US stocks closed lower, putting the recent rally on standby for now. The sector breakdown saw Energy outperform amid a rebound in crude prices.
Fed Chair Powell said downside risks to employment shifted the balance of risks, prompting last weekʼs rate cut, which he described as another step towards a more neutral policy stance.
T-notes flattened following Powell’s reiteration; Fed chair reiterating that the economy faces a challenging situation, near-term inflation risks were tilted to the upside, while employment risks were tilted to the downside.
The Dollar Index was slightly lower, weighed down by strength in JPY, CHF, and EUR. S&P Global PMIs largely met expectations in September, resulting in a very muted reaction across markets.
Looking ahead, highlights include Japanese PMI (Sep), Australian CPI (Aug), German Ifo Survey (Sep); Supply from Australia, Italy, UK, Germany, US; Speeches from BoEʼs Greene, Fedʼs Daly
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US TRADE
US stocks closed lower, putting the recent rally on standby for now. The sector breakdown saw Energy outperform amid a rebound in crude prices; meanwhile, Consumer Discretionary and Technology lagged. NVIDIA (NVDA, -2.8%) pared some of Monday’s upside on the OpenAI deal, which was the biggest weight contributing to SPX’s 0.6% and NDX’s 0.7% decline, followed by Amazon (AMZN, -3%).
SPX
Click here for a detailed summary.
NOTABLE HEADLINES
Fed Chair Powell said downside risks to employment shifted the balance of risks, prompting last week’s rate cut, which he described as another step towards a more neutral policy stance; he stressed that with two-sided risks there is no risk-free path and policy is not on a preset course, while the stance remains modestly restrictive and well-positioned to respond to developments; he noted economic growth has moderated with rising downside risks to jobs, consumer spending has slowed, and businesses say uncertainty weighs on the outlook; he said inflation has risen and remains somewhat elevated, with August PCE likely at 2.7% and core PCE at 2.3%, both up from a year earlier and driven by goods prices reflecting tariffs rather than broad pressures, adding that tariff-driven effects should be short-lived while services disinflation continues and long-term expectations remain consistent with 2%; he described the labour market as less dynamic and somewhat softer, with an unusual decline in both supply and demand for workers; he warned tariff increases will likely show up as higher inflation over several quarters but pledged to prevent a one-off price jump from becoming ongoing inflation; and he emphasised that at a time when public trust in institutions is challenged, those in public service must focus tightly on their critical missions, according to Reuters.
Fed Chair Powell (Q&A) said that towards the next meeting on October 29th the Fed will look at labour market, growth, and inflation data to assess if policy is in the right place, and if not, it will be moved; he noted the policy path is difficult and involves compromise, stressing the Fed must weigh both goals equally and adopt a policy that covers a range of plausible outcomes. Click here for the full headline.
Fed Vice Chair of Supervision Bowman said an inflation target range works for other central banks, according to Reuters.
Fed’s Bostic (2027 voter) said the new Fed policy framework is valid in multiple circumstances, that he would be open to using an inflation target range and could back one of 1.75–2.25% in the future, and that the FFR is the primary tool; he warned inflation should be a concern given its persistence above target, said businesses are facing cost pressures but have limited ability to pass them on, and expects further inflationary pressures ahead; he stressed continued vigilance on price trends, warning elevated inflation may trigger severe economic repercussions; he added that it is currently difficult to interpret labour market conditions, with businesses reporting they are neither hiring nor firing given the uncertainty, according to Reuters.
Former St. Louis Fed President Bullard suggested a potential rate cut could be considered for October and up to 100bps of cuts by Q1 following last week’s 25bps reduction, argued against whipsaw-related policy to avoid uncertainty, and praised new Governor Miran as a strong economist with compelling arguments, according to CNBC.
Fed’s Goolsbee (2025 voter) said the US remains in a “low hiring, low layoffs” phase with jobs showing stability as the labour market cools modestly, highlighted shifting supply dynamics amid migration changes, stressed the need to get inflation to 2%, said the current stance is mildly restrictive with rates exceeding neutral by 100–125bps, noted rates could fall significantly once stagflation concerns subside, cautioned against getting too aggressive, and said interest rates may stabilise at 3% once inflation returns to 2%, which he deemed acceptable, according to Reuters.
Fed’s Bowman (2025 voter) backed last week’s 25bps cut but stressed the Fed must now proactively support the jobs market, warning it may be behind the curve on labour weakness; she said policy may need to adjust further if risks materialise, the reduction was a first step towards a more neutral rate if the economy evolves as expected, and warned businesses could begin layoffs if demand does not improve; she added tariff effects will fade, inflation is otherwise near target, expressed concern that housing weakness could lead to a decline in values, and sees three cuts total for 2025, according to Reuters.
US President Trump said the economy is strong, the stock market is at highs, and workers’ wages are rising, and reiterated that Iran can never have a nuclear weapon, according to Reuters.
US President Trump’s administration proposed a new H-1B visa system favouring higher-skilled and better-paid workers, according to Reuters.
US President Trump posted “I have decided that no meeting with their Congressional Leaders could possibly be productive,” adding “To the Leaders of the Democrat Party, the ball is in your court”, according to Truth Social.
House Democrats will meet on September 29th in Washington, D.C. to discuss government funding, according to Bloomberg.
BoC Governor Macklem said President Trump’s attempts to influence the Fed are raising questions about the continued independence of US monetary policy, while Trump’s “Liberation Day” tariffs have called into question the USD’s safe-haven role; he noted that for many investors the value of the USD as a hedge has been dented, raising the question of whether US dominance in global financial flows will ebb, though he suspects the USD will remain the global reserve currency for the foreseeable future. BoC Governor Macklem said he thinks the Bank will get back to a baseline forecast in the MPR and that the BoC will need to start being more forward-looking again, according to Reuters.
Micron (MU) Q2 2025 (USD): Adj. EPS 3.03 (exp. 2.86), Revenue 11.32bln (exp. 11.21bln). Adj. net income 3.469bln (exp. 3.158bln).Outlook: Q1 EPS 3.75 (exp. 3.07). Q1 revenue 12.5bln (exp. 11.87bln).
DATA RECAP
US S&P Global Manufacturing PMI Flash (Sep) 52.0 vs. Exp. 52.0 (Prev. 53)
US S&P Global Services PMI Flash (Sep) 53.9 vs. Exp. 54.0 (Prev. 54.5)
US S&P Global Composite PMI Flash (Sep) 53.6 (Prev. 54.6)
US Rich Fed, Services Index (Sep) 1.0 (Prev. 4.0)
US Rich Fed Comp. Index (Sep) -17.0 (Prev. -7.0)
US Rich Fed Mfg Shipments (Sep) -20.0 (Prev. -5.0)
TARIFFS/TRADE
US President Trump said he looks forward to continuing to work closely with Argentina’s President Milei and endorsed him for re-election, according to Truth Social.
US President Trump said he agreed to meet Brazilian President Lula next week and described the conversation as positive, according to Reuters.
US President Trump said trade should be reciprocal and described tariff measures as a defensive mechanism, according to Reuters.
FX
The Dollar Index was slightly lower, weighed by strength in JPY, CHF, and EUR. S&P Global PMIs largely met expectations in September, resulting in a very muted reaction across markets.
G10FX price action was generally muted across dollar pairs. The Euro was marginally higher following mixed PMI reports out of Europe; Services and Manufacturing deteriorated more than expected in France, amid the sharpest weakening in economic activity since April.
The Riksbank surprised markets with a 25bps cut, despite expectations for rates to remain at 2.0%. The central bank argued that new information has given further reassurance regarding the assessment that the high inflation is transitory, for example, companies’ pricing plans have declined, and the krona has strengthened.
In the UK, the Flash Composite PMI reading for September fell more than expected to 51.0 (exp. 53.0, prev. 53.5), weighed by steeper declines in the Manufacturing and Services components.
FIXED INCOME
T-notes flattened following Powell reiteration; Fed chair reiterating that the economy faces a challenging situation, near-term inflation risks were tilted to the upside, while employment risks were tilted to the downside.
Italy to sell up to EUR 8.75bln in bonds on September 26th, via auction.
UK sold GBP 1.5bln 5.375% 2056 Gilt: b/c 3.07x, average yield 5.476%, tail 1.4bps.
Germany sold EUR 3.601bln vs exp. EUR 4.5bln 1.90% 2027 Schatz: b/c 1.8x (prev. 2.0x), average yield 2.01% (prev. 1.96%) & retention 19.98% (prev. 21.07%).
US sold USD 69bln of 2yr notes, stops-through 0.1bpsHigh Yield: 3.571% (prev. 3.641%, six-auction average 3.847%); WI 3.572%: Tail -0.1 (prev. -1.5bps, six-auction avg. -0.5bps), Bid-to-Cover: 2.51x (prev. 2.69x, six-auction avg. 2.61x), Dealers: 11.49% (prev. 9.7%, six-auction avg. 11.3%), Directs: 30.77% (prev. 33.2%, six-auction avg. 27.3%), Indirects: 57.75% (prev. 57.1%, six-auction avg. 61.4%)
COMMODITIES
Oil prices gained following reports that Russia is considering extending its gasoline export ban.
Russia’s Primorsk port continues to load oil with delays, according to Reuters.
Russia is reportedly considering an extension to the gasoline export ban, according to Ifx.
US President Trump criticised renewables, calling them “a joke”, said there are huge amounts of oil yet to be discovered in the North Sea, and predicted gas prices will be much lower in one year, according to Reuters.
GEOPOLITICAL
NATO
US President Trump said NATO countries should shoot down Russian aircraft if they enter NATO airspace, and when asked if the US would support such action, he said it depends on circumstances; he added that he thinks Hungarian leader Orban will stop buying Russian oil, and commented that “we don’t know exactly what happened in Denmark,” according to Reuters.
US President Trump thinks Ukraine, with the support of the EU, is in a position to fight and win all of Ukraine back in its original form, via Truth Social.
US President Trump criticised NATO nations over their continued reliance on Russian energy purchases, urged European nations to implement identical measures against Russia for tariffs to be effective, said Europe must immediately halt all Russian energy purchases, and added he will discuss the matter with Europe today, according to Reuters.
The Kremlin said time is short and allowing the nuclear treaty with the US to expire would be fraught with risks for international security, adding it is not yet clear when President Putin and US President Trump will speak again; it warned that if the US does not agree to extend nuclear treaty limits for a year, measures will have to be taken, according to Reuters.
NATO’s North Atlantic Council said Russia’s jet incursion into Estonia is part of a “wider pattern of irresponsible Russian behaviour” and said Russia “must stop” its air violations; NATO’s Secretary General added recent Russian actions are either intentional or “blatant incompetence”, according to Reuters.
Polish Prime Minister Tusk said border crossings with Belarus will be reopened, according to Reuters.
European Commission President von der Leyen, when asked about when Europe can stop buying Russian oil, said Europe has done a lot though some purchases continue, and reiterated the goal to end them by year-end, according to Reuters.
MIDDLE EAST
There was nothing in the E3/EU-Iran meeting that made a snapback less likely, according to WSJ’s Norman citing sources.
US President Trump said Hamas is rejecting reasonable peace offers, that the Gaza war needs to be stopped immediately, and that he wants all the remaining hostages released in one go, according to Reuters.
Iran’s Supreme Leader Khamenei will address the nation on Tuesday 23rd at 20:00 ET, according to Reuters.
Iran’s Supreme Leader Khamenei said negotiations with the US are a dead-end, that Iran does not need nuclear weapons and does not intend to produce them, and that the nation will not surrender to pressure regarding uranium enrichment, which the Iranian people will not accept at zero; he stressed that negotiations with the US in the present situation will not help Iran’s interests and are harmful, and claimed the US seeks to prevent Iran from possessing missiles, including midrange missiles, according to Reuters.
RUSSIA-UKRAINE
OTHERS
US President Trump talked up AI as part of remarks about an AI verification system for biological weaponry, according to Reuters.
Ukraine’s military struck two Russian oil distribution facilities in Bryansk and Samara, according to Reuters.
ASIA-PAC
NOTABLE HEADLINES
China’s Foreign Ministry, in a meeting with US lawmakers, said China and the US should enhance communications and avoid confrontation, according to Reuters.
EU/UK
NOTABLE HEADLINES
The Riksbank cut its policy rate to 1.75% vs exp. 2.00% (prev. 2.00%), with Seim dissenting in favour of unchanged; it said if the outlook for inflation and economic activity holds, the rate is expected to remain at this level for some time, and decided its holding of long-term Swedish government bonds will be allowed to fluctuate between SEK 18–22bln vs prev. SEK 20bln to facilitate efficient trading; Governor Thedéen said the Bank sees a pretty strong recovery ahead but noted the labour market has weakened noticeably.
BoE’s Pill said the UK’s approach to QE is more transparent than elsewhere, noting he wanted to keep QT at £100bln at the last meeting, placed higher weight on the need to exit the QE portfolio quicker, warned restrictive policy may need to be maintained, said underlying inflation is not yet back in line and domestic inflation is declining sluggishly, and pointed to more lasting changes in price and wage-setting behaviour, according to Bloomberg.
ECB’s Cipollone said if the digital euro legislation is not in place by Q2 2026, it will be by Q3, adding that mid-2029 is a fair assessment for the launch, according to Reuters.
Hungary’s base rate was left unchanged at 6.5% in September vs exp. 6.5% (prev. 6.5%), with Governor Varga saying forward guidance will remain unchanged.
German institutes expect growth at 0.2% in 2025, 1.3% in 2026, and 1.4% in 2027, according to Reuters.
DATA RECAP
EU HCOB Composite Flash PMI (Sep) 51.2 vs. Exp. 51.1 (Prev. 51); Services Flash PMI (Sep) 51.4 vs. Exp. 50.5 (Prev. 50.5); Manufacturing Flash PMI (Sep) 49.5 vs. Exp. 50.7 (Prev. 50.7)
French HCOB Services Flash PMI (Sep) 48.9 vs. Exp. 49.6 (Prev. 49.8); Manufacturing Flash PMI (Sep) 48.1 vs. Exp. 50.1 (Prev. 50.4); Composite Flash PMI (Sep) 48.4 vs. Exp. 49.7 (Prev. 49.8)
German HCOB Composite Flash PMI (Sep) 52.4 vs. Exp. 50.6 (Prev. 50.5); Services Flash PMI (Sep) 52.5 vs. Exp. 49.5 (Prev. 49.3); Manufacturing Flash PMI (Sep) 48.5 vs. Exp. 50 (Prev. 49.8)
UK Flash Composite PMI (Sep) 51.0 vs. Exp. 53 (Prev. 53.5); Manufacturing PMI (Sep) 46.2 vs. Exp. 47.1 (Prev. 47); Services PMI (Sep) 51.9 vs. Exp. 53.5 (Prev. 54.2)
UK CBI Trends – Orders (Sep) -27.0 (Prev. -33.0)
GLOBAL
OECD sees global growth at 3.2% in 2025 (prev. view of 2.9%) with the 2026 projection held at 2.9%.
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