take

Business caution could weigh on investment and hiring, slowing U.S. economic growth. At the same time, persistent concerns about costs suggest that softer economic activity does not necessarily translate into immediate inflation relief. This combination complicates the Fed's policy outlook, although the index remains close to its historical average and does not, on its own, signal an economic contraction.

Japan's producer price inflation eased to 6.8% year-over-year in September, down from 7.6% in August. Prices fell 0.3% month-over-month, marking a second consecutive decline, driven by lower prices for agricultural and fishery products, as well as petroleum and coal products. However, price increases persisted across other inputs, suggesting that cost pressures are easing unevenly.

Our Take

The moderation provides some relief for corporate profit margins and could reduce pressure on consumer prices. However, still-elevated annual inflation and divergent trends across components warrant caution before anticipating sustained disinflation. For the Bank of Japan, the data support a gradual approach to further monetary policy adjustments.

Corporate News

Johnson & Johnson raised its earnings guidance after strong demand for its newer cancer and autoimmune disease treatments offset slower growth in its medical devices business. The results underscore the importance of its pharmaceutical portfolio in sustaining profitability.

BP reduced its net debt by approximately $8 billion, reaching its 2027 target ahead of schedule, as windfall profits from higher energy prices boosted earnings across its trading and refining operations. The reduction strengthens its balance sheet and provides greater financial flexibility.

Banca Monte dei Paschi di Siena reiterated its support for a plan to build a larger banking group and said Intesa Sanpaolo's improved offer for Banco BPM remains financially unattractive. Its position keeps the battle over consolidation in Italy's banking sector unresolved.

The To-Do List

  • Review earnings reports from JPMorgan, Goldman Sachs, Citigroup, Wells Fargo, UnitedHealth, and Johnson & Johnson.

  • Follow the Open Compute Project Global Summit in San Jose, featuring Nvidia, Microsoft, Meta, Intel, HPE, Oracle, and AMD.

  • Set aside 30 minutes today for a chest, back, and core workout. Complete three sets of 10–12 repetitions of chest presses, dumbbell rows, and lateral raises, using a weight you can control. Finish with three 30-second planks and two sets of 15 crunches.

  • Watch for signs of stabilization in the semiconductor selloff, now in its sixth consecutive session.

  • Remember that today marks another anniversary of Mexican diplomat Alfonso García Robles being awarded the Nobel Peace Prize in 1982.

Quote of the Day…

"We are the firefighter who provides financial assistance in times of need"... Christine Lagarde, on the IMF's role