The first full day’s trading of September after Labor Day was marked by volatility and rising bond yields. Stocks on Wall Street fell, with the Dow Jones trading in a 400pt range and ending the sesion down almost 200pts. The S&P 500 dropped under the 3,900 support but managed to cling to that level by the close, sliding 0.4%. This followed a third straight weekly decline. Meanwhile the US 10yr Treasury yield rose to 3.53% at one stage during the day.  

European stock markets continued the softer tone on Wednesday morning, with the FTSE 100 100 sliding 1%, the DAX down around 0.75%. Asian shares declined, crude oil fell to its lowest since January, and the dollar index made a fresh 20-year high. 

Today: German industrial production down. UK Halifax house prices a tad firmer but signs of cooling as rates rise. Later, the Bank of Canada is expected to hike, and we hear from the Fed’s Mester, Brainard and newbie governor Barr.

Morgan Stanley out with a bearish note from the ever-downcast Mike Wilson: “We think the next several quarters will end up containing some of the most significant downward revisions to forward EPS forecasts we have seen in the past several cycles.” Hard to disagree and then you have quantitative tightening, which doubles to $95bn this month, rugging liquidity. September is often volatile and expect it to be the same. Chuck in the midterms ahead and an incredibly uncertainty macro outlook and you just think there is another leg lower to be found: bottom not in, it’s not over until the Fed stops raising rates. 

SPX: 3,900 just about holds

Dollar strength is unabated and unavoidable. Sterling’s rally fizzled and GBPUSD is back to a 1.14 handle this morning, though sellers ran out of steam before retesting Monday’s lows. EURUSD just about holds 0.99 and the yen continues to get crushed as USDJPY took out 144, the weakest for the Japanese currency in 24 years.  

GBPUSD: not quite prepared to breach the 2020 lows…resistance at 1.160. Liz Truss is set to announce plans to freeze typical household energy bills at £2,500, still higher than today but below the £3,500 being talked about next year…enough? The plan sounds like an uncapped liability…hardly the sort of thing that will drive market prices lower.