US futures are weaker after all major indexes closed at ATHs on Friday. As of 8:10am, S&P and Nasdaq futures are down 0.3%; the S&P is now notably overbought, but that may not stop the overall uptrend according to bullish analysts, with earnings expectations rising and the market betting on almost two more rate cuts this year. Pre-market, Mag7 names are lower ex-AAPL, TSLA; NVDA is -88bp dragging Semis lower as we start the week with a slight defensive tone. Bond yields are flat with the 10Y trading at ~4.13%; the USD is slightly weaker as gold hit a fresh record high above $3700 at the start of a macro-data light week which will focus on the Fed’s preferred inflation gauge release on Friday. In commodities precious metals are the upside standouts with Gold +1%, Silver +1.5% with crude flat and Ags mostly weaker. Cryptocurrency traders saw more than $1.5 billion in bullish wagers liquidated on Monday, triggering a sharp selloff that hit smaller tokens hardest. This week’s macro data is not expected to be market-moving but there are 16 Fed speakers this week including 4 today. Keep an eye on the yield curve where Jay Barry and team like tactical shorts in the 10Y, which may pressure Equities into quarter-end.
In premarket trading, Mag 7 stocks are under pressure with just TSLA and AAPL green (Tesla +0.8%, Apple +0.4%, Alphabet -0.4%, Amazon -0.3%, Meta Platforms -0.4%, Microsoft -0.6%, Nvidia -0.6%).
Amer Sports (AS) falls 6% on news that Chinese authorities launched an investigation after a fireworks show in Tibet sponsored by Amer Sport’s Arc’teryx, maker of outdoor gear, sparked a backlash on social media because of concern about the effect on the environment.
Anywhere Real Estate (HOUS) soars 46% on a pact to merge with Compass Inc. (COMP). Shares of Compass are down 12%.
Cryptocurrency-exposed stocks including Coinbase (COIN) are falling after traders saw more than $1.5 billion in bullish bets liquidated on Monday. Coinbase is down 2.7%.
ASML (ASML) ADRs are up 3% after the chip-equipment stock received a third analyst upgrade in a month, with Morgan Stanley seeing a potential cyclical recovery on the horizon.
Ionis (IONS) rises 2% after announcing that a study of zilganersen in children and adults with Alexander disease met its primary endpoint.
Kenvue (KVUE) shares are 5% lower after the Washington Post reported that the Trump administration plans to link the drug’s active ingredient to autism. Kenvue said that “independent, sound science” shows the medication does not cause autism.
MBX Biosciences (MBX) climbs 30% after the company provided topline results from its Phase 2 clinical trial of once-weekly canvuparatide for patients with chronic hypoparathyroidism.
Metsera (MTSR) is up 59% after Pfizer Inc. agreed to buy the obesity startup for an enterprise value of about $4.9 billion.
T-Mobile US Inc. (TMUS) slips 1% after saying the company will elevate its chief operating officer, Srini Gopalan, to the chief executive officer spot on Nov. 1, replacing Mike Sievert, who has held the job for nearly six years
In other corporate news, MediaTek is launching a mobile processor more capable of handling agentic AI tasks on devices, positioning to better compete with Qualcomm. BYD shares dropped after CNBC reported that Berkshire Hathaway offloaded its stake in the Chinese EV maker. Samsung Electronics shares jumped after local media reported that it won approval from Nvidia for the use of advanced memory chips.
After the Federal Reserve cut rates for the first time this year, this week’s data calendar looks thin, with Friday’s release of policymakers’ preferred gauge of underlying inflation the main item. With the central bank’s dovish stance largely shaped by a weakening labor market, next week’s payrolls report looms as the bigger catalyst, alongside the start of the earnings season next month.
“This week is overall the calmest week of the month on the macro front and with the earnings season over, markets will likely drift on hearsay and sentiment,” said Panmure Liberum strategist Joachim Klement. “Investors are increasingly bullish on the six-month outlook for US stock markets as the Fed has restarted its cuts, but we think this is a case of collective overconfidence.”
The tech sector will be in focus after Trump’s move to slap a $100,000 application fee on new H1-B visas. The fee is set to push more IT-services work offshore, or spur big price hikes for end-users.
Deutsche Bank’s strategy team wrote that pockets of exuberance are appearing as equity positioning in the US keeps climbing. Goldman’s David Kostin changed his S&P 500 target for the fifth time, raising his three-month projection to 6,800.
Bloomberg Intelligence equity strategists Gillian Wolff and Michael Casper caution that the US is entering an easing cycle “amid a troubling trend.” Inflation is hot and accelerating, a stark contrast to most major economies where consumer prices are falling. This creates a dilemma for the Fed and investors: rate cuts should support stocks but could ultimately backfire by fueling inflation — a risk that tariffs would worsen.
And speaking of easing cycles, gold soared past $3,700 an ounce as ETF inflows hit a three-year high. Silver rose to the highest since 2011. With lower rates typically boosting non-interest bearing precious metals, market bets for almost two more cuts this year — alongside haven demand from geopolitical risks and trade tensions — have fueled a rally of more than 40% in bullion for 2025.
“As the world’s oldest inflation hedge and with the Fed poised to embark on another monetary policy loosening cycle, gold is likely to remain well supported,” said Kathleen Brooks, research director at XTB Ltd.
European stocks opened in the red, pared the decline, and are now lower again. Automobile and banking shares are leading the declines dragged down by a guidance cut from Porsche as it pulls back from its EV strategy; mining and technology stocks are the biggest outperfromers. Here are the biggest movers Monday:
The Stoxx 600 basic resources sector is the best-performing sub-index on Monday, after copper gained as traders assessed the impact on global supplies from an accident in Indonesia that’s left the world’s second-largest mine suspended for two weeks
Precious-metals producers in South Africa and Europe rise, after prices for gold climbed to a new record. Flows into gold-backed exchange-traded funds hit a three-year high, with investors betting that the Federal Reserve’s rate-cutting cycle has further to run
ASML shares rise as much as 3.7% on Monday after the chip-equipment stock received a third analyst upgrade in a month, with Morgan Stanley seeing a potential cyclical recovery on the horizon
Roche shares climb as much as 2.2% after the Swiss drugmaker said its experimental drug giredestrant helped patients with a form of advanced breast cancer live longer without the disease worsening in an advanced trial
Porsche AG shares fall as much as 7.4% after the luxury carmaker cut its annual profit forecast late Friday and shelved a future battery-powered luxury SUV
Tate & Lyle shares tumble as much as 5.8%, to its lowest intraday level since April, after being downgraded by Morgan Stanley, with analysts citing higher risk attached to the ingredients company’s mid-term targets
Fugro falls as much as 13% to its lowest since 2022 as the Dutch geological data specialist withdraws 2025 guidance, citing project deferrals and cancellations
OCI shares plunge as much as 19%, slumping to a record low, after Degroof Petercam cut its price target following news Orascom Construction is considering acquiring the Amsterdam-listed provider of fertilizers and chemicals
Earlier in the session, Asian stocks rose, supported by regional tech shares and a rally in Japan, where easing concerns over the Bank of Japan’s unwinding of exchange-traded funds boosted sentiment. The MSCI Asia Pacific Index jumped 0.2%, led by gains in TSMC. Samsung Electronics shares surged the most in nearly two months, leading South Korea’s advance on a report that its chip passed Nvidia’s quality test. Apple Inc.’s suppliers in Asia climbed after the latest iPhone release was met with high shopper turnout. In Japan, traders returned to the market to pare Friday’s losses, focusing on the Bank of Japan’s century-long, very gradual plan to unwind its massive holdings of ETF holdings. Sentiment across the region also got a boost from President Donald Trump touting progress on issues with China after a highly anticipated call with Chinese leader Xi Jinping. China’s CSI 300 Index rose 0.5%.
In FX, the dollar reverses its earlier gain. Norwegian krone and Swedish krona leading G-10 currencies, Canadian dollar the laggard.
In rates, 10Y treasury yields are unchanged at 4.13% while bund yields edge lower; gilts are outperforming in bond markets, with two-year yields down about two basis points. US futures are also lower. Treasury auctions this week include $69 billion 2-year notes Tuesday, $70 billion 5-year notes Wednesday and $44 billion 7-year notes Thursday
In commodities, gold hits another record high, rising by $35 to $3,720/oz as investors bet on an extended Fed rate-cutting cycle and as flows roll into ETFs. Silver is also rising to the highest since 2011. Oil prices gain, with WTI sitting around $63/barrel and Brent just below $67. Cryptocurrencies sink following the liquidation of a series of bullish wagers.
This week’s macro data is not expected to be market-moving but there are 16 Fed speakers this week including 4 today. Friday’s personal consumption expenditures price index, excluding food and energy, is expected to slow down in August, giving the Fed more room to address labor market weakness. Traders will also parse remarks from several Fed officials, including Chair Jerome Powell on Tuesday and new Governor Stephen Miran. The speakers will likely “give their own spin on a complicated FOMC last week where the dots were a little all over the place,” wrote Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG. “The global flash PMIs tomorrow will be the other main highlight, but it’s not likely to be a major mover with most main economies seemingly fairly stable at the moment.”
Market Snapshot
S&P 500 mini -0.3%
Nasdaq 100 mini -0.3%
Russell 2000 mini -0.1%
Stoxx Europe 600 -0.2%
DAX -0.8%
CAC 40 -0.4%
10-year Treasury yield little changed at 4.12%
VIX +0.8 points at 16.26
Bloomberg Dollar Index little changed at 1197.86
euro +0.2% at $1.1764
WTI crude +0.6% at $63.04/barrel
Top Overnight News
State Street’s SPDR Gold Shares, the biggest precious-metals ETF, boosted its holdings by 607,540 ounces in the last session — valued at $2.24 billion. The fund’s total holdings surged to the highest in three years. BBG
Rupert Murdoch reportedly privately told executives working on the TikTok deal that he wanted to own a small stake in the company if an agreement could be reached, and any investment in the TikTok-US deal would come through Fox Corp: WSJ
Oracle will recreate and provide security for a new US version of TikTok’s algorithm under a planned deal that gives ownership to a consortium of American investors, a White House official said. Trump suggested Fox Chairman Lachlan Murdoch and his father Rupert will also have a role. BBG
Trump invoked a ‘golden share’ to block US Steel’s (X) plans for an Illinois plant, while Commerce Secretary Lutnick told the company’s CEO the administration would not allow Granite City production to cease, according to WSJ
Fed Governor Miran on Friday said disinflationary forces are in the works, including lower immigration, via Fox Business. He reiterated that he doesn’t see material inflation from tariffs. Monetary policy is pretty restrictive, and he warned that the longer it stays restrictive, the bigger the risk. He said comparing goods inflation this year to pre-pandemic trends is the wrong comparison. He reiterated that he will be trying to convince other Fed policymakers to cut rates faster. He said, “We are in an easing cycle”. He noted that people have been moving in the direction of thinking tariff inflation is less than previously thought, and added that folks will eventually come around to the view that tariffs will not drive up inflation.
Schumer said he is ready to meet “anytime” with President Trump to avoid a government shutdown, according to a CNN interview.
Trump said he will deliver a speech at the UN General Assembly: Fox News interview
US lawmakers set to meet with Chinese defence minister in Beijing: Pool Report
Tylenol-maker Kenvue (KVUE -4% pre) fell premarket after a WaPo report that the US plans to link the active ingredient in the OTC pain reliever to autism. Kenvue said “independent, sound science” shows taking acetaminophen does not cause autism
Republican Senators are reportedly holding early discussions about altering Affordable Care Act (ACA) tax credits to allow for subsidies to be extended beyond the end-2025 expiry, via Axios.
Pfizer is closing in on a potential $7.3 billion takeover of anti-obesity startup Metsera. Metsera shares surged premarket (MSR +56% premkt) .
India’s trade chief Piyush Goyal heads to the US today seeking a “mutually beneficial” deal, though talks may be complicated by Russian oil ties and the new H-1B’s visa fee. BBG
China kept its benchmark lending rates unchanged for the fourth consecutive month in September, in line with market expectations, following the central bank’s decision to hold a main policy rate steady last week. RTRS
North Korea’s Kim Jong Un said there was no reason to avoid talks with the U.S. if Washington stopped insisting his country give up nuclear weapons, but he would never abandon the nuclear arsenal to end sanctions, state media reported on Monday. RTRS
Switzerland is offering to buy more American weapons and energy products and make more investments in the US, in a fresh push to persuade the Trump administration to lower its tariffs on Swiss imports. FT
Venezuelan President Nicolás Maduro wrote directly to Donald Trump this month to call for talks with the US to defuse tensions. In the letter dated Sept. 6, the socialist leader said that his government “has consistently sought direct communication to address and resolve any issue that arises between our two governments.”
Trade/Tariffs
US House lawmakers made a rare visit to China on Sunday in an effort to stabilise ties, according to Nikkei. “The visit on Sunday was the first House of Representatives delegation to visit China since 2019”.
US President Trump reportedly withheld approval of over USD 400mln in military aid to Taiwan this summer while seeking a trade deal and possible summit with Chinese President Xi Jinping, according to Washington Post sources.
US President Trump said “we made progress with China on several important issues” and said “we will not allow anything bad to happen to the TikTok app”.
China’s Commerce Ministry said its position on the TikTok issue is clear, adding that the government respects the will of enterprises and welcomes companies to conduct business negotiations based on market rules. The ministry said it hopes the US will work together with China to fulfil its commitments earnestly, and provide an open, fair, just, and non-discriminatory business environment for Chinese companies, including TikTok, to continue operating in the US. It added that China hopes the US will work with it to promote stable, healthy, and sustainable development of China-US economic and trade relations, according to Reuters.
EU is set to block big tech companies from a new financial data sharing system, according to FT.
South Korean President Lee said South Korea will face a financial crisis if it agrees to US demands on USD 350bln investments, according to comments made to Reuters; South Korea and the US are at odds over the investment. South Korean President Lee aims to resolve the US-South Korea tariff issues as soon as possible. The Hyundai US plant raid will not damage the alliance with the US.
South Korea, US, and Japan’s leading diplomats plan to meet in New York this week, according to Yonhap.
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mixed after sentiment from Wall Street initially reverberated to the region before dissipating. Chinese markets failed to benefit from the phone call between US President Trump and Chinese President Xi on Friday, with some citing a lack of concrete progress. ASX 200 was lifted by the metals and mining sector, with gold names spearheading the upside following the recent rise in the yellow metal, offsetting underperformance in energy names. Nikkei 225 was boosted at the open amid a softer JPY and as the index digested Friday commentary from BoJ Governor Ueda, with the BoJ’s surprise ETF and J-REIT selling seen as too incremental to impact markets. Focus now turns to the LDP election as the 12-day official campaign period began ahead of the October 4th polls. KOSPI was supported amid Samsung Electronics shares surging ~5% after clearing the NVIDIA hurdle for 12-layer HBM3E supply. Hang Seng and Shanghai Comp initially bucked the trend and failed to benefit from upbeat mood elsewhere, with traders unconvinced despite the “productive” Trump-Xi call, although the mainland later eked mild gains. Meanwhile, US lawmakers made a rare visit to China on Sunday in an effort to stabilise ties. Overnight, the PBoC maintained its LPRs as expected and injected CNY 300bln via 14-day reverse repo after an eight-month hiatus. In Hong Kong, participants brace for a “Super” typhoon with Hong Kong airport weighing a 36-hour closure, according to Bloomberg. Nifty 50 fell at the open with losses attributed to US President Trump’s H-1B visas update. India is said to be the primary beneficiary of H-1B visa which allows US employers to hire foreign workers in “speciality occupations”.
Top Asian News
Japanese PM candidate Takaichi is the top pick to lead LDP with 28.3%, according to an FNN Poll.
Japanese PM contender Koizumi said it is important for the government and the BoJ to move in lockstep in achieving price stability and economic growth, according to Reuters.
Japanese PM contender Hayashi said the BoJ is conducting monetary policy in a way that does not deviate much from government thinking, adding that Japan’s past aversion to a strong JPY has diminished. He said a weak yen, coupled with rising oil costs from the Ukraine war, has caused cost-push inflation. Hayashi said if chosen as prime minister, he will compile an economic package to cushion the blow from rising living costs and provide spending for disaster relief, adding that the size of the package must take into account Japan’s ‘quite small’ output gap and avoid the issuance of deficit-covering debt, according to local media.
Japanese LDP leadership candidate Takaichi says she won’t rule out cutting sales tax on food as an option.
Japanese LDP leadership candidate Koizumi says is open to discussing options for sales tax.
RBA Governor Bullock said since the August meeting, domestic data have been broadly in line with expectations, or slightly stronger. She noted that recent interest rate cuts are expected to support household and business spending. While labour market conditions have eased a little with the unemployment rate rising slightly, some tightness remains, and conditions are close to full employment. Bullock said the economic outlook continues to be clouded by uncertainty, though recovery in household consumption growth is forecast to be sustained as real incomes grow. She warned there is a risk the recent pick-up in domestic activity is not sustained, but monetary policy is well placed to respond if international developments have a material impact. She added there may be more excess demand in the economy and stronger-than-expected labour outcomes. The board will remain attentive to data and evolving risks, and must be alert to changing circumstances and prepared to respond if necessary, according to the RBA. Bullock noted there is scope for rate adjustments if there is a downturn in the global economy, adding she is more confident that inflation will stay within the RBA’s band.
Indian PM Modi said he will accelerate the country’s growth story with GST reforms, according to his national address.
Hong Kong’s weather forecaster will issue the No 1 standby signal at 12:20pm local on Monday and consider upgrading it to the No 3 alert later in the evening as Super Typhoon Ragasa moves towards the city at a “relatively high” speed, according to SCMP.
Hong Kong airport weighs 36-hour closure as super typhoon nears, according to Bloomberg.
PBoC injected CNY 240.5bln via 7-day reverse repos with the rate maintained at 1.40%; PBoC injected CNY 300bln via 14-day reverse repo following an eight-month hiatus; conducted through fixed-volume, interest-rate bidding with multiple-price allocation.
PBoC Governor Pan says China has ensured there are no systemic financial risks. Press conference will not involve short term policy adjustment. Domestic financial system is sound. Pledges support for high-quality economic growth. Local government financing platform debt fell over 50% versus 2023 levels. Will strengthen monitoring and early warning of financial risks. Plans to strengthen measures against financial corruption.
PBoC Governor Pan says China will use various policy tools based on economic situation and will be data driven; Have “appropriately accommodative policy stance”
China’s Financial Regulator says efforts to prevent risk have seen important results attained. Number of high risk institutions and assets are well off peak levels, this will continue to moderate. Number of high-risk institutions set to decline further. Pledges to establish more transparent foreign exchange management mechanisms. Risks from small banks have been brought under control. Supports resolution of local government debt risks. Notes significant improvement in investor confidence and market expectations.
China Securities Regulator Head says “will improve mechanisms for stock listing and M&A; will strictly supervise market”.
Alibaba (BABA/9988 HK) is to offer commission and shipping to brands on Amazon (AMZN), according to Bloomberg.
European bourses (STOXX 600 U/C) opened mostly in the red, and then moved lower soon after the European cash open despite a clear driver, but alongside a broader slip in sentiment across markets. However, that downside has since pared, with some indices managing to climb back into the green. Some traders may focus on the lack of concrete progress between US President Trump and Chinese President Xi, following their call on Friday. European sectors were split down the middle but have followed benchmarks lower, with a very broad breadth to the market thus far. Basic Resources is by far and away the outperformer today, boosted by the continued strength in spot gold, which has made yet another ATH. Mining names such as Fresnillo (+4%), Rio Tinto (+2%) and Anglo American (+1%) all move higher. Tech follows in second place, albeit with gains of a much lesser magnitude. Strength which can be attributed to upside seen in ASML (+2.5%), which has been boosted following a broker upgrade at Morgan Stanley to Overweight from Equal Weight; its PT was also boosted to EUR 950 (prev. EUR 600). Autos is in last place, and by far the clear underperformer today. Pressure in Porsche SE (-5.2%) is driving the downside in the sector after the Co. cut guidance citing EV-launch delays and increased costs due to a revamp to its production lineup; Porsche AG (-6%) and Volkswagen (-6.5%) move lower as a result.
Top European News
ECB’s Kazaks said there will be plenty of data available at the December meeting, adding that the central bank has achieved its 2% goal and there is no need to hurry the next interest-rate shift, according to Bloomberg.
ECB’s Simkus said a December rate cut is needed to safely reach 2% inflation, according to Bloomberg.
France’s sovereign debt rating downgraded to AA by Morningstar DBRS
Italy’s sovereign debt rating upgraded to BBB+ from BBB at Fitch
European Commission President von der Leyen said she isn’t considering running in Germany’s 2027 presidential election, according to a newspaper interview published on Sunday.
Multiple European airports have said a suspected cyber attack has impacted them, according to Sky News.
Stellantis (STLAM IM/STLAP FP) said they detected unauthorised access to a third-party service provider’s platform that supports North American customer service operations; the company is notifying the appropriate authorities and informing affected customers, according to the company.
ECB Blog: Consumer expectations and actions during the recent trade tensions; “consumers expect tariffs to adversely affect inflation, household finances and economic growth”. “In response to tariff-related concerns, consumers are altering their spending habits in notable ways. Approximately 26% of respondents reported switching away from US products, while around 16% indicated that they have reduced their overall spending”.
BoE’s PRA has today announced proposals to reduce regulatory requirements for banks by deleting 37 individual reporting templates.
FX
DXY has kicked the week off on the back foot after the post-FOMC gains seen in the second half of last week. FOMC officials will come thick and fast at the start of this week with today’s agenda including voters Williams & Musalem, non-voters Hammack & Barkin and dovish-dissenter Miran. DXY briefly eclipsed Friday’s peak at 97.80, topping out at 97.82 before pulling back in early European trade.
EUR is a touch firmer vs. the USD with incremental macro drivers for the Eurozone lacking since the ECB policy announcement earlier in the month. Over the weekend, ECB’s Kazaks and Simkus gave remarks with the former noting there will be plenty of data available at the December meeting and the latter stating that a December rate cut is needed to safely reach 2% inflation. There has been little follow-through from Morningstar DBRS’s downgrade of France on Friday or Fitch’s upgrade of Italy. EUR/USD briefly dipped below Friday’s trough at 1.1728 before fading downside and moving back above the 1.1750 mark.
JPY is currently flat vs. the USD after a brief foray above the 148 mark overnight, which saw the pair top out at 148.37; highest level since September 8th. Domestic focus has shifted from the BoJ to the LDP election. The latest poll suggested that dovish Japanese PM candidate Takaichi is the top pick to lead the LDP with 28.3%, according to FNN Poll. Modest JPY weakness was seen before the poll was released to Western wires. Since, Takaichi has remarked that she won’t rule out cutting sales tax on food as an option, whilst second-place Koizumi, who is seen to be more fiscally prudent, says he is open to discussing options for sales tax.
GBP is attempting to atone for Friday’s selling pressure, which was brought about by the dreadful public sector borrowing data for August. Fresh UK newsflow has been lacking over the weekend, however, markets are awaiting comments from BoE Chief Economist Pill at 1.30pm London time, followed by Governor Bailey at 7pm. Cable briefly breached the 1.35 mark but has been unable to make a meaningful move above the level. Friday’s high is still some way off at 1.3559.
Antipodeans both are broadly steady vs. the USD. AUD showed little reaction to RBA Governor Bullock’s overall balanced remarks, highlighting increased uncertainty, while she noted scope for rate adjustments if there is a downturn in the global economy. Upticks in the AUD were seen after China pledged tighter controls on steel sector capacity, with iron ore and steel prices also supported.
PBoC set USD/CNY mid-point at 7.1106 vs exp. 7.1159 (Prev. 7.1128)
Fixed Income
USTs are marginally firmer, though very much at the low-end of the post-Powell range, which modest support gleaned from the weak start to the European week. However, as sentiment has picked up off worst this morning, fixed income has remained robust and continues to gradually inch higher. USTs are at the upper-end of a 112-22 to 112-27+ band. A slew of Fed speakers are due, including Miran’s formal dissent speech is scheduled to be published today.
Bunds are steady. Underpressure in APAC trade despite the numerous geopolitical updates and mixed tone, with benchmarks continuing the downward trajectory that has been in play since the latter half of last week post-Powell. Specifics for the bloc thus far a little light. Largely awaiting PMI data later in the week. A few points of note in an ECB bulletin this morning, writing that “consumers who view tariffs as inflationary have adjusted their inflation expectations upward” and consumers are altering spending habits due to tariff concern, pivoting from the US and reducing spending. Bunds marginally firmer in a 128.01 to 128.35 band, taking out last week’s 128.16 base and looking to 127.82 from the last week of August for support. Supply from the EU due shortly, EUR 6bln to be sold across three lines.
Gilts are firmer by a handful of ticks. Domestic press remains focussed on the deputy contest and the mood music around PM Starmer, as the US state visit moved into the rear view and focus more generally returns to the Autumn Budget. Today, a contained to slightly firmer start which is very much in-fitting with the above peers. Gilts are just about in the green in 90.60 to 90.78 parameters; the low point takes out last week’s 90.65 base and we now look to 90.31 and 90.22 before the 89.36 contract low from the first week of September.
Commodities
Crude was initially firmer by c. USD 0.60/bbl after a weekend of geopolitical newsflow. More recently, benchmarks have moved into the red and are at the lower end of USD 62.23-63.00/bbl and USD 66.53-67.31/bbl parameters for WTI and Brent respectively. Initially unreactive to the recent bout of USD pressure and slight recovery in the European equity risk tone; however, as the European morning progressed the complex has trimmed notably. Geopolitical focus has been on Estonia triggering NATO Article 4; in the Middle East, Israel is said to be considering annexing the West Bank to some degree.
Spot gold benefits from the heightened geopolitical environment. Experienced a modest jump in the European morning as the general risk tone deteriorated from the mixed APAC handover. As a reminder, much of the overnight focus was on the Xi-Trump call, described as disappointing by some. Despite the mentioned slight recovery in sentiment, the yellow metal continues to inch higher (similar action seen in Fixed), at a USD 3722.56/oz peak and at yet another ATH.
Copper was contained in APAC trade with initial modest gains fading as the tone in China deteriorated as the leaders’ call was digested, and into a meeting with Chinese regulators. The readout started with the PBoC Governor saying the briefing would not involve any short term policy adjustment. For the first part of the morning, 3M LME Copper didn’t move significantly from the unchanged mark, however, the slight recovery in the European risk tone/US pre market has been sufficient to lift the base metal back above the USD 10k handle.
The Iraqi Petroleum Marketing Authority said it has increased its oil exports after a gradual end to voluntary production cuts within the framework of the OPEC Plus deal, according to Iran International.
NHC said a new tropical storm has formed south of Mexico, which is expected to remain offshore and intensify, according to Reuters.
Chilean state copper miner Codelco said its biggest mine will take longer to return to full production following a deadly tunnel collapse in July, according to El Mercurio.
China pledged tighter controls on steel sector capacity and will ban new production capacity in the industry, according to state media CCTV.
Geopolitics: Russia/Ukraine
On September 21st, Germany’s air force said it sent two fighter jets to track a Russian plane flying over the Baltic Sea, according to Sky News.
Russian Defence Ministry said Russian fighters did not violate Estonian airspace, according to Reuters.
The United Nations Security Council (UNSC) will meet on Monday at Estonia’s request to discuss the violation of the Baltic country’s airspace by Russian fighter jets on Friday, according to a statement.
US President Trump said the US will help defend Poland if Russia continues escalating, according to a Fox Interview. Trump, when asked about Russian jets in Estonia, said “we don’t like it”.
British Defence Minister said Typhoon aircraft carried out their first air defence missions over Poland, according to a statement on Sunday.
Ukraine’s President Zelensky said they are closer to finalising the 19th sanctions package and he expects its approval soon. He added that Ukraine will quickly synchronise the package domestically and expressed gratitude that many of Ukraine’s proposals were taken into account in the EU sanctions package. Zelensky also said he now expects strong sanctions steps from the United States on Russia, according to his X post.
US President Trump urged Europe to “stop buying oil” from Russia ahead of new US economic pressure on Moscow, adding that the US won’t let Europeans buy Russian oil much longer, according to Bloomberg.
Russian Defence Ministry said a Ukrainian drone attack on a resort area in the Crimean peninsula killed two people and injured 15, according to Reuters.
A Ukrainian SBU official said Ukrainian drones hit oil pumping stations involved in Russian oil exports via the Novorossiysk port, according to Reuters.
Geopolitics: Middle East
An Israeli official has told Sky News a full or partial annexation of the West Bank is being considered in response to the UK’s formal recognition of Palestinian statehood. Israeli media reported that the Israeli army is preparing for the possibility of an escalation of the conflict in the West Bank, according to Iran International.
UK, Canada, Portugal, and Australia recognised Palestine as an independent state, according to the BBC.
Israel “categorically rejects” the UK and other countries’ unilateral recognition of a Palestinian state, according to the Foreign Ministry.
Palestinian Authority Foreign Minister said a two-state solution is possible, according to Iran International.
Israeli military said it killed a Hezbollah member in southern Lebanon, adding that as a result of the attack, a number of citizens were killed. The military said it regrets any harm to civilians and is working as much as possible to minimise harm to them, according to Reuters.
US President Trump plans to meet with Arab leaders on Tuesday to discuss the Gaza war, according to Axios.
“The Lebanese newspaper Al-Akhbar quotes senior Egyptian officials as saying that although Egypt has shown indirect readiness for the possibility of a military confrontation with Israel”, via Kan’s Kais on X.
Geopolitics: Other
South Korean President Lee said South Korea does not believe any concrete discussions are happening between the US and North Korea. Russia-North Korea military cooperation is a significant threat to South Korea and must be addressed with dialogue. He added that dialogue with North Korea will likely be difficult for the time being. South Korea risks being on the frontier of conflict and must find peaceful coexistence with North Korea, Russia, and China.
North Korea leader Kim Jong Un said the concept of denuclearisation for the country is no longer valid, via KCNA, adding that North Korea will never give up its nuclear force. He added they will never sit down with South Korea, and that he still has good memories of US President Trump, but there is no reason to sit down with the US until it gives up its insistence on denuclearisation.
US President Trump said that on his orders, the Secretary of War authorised a lethal kinetic strike on a vessel in the USSOUTHCOM area of responsibility. He said intelligence confirmed the vessel was trafficking illicit narcotics, and the strike killed three males. Trump added that no US forces were harmed and that the vessel was in international waters, according to Reuters.
US President Trump said that if Afghanistan does not give the Bagram airbase back to the US, bad things are going to happen, according to Reuters.
US Event Calendar
8:30 am: Aug Chicago Fed Nat Activity Index, est. -0.16, prior -0.19
Fed Speakers
9:45 am: Fed’s Williams Speaks on Monetary Policy Panel
10:00 am: Fed’s Musalem Speaks of Economic Outlook and Monetary Policy
12:00 pm: Fed’s Hammack Speaks on Reserve Banks and the Economy
12:00 pm: Fed’s Barkin Speaks at Howard Co Chamber
12:00 pm: Fed’s Miran Speaks at The Economic Club of NY
DB’s Jim Reid concludes the overnight wrap
The data highlight this week will be Friday’s US core PCE deflator which should print softer than feared a few weeks ago given the recent inputs from other inflation releases. Perhaps the main events outside of this will be a series of Fed speakers who can give their own spin on a complicated FOMC last week where the dots were a little all over the place. Our economists tried to work out who was who in the latest dot plot here: “Who’s who in the Fed’s latest dot plot?”. The global flash PMIs tomorrow will be the other main highlight but its not likely to be a major mover with most main economies seemingly fairly stable at the moment.
Friday’s personal income (+0.3% DB est. vs. +0.4% last) and consumption (+0.5% vs. +0.5%) data will include the all-important core PCE deflator which DB expects to come in at a relatively tame +0.22% vs. +0.27% last time. Thursday sees the final print on Q2 GDP (3.3% final vs. 3.3% prelim) and will also feature the annual update to the national accounts in which the BEA incorporates more complete and detailed source data covering the prior five years, allowing for revisions. So, another chance for history to be rewritten. Other notable US releases will include tomorrow’s existing home sales; Wednesday’s new home sales; Thursday’s durable goods orders, and the advanced trade balance; and Friday’s University of Michigan consumer sentiment index.
In terms of those Fed speakers this week, we’ll highlight the current voters. Today kicks off with Williams who should mirror the views of Powell last week. Musalem will also give an outlook speech later and new Governor Miran will be on the tapes with his thoughts likely to be fascinating to hear. Tomorrow, Chair Powell will give an outlook speech which will likely be similar to his FOMC rhetoric. Governor Bowman will also speak. Thursday sees Goolsbee, Williams, Governors Bowman and Barr, and Daly who votes next year. Governor Bowman also speaks on Friday. As our economists also point out, the Supreme Court has asked Governor Cook to respond by Thursday to President Trump’s appeal, which seeks to overturn lower court rulings preventing her immediate removal from office. Mr Trump will likely be in the news earlier in the week as he addresses the 80th UN General Assembly in New York tomorrow. We’ll also get a better idea of where we are with US exceptionalism on Friday with the Ryder Cup starting in New York. It will also be interesting to see the reaction from corporate America to Trump’s weekend plans to impose a $100,000 application fee for the widely used H-1B visa for foreign workers in speciality occupations. It’s caused a huge amount of uncertainty over the weekend for those that rely on it.
Outside of the US, Sweden (tomorrow) and Switzerland (Thursday) central banks are meeting with markets pricing in a 30% chance of a cut from the Riksbank, but with only a 4% chance for the SNB. A cut for the Swiss would lead the country back into negative rate territory if it did happen. Staying in Europe, sentiment gauges out include the Ifo survey in Germany on Wednesday as well as consumer confidence across major European economies, including Germany and France on Thursday.
Elsewhere, rounding out notable data releases, highlights include the Tokyo CPI for September in Japan and the July GDP report in Canada both on Friday, as well as the August CPI in Australia on Wednesday. For the Tokyo CPI, our Chief Japan economist sees an acceleration in core inflation ex. fresh food to 2.8% YoY (2.5% in August) and a slowdown in core-core inflation ex. fresh food and energy to 2.9% (3.0%). See his full week ahead here, including the details around the LDP presidential election campaign that has officially kicked off today. See the day-by-day calendar at the end as usual for the full week ahead.
Asian equity markets are largely comfortably higher with China risk the exception. Japanese stocks are seeing a significant recovery after Friday’s post BoJ declines, with the Nikkei (+1.33%) leading the bounce back after the central bank stated its intentions to commence the reduction of its substantial ETF holdings at the end of last week. The KOSPI (+0.43%) is being buoyed by a notable rise in index leader Samsung Electronics, which is currently up around +4.0% after various reports indicated that it had received NVIDIA’s endorsement to provide advanced memory chips to the AI giant. Mainland Chinese markets are fairly flat, while the Hang Seng (-0.95%) is experiencing a decline due to ongoing profit-taking in local technology stocks. S&P 500 (-0.07%) and NASDAQ 100 (-0.04%) futures are a touch lower with 10yr USTs +1.7bps higher at 4.145% as I type and closing back in on the pre-payrolls level of around 4.16%.
Recapping last week now, US equities continued to surge ahead, with the S&P 500 up +1.22% (+0.49% Friday), the Nasdaq up +2.21% (+0.72% Friday), and the Magnificent 7 up +3.57% (+1.24% Friday) reaching new all-time highs. Stocks were buoyed by strong tech performances and renewed Fed easing, with Friday’s rally also supported by President Trump’s statement about meeting Chinese President Xi Jinping at the APEC summit at the end of October. Intel led the week’s tech rally, up +22.84% after Nvidia’s $5 billion investment. Among the Mag-7, Alphabet (+5.78% on the week; +1.07% Friday) became the 4th company to reach a $3trn valuation, while Tesla advanced +7.61% (+2.21% Friday) after Elon Musk purchased around $1bn worth of shares.
Other risk assets also benefitted, with US IG credit spreads ending the week at 72bps, their tightest since 1998. And Gold reached another an all-time high mid-week before closing just below it at $3,685/oz (+1.16% on the week).
Central bank action was in focus with the Fed delivering an expected 25bps cut, with the median dot expecting another 50bp of cuts by year-end. However, Chair Powell characterized the move as a “risk-management cut” and signalled a “meeting-by-meeting situation”, leaving investors less confident on the extent of the renewed easing cycle. Treasury yields moved higher across the curve, with the 2yr yield up +1.5bps (+0.8bps Friday) to 3.57%, while the 10yr was up by a larger +6.1bps (+2.2bps Friday) to 4.13%. Also driving the Treasury sell off were solid US data releases. Retail sales were up +0.6% in August (vs. +0.2% expected) and industrial production rose +0.1% (vs. -0.1% expected). Meanwhile, weekly initial jobless claims fell to 231k (vs. 240k expected), more than reversing the previous week’s sharp jump to 264k.
Over in Europe, the Bank of England kept the policy rate at 4% as expected, maintaining their forward guidance of a “gradual and careful approach” on further easing and voted to slow the pace of QT over the coming year. 10yr gilt yields ended the week +4.4bps higher (+3.9bps Friday). Elsewhere in Europe the 10yr bund yield rose +3.2bps (+2.2bps Friday), while OATs underperformed (+4.8bps on the week) as investors doubted the political prospects of passing a budget. European equities saw a muted week, with the Stoxx 600 (-0.13%) and the DAX (-0.25%) inching lower while the CAC saw a modest gain (+0.36%).
Elsewhere, Bank of Japan kept their policy rate at 0.5%, but the decision saw a split vote with two board members supporting a hike. That led to a large sell-off of Japanese government bonds, where the 2yr yield climbed +4.9bps (+3.3bps Friday) to 0.91%, the highest since 2008, and the 10yr yield was up +5.1bps (+4.1bps Friday) to a post-2008 high of 1.64%.
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