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MPC Markets Morning Call — 1 October 2026: Soft Inflation, Hard Yields — Wall St Fades Into Q4
Cooler-than-expected US inflation data slashed October rate hike odds, but a vicious late-session selloff left the Dow down 0.9% and the S&P 500 off 0.25% as long-dated Treasury yields held near multi-decade highs. Micron’s blowout earnings after the bell lit up the AI trade.
US stocks gyrated on Wednesday, caught between cooler-than-expected August PCE inflation data and stubbornly elevated long-dated Treasury yields. A morning rally of as much as 0.7% on the S&P 500 was erased in a final-hour selloff, leaving the Dow down 0.9% and the benchmark index off 0.25% to close out September. The Nasdaq eked out a 0.24% gain on megacap tech strength. October Fed hike odds collapsed to ~37% from ~51% a day earlier after the soft PCE print and New York Fed President Williams’ “no urgency” remarks. But 10-year yields closed at 5.293% (session high 5.306%) and 30-year yields hit 5.638% — the highest since 2002 — keeping duration-sensitive sectors under pressure. Oil rebounded with WTI settling at US$90.61 (+1.4%) on stalled US-Iran diplomacy. After the bell, Micron delivered a blowout fiscal Q4 with revenue of $54.23 billion and guided Q1 well above consensus, reinforcing the AI-memory demand story. The ASX 200 closed up 0.92% on Wednesday on CPI relief, but SPI futures point to a softer open of around −51 points (−0.6%).
US core PCE rose just 0.2% m/m in August (below the 0.3% expected), with prior months revised lower — cutting October Fed hike odds to ~37% from ~51%.
A vicious final-hour selloff wiped out early gains: the S&P 500 had been up ~0.7% before closing −0.25%, as long-end yields reasserted pressure.
The 10-year Treasury yield closed at 5.293% and the 30-year at 5.638% — both at or near multi-decade highs despite the soft inflation print.
Micron’s after-hours blowout — $54.23 billion in quarterly revenue and Q1 guidance of $61.5 billion — validated the AI-memory cycle heading into Q4.
WTI crude rose 1.4% to US$90.61 after Trump denied reports of Iran sanctions easing; diesel at or near US record highs with export-ban talk circulating.
The ASX 200 gained 0.92% on Wednesday on CPI relief (property +3.7%), but SPI futures point ~−51 (−0.6%) into Thursday’s open on Wall Street’s late fade.
Wall Street Mixed Into Month-End as Late Selloff Erases PCE Rally
US equities finished Wednesday mixed after a soft August PCE print sparked a morning rally that was largely erased in a vicious final-hour selloff as longer Treasury yields reasserted. The Dow fell 443.87 points (−0.86%) to 50,906.05; the S&P 500 lost 19.30 (−0.25%) to 7,651.54; the Nasdaq Composite rose 63.52 (+0.24%) to 26,861.06; the Nasdaq 100 gained 0.23%; Russell 2000 −0.39%. The S&P had been up as much as ~0.7% and the Nasdaq ~1.2% on the PCE print before the late fade.
Breadth stayed soft with NYSE decliners outnumbering advancers 1.66-to-1. Nine of 11 S&P sectors ended lower; technology was the best sector at roughly +0.6%, with Microsoft, Apple and Nvidia all higher. For September, the S&P lost 0.45% and the Dow fell 4.29% (snapping a five-month winning streak), while the Nasdaq gained 1.86%. Both the S&P 500 and Nasdaq posted a second straight quarterly advance.
Hewlett Packard Enterprise +3.9% after raising its long-term networking revenue growth forecast and announcing a $1.2 billion Vultr order. MongoDB +3.4% on a $1 billion buyback boost. Moderna −5.3% after Citi cut to Sell. Northrop Grumman −4.2% after losing the US Navy next-gen fighter award to Boeing. Megacaps: Apple +1.1%, Amazon +1.0%, Alphabet +0.9%, Microsoft +0.8%, Nvidia +0.5%; Meta −1.8%.
Soft PCE Slashes October Hike Odds — But the Fed Isn’t Done Yet
The headline August PCE came in at +0.3% m/m and +3.4% y/y (vs +0.4% and ~3.7% expected). Core PCE rose just +0.2% m/m and +3.0% y/y (vs +0.3% and ~3.3% expected). BEA methodology changes to software, portfolio-management fees, and legal services cut core PCE by roughly 36 basis points — more than the 20–30 bp many economists had anticipated. Gasoline rose 4.4% m/m, driving the monthly headline; food was unchanged.
Consumer spending surged 0.9% in August (the fastest pace in over a year); real spending rose 0.6%. The personal saving rate fell to 4.1%, the lowest since November 2022. Final Q2 GDP was revised up to 2.2% annualised, while ADP private payrolls showed +90,000 jobs in September after a revised +36,000 in August.
CME FedWatch odds of at least a 25 bp October hike fell to about 37% at the close (from ~51% a day earlier and ~71% a week ago). NY Fed President Williams’ “no urgency” remarks had already begun trimming odds before the data. Governor Lisa Cook reiterated commitment to bringing inflation down without harming the labour market. Evercore’s Krishna Guha: revisions buy breathing room and make an October hike unlikely, while strong growth keeps the debate open on how far the Fed must ultimately go. TradeStation’s David Russell warned the print is “old data” that doesn’t reflect this month’s diesel surge.
Bonds: Front End Eases, Long End Holds at Multi-Decade Highs
Wednesday’s rates tape split cleanly: the front end eased on soft PCE and collapsing October hike odds, while the long end sold off again into the close on growth and term-premium narratives. The 10-year closed at 5.293% after a session high of 5.306%; the 30-year closed at 5.638% after touching 5.650% — its highest level since 2002. The 5-year settled at 5.089%.
Germany’s 10-year fell 4 bp to ~3.59%; UK 10-year rose 1 bp to ~5.42%. Short-dated yields “barely budged” while 30-year yields remained at multi-decade highs. The story for the desk: soft inflation cut October odds, but sticky 5.3% 10-years and 5.6%+ 30-years kept duration-sensitive equities under pressure into the close — producing the late equity fade despite a green Nasdaq.
Oil Rebounds on Stalled Iran Talks; Diesel Near Record Highs
Crude rebounded Wednesday as stalled US-Iran diplomacy and tight fuel markets outweighed continuing recovery in Gulf crude exports. WTI settled at US$90.61 (+1.4%); Brent ~US$98.03 (+1.9%). President Trump denied reports that he was willing to ease Iran sanctions and release frozen funds for “concrete” nuclear steps. EIA data showed gasoline stocks −1.7m barrels, distillates −2.3m, crude +922k. Brent was on track for a ~14% September gain (biggest since July); WTI ~+5.5%.
Hormuz & Diesel Watch
- Kpler data showed crude transiting Hormuz at a 7-day average of 13.5 mb/d (matching prewar baseline), but refined products remained at only 677 kb/d vs 3.6 mb/d prewar.
- Roughly 40% of Gulf crude now bypasses Hormuz via pipelines (vs 17% prewar).
- Diesel at or near US record highs. The White House urged the EU to draw emergency diesel inventories.
- Trump is considering red-dyed diesel sales and/or an export ban under midterm political pressure.
- Another 40 million barrel SPR release was announced.
FX & Gold: Aussie Soft Near 69.6¢; Dollar Posts Best Month Since June
The Australian dollar traded soft at US69.58¢ Thursday morning after Wednesday’s local CPI relief still left it near two-month lows on a firm US dollar and global yields. DXY closed at 101.466 — ending its best month since June. Euro −0.1% to $1.1326; sterling +0.2% to $1.3261; yen −0.1% to 157.46.
Gold spot fell 0.7% to US$4,154.08/oz as real yields and a firmish dollar capped the metal even as soft PCE briefly helped risk. Silver ~$60.78. Bitcoin was little changed at ~$83,538; ether fell 0.7% to ~$2,670.
Europe Posts First Monthly Loss in Six
European equities finished lower as the oil rebound and hotter continental inflation outweighed early relief from US PCE. Stoxx 600 closed −0.50% at 634.89 — on track for its first monthly loss in six (~−2.5% in September). FTSE 100 −0.29% to 10,606; DAX −0.79% to 25,199; CAC −0.89% to 7,965. Germany CPI for September printed 3.3% y/y, above expectations and the highest since December 2023.
Micron Blowout Lights Up AI Trade After Hours
Micron reported a blowout fiscal Q4: revenue of $54.23 billion (vs ~$51.07 billion consensus), non-GAAP EPS of $33.42 (vs ~$31.61 expected). Full-year FY2026 revenue hit $133.19 billion (+256% y/y). The company guided Q1 FY2027 revenue of $61.5 billion ±$1.5 billion and EPS of $38.15 ±$1.00 — both well above consensus (~$57 billion / ~$35.14). CEO Sanjay Mehrotra expects “even stronger fiscal 2027” with sequential revenue growth each quarter.
The FTC is scrutinising OpenAI, Anthropic and other AI firms on product safety. OpenAI accused China’s Moonshot AI of GPT data-extraction. Counterpoint pegged Apple’s foldable iPhone Duo at ~6 million units in 2026. Google is grappling with internal scepticism over its Gemini 4 model, with some employees concerned it lags Anthropic’s Fable and OpenAI’s Astra in coding tasks. Paramount Skydance sold $30 billion of IG bonds to fund the Warner Bros. Discovery buyout.
ASX Rallies on CPI Relief; SPI Points Softer Into Thursday
Australia’s monthly CPI indicator for August printed headline +4.0% y/y (from +3.5% in July) with trimmed mean held at 3.6% — hotter than comfortable but better than feared. The ASX 200 closed +0.92% at 8,789.3 with 10 of 11 sectors green: real estate +3.68%, discretionary +2.27%, telcos +1.94%. Tech was the only sector in the red (−0.41%). Three-year Aussie yields fell sharply as November RBA hike odds were pared; Capital Economics said the hiking cycle is “probably done.” The RBA cash rate remains 4.60% after Tuesday’s decision.
Movers: Lendlease ~+12% after completing the $525 million sale of its remaining Keyton stake. Northern Star >+6% on reports Gold Fields may sweeten a takeover proposal. Codan >+6% extending Tuesday’s ~24% surge. DroneShield firm after securing a place on a US counter-drone contract vehicle worth up to US$500 million. Black Cat Syndicate sold off on higher first-half cost guidance at Kal East.
Open frame Thursday: SPI futures pointed about −51 points (−0.6%) at 6:36am AEST after Wall Street’s late fade. Aussie ~US69.6¢. Desk watch: Micron after-hours into local tech, oil/diesel headlines, Friday US payrolls, and whether Wednesday’s property/discretionary leadership survives a softer SPI open.
Day Ahead: Key Events — Thursday 1 October 2026
- Middle East developments — Any progress on US-Iran diplomacy; Hormuz shipping and diesel supply.
- US Challenger layoffs (September) — Leading indicator ahead of Friday’s payrolls.
- US weekly jobless claims — Labour market health check.
- US ISM Manufacturing PMI (September) — First hard data for the new quarter.
- EU & UK PMIs (September final) — Gauge of European growth momentum.
- Fed speakers — Barkin, Waller, Jefferson, Bowman, Williams, Logan all scheduled.
- Micron after-hours reaction — Watch ASX tech names at the open for read-across from the AI-memory blowout.
- Oil & diesel — SPR release, export-ban headlines; Brent spread watch.