US stocks swing as oil rises, inflation worries grow, and AI chip sentiment remains mixed

The Dow and S&P 500 slipped on Tuesday as oil prices held near $100 a barrel while gains in Micron Technology and other AI-related stocks lifted the Nasdaq to a record close, Reuters reported.The S&P 500 fell 0.43 points, or 0.01%, to 7,764.27 points while the Nasdaq Composite rose 121.15 points, or 0.45%, to 27,243.24. The Dow Jones Industrial Average fell 184.94 points, or 0.36%, to 51,863.89.Chip stocks extended their recent gains while shares of consumer-focused software companies declined as investors assessed the strong response to Meta Platforms’ new AI assistant.The assistant, called Muse, launched earlier this month can send emails and carry out transactions on a user’s behalf. Its early success lifted AI-related chip stocks in recent sessions, but it also sparked concerns that the technology could disrupt retailers, online brokerages and other consumer businesses. Amazon blocked Muse from shopping on its platform on Monday.“There are a lot of tech stocks that are down today on Muse-related fears of one sort or another,” Jed Ellerbroek, portfolio manager at Argent Capital Management, told Reuters. “People fear that Muse will be used to manage your insurance relationships, book your travel and search for stuff to buy.”Uber Technologies and Lyft fell about 1% each, while Expedia dropped 4% and Charles Schwab slid 5.5%. Micron gained 3.9%, and SanDisk surged 7.2%.Oil prices were choppy near $100 a barrel, while the yield on the benchmark 10-year Treasury note hovered around 4.94% after US President Donald Trump warned in a speech to the UN General Assembly that he could "annihilate the Islamic Republic" if no deal is reached to end the Middle East conflict.Investors also turned their attention to Thursday’s US-China summit amid speculation that the trade truce with Beijing could be extended and that the talks may include AI regulation.“What people are looking for is at least the start of a conversation that maybe you can come up with some sort of global framework as opposed to fighting each other and having this race and so,” said Joe Saluzzi, head of equity market structure research at Themis Trading.JPMorgan Chase and Wells Fargo both lost ground.Meanwhile, Boston Federal Reserve President Susan Collins said she supported last week’s interest-rate increase because of inflation risks. New York Fed President John Williams said the Fed’s framework for managing short-term rates had effectively supported financial markets.Traders saw a 53% probability that the central bank would raise interest rates by at least 25 basis points in October, according to CME Group’s FedWatch Tool.(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)

Futures Flat As Oil, Yields Drop Ahead Of Trump UN Address Futures are flat, having recoverd  a modest drop after the European open, following yesterday’s strong, positive performance despite energy prices and yields being lower for a second consecutive day. As of 8:00am ET, S&P and Nasdaq futures are fractionally in the green after an advance in tech giants and chipmakers drove the index to a one-month high. In premarket trading, semis are down ~60bp after a blistering 5-day run that added 11.2%. Memory names are weaker as Mag7 and Software remain bid. Alibaba ADRs (BABA) gain 3% as the company is rolling out what it calls China’s most powerful AI chip, an accelerator to compete with Nvidia Corp. Brent crude erased gains of as much as 2% to fall toward $98 a barrel. The reversal came after Japan’s Kyodo News Agency reported that Iran has proposed to reopen Hormuz within seven days if the US blockade is lifted. While Iran has since denied this report, a separate report that Saudis may restart the East-West pipeline helped sentiment. Treasury yields turned lower, with the 10-year rate down two basis points to 4.93%. The dollar barely budged while the entire commodity complex is lower, though Base Metals are a bid. These moves likely reflect growing optimism around a diplomatic solution in the Middle East and improved US / China relations, which combined will support AI and lower energy prices, and potentially lower tariff rates. Today’s macro data focus is on ADP’s weekly number, regional Fed activity indicators, and another Fedspeaker. Looking ahead, highlights include UN Meetings: UN General Debate including Trump, Macron, Burnham; Trump-Zelensky meeting; Trump-Burnham meeting; Trump-Gulf Leaders meeting.  In premarket trading, Mag 7 stocks are mixed: Alphabet +0.5%, Amazon +0.4%, Apple +0.2%, Meta -0.7%, Microsoft +0.8%, Nvidia -0.2%, Tesla +0.7% Alibaba ADRs (BABA) gain 3% as the company is rolling out what it calls China’s most powerful AI chip, an accelerator to compete with Nvidia Corp. GameStop (GME) rises 4% after CEO Ryan Cohen disclosed a $26.4 million stock purchase in a filing with the Securities and Exchange Commission. Grab (GRAB) rises 6% after Chief Executive Officer Anthony Ping Yeow Tan disclosed a $29.9 million stock purchase in a filing with the SEC. Quest Diagnostics (DGX) falls 6% after the Centers for Medicare & Medicaid Services released new preliminary medicare payment rates for lab services. Vicor (VICR) jumps 9% after the power equipment company raised its third-quarter revenue growth guidance, citing royalties from non-exclusive license to Vertical Power Delivery. Viking Therapeutics (VKTX) soars 32% after announcing positive topline results from a study of dosing regimens for maintaining weight loss. In other corporate news, Roche’s experimental obesity shot enicepatide reduced body weight by 15.5% in trial, potentially ramping up competition with Eli Lilly and Novo Nordisk. On Holding plans to increase constant currency sales at a rate in the high teens through 2029 and ratchet up profitability, as the Swiss brand introduces new products for golf and soccer in its effort to take on Adidas and Nike. Federal prosecutors are investigating whether Binance, the operator of the world’s biggest crypto exchange, violated US sanctions on Iran by not stopping certain trading on its platform. The newly merged Paramount Skydance and Warner Bros. will be headquartered in Los Angeles, CEO David Ellison said. Stocks are set to for a breather after the strongest session since early August. Positive geopolitical developments and a new lease of life for the AI trade made Monday an easy win, but questions remain on both fronts. Crude prices reversed earlier gains after Kyodo reported, citing an Iranian official, that Iran has suggested to the US administration that it will open the Strait of Hormuz within seven days if the US lifts its blockade on Iranian ports and stops military operations related to Hormuz. Alongside the Kyodo report were constructive comments by the IRGC, stating that if Iran’s national interests require negotiations alongside war, then it must negotiate. Elsewhere, Saudi Arabia was testing a restart of its East-West pipeline, according to a person familia with the matter, offering another potential boost to supply. Brent has returned below USD 94/bbl on the above headlines. A constructive risk tone followed, with equity futures and fixed income rising while the USD weakened. President Donald Trump is set to address the United Nations General Assembly in New York later Tuesday, with traders watching for a possible meeting with his Iranian counterpart that could prove pivotal. AI-linked stocks were mixed after a positive reception for Meta Platforms Inc.’s new AI agent fueled broad gains in the previous session. Microsoft Corp. rose 0.9% in premarket trading to lead gains among the Magnificent Seven. An exchange-traded fund tracking chipmakers was slightly lower. Monday’s price action showed that AI FOMO is still a big driving force in the market. One indication appears in call to put skew on a 10% move in SPX over the next month. That skew metric is at its highest since late August, hovering just below its year-to-date high. The sentiment is across asset classes, with SoftBank said to have drawn more than $20 billion of preliminary demand for its junk bond deal to help fund investments in OpenAI. The swings in sentiment after Monday’s rally highlighted how confidence in the AI trade remains vulnerable to macroeconomic risks. Bond yields remain near their highest levels in years despite easing this week, as traders continue to price in imminent interest-rate hikes and persistent fiscal shortfalls. “I don’t see anyone shorting tech and AI before the third-quarter earnings season begins,” said David Kruk, head of trading at La Financiere de l’Echiquier in Paris. “There’s also some hope that Trump will find a way to lower oil prices before the midterms. It makes sense that the market consolidates slightly.” The strong early uptake of Meta’s Muse AI agent revived hopes of agentic AI coming to the mainstream consumer market, with more insights expected during Zuckerberg’s keynote speech at Meta Connect tomorrow night. Elsewhere in AI, Alibaba rolled out what it called China’s most powerful AI chip, an accelerator to compete with Nvidia and underpin a massive expansion of data center capacity in coming years. Tencent launched its latest image-generation model. Headlines may also come from Amazon Accelerate over the next few days. Still, angst about the data center buildout continues, with Texas Governor Greg Abbott halting all permits sought by data centers until an audit of risks to the grid is complete. Texas is home of one-fifth of the US’s data center pipeline in terms of IT power capacity, by far the largest of any single state. Global investors are also gearing up for the summit between Trump and Chinese President Xi Jinping later this week. Officials from the two sides wrapped up their second day of talks in New York on Monday as they sought to advance negotiations ahead of Xi’s visit to the US. For markets, the big question is what happens when the yearlong trade truce expires in November, noted Jim Reid at Deutsche Bank AG. While the tone between the two sides remains positive, they have yet to reach an agreement. “Given increasing geopolitical uncertainty worldwide, keeping the world’s two dominant economies on speaking terms has rarely mattered more,” said Roman Ziruk, lead FX strategist at Ebury. In trade, Vietnamese President To Lam said his nation is “very close” to a deal with the US as he pledged to buy more high-tech goods to narrow the trade gap. Canada’s trade minister said talks with India are “moving along really well” as his country looks for new markets amid a tariff war with the US. Meanwhile, China’s expansion in the rare-earth supply chain could help provide Xi leverage over the US during their talks. The Stoxx 600 briefly touched a session high too and is up by around 0.2%, rising on Tuesday as oil drops, with tech shares also fueled by optimism around artificial intelligence developments. Retail and consumer shares are the best performers. Energy and insurance fall. Stoxx 600 gains 0.2% to 643.25 with 200 members down, 390 up and 10 unchanged. Here are some of the biggest movers on Tuesday: Bureau Veritas rises as much as 2.1% after saying it expects double-digit revenue growth over 2027-2028 and aims to deliver €1 billion from AI-driven markets by the end of the decade. Kingfisher shares rise as much as 11% after the B&Q and Screwfix owner posted a first-half earnings beat and lifted its full-year profit guidance beyond analyst expectations. Vusion shares rise as much as 11% after the French maker of electronic labels for retail stores reported first half results that included an almost 50% increase in adjusted Ebitda. Verbund gains as much as 5.1%, while ERG is up as much as 2.9%, after Bank of America upgraded both to neutral from underperform. Smiths Group gains as much as 6.4% with analysts generally positive on the UK manufacturing equipment firm’s performance in 2026, and its outlook for 2027. Buzzi shares fall as much as 5%, to the lowest since January 2025, as UBS downgrades the Italian construction materials firm to sell from neutral, warning that import pressure and CO2 allowance costs could drive sharp earnings downgrades. UBS shares fall as much as 4.1% after CEO Sergio Ermotti says year-on-year transactions in wealth management and banking fee pool are likely down in 3Q. Ericsson slips as much as 4.3% after Morgan Stanley downgrades the Swedish mobile networks and technology group to underweight from equal-weight, saying margins are “inflecting to the downside.” Industrie De Nora tumbles as much as 14% after investor Snam offloaded a chunk of shares at a hefty discount to the last close. The stock has slipped below the offer price. Asian stocks advanced for a fifth day, as technology sector gained amid optimism over Meta Platform Inc.’s new personal agent. The MSCI Asia Pacific excluding Japan Index jumped as much as 1.5% before paring about half of those gains. Taiwan’s Taiex climbed to a record before erasing most of the advance. Korea’s Kospi closed 0.2% higher, while Japan remained shut for a holiday. In FX, the Bloomberg Dollar Spot Index fluctuated, and is now flat. The yen wiped out its decline, with USDJPY briefly slipping below 157. Tencent shares jumped 5%, as positive feedback on Meta’s new personal agent unleashed investor optimism that the Chinese social media giant may unlock similar AI‑driven optionality through its WeChat ecosystem. Alibaba gained 2% after it rolled out an AI chip and announced plans to expand data center capacity over the coming years.  In rates, treasuries hold modest gains after erasing losses during European morning following a sharp drop in oil prices. US yields are about 2bp-3bp richer across the curve led by the belly, steepening 5s30s spread by around 1bp. 10-year, near session lows around 4.93%, keeps pace with German counterpart and trails UK by about 1bp. European bond yields shifted direction on the slide for crude, with 10-year yields down by about a basis point in the US, Europe and the US, having been pushing higher through the first portion of the session. 2-year note auction at 1 p.m. has WI yield near 4.75%, about 55bp cheaper than last month’s, which stopped through by 0.4bp; $70 billion 5-year and $44 billion 7-year note auctions follow over next two days. IG dollar issuance slate includes a few offerings so far. Nine were priced Monday totaling around $10 billion, with issuer paying about 3bp in new issue concessions on deals that were 3.4 times covered. US session includes $69 billion 2-year note auction, the first of this week’s three coupon sales, with additional supply pressure possible from Sysco Corp. jumbo multi-currency bond offering.  In commodities, crude futures fell on signs of diplomatic efforts to reopen the Strait of Hormuz - driven by a Japanese media report on a possible early reopening of the Strait of Hormuz - and as Saudi Arabia sought to reopen a pipeline Brent is sitting just below $100/bbl while WTI has slipped below $94. Gold fell below $4,300 but recovered some ground, though is still off for the day. US economic data slate includes ADP weekly employment change (8:15 a.m.), September Philadelphia Fed non-manufacturing activity (8:30 a.m.) and September Richmond Fed manufacturing index (10 a.m.). Fed speaker slate includes New York’s Williams (10:05 a.m.), Vice Chair Jefferson (10:20 a.m.) and Richmond’s Barkin (1 p.m.) Market Snapshot Top Overnight News Brent crude dropped below $100 on a Kyodo report that Iran could reopen the Strait of Hormuz if the US lifted a blockade of its ports. Futures whipsawed. Iran’s Revolutionary Guard said it must negotiate if it’s in the national interest to do so. BBG Several Asian refiners have been told informally by Saudi Aramco they will soon be able to pick up oil from the Red Sea port of Yanbu. Loadings from Yanbu have been all-but-halted since the East-West pipeline was closed after being attacked by drones launched from Iraq on Sept. 10. BBG China's Xi Jinping is expected to press US President Donald Trump to halt Taiwan arms sales under a 1982 joint statement during a visit to Washington this week, which he could do at the US National Archives, sources briefed on the matter said. BBG Alibaba unveiled what it called China’s most powerful AI chip, an accelerator to rival Nvidia and underpin a massive expansion of data center capacity. BBG Saudi Arabia spent months rerouting oil across the desert to circumvent the Strait of Hormuz. Now, with its Red Sea bypass route disrupted by attacks, the world’s oil kingpin is having to return to the waterway it was trying to avoid in the first place. Saudi Aramco, the country’s state-controlled oil giant, is loading more oil onto tankers in the Persian Gulf and then taking its chances sending them through the Strait of Hormuz. WSJ Republican lawmakers are ratcheting up pressure on Donald Trump to ban diesel exports as surging prices squeeze American farmers and truckers just weeks ahead of pivotal midterm elections. FT SoftBank drew more than $20 billion of preliminary demand for what’s shaping up to be one of the biggest junk bond deals ever. BBG Trump's approval rating fell to 32% - the lowest of his political career - as his fellow Republicans soured on his handling of the cost of living amid the unpopular Iran ‌war. RTRS US office real estate is entering a new phase as billions in maturing debt force owners and investors to confront losses. Office CMBS delinquencies are near a record 12%, with almost $40 billion of debt maturing this year and next already troubled. BBG Iran War A Senior Iranian Official said that Tehran welcomes the revival of diplomacy if the US takes tangible steps, stating that the Iranian delegation is in the US and has full authority to revive diplomacy in the US, Reuters reported. The official added that details of an agreement to end hostilities with the US can be discussed in New York via mediators. Furthermore, the official said the proposal was delivered to the US via mediators on September 16th while reiterating the Kyodo report that Iran can reopen the Strait within seven days if the US eases military pressure and lifts the blockade. Iran has reportedly suggested to the US administration that it will open the Strait of Hormuz within seven days if the US lifts its blockade on Iranian ports and stop military operations related to Hormuz, Kyodo reported citing an Iranian official. The official added that the proposal called for renewed talks aimed at reaching a permanent end to hostilities between the two countries. Furthermore, the official went on to say that there is a possibility of moving toward an agreement, but the US must demonstrate "seriousness and commitment" if diplomacy is to advance. IRGC said that if Iran’s national interests require negotiations alongside war, then it must negotiate but it will respond to any enemy strike with multiple strikes across different arenas and in various ways, Al Jazeera reported. To add, the IRGC said it will have no contact with the US as a military institution, even if Washington requests it and its assessments indicate the US and Israel are not prepared for a new war, but Iran is ready if they miscalculate. US President Trump said he had meetings regarding Iran and that Iran is not doing well. Iranian Parliament Speaker Ghalibaf said US President Trump cannot impose his power on Iran, adding that Iran will neither shut down nor surrender. Ghalibaf went on to say that missile technology is at a stage where Iran can "target anywhere it decides" and they will never yield in the conflict. Iran's Judiciary Spokesperson said Iran has full control over the Strait of Hormuz, SNN reported. Iran's Foreign Ministry said introducing Iran as a cause of fuel price hikes is merely a sign of the US administration's evasion of responsibility for consequences of military aggression against Iran. G7 issued a statement on the Middle East which noted the situation in Yemen poses an unacceptable threat to the stability and security in the region and to global energy security, while it condemned in the strongest terms the unacceptable continued strikes carried out by the Houthis in Yemen and against Saudi Arabia. It called on the Houthis to immediately cease all military actions, threats and attacks against civilian shipping, as well as called on Iran to end its arming of and support for the Houthis, which it noted violates UN Security Council resolutions. Furthermore, it stated that Iran's reprehensible actions constitute a dangerous pattern of escalation and risk further exacerbating the conflict. Israeli Defence Minister said they will bomb Iran for the 3rd time if necessary until the regime is overthrown, Al Arabiya reported. French President Macron said he had a constructive discussion with US President Trump on the Red Sea and Ukraine. UK PM Burnham agreed for the UK to provide Saudi Arabia with defensive air-to-air refuelling, with the support to begin in days and last for weeks. EU's Kallas said the EU naval mission in the Red Sea requires additional naval and air resources, while she added the EU would need more than 10 ships in the Red Sea. A more detailed look at global markets courtesy of Newsquawk APAC stocks mostly gained following the advances on Wall Street, where the Nasdaq outperformed and notched a record close as Meta shares surged over 11% on strong adoption of its Muse AI agent and with AMD joining the USD 1tln market cap club, while markets in Japan were closed again for the holidays. ASX 200 traded marginally higher but with gains capped as the strength in tech, consumer discretionary and health care was partly offset by losses in utilities, energy and financials. KOSPI took its cue from the tech and communications outperformance stateside, while South Korea's Industry Ministry noted that the final announcement on the US investment plan will be made by President Trump, with the funds to be remitted within 45 days if requested by the US. Hang Seng and Shanghai Comp were positive as tech stocks led the advances in Hong Kong, although some property, energy and biopharmaceutical stocks lagged while participants also continue to await the Trump-Xi summit this week. Top Asian News RBA Governor Bullock said supply shocks are difficult for monetary policy to deal with and that policy needs to deal with second-round effects on inflation, while she stated that the current decline in house prices is consistent with past episodes and that unemployment at 4.5‑5% is likely to reduce inflation pressure. Furthermore, Bullock said she is not signalling anything on policy, and it is up to the board, as well as noted that inflation risks are materialising from the Middle East and excess demand at home. RBNZ Governor Breman said near-term inflation is expected to be somewhat higher if elevated oil prices persist, while she noted the RBNZ remains focused on the inflation outlook ahead of the October policy decision. Breman also commented that the economic outlook remains subject to significant risks and that current data points to continued economic recovery, though progress remains uneven. Alibaba (9988 HK) unveiled its Zhenwu V900 chip, which it said is the most powerful in China with three times the performance of the predecessor, while the Co. targets 20GW of data centre capacity by 2032 and the Qwen team plans to train a new model at a scale of 5tln-10tln parameters. European bourses were initially lower this morning, but then flicked into the green after a report in Kyodo suggested that Iran could open the Strait of Hormuz within seven days, citing a source. This helped boost sentiment, with crude benchmarks falling to lows, hence weighing on yields. European sectors hold a positive bias. Retail took the top spot, joined closely by Media and Tech. To the downside resides Insurance and Telecoms. Key European movers include: Kingfisher (+8.2%) , raises its FY26/27 adj. PBT guidance; Smiths Group (+4.5%), FY26 revenue raises Y/Y and raises its dividend above estimates; Evonik (+3.3%), reports that BASF explored a potential deal with the Co. earlier in 2026; Bureau Veritas (+1.0%), raises its 2027-28 total revenue CAGR guidance; Ericsson (-3.5%), downgraded to Underweight from Equal Weight at Morgan Stanley. Top European News German Chancellor Merz’s woes cast doubt over the bloc's EUR 2tln budget deal, with his authority in Brussels hobbled by his party’s poor results in regional elections, according to FT. UK PM Burnham to call on EU Commission President von der Leyen to allow the UK to partake in the EU's Made in Europe industrial framework, according to the FT. FX Snapshot: The FX space has been exceptionally choppy this morning. Initially, G10s were mixed against the USD, but are now mostly lower, as the USD clambered higher as the session progressed. The Kiwi outperforms after hawkish comments from RBNZ Governor Bremen. She noted that near-term inflation is expected to be somewhat higher if elevated oil prices persist. DXY is a touch lower this morning and holds within a 100.30 to 100.66 range. The bias was initially stronger for much of the European morning, before a report in Kyodo, citing an Iranian source, suggested that Iran had told the US admin that it will open the Strait within seven days, if the US lifts its blockade on Iranian ports. This spurred immediate and sustained pressure in the crude complex, weighing on yields and therefore on the USD. Following this action, JPY was the largest beneficiary, flicking from red to green within a few minutes. USD/JPY fell from 157.62 to a session trough of 156.85 within a small timeframe – largely thanks to narrowing yield differentials. Some may view this move as a bit outsized, given that there is currently no progress to peace at this stage. However, it points out that the mood is a bit more constructive heading into the UN General Assembly, where the Iranian President is set to make an appearance. No sideline meetings are currently expected between the US and Iran, however, the US and Gulf leaders will meet. Any positive mood music following that meeting will no doubt put another bout of pressure on the USD. Fixed Income A bearish start for fixed income, amid initial crude strength and a modest reversal of some of Monday’s action. Gilts underperformed modestly in early-trade, given the unwelcome borrowing data for the UK vs both market and OBR consensus. However, this action, of circa. 30 ticks lower in Bunds, five in USTs and over 40 in Gilts gave way to a geopolitical/energy-induced move higher and into the green. After a Kyodo source outlined that Iran has suggested to the US that it would open Hormuz in one week if the US blockade is lifted, alongside a tone change from the IRGC on negotiating with the US if needed. This lifted USTs to a 106-09+ peak, firmer by just under 10 ticks on the day. Bunds and Gilts followed, to the upside of 23 ticks and just over 30 respectively. However, as the energy move pauses for breath and updates since the two above have, net, been more bullish for crude, this has unwound with fixed income now near-enough unchanged on the day. The day was always headlined by the UN General Assembly, but following the morning reporting, the speeches by US President Trump and Iranian President Pezeshkian tomorrow now draw even greater attention; for any rebuttal of the above, or signs of tangible progress between the sides. That aside, BTPs were disappointed by the 2025 deficit/GDP revision, which remained above the key 3.0% mark that determines the EU’s EDP system. As such, we now look to see if Italian Finance Minister Giorgetti moves forward with using the Escape Clause or not. For reference, the BTP-Bund 10yr spread remained steady at 90bps at the time. Germany sells EUR 3.735bln vs Exp. 5bln 2.90% 2031 Bobl: b/c 1.21x (prev. 1.56x), average yield 3.28% (prev. 3.09%), retention 25.3% (prev. 22.16%). UK sells GBP 4.75bln 4.625% 2032 Gilt: b/c 3.07x (prev. 3.34x), average yield 4.843% (prev. 4.613%), tail 0.4bps (prev. 0.2bps). Commodities WTI Nov and Brent Dec futures have reversed earlier gains and are now sharply lower following a notable shift in tone from Iran, alongside a report from an Iranian source in Japan's Kyodo. First, the IRGC said that if Iran’s national interests require negotiations alongside war, then it must negotiate; this contrasts with the usual escalatory tone of the Iranian Revolutionary Guards. Shortly after the IRGC headline, and adding to the diplomatic mood, Iran reportedly suggested to the US that it could reopen the Strait of Hormuz within seven days if Washington lifts its blockade on Iranian ports, reiterating Iran's conditions for Hormuz concessions. The Kyodo report was later corroborated by a Senior Iranian Source who noted that the Iranian delegation is in the US to revive diplomacy with the US. On the supply front, Saudi Arabia has reportedly restarted the East-West oil pipeline to resume crude oil exports from the Yanbu port. Following the above developments, Brent fell from USD 97.70/bbl before the headlines to a USD 93.84/bbl low, while WTI fell from USD 93.14/bbl to a USD 89.40/bbl low. Dutch TTF has followed the broader energy complex lower as the prospect of progress around Hormuz reduces some of the Middle East supply risk premium. The contract has fallen from a EUR 75.22/MWh high to around EUR 72/MWh. Precious metals have trimmed some of their earlier downside as energy prices and global yields fall following the more diplomatic Iranian headlines. Spot gold has recovered from a USD 4,292/oz low to above its 50 DMA (USD 4,316/oz), having earlier reached USD 4,376/oz. Spot silver similarly trades around USD 65.50/oz after falling to a USD 64.57/oz low from a USD 65.81/oz high. Base metals remain firmer, with copper supported by the broader positive global risk tone, while the sharp pullback in energy prices provides some relief to the inflation and growth outlook. COMEX copper trades around USD 6.66/lb, near the upper end of its session range. 3M LME copper trades towards the upper end of a USD 14,703.60-14,790.00/t range. Saudi Arabia restarts the East-West oil pipeline and prepares to resume crude oil exports from Yanbu port later on Tuesday, according to trade sources. Saudi's Aramco has reportedly told Asian refiners that they will be able to pick up oil from Yanbu soon, Bloomberg reported citing sources. Libya's NOC said an armed group closed valve 7 on the Sharara crude pipeline to Zawiya port, causing a sharp drop in output at the Sharara oilfield. It was later reported that the Sharara oil field production fell by more than half to about 127k bpd after an armed group shut the pipeline to the Zawiya export terminal. Russia's oil exports from Black Sea Novorossiysk Port reportedly surged to 650k bpd in September, +50% M/M, sources suggested. Indonesia's nickel hub will cut output as an El Niño-driven drought reduces production. Russia's Agriculture Ministry said its grain procurement planned for 2026-27 at 3mln tonnes, IFX reported. Trade/Tariffs Chinese President Xi's most urgent goal during the summit with US President Trump is extending the trade truce with the US, but he is also expected to discuss Taiwan, Iran and AI, according to FT. USTR will hold a hearing regarding the Section 301 investigation into Germany's pharmaceutical policies today. EU Trade Commissioner Sefcovic is to visit China between October 8th-9th for trade talks. Canada's Trade Minister said the country is making great headway in concluding a free trade agreement with India, while they will continue to have talks with the US. China's MOFCOM announced the adjustment to the "Catalogue for the Administration of Export of Precursor Chemicals to Specific Countries", stating that export permits will be required for the US, Mexico and Canada under new rules. China's MOFCOM said that its Commerce Minister met with the German Auto Industry Association President to discuss bilateral auto cooperation and China-EU trade. MOFCOM said that China is not the root cause of EU trade problems. Geopolitics Russian Kremlin said they are finding alternative routes for their grain and that Ukraine is the reason for the export issues. Discussions with Turkey around the Black Sea have taken place. Russian Foreign Minister Lavrov and US Secretary of State Rubio are set to meet on September 23rd, TASS reported. Russian Defence Ministry said Russian forces struck an oil refinery in Ukraine’s Kremenchuk, TASS reported. Ukraine's Naftogaz said that the Russian attack caused critical damage, which makes it effectively impossible to restore it. Polish Army said it commenced military aviation operations in Polish airspace following a Russian aerial attack on Ukraine, although it later announced that military aviation operations in Polish airspace concluded and there was no violation of Polish airspace observed. The US will reopen a military base in southern Greenland and establish presence at a second site in eastern Greenland, according to sources. Event Calendar DB's Jim Reid concludes the overnight wrap Markets have put in a strong performance over the last 24 hours, with Brent crude oil (-3.40%) briefly falling beneath $100/bbl again as hopes grew for a diplomatic solution in the Middle East. Brent is a little above $101/bbl this morning but net net the week has started more optimistically. This has been highlighted by the record high for the Nasdaq (+2.26%), Bitcoin moving back above $85,000 for the first time since January, whilst the 10yr bund yield (-6.3bps) had its biggest daily decline since May. And despite September’s reputation as one of the worst of the year for markets, the latest moves actually leave the S&P 500 (+1.49%) back in positive territory for the month and within half a percent of its all-time high.   Although oil is back up a little overnight, Brent fell back beneath $100/bbl yesterday for the first time in nine trading sessions before closing at $100.34/bbl. In part, that followed more positive headlines over the weekend, including comments from President Trump to Fox News that he would be open to meeting Iran’s President at the UN this week. So that raised hopes about some kind of deal between the two sides, and it helped drive a big reduction in energy prices across the board. In fact, European natural gas futures (-7.88%) saw their biggest daily decline since July, which was a huge positive impulse to risk appetite given Europe’s dependence on imported energy. Even though there are hopes of diplomatic progress, the rise back in oil overnight seems to be in part due to Bessent suggesting that all Iranian airlines will be shut down from tomorrow with anyone providing fuel, landing services etc., shut out of the dollar system.   For now the momentum is on the more positive side though and with inflation fears subsiding again, that meant investors dialled back the likelihood of rapid rate hikes, even if plenty are still priced in for the month ahead. For instance, markets are still fully pricing in another ECB hike by year-end, but the probability of a second hike this year fell from 52% on Friday to 40% by the close. The read across from the energy pullback to Fed repricing wasn’t as clear, with 33bps of Fed hikes still priced by year end. That came amid some hawkish-leaning commentary from regional Fed presidents, with Goolsbee suggesting there was some “traditional demand overheating” around the AI investment boom, while Musalem said that the current fed funds rate of 3.75% to 4% is “on the accommodative side”.     Notwithstanding the hawkish Fedspeak, lower energy prices proved to be a huge tailwind for sovereign bonds, particularly in Europe. So yields came down across the continent, with those on 10yr bunds (-6.3bps), OATs (-9.3bps) and BTPs (-9.6bps) all seeing sharp declines. In fact, in all three cases that was their biggest decline since May. In the US, the declines weren’t quite as big, with the 10yr Treasury yield down -4.5bps to 4.95% while the 2yr yield actually inched up +0.3bps to 4.75%. That brought the Treasury 2s10s slope to its flattest since February 2025, just before Trump’s tariff escalation raised questions about the sustainability of US exorbitant privilege.   For equities, it was also a very strong session, as fresh optimism on the outlook led to big gains across the major indices. In the US, the S&P 500 (+1.43%) rose for a third consecutive session and had its best day in seven weeks, leaving the index just -0.44% beneath its record high from last month. Tech stocks led the rally, with the Nasdaq (+2.26%) and the Magnificent 7 (+3.44%) rising to new record highs of the own. Top performers included Meta (+11.43%), amid optimism over its Muse AI agent, and chipmaker AMD (+9.95%), which became the latest company to reach a $1trn valuation. Meanwhile, there were broad gains in Europe, where the STOXX 600 (+1.02%), the DAX (+1.07%) and the CAC 40 (+0.92%) all climbed.   Speaking of geopolitical developments, there were plenty of headlines on the US-China trade talks yesterday, ahead of the meeting between Presidents Trump and Xi later this week. For markets, the big question is what’s going to happen when the current one-year trade truce expires in November, and whilst the general tone remains positive, there still isn’t an agreement yet. For instance, the New York Times reported yesterday that the US had proposed a 6-month extension, whilst China had pushed for a longer one. So that fitted with comments from US Trade Representative Greer on Bloomberg, who was asked if it would be a 3-6 month extension, and he said “that’s probably the right kind of range”. Otherwise he sounded positive though, saying that “we’ll continue talking and I think both sides want it”. Ahead of the Trump-Xi meeting, our geopolitical analysts, economists and strategists are hosting a China macro webinar at 9am LDN today. You can register  here. Otherwise, the big political news came from Germany yesterday, where there was plenty of reaction after Sunday’s state election results. As a reminder, that vote saw Chancellor Merz’s CDU party fail to meet the 5% threshold in the state of Mecklenburg-Western Pomerania, meaning they’re not in the regional parliament for the first time in Germany’s post-war history. Yet despite the speculation over Merz’s position, he said that he had the backing of CDU party leaders, and that both the CDU and SPD wanted the governing coalition to continue.  Asian equity markets are broadly higher this morning, led by technology stocks as an overnight rally on Wall Street reignited investor appetite for AI-related stocks. Across the region, the KOSPI (+0.69%) is leading gains, while Japanese markets remain closed through Wednesday. Elsewhere, China’s CSI 300 (+0.51%) is trading moderately higher, with the Shanghai Composite (+0.23%) and Hang Seng (+0.33%) posting modest advances. Meanwhile, Australia’s S&P/ASX 200 (+0.29%) is also edging higher. US equity futures are fairly flat.   Looking at the day ahead now, data releases include the UK public finances for August, the European Commission’s preliminary consumer confidence reading for the Euro Area in September, and the US Richmond Fed’s manufacturing index for September.  Otherwise from central banks, we’ll hear from Fed’s Vice Chair Jefferson, the Fed’s Williams and Barkin, ECB President Lagarde, and the ECB’s Kaasik, Nagel, Kocher, Seijpen and Simkus. Tyler Durden Tue, 09/22/2026 - 08:39

US Futures Rise, Near All-Time High, As Oil, Yields Drop On US-China Diplomacy Optimism US futures are higher driven by Trump / Xi optimism around AI, Middle East, and trade with Middle East kinetic headlines over the weekend reflecting a pause to escalation. Sentiment was lifted by signs of progress on geopolitical issues: it’s a big week for talks, with Trump set for a summit with China’s Xi Jinping on Thursday and a possibility of talks with Iran’s president at the UN General Assembly. As of 8:00am ET, S&P futures are up 0.7%, rising to 7,770 and less than 1% from all time highs, as Nasdaq futures gain 1.1%, with tech strength on full display in APAC trade and also leading in premarket US trading with broad-based strength across Semis, Memory, and Mag7. Cyclicals ex-Energy are leading Defensives with the AI theme boosting Tech / Industrials within Cyclicals. Within Defensives, both healthcare and staples have pockets of strength as today looks like a broad-based rally in both the SPX and within Tech. WTI is below $100, dropping for a fourth day, fuel prices are lower, while bond traders reckon the Fed will succeed in its fight against inflation helping drive bond yields lower as the yield curve bull flattens, as the USD drops to session lows. This is bidding up risk assets with Equities leading. The Fed’s Goolsbee speaks 6.30am with previous speakers Fri / Sun offering a hawkish view which reiterates Warsh’s key points. According to JPM, given the macro and earnings strength, the market may be underpricing the number of hikes through YE27. There is little on today's calendar: we get the Aug Chicago Fed Nat Activity Index (est. -0.04) at 8:30am ET. In premarket trading, Mag 7 stocks are all higher: Meta climbs about 2% after shares in the social media giant sold off on Friday. Tesla +1.5%, Alphabet +0.3%, Nvidia +0.8%, Amazon +0.7%, Microsoft +0.4%, Apple unchanged. Cryptocurrency-linked stocks are rallying as Bitcoin trades above $84,000, near an eight-month high. Accenture (ACN) gains 4% after Anthropic partnered with the technology consulting company to test the safety of its advanced artificial intelligence models. Alkermes (ALKS) climbs 8% after announcing positive Phase 1b results for ALKS 7290 in adults With attention-deficit hyperactivity disorder. Arhaus (ARHS) rises 2% after Jefferies upgraded the furniture company to buy, writing that it has “newfound optimism on the retailer’s strategy to elevate brand awareness” and improve market share. Candel Therapeutics (CADL) gains 6% after BofA upgraded the biotech company to buy, citing optimism about a prostate cancer treatment. Ciena (CIEN) rises 5% after Evercore ISI raised the recommendation to outperform, citing the way data centers are boosting demand for optical networking equipment. Critical Metals (CRML) soars 24% after President Donald Trump said the he reached an agreement with Denmark over Greenland that would give the US “permanent control over security” of the Arctic island. In April, Critical Metals agreed to acquire European Lithium Ltd., giving it full ownership of a rare earth project in Greenland. Securitize (SECZ) rises 8% after Cantor Fitzgerald initiated coverage with a recommendation of overweight as it sees the tokenization company benefiting from recent Securities and Exchange Commission guidance. Warner Bros. (WBD) is up 7% and Paramount Skydance (PSKY) is up 6% as the latter is in settlement talks with California officials over its planned acquisition of the former. In other corporate news, settlement talks between Paramount Skydance and California officials over the planned acquisition of Warner Bros. Discovery are said to include a financial penalty if the company fails to make good on a promise to distribute 30 films per year in theaters. Nscale, a developer of AI data centers that counts Nvidia and Microsoft among its partners, filed for an IPO. Novo Nordisk shares fell after the maker of Ozempic and Wegovy outlined its 2030 strategic ambitions, targeting revenue CAGR in line with industry peers. SoftBank is seeking the equivalent of more than $11 billion in what would be one of the biggest junk bond deals ever to fund OpenAI investments in OpenAI Global markets are firmer across the board, helped by lower energy prices despite heightened geopolitical tensions over the weekend. Brent is down about 2% as diplomatic efforts to resolve the conflict are parsed, while oil and LNG flows through Hormuz hit a six-month high. The Houthis said they attacked sensitive sites in Riyadh and an Aramco facility in Yanbu over the weekend, while US President Trump reportedly said that he is thinking of "blowing up" all of Iran. One source of potential optimism is the commentary following US-China trade talks, with US Treasury Secretary Bessent describing talks as "successful" on trade and AI, while they agreed to hold another meeting on AI dialogue. For the Trump-Xi meeting - which is Xi’s first trip to the US in three years - trade, AI, critical minerals, industrial capacity, Taiwan, Ukraine and the Middle East are all on the bingo card. The “feedback from the talks between China and the US is feeding a positive narrative as the week begins,” said Alexandre Baradez, chief market analyst at IG in Paris. “That said, for me oil prices remain the key driver.” “The market doesn’t really need any grand bargain,” says Panmure Liberum’s Mark Taylor, who thinks signs of “amicable agreement to manage tensions” will be enough to support risk appetite. “However, if fresh tariff threats, tech restrictions or hostile commentary resurface, it could quickly revive the trade-war risk aversion,” he adds. For today, oil is also a major risk-on driver. In a sign that US naval protection and mine-clearing efforts in the Strait of Hormuz were paying off, a regional US commander said oil and liquefied natural gas shipments through the waterway reached their highest level in six months, which almost helped push Brent below $100. Trump told Fox News he would “probably” be open to meeting his Iranian counterpart on the sidelines of the UN assembly this week. Meanwhile, as BBG notes, the AI debate continues to rumble on, with the narrative to positive over the weekend, despite some news reports of a looming drop in memory prices. South Korea’s chip exports surged nearly 260% year-on-year in the first 20 days of September, to a record $34.1 billion. Accenture shares surged after it was chosen by Anthropic to test the safety of AI models, and SocGen said AI could help it make substantial cost savings. But there’s still a lot of caution. Citi’s CEO said companies are racing to build up their defenses as AI models become more powerful and risk spurring cyber attacks. Today’s Big Take looks at how AI risk is making CIOs nervous. Elsewhere, opposition to data centers continues to mount: Data Center Watch said some 45 projects worth $68 billion were blocked or delayed by local pushback during the second quarter. “AI is clearly becoming the next major area of strategic competition, but the fact that both sides are at least discussing a mechanism for dialogue is constructive,” said Mohit Mirpuri, senior partner at SGMC Capital Pte. “Markets don’t necessarily need Trump and Xi to resolve all their differences on Thursday, they mainly need reassurance that those differences remain manageable and don’t spill back into another trade or technology shock.” And then there is inflation: price pressures continue to show up, with US retail diesel prices topping $6.50 a gallon for the first time, copper holding gains and food shock risks making headlines. Fed’s Kashkari said inflation remains too high and that pressures have broadened beyond the oil-price shock of the Iran war. European shares gain as cooling oil and gas prices ease inflation concerns, while optimism ahead of this week’s China-US summit also lifts sentiment. The Stoxx 600 rises 0.9% with tech outperforming while healthcare falls after Novo Nordisk disappointed investors who were hoping to see more robust sales targets at the company’s capital markets day. Here are some of the biggest movers on Monday: Kuehne+Nagel shares rise as much as 6% following the freight transportation firm’s collaboration with US tech behemoth Amazon, which will include providing assistance on logistics services and infrastructure for Amazon Web Services. Lundbeck gains as much as 4.6% after UBS raised its recommendation to buy from neutral, saying the company is potentially on track to turn around its R&D activities, and notes several upcoming key trial readouts. Lotus Bakeries gains as much as 6.2% after UBS raised its recommendation to buy from neutral, saying the company is potentially on track to turn around its R&D activities, and notes several upcoming key trial readouts Huber+Suhner shares rise as much as 5.6%, recouping the losses booked on Friday after the maker of telecommunication products held its capital markets day. Industrie De Nora shares rise as much as 5.9%, extending a rally after Italy agreed to cover full costs for its Gigafactory project, according to a statement. Novo shares fall as much as 7.7% after the Danish firm outlined its 2030 strategic ambitions at its Capital Markets Day in London. Ayvens shares drop as much as 6.2% after the fleet management company outlined its new 2029 strategic plan. Jefferies said the new targets are “more realistic than ambitious.” VW shares fall as much as 2.6% after Kepler Cheuvreux downgraded the German carmaker to hold from buy citing a profit warning that offset positives from a restructuring program. Craneware shares fall as much as 25% after the healthcare software company cut its revenue guidance for FY27 amid disruption caused by a cyber security incident. Ipsen drops as much as 7.8% after Amneal Pharmaceuticals received FDA approval for its generic version of somatuline. Asian stocks advanced as an extended rally in semiconductor shares and a decline in oil prices supported investor sentiment. The MSCI Asia Pacific Index rose more than 1%, heading for a fourth straight session of gains. Samsung Electronics, TSMC and MediaTek were the top contributors to the gauge’s increase. South Korea’s Kospi was the best performer in the region. Markets in Japan were shut for a holiday. “Friday’s Wall Street session has aided sentiment in the AI names early, with the US semiconductor index rising close to 3%, led by the memory names as contract prices keep rising,” said Josh Gilbert, lead APAC analyst at Etoro. “Korea and Taiwan carry the most exposure to that, which is why we’ve seen buyers return to Asia, with flows coming back into the region after a run of selling.” The MSCI Asia Pacific Index is up about 23% so far this year. However, the gauge has risen just 0.3% so far in September as the Federal Reserve’s hawkish rate hike, persistent inflation concerns, elevated bond yields and growing unease over the In FX, the Bloomberg Dollar Spot Index is near unchanged. USD/JPY is back on a 157 handle after Friday’s reported rate check. In rates, treasuries trade near session highs in early US session, supported by steeper gains across European bond markets as oil prices slide, leaving Brent crude on track for the longest run of declines since June. Energy prices are easing amid diplomatic efforts to end the US-Iran war and signs cargoes are still moving through the Strait of Hormuz. Treasury coupon auctions of 2-, 5- and 7-year notes commence Tuesday. US yields are 3bp to 4bp richer across the curve with front-end lagging slightly, flattening 2s10s and 2s5s spreads by ~1.5bp. 10-year is around 4.955% with bunds and gilts in the sector outperforming by 1.5bp and 3.5bp. In Europe, French bonds outperform, moving the French-German 10-year yield spread back below 100bp; 105bps spread reached Friday was the widest since 2012. IG dollar issuance slate includes a few deals already.  Dealers expect around $40 billion of new issuance this week, possibly including Sysco Corp., which is preparing a roughly $17 billion bond sale. This week’s Treasury note auctions include $69 billion 2-year Tuesday, $70 billion 5-year Wednesday and $44 billion 7-year Thursday. are on the decline with the US 10-year borrowing cost down 4bps at 4.96% - note, cash trade was closed overnight due to the Japanese market holiday. Yields in the UK and Germany are also lower, with the pullback in energy outweighing mounting political risks for the latter. French 10-year bonds are outperforming after being trounced on Friday and the OAT-bund yield spread is back below 100 basis points. In commodities, WTI crude futures are down almost 3%, Brent is down more than 2% as diplomatic efforts to resolve the conflict are parsed, while oil and LNG flows through Hormuz hit a six-month high. Spot gold is down 0.8%. The crypto rally is extending with Bitcoin up 4.7% and at levels not seen since January.  US economic data slate includes August Chicago Fed national activity index at 8:30 a.m. Fed speaker slate is blank for Monday. Market Snapshot Top Overnight News Oil prices slid to their lowest in 11 days on Monday as investors ‌hoped for diplomatic progress on the Iran war due to this week's UN meeting, and eyed a partial recovery in shipments from Saudi Arabia. Brent crude futures and US West Texas Intermediate crude touched their lowest since September 10 earlier on Monday. The Brent contract for November was at $101.75 a barrel at 0859 GMT, down $2.12, or 2%. RTRS The Iran war has created a new shortage on the oil market. This time the scarce commodity isn’t just crude—it is the ships that carry it. Drone attacks that shut Saudi Arabia’s bypass pipeline earlier this month have forced more crude back through the Strait of Hormuz and onto a tanker fleet already stretched thin. WSJ The US and China have agreed to set up an AI dialogue ahead of a high-stakes summit on Thursday in Washington between Donald Trump and Xi Jinping. US Treasury secretary Scott Bessent said the two sides had negotiated the creation of an AI dialogue mechanism, which was floated when Trump met Xi in Beijing in May, in talks with Chinese vice-premier He Lifeng in New York on Sunday. FT China is more than halfway toward its pledge to buy 25 million tons of US soybeans this year, but a commitment to purchase at least another $17 billion of American farm products has largely stalled. BBG OpenAI projects it will burn through almost $280bn by the end of 2030, highlighting its huge long-term funding needs as the AI company pushes for a valuation of more than $1.2tn in fresh investment talks. The company expects negative free cash flow of $278bn over five years from 2026 to 2030 as it invests aggressively to expand its access to computing power. FT Friedrich Merz vowed to stay on as German chancellor after his CDU suffered heavy losses in state elections. The party won just 4.9% in Mecklenburg-Western Pomerania, shutting it out of a regional assembly for the first time in the country’s postwar history. BBG SoftBank’s seeking the equivalent of over $11 billion for AI investments in what would be one of the biggest junk bond deals ever, people familiar said. BBG Wall Street banks are expecting the US to borrow up to $1tn over the next year by selling short-term Treasury bills as part of a growing dependence on quick-maturing debt that leaves Washington vulnerable to rising interest rates. FT The Fed’s Austan Goolsbee warned the central bank cannot ignore repeated and persistent supply shocks, and must respond in a way that may cause economic hardship. BBG Investors are betting on a Fed win the inflation fight, turning bullish on front-end Treasuries. Two-year yields remain well above the central bank’s range, offering scope for the securities to rally if inflation eases or rate hikes are less than priced. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were ultimately mixed, but with cautious gains seen for most of the region ahead of this week's key meetings in the US, including the UN General Assembly and the Trump-Xi summit, while there are also thinned conditions with the closure of Japanese markets through to Wednesday. ASX 200 was uneventful amid mixed M&A related headlines and further RBA rate hike calls, with CBA bringing forward its rate hike call to September from November, while ANZ expects hikes in both September and November. KOSPI outperformed as tech stocks took impetus from the advances in the Nasdaq last Friday. Hang Seng and Shanghai Comp were mildly higher ahead of the Trump-Xi summit this week and after US and Chinese officials held talks in New York ahead of the leaders' meeting, with China's top trade negotiator describing the discussions as 'not bad', while state media noted the sides had frank, in-depth and constructive exchanges on important economic and trade issues of mutual concern, as well as holding dialogue on AI-related issues. Top Asian News Japan's government will work with major machinery manufacturers to collect machine-learning data for physical AI applications such as autonomous robots and assigning unique IDs to factory equipment to enable cross-vendor data aggregation, according to Nikkei. Japan is poised to ease restrictions on regional bank loans for AI and energy projects, Nikkei reported. China's CPC Politburo met to discuss draft documents to be submitted to the Fifth Plenary Session (26th-29th October), with Chinese President Xi presiding. European bourses (STOXX 600 +1.0%) are firmer across the board, helped by lower energy prices despite heightened geopolitical tensions over the weekend. The Houthis said they attacked sensitive sites in Riyadh and an Aramco facility in Yanbu over the weekend, while US President Trump reportedly said that he is thinking of "blowing up" all of Iran. One source of potential optimism is the commentary following US-China trade talks, with US Treasury Secretary Bessent describing talks as "successful" on trade and AI, while they agreed to hold another meeting on AI dialogue. Sectors highlight the positive bias. Tech tops the sector pile, with Industrials and Basic Resources following closely behind. To the downside is Health Care, with Optimised Personal Care and Energy rounding out the sector laggards. Explaining the underperformance in Health Care is the downbeat reaction in Novo shares (-5%) after they announced their 2030 ambitions. The drugmaker plans to launch over 5 blockbusters by the end of 2030 and targets pipeline sales of over DKK 150bln in 2035. Top European News German Chancellor Merz vowed to stay on despite a ‘disaster’ in regional elections with partial results showing his CDU at just under the 5% threshold for parliamentary representation in Mecklenburg-Vorpommern, while the centre-left SPD is projected as 35.5% of votes and the far-right AfD is expected to get 37.0% of votes, according to exit polls. Merz's conservatives are projected at 20% of votes in the Berlin state election, while the Left Party is seen at 24.5%, SPD is seen at 12%, and AfD is seen at 16% in Berlin. Scope downgraded France’s long-term ratings to 'A+' from 'AA-' and revised the outlook to stable; DBRS affirmed France at 'AA', lowered the French outlook to negative. FX Snapshot: G10s are mixed against a flat USD this morning. The Antipodeans are mildly firmer, benefiting from the risk tone, whilst the Loonie and JPY are the marginal laggards. DXY currently holds within 100.20 to 100.37 range, and towards the highs made post-FOMC last week. Newsflow for the Dollar has been lacking this morning; oil prices are slipping off highs, despite ongoing supply disruptions, as attention turns to the UN General Assembly Council this week, alongside the summit between President Trump and Xi. The current mood between the two is positive; Trump recently suggested that he and Xi get on “very well”, whilst Treasury Sec Bessent suggested they had a very successful engagement with the Chinese on trade and AI. JPY is a touch lower this morning, giving back some of the strength made last Friday. The Nikkei reported that the BoJ conducted a “rate check” on that Friday, which helped curtail some of JPY pressure seen following the Bank’s dovishly perceived rate decision. This makes evident that the Japanese officials remain ready and active in the market to keep USD/JPY from approaching the 160.00 mark once again. If market expectations of a Fed-BoJ divergence continue to grow, then it may prove to be difficult for Japan to significantly prevent another bout of upside in the pair. Do note that Japan is away on holiday and returns on Thursday; as such, the lower-volume environment could provide a decent opportunity for the MoF to enact some intervention. EUR is essentially flat vs USD, despite political uncertainty from within the region. Firstly, two regional elections were held in Germany over the weekend; the ruling CDU party performed terribly, falling short of the 5% threshold to enter state parliament in one state. There is now mounting pressure on current Chancellor Merz to resign, though he announced that he will stay in office and “fight on”. The state election results point out the issues the German population is currently facing, but for now, it will remain a regional problem. It will likely have little impact on the federal government itself; as such, the EUR is little changed. Fixed Income USTs (+8 ticks) are stronger this morning, benefiting from 1) falling energy prices and 2) markets awaiting the US-China meeting at the White House on Thursday. On the first point, supply disruptions remain, and Trump recently said he is thinking of “blowing up” all of Iran. It seems as if markets are shifting their attention to the UNGA this week, with Trump reportedly set to meet Gulf leaders and then President Xi. There may be growing hopes that a framework agreement/deal can be ironed out; recent reports have noted that Pakistan’s Interior Minister has travelled to Iran. Yields are lower across the curve, with very slight underperformance at the belly. The US 10-year (4.96%) has now slipped below the key 5.00% mark, given the aforementioned energy dynamics. A constructive UNGA mood and/or geopolitical progress could help the 10-year continue to slip to near-term lows, with 4.92% a likely area of support (low from 18 Sep). Gilts (+72 ticks) outperform vs peers, and currently hold towards the upper end of an 85.28 to 85.76 range. UK-specific news flow has been focused on pre-budget speculation around housing and CGT, but with action in UK paper today ultimately driven by energy dynamics. On trade relations, UK PM Burnham is set to meet US President Trump this week. Reports suggest that the talks between the pair will focus on the Middle East, energy costs and the ongoing Russia-Ukraine conflict. EGBs dominate the fixed income space this morning. Bunds after the latest state parliamentary elections, and OATs after sovereign updates and the latest fiscal disclosure. However, despite these points, EGBs are firmer with the marked energy pullback providing relief and some caveats/points to look to with reference to Bunds and OATs specifically. For Germany, the Grand Coalition’s CDU had a disaster in the two elections, while their SPD partner fared somewhat better. Within Mecklenburg-Western Pomerania, the CDU are set to come in below the 5% threshold to enter state parliament, while AfD won with 38.2% but PSD a near second on 35.5%; a point that provides some relief, as there is no appetite to work with AfD, and thus SPD will likely lead a SPD-Green-Die Linke combination of some description in the region. For now, we await the final results of Mecklenburg-Western Pomerania to confirm if CDU has missed the threshold. Thereafter, we look for signs of more pressure on Chancellor Merz and whether the Grand Coalition may look for an alternative to him, a ‘Kanzlertausch’, given the September regional election outcomes and his personal low approval rating. Turning to OATs, firstly digesting the trend cut to negative from stable at DBRS, due to “the risk of the government failing to address fiscal imbalances is increasing, leading to a continued rise in the government debt ratio over the medium term”. Additionally, Scope cut France to A+ (prev. AA-), primarily due to the deteriorating fiscal outlook. Commodities WTI Nov and Brent Dec futures are softer after initially advancing at the open on weekend escalation, including a Houthi attack on a Saudi Aramco facility in Yanbu and Trump reportedly saying he was considering “blowing up” Iran. Prices subsequently reversed as the immediate escalation failed to develop further and Trump also signalled openness to meeting Iran’s President. Further, there may be some hopes that the Trump-Xi meeting this week may help simmer down some geopolitical tensions in the Middle East. This morning’s picture remains mixed in terms of newsflow: the IRGC said it shot down a US MQ-1 drone over Hormuz and warned the war “is not over”, while Pakistan’s Interior Minister is heading to Tehran, with conflicting reports over whether the trip involves US-Iran mediation. WTI Nov trades close to the bottom of a USD 93.46-97.22/bbl range, while Brent Dec nearer to the lower end of a USD 96.97-100.22/bbl range. Dutch TTF is sharply softer (-3.8%) alongside the broader pullback in the energy complex within a EUR 76.85-80.55/MWh range. Precious metals are softer as the Dollar remains firm in the face of lower oil prices. Spot gold trades around USD 4,350/oz within a USD 4,342-4,383/oz range, and with the 100 DMA at USD 4,319/oz today. Spot silver similarly trades flat on either side of its 100 DMA (USD 66.40/oz) in a narrow USD 65.73-67.05/oz parameter. Base metals are firmer despite the cautious broader backdrop, extending some of last week’s gains. COMEX copper trades near the upper end of a USD 6.60-6.66/lb range, and 3M LME copper trades towards the top end of a USD 14,540.50-14,688.00/t parameter, with the complex supported by the generally positive tone across Chinese markets ahead of the Trump-Xi summit and after constructive US-China trade discussions in New York. Kazakhstan oil shipments to Ust-Luga were recorded at 200k metric tons in August, according to Interfax. French Finance Minister Lescure said France’s strategic oil stocks are full. Naftogaz said ORLEN (PKN PW) will supply up to USD 500mln of petroleum products to Ukraine to stabilise the market and deliver three LNG cargoes in Q1 2027. South Africa's Pretoria is reportedly looking to leverage its role as a platinum supplier to help integrate into the US and China, Semafor reported. Trade/Tariffs US Treasury Secretary Bessent said they had a very successful engagement with the Chinese on trade and AI, while they agreed to hold another meeting on AI dialogue and the US suggested a notification system between the two countries. Bessent separately commented that he is likely to meet the Chinese delegation in two months and they discussed extending the trade truce, although no pact was reached, according to FT citing an interview following Bessent's meeting with Vice Premier He Lifeng. USTR Greer said they implemented a board of trade, with the US and Chinese teams to continue working on a board of trade agreement, while the board of trade from the Chinese side is likely to include consumer goods and low-tech items. China's top trade negotiator Li said trade talks are ‘not bad’ and that talks will continue on Monday among the working group, while he confirmed that both sides discussed AI along with trade and investment. Chinese state media noted that China and the US conducted frank, in-depth and constructive exchanges on important economic and trade issues of mutual concern, while they held dialogue on issues related to AI. US and China were reported on Friday to be discussing cutting tariffs on US LNG ahead of Xi's visit, with potential USD 30bln reciprocal tariff cuts, while the visit could bring broader energy and agricultural deals. China reportedly purchases more US soy cargoes ahead of the President Trump-Xi meeting. Indian Trade Minister said a trade agreement with New Zealand will provide duty-free access to New Zealand for 100% of India's exports. Central Banks Fed's Kashkari (2026 voter) said inflation remains too high and that price pressures have expanded beyond the oil-price shock from the Iran war and are affecting the broader economy. Geopolitics: Iran US President Donald Trump reportedly said on Sunday that he is thinking of "blowing up" all of Iran as he left the Camp David retreat a day early to return to the White House, while Fox News reporter Yungst said Trump told him during a phone call that "very big things are going to be happening" soon. Furthermore, Trump said his options are ‘wiping out’ the regime, letting it ‘rot economically’ under naval blockade, or striking a deal, according to Fox News and The Telegraph. US President Trump said on Friday that the Iran War will end soon, adding that once the war ends, US gasoline prices will revert to prior levels and could even fall further. US President Trump confirmed on Friday the US is talking to the Houthis, saying they want a deal, while adding "we'll see" on whether to annihilate Iran. US CENTCOM commander Cooper said oil and LNG shipments through the Strait of Hormuz in the past two weeks reached the highest levels in six months. More US troops had reportedly died amid the Iran war than the Pentagon disclosed publicly, according to a report on Friday in the Washington Post. Pakistani Interior Minister travelled to Iran today, IRNA reported. Tasnim later reported that the trip is unrelated to Iran-US matters and will focus on bilateral relations and cooperation, with the report adding that Pakistan is not carrying a message between Iran and the US. Iranian officials conveyed their conditions to mediators for re-engaging in negotiations for ending the war with the US, while the conditions include ending the war on all fronts and the naval blockade, as well as unfreezing Iranian funds and they also want an end to the war between Saudi Arabia and Yemeni Houthis. IRGC spokesman said all of the US' superior technologies pale in comparison to Iran's offensive and defensive capabilities, adding that Tehran are defining the new regime in the region, not America, and the war is not over and continues. The spokesman added that the IRGC has prepared itself for a long-term war and that they have new targets and weapons ready if the US launches a new attack. IRGC said it shot down a US MQ-1 drone over the Strait of Hormuz. UKMTO received a report of an incident involving a vessel transiting the Strait of Hormuz, reported at 07:30 UTC. A tanker conducting an inbound transit was struck by an unknown projectile. Qatar's PM Al-Thani said Gulf states need to cooperate to restore regional stability and help reach a settlement between the US and Iran. It was separately reported that Qatar's Energy Minister said US Treasury Secretary Bessent is "wrong" in saying that the strategic Strait of Hormuz will be worthless in two years. Geopolitics: Ukraine Russia's Press Secretary Peskov said there have been no progress in negotiations on Ukraine yet but remains open to further talks, IFX reported. UK Burnham hopes to build bridges with US President Trump at their first meeting and wants to press the case for the US to help Ukraine with air-defence systems. Moscow Oil Refinery was hit during a drone attack that was part of Ukraine's largest barrage this year. Geopolitics: Other US, Denmark and Greenland reached a security agreement that expands the US’s role on the Arctic island to end the row that threatened NATO. North Korea launched two missiles off its eastern coast on Sunday. It was also reported that North Korea rejected an IAEA resolution on its nuclear program and vowed to keep its status as a nuclear-armed state. Japanese Defence Minister Koizumi and US Defence Secretary Hegseth agreed in a phone call to further strengthen security ties. US Event Calendar 8:30 am: Aug Chicago Fed Nat Activity Index, est. -0.04, prior -0.08 DB's Jim Reid concludes the overnight wrap For 2026 standards, its been a relatively quiet weekend news wise but yesterday saw more, albeit expected, heavy defeats for the ruling CDU in two German state elections with a surge in support for the far right AfD in one and the far left Die Linke in the other. Chancellor Merz called the early results "a disaster" but vowed to press on with reforms. In Mecklenburg-Western Pomerania, the AfD won 38.3% of the vote, roughly double its support from the previous election in 2021 and enough to make it the largest party in the state even if a coalition to keep them out of power is likely. The shock was that the CDU didn't even make the 5% threshold to enter parliament for the first time in the country’s post-World War II history. So this will create huge amounts of political pressure on the Chancellor and raise questions about the reform agenda.   Meanwhile, in Berlin, the Left Party (Die Linke) emerged as the biggest force with 25.3%, ahead of the CDU and Greens. The mainstream parties seem to be caught in a continued pincer movement. On the far-right the AfD continues to gain support on anti-immigration and anti-establishment themes, particularly in eastern Germany, while the Left appears to have capitalised on concerns over housing affordability, living costs and social inequality. For markets, the immediate implication is not a change in national policy, but a further weakening of Germany’s political centre and another reminder that the forces driving political polarisation across Europe remain alive and well. Also over the weekend, President Trump announced that the US, Denmark and Greenland had reached an agreement that would allow a significant expansion of the US military presence on the island, with Trump describing the deal as giving the US “permanent control over security” in Greenland. The agreement falls well short of Trump’s earlier ambitions to acquire Greenland, while Danish and Greenlandic leaders stressed that it explicitly recognises Greenland’s right to self-determination and Danish sovereignty. Taken at face value, if this agreement holds it actually reduces event risk, as the Greenland issue could easily have come back to be a high tension hotspot in the months ahead. Overnight in Asia, equity markets are advancing led by technology shares supported by optimism from US-China trade talks ahead of the much anticipated summit between President Trump and President Xi Jinping later this week. Across the region, the KOSPI (+1.79%) is outperforming with Japanese markets closed for the three-day Silver Week holiday. Elsewhere, the Hang Seng (+0.57%), the Shanghai Composite (+0.55%) and the CSI 300 (+0.42%) are all trading moderately higher. S&P 500 (+0.41%), NASDAQ 100 (+0.54%) and Stoxx (+0.55%) futures are all higher. Brent is -2.21% lower at $101.65/bbl which is helping. It's been above $100/bbl again since September 9th, and although US cash Treasury trading hasn't commenced due to the Japanese holiday, US and European bond futures are all notably higher this morning.   Moving on, the week ahead brings a mix of economic data, central bank decisions, lots of Fed speak, and geopolitical events. The first read of the September PMIs across the major economies on Wednesday should provide the most timely update on global growth momentum, while investors will also be watching policy decisions from the Norges Bank, Riksbank and SNB on Thursday with their hike probabilities according to futures at 62%, 21% and 5% respectively. Elsewhere, attention will turn to the meeting between Presidents Trump and Xi on Thursday which will likely garner a lot of headlines. Indeed they already have overnight as discussed above. See our Geopolitics team's preview of the summit here. We also have opening week of the UN General Assembly debate in New York.   In the US, the focus will increasingly shift towards next Friday’s payrolls report, which will be the most important data release before the October FOMC meeting. Ahead of that, markets will be very keen to hear from a heavy schedule of Fed speakers throughout the week. These comments will frame last week’s FOMC meeting, where policymakers delivered a widely expected rate increase but signalled a more hawkish policy outlook. The updated projections showed a strong majority of officials anticipating further tightening, while Chair Warsh emphasised that the Committee still sees limited evidence that policy is meaningfully restrictive.   Fed communication begins today with Chicago Fed President Goolsbee alongside the Chicago Fed National Activity Index. Tomorrow, investors receive the Philadelphia Fed non-manufacturing survey and the Richmond Fed manufacturing index. On the policy front, Fed Vice Chairs Williams and Jefferson are due to speak. Our economists view Williams as one of the four officials who are still expected to see the Fed easing by the end of next year, so any hints on that outlook will be closely scrutinised.   Wednesday’s main event will be the September flash PMIs. Our economists expect the US manufacturing PMI to edge up to 54.0 from 53.9, while the services gauge is forecast to ease slightly to 56.1 from 56.5. Given the recent focus on AI-related investment and broader capex trends, these surveys will be watched closely for signs that business activity remains resilient. Fed Governor Barr is also due to speak. Investors will also be watching Wednesday's Treasury buyback announcement ahead of Thursday's 20-30yr operation, particularly after last month's decision to at least double the size of long-end buybacks.   Thursday sees August new home sales and initial jobless claims. Last week continuing claims hit their lowest since January 2024. Fed speakers include Williams, Barkin, Hammack and Paulson, offering further opportunities for markets to assess where officials stand after last week’s hawkish meeting. Friday’s US durable goods report will be particularly important from a growth perspective. Our economists expect headline orders to rise by 0.6% month-on-month, with orders excluding transportation and core capital goods both expected to increase by 1.1%. The data should provide one of the clearest indications yet of whether the recent strength in business investment is being sustained. Williams and Hammack are also due to speak on Friday.   Recapping last week now and it was a story of two halves that left most assets little changed from where they started the week. The first half saw a fresh rise in energy prices that led to renewed fears of stagflation, and we even saw the 10yr Treasury yield close above 5% for the first time since 2007. But on Wednesday, the Fed delivered their first rate hike since 2023, which seems to help ease inflation fears with a delay but the reality was that energy price falls were the more important theme reversing the yield spikes.   Brent crude oil prices were down -0.71% on the week (-0.91% Friday), closing at $103.87/bbl after approaching $110/bbl in the first half of the week. That marked a reversal after a +17.1% jump over the previous two weeks. While oil prices stabilised, sovereign bond yields still extended their rise overall. For instance, the 10yr Treasury yield reached an intraday peak of 5.04% last Tuesday, before ending the week at 5.00%, up +2.9bps on the week (+6.5bps Friday). Meanwhile in Germany, the 10yr bund yield also hit an intraday peak of 3.57% on the Wednesday, before ending the week -1.4bps overall at 3.52%. French bonds underperformed, with the 10yr spread over bunds closing above 100bps on Friday for the first time since 2012. In absolute terms, the 10yr French yield also hit a post-2008 high on Friday of 4.56%.   This backdrop meant equities saw modest losses last week, with the S&P 500 down just -0.08% (+0.17% Friday). The index was boosted by some of the big tech stocks, with the Magnificent 7 up +1.05% last week, marking its 4th consecutive weekly gain. However, small cap stocks struggled by comparison, with the Russell 2000 down -1.50% last week. After the AI doomerism of the previous weekend, the Philly Semiconductor index (SOX) closed up +0.73% after being down nearly -6% on Monday. Meanwhile in Europe, there were slightly larger declines, with the STOXX 600 down -0.57% (-1.11% Friday). Elsewhere, there were some sizeable moves in FX last week, with the dollar index up +1.11% after the Fed’s hike, marking its biggest weekly gain since June. Conversely, the Japanese Yen weakened -2.08% against the US Dollar last week, which marked its biggest weekly decline since October 2025. That followed the BoJ’s 25bp rate hike, but the move was already priced in and two members voted against the hike, so markets interpreted the decision in a dovish light. Tyler Durden Mon, 09/21/2026 - 08:36

Futures Flat Ahead Of Massive $7 Trillion Quad-Witching As Yields Resume Rise US stock futures are little changed on Friday, with big tech stocks rising while sentiment is supported by another modest decline in oil prices; a near-record $7 trillion quad-witching and index rebalances add to Friday's set-up. US tariff-delay hopes, a flattening US curve and softer diesel and WTI prices ease inflation concerns, while AI bulls are back in charge. As of 8:00am ET, S&P 500 futures rose 0.1% to 7,713.25, erasing modest gains, while Nasdaq futures rise 0.3% as the market momentum after the risk-on rally yesterday holding well into today’s session with Tech continuing its leadership. In premarket trading, Mag 7 stocks are mostly higher led by GOOG/L (+2.0%); AMZN is flat after the 5% rally yesterday amid a long-term deal with Generac. Meanwhile, Brent crude traded near $104 a barrel. The dollar climbed 0.2%, while gold rose toward $4,400 an ounce. Treasuries resumed losses after a brief rebound, with the 10-year yield up three basis points to 4.97%. Overnight, the BOJ hiked by 25bps as expected, but the vote split skewed dovish as two Takaichi-appointed members dissented, which sent the yen sharply lower (USDJPY breaking above 157 for first time since early Sept) and Japanese stocks rallying (Tech > Banks). The USD is higher post BOJ decision. Oil is unchanged this morning; both precious and base metals are higher. Today’s macro data focus is on Industrial Production and Leading Index which are not expected to be market moving. In premarket trading, Mag 7 stocks are mostly higher: Alphabet is leading Magnificent 7 peers higher as technology and AI-related stocks boost the US stock futures. Meanwhile, Apple underperforms the cohort (Alphabet +2.4%, Nvidia +0.4%, Apple +0.1%, Tesla +0.5%, Amazon +0.5%, Microsoft -0.1%, Meta +0.7%). Cryptocurrency-linked stocks are rallying in premarket trading, set to extend gains, after US SEC greenlit digital versions of securities to start trading in the US. European telecom stocks sold off on Friday, following US-listed peers lower, amid concerns over competition from satellite operators and disruptive impact from agentic AI tools. Fluence Energy Inc. received another downgrade on Friday, with Jefferies cutting the energy storage company to hold from buy, citing a recent cut to the company’s outlook. Intuit shares are little changed in premarket trading, after the tax-preparation software company hosted an investor day where it gave financial targets and discussed its strategy to deliver higher growth. Analysts say the stock remains a show-me story as the company navigates the AI era. Macom Technology Solutions Holdings Inc. shares are up 2.1% in premarket trading, after BMO Capital Markets upgraded the semiconductor device company to outperform from market perform, seeing an attractive valuation in the wake of recent weakness. Netflix shares drop 2.9% in premarket trading as Wells Fargo Securities downgrades to underweight from equal-weight, citing “worrying” engagement trends. Nvidia Corp. Chief Executive Officer Jensen Huang expects to sell twice as many chips in the coming year, fueled by the spread of artificial intelligence across different industries. Stubhub shares gain 3.5% in premarket trading as Citi upgrades to buy from neutral, citing “robust” third-quarter trends. . Tyson Foods shares are up 1.4% ahead of the bell as JPMorgan upgrades the meat producer to overweight from neutral. Xenon shares tumble 27% in premarket trading Friday after the bio-pharmaceutical firm voluntarily paused enrollment in clinical studies of major depressive disorder (MDD) and bipolar depression (BPD). In other corporate news, Berkshire Hathaway Inc. founder Warren Buffett is stepping down as the company’s chairman to be replaced by his son Howard. SoftBank Group Corp. has increased its margin loan backed by shares of its chip unit Arm Holdings Plc by $5 billion to $25 billion, according to people familiar with the matter. Russia seized control of the local assets of Swiss food giant Nestle SA and French supermarket chain Auchan, placing their stakes in Russian businesses under temporary administration. More than a quarter of Anthropic PBC’s research and development work for artificial intelligence is driven by its Claude chatbot, according to the company. Morgan Stanley and CIBC have won the mandate to advise the Canadian government on selling the operating rights to the country’s four largest airports. Malaysia Airlines’s parent is said to be closing in on an order for Boeing 787 Dreamliners as the carrier seeks to renew its long-haul fleet. Today's quieter tone signals a notable shift for markets that started the week with Brent crude at a four-month high, 10-year Treasury yields at levels seen 19 years ago and chipmakers under pressure on concerns that AI poses an existential risk to humanity. Since then, a US interest-rate hike has helped shore up the Federal Reserve’s inflation-fighting credibility, worries over crude supplies from the Middle East have eased and a persistent supply-demand imbalance in chips continues to underpin robust profit outlooks for semiconductor companies. Friday’s main event saw the Bank of Japan raise its benchmark rate as widely expected, though in a split decision. The yen weakened 1.2% against the dollar after two board members voted against the hike, suggesting the bank may not embark on a series of increases as quickly as initially anticipated.   Developments in the Middle East and the outlook for global rates will be the main steer for traders in the coming weeks, said Roberto Scholtes at Singular Bank. The risk of further energy-supply disruptions from the Iran war came back into view Friday as Saudi Aramco told some refining customers in Europe they won’t be allocated crude next month. “Energy prices and monetary policy expectations will remain the main market drivers until the third-quarter earnings season begins,” Scholtes said. “The US midterm elections will gradually move into the spotlight, especially if leading candidates put forward bold policy proposals.” An easing of geopolitical tensions should help both bonds and equities, according to Mohit Kumar at Jefferies. “The first couple of weeks of October could be a sweet spot to get some form of a deal between US and Iran, even if it’s a fudge,” Kumar wrote. “We are at a local peak in geopolitical tensions and see improvement in the coming weeks.” Friday's quad-witching option expiration may remove positioning that has dampened realized moves, Citadel Securities says, with about $7 trillion of options notional value set to expire, one of the largest ever. Meanwhile Bloomberg notes that the equity dispersion trade’s golden age may be ending, with single stock volatility’s premium relative to the VIX plunging since July. With the Fed’s communications blackout ending after Wednesday’s rate decision, focus on the policy outlook will shift back to the views of voting officials. Fed Vice Chair for Supervision Michelle Bowman is scheduled to deliver a speech in London on Friday. US equity funds had the biggest weekly inflows in three months at $63.8 billion, according to BofA, citing EPFR data through Sept. 16. Index rebalances after the close tonight include Bloom Energy, Illumina and Everpure into the S&P 500 and SpaceX will get a weighting boost from a Nasdaq 100 rebalance. In poltiics, the US is expected to hold off announcing new tariffs on China and other trading partners until after next week’s summit between Presidents Xi Jinping and Donald Trump. AI is widely expected to be a central topic at the event, with access to advanced US chips and safety standards among key points of contention.  And on the subject of AI, SoftBank increased its margin loan backed by shares of its chip unit Arm Holdings by $5 billion to $25 billion, as the conglomerate finds ways to fund its expanding investments in AI. Software’s recovery, having been left for dead earlier by in the year by perceived imminent AI threats, is the focus of today’s Tech Watch. Europe's Stoxx 600 falls 0.4% to 640.2 with Nestlé in the red after a decree from Russia’s President about its operations in the country. The telecom and insurance sectors weigh the most, while technology and healthcare are among the few gainers. Still, the region is set for its first weekly advance in three as oil retreats on optimism about diplomacy between the US and Iran. Here are some of the biggest movers on Friday: Infineon shares rise as much as 3.8% after being upgraded at Oddo BHF, which recommends investors return to the stock following a recent de-rating. Adecco rises as much as 2.1% as Bank of America says its underperform thesis on the company has played out, with the stock having derated ~40% between August 2023 and June 2026 due to two years of negative EPS revisions. Softcat shares fluctuate after the IT reseller raised guidance for FY26 operating profit growth, while announcing an acquisition that was partially funded by an equity raise. Nestlé shares drop as much as 1.9% after Russian President Vladimir Putin signed a decree transferring stakes in the firm’s local unit into temporary administration. Orange shares fall as much as 4.5% after the carrier was downgraded to underweight by analysts at Morgan Stanley, who see multiple headwinds ahead for the carrier. Asian stocks rose, driven by gains in chipmakers as tech sentiment got a lift from declines in oil prices and a bullish outlook from Nvidia. Japanese stocks advanced after the nation’s central bank raised rates, as expected. The MSCI Asia Pacific Index climbed as much as 1% before paring some of the gains, with SK Hynix, Samsung and TSMC among the biggest boosts. A Bloomberg gauge of Asian chipmakers rose 3.5%, though most sectors beyond tech declined. South Korea’s Kospi led advances among regional benchmarks, rising 2.7%, while Taiwan, China and Hong Kong also gained. The tech-driven gains underscore the resilience of the AI trade even as the broader backdrop for Asian equities has become more challenging. The Fed Reserve and BOJ have tightened policy, while still-elevated crude and global bond yields have added pressure on financial conditions. Investors are still optimistic that strong tech earnings will help broader equities markets withstand headwinds. Chinese optical technology stocks rose after Huawei said it’s set to ship its first near-packaged optics modules in the coming quarters. Shares of Chinese robotics component suppliers extended gains after a local media report said that Tesla has begun a new round of audits at local firms to support mass production of its Optimus humanoid robot. Elsewhere, Philippines’ benchmark index was the biggest decliner in Asia and dropped the most in three weeks on expectations of higher local energy cost after rising oil prices. In FX, the yen tumbles to 158 as Bank of Japan Governor Ueda’s comments following a split-vote hike by the central bank failed to meet traders’ hawkish expectations. The Bloomberg Dollar Spot Index is up by 0.1% and currency moves beyond the yen are relatively muted. In rates, treasuries hold front-end-led losses in early US session, flattening key yield-curve spreads amid similar price action in bunds and gilts. US 2s10s is testing YTD lows reached in June, and 5s30s is lowest since March 2025, extending moves spurred by Wednesday’s Fed meeting.US front-end yields are 4bp-5bp cheaper on the day, flattening 2s10s by 2bp to 24bp, within 1bp of its June low; 5s30s is nearly 4bp flatter near 46bp; the 10-year is higher by 4bp near 4.97% with UK and German counterparts higher by 4.4bp and 2.5bp respectively. IG dollar issuance slate contains a couple of offerings so far; six were priced Thursday totaling $21 billion, with issuer paying about 3bp on deals that were 4.4 times oversubscribed. Dealer expectations for next week’s volume have been in the $35 billion area. Next week’s Treasury auctions include 2-, 5- and 7-year notes commencing Sept. 22. In commodities, WTI crude oil futures are flat at $96, erasing an earlier drop. Gold is rising, nearing $4,400/oz. US economic data slate includes August industrial production (9:15 a.m.) and August Leading Index (10 a.m.). Fed speaker slate includes Governor Bowman (9:30 a.m.) and Kansas City’s Schmid (11:45 a.m.). Market Snapshot Top Overnight News Pakistan’s army chief has urged Iran to try to rein in Houthi attacks on Saudi Arabia, referencing their mutual defense agreement with Riyadh. FT China has privately asked Tehran to help rein in Yemen's Houthis after an appeal to Beijing by Saudi Arabia following the Iran-backed group's military blitz in the past week. RTRS The Trump administration has approved visas for top Iranian officials, including the president and foreign minister, to attend next week’s U.N. General Assembly high-level meeting in New York even as the two countries are locked in a stalemated war. AP Amazon said AI models should be released only when “ready and safe,” calling for rigorous testing, safeguards and industry cooperation with government. BBG Cyber researchers broke into OpenAI using its key rival Anthropic’s software, highlighting vulnerabilities in the ChatGPT maker’s security as leading AI companies face mounting scrutiny over safety. FT The BoJ has raised interest rates to a 31-year high, accelerating monetary policy normalization under mounting pressure from Washington but failing to arrest an ongoing slide in the yen. The BoJ’s policy board on Friday voted for a 0.25 percentage point increase by a 7-2 margin, taking its target rate to about 1.25 percent. FT Turkey turned to two major banks to oversee the liquidation of 131 investment funds holding more than $18 billion. The move follows a week of turmoil in Turkey’s fund industry after funds at Tera and Pusula said they were unable to meet some investor redemption requests. BBG Reserve Bank of Australia Gov. Michele Bullock warned Friday that the central bank’s concerns regarding stubborn inflation are materializing. Inflation remains “too high” and recent developments suggest that “some upside risks to inflation appear to be materializing,” Bullock said in a testimony before parliament. WSJ Strategists are the most bullish on European stocks for September since 2018, a Bloomberg survey showed, as strong earnings help cushion the impact of energy prices and rising bond yields. BBG OpenAI CEO Altman, NVIDIA (NVDA) CEO Huang and Qualcomm (QCOM) CEO Amon plan to attend the Trump-Xi dinner next week, with AI expected to be a key focus in the summit on September 24th: Politico  The US administration is set to announce that all states will see MFN pricing for certain drugs in Medicaid programmes: Semafor US Department of Agriculture confirmed a case of New World screwworm in a horse in Grant County, New Mexico, marking the state's second case since the parasite entered from Mexico in June. A more detailed look at global markets courtesy of newsquawk APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where markets reversed the post-FOMC moves amid a Fed credibility boost and lower oil prices. ASX 200 lagged with the index range-bound trade as gains in tech and miners were counterbalanced by weakness in defensives, telecoms, energy and financials, while there were comments from RBA Governor Bullock that lowering inflation is essential and that the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Nikkei 225 rallied following the BoJ announcement to hike rates by 25bps, as widely expected, with the decision made by a 7-2 vote as Takaichi-appointed board members Asada and Sato dissented. The language from the central bank reaffirmed a hiking bias but didn't signal any major urgency, noting it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target, while the latest inflation data from Japan printed softer-than-expected on all key metrics of the report. KOSPI advanced with tech stocks buoyed following the outperformance in the Nasdaq stateside, while South Korean President Lee ruled out sending troops to the Strait of Hormuz. Hang Seng and Shanghai Comp conformed to the broad positive mood, with reports noting that the US is expected to delay announcing excess manufacturing capacity tariffs till after the Trump-Xi summit, while MOFCOM said Chinese and US trade teams remain in close contact over negotiations on mutual tariff reductions covering USD 30bln. In addition, the PBoC conducted 7-day and 14-day reverse repo operations ahead of the National Day holidays in early October. Top Asian News Japanese Finance Minister Katayama said they will work to maintain an orderly FX market and will not hesitate to conduct further coordinated forex intervention. She added that they maintain close communication with financial authorities of other nations on FX and that it is important to maintain order regarding exchange rates and interest rates. Japan Economy Minister Kiuchi expects the BoJ to conduct appropriate monetary policy to sustainably and stably achieve its price target while working closely with the government, adding that details of monetary policy are for the BoJ to decide. European bourses have started the final trading session of the week on the backfoot, despite the constructive risk tone in Asia-Pac equities and the downside seen in energy benchmarks. Optimism in Europe has risen and according to a Bloomberg poll, the STOXX 600 will finish 2026 at 670, implying gains of 5% from Wednesday's close. HSBC analysts highlight the improving macroeconomic data as a driver for the upbeat tone in Europe, while welcoming any downside in energy prices. Sectors point to a negative bias. Telecoms is the sector laggard, followed by Insurance and Retail. On the other hand, Tech is the sector outperformer, with Health Care and Industrials rounding out the sector gainers. Top European News ECB Consumer Expectations Survey (Aug): 1-year 3.0% (prev. 2.9%), 3-year 2.9% (prev. 2.7%), 5-year 2.5% (prev. 2.4%). UK Retail Sales (Aug MM) 0.5% vs. Exp. -0.2% (Prev. -0.5%). UK Retail Sales (Aug YY) 2.4% vs. Exp. 1.9% (Prev. 1.2%). UK Retail Sales ex Fuel (Aug MM) 0.6% vs. Exp. -0.2% (Prev. -0.9%). UK Retail Sales ex Fuel (Aug YY) 2.7% vs. Exp. 1.9% (Prev. 1.8%). German PPI (Aug MM) 1.1% vs. Exp. 0.4% (Prev. 1.1%). German PPI (Aug YY) 4.6% vs. Exp. 4.1% (Prev. 3.0%). FX Snapshot: G10s are mixed against the USD; the Aussie slightly outperforms, whilst the JPY is the clear laggard following the BoJ’s policy announcement. DXY is mildly firmer this morning and currently holds within a fairly narrow 100.19-38 range. The index still remains towards post-FOMC highs, benefiting from higher energy prices and as markets pull forward their calls for further hikes this year. The JPY is the clear underperformer this morning, after the BoJ decided to lift rates by 25bps (as expected), with the decision made by a 7-2 vote split. The two dissenters were PM Takaichi “reflationist” members; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The announcement itself spurred immediate pressure in the JPY, given the two surprise dissenters and after the BoJ avoided any guidance surrounding a faster pace of rate hikes. Governor Ueda’s presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. USD/JPY is stronger by c. 1.3% on the session so far, and currently holding at the upper end of a 155.87-158.06 range. No doubt, if the theme of widening differentials between the Fed and BoJ returns, USD/JPY will likely head back towards the 158-160 range. EUR is mildly firmer this morning, amidst a slew of ECB speak, where a number of members are currently in Ireland for an informal meeting of EU ministers. ECB’s Kaasik and Kazaks struck a hawkish tone, with the latter suggesting that a September hike is unlikely to be the last, “unless we find ourselves in a very different scenario than the baseline”. Elsewhere, President Lagarde reiterated that they are not seeing second-round effects. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East. Fixed Income Global fixed benchmarks are lower this morning. USTs (-3 ticks) are trading on either side of the unchanged mark, whilst Bunds (-30 ticks) and Gilts (-41 ticks) underperform. Pressure today for the latter two is likely an accumulation of factors: 1) BoJ rate hike, 2) elevated energy prices, 3) paring of recent BoE-related strength, 4) hawkish central bank speak from the ECB. JGBs are net firmer today, following the BoJ’s decision to hike rates by 25bps to 1.25%. However, the decision was subject to dovish dissent, which saw PM Takaichi's “reflationist” appointees vote to hold rates; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. The JGB curve is steepening this morning (in contrast to global peers which are flattening), with underperformance in the short end given the dovish tone from the meeting/Ueda. USTs are flat, trading on either side of the unchanged mark. Some strength was seen in early morning trade alongside the pressure in energy prices, but this ultimately reversed. Ultimately, USTs are subdued this morning, following global peers with worldwide central banks shifting hawkish – the BoJ the latest to do so. Markets will get clarity out of the Fed later today, with Schmid and Bowman on the docket. It is worth highlighting that yields are bear-flattening this morning; this indicates that elevated energy prices and hawkish repricing are the main themes in traders’ minds. The US 2s10s currently holds around 24bps vs 34bps earlier in the week. Bunds have had a number of hawkish ECB speeches today, namely Kaasik and Kazaks. This may, in part, be weighing on the benchmark this morning. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East. Bunds will eye the Mecklenburg-Vorpommern state election, particularly in the context of the AfD’s strong showing in Saxony-Anhalt a few weeks ago. Australia sells AUD 1.0bln 1.00% November 2031 bonds: b/c 4.47x, average yield 4.9936%. Commodites Crude benchmarks continue to pull back from its peak seen earlier in the week, with escalatory strikes in the Gulf seemingly slowing down. There were a couple of UKMTO reports, which failed to move markets as traders now focus on next steps over any potential end to the war. Overnight, US President Trump told Axios he is at a "critical juncture" regarding the war in Iran, weighing whether to launch massive new attacks or pursue a different path to end the conflict. Further, this morning, a source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar. WTI Oct'26 rotates in a USD 99.39-101.57/bbl range while Brent Nov'26 trades either side of the USD 103/bbl mark (USD 101.92-104.27/bbl range). Precious metals continue to climb post-Fed, with spot gold currently trading at the upper end of its USD 4,334-4,400/oz range. The narrative behind the recent gold upside seems to come from lower yields and energy prices, tempering worries of inflation. 3M LME Copper regains the USD 14.5k/t handle and rose to levels just shy of USD 14.6k/t, as the red metal prepares for its 4th consecutive day of gains. Supporting copper gains are signs that Chinese demand is re-entering the market. The Yangshan premium, a gauge of copper demand, rose to its highest level since November 2022 while domestic copper production fell slightly in August. Saudi Arabia has sold about 60mln barrels of crude from its Ras Tanura port inside the Strait of Hormuz for loading in September and October, Reuters reported citing sources. Venezuela nears an agreement to move USD 4bln gold reserve to New York which would allow the interim government to access funding, according to FT. Central Banks BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote as board members Asada and Sato dissented and voted to hold. BoJ said it will continue to raise rates in response to economic and price developments as well as financial conditions. BoJ said inflation expectations are heightening moderately, with underlying inflation approaching 2%, and it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target. Furthermore, it said the accommodative financial environment will be sustained after the policy rate change, thereby supporting economic activity, and it is necessary to pay attention to the impact of the Middle East situation on financial and FX markets, the economy and prices. In terms of the dissenters, who are both known reflationists appointed by PM Takaichi, BoJ's Asada considered that with the rate of increase in the core CPI below 2% recently, it could not necessarily be said that the economic situation was strong and it was desirable for the Bank to maintain the guideline for money market operations, while Sato considered current economic and price developments did not appear to have substantially accelerated compared with before, and in this context, it was not appropriate for the Bank to raise the policy interest rate at this time. Overall, Ueda’s press conference did not signal any urgency to accelerate the pace of tightening. He mentioned that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. One hawkish aspect of the presser was that Ueda suggested that the BoJ believes the phase of policy has changed. However, he later clarified that this meant that the objective is now to stabilise underlying inflation at around 2%, essentially removing the initial hawkish remark. Ueda also did not mention anything related to increasing the pace of future rate hikes, which further added to the dovish tone. RBA's Governor Bullock said various indicators continue to suggest labour market conditions remain close to, but a little tighter than full employment, while she added that monetary policy is well placed to respond to developments. Bullock said lowering inflation is essential, and the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Furthermore, she stated they are in a world of higher-for-longer oil prices and that businesses are now more inclined to pass on cost increases. ECB President Lagarde, speaking on RTE Radio, said growth is a bit more promising than we thought and that they are not seeing second round effects yet. She also reiterated a meeting-by-meeting approach. ECB's Vujcic said market bets on further ECB rate hikes are being largely driven by higher energy prices and will look at a wider set of economic indicators when deciding the next policy move. Vujcic said higher inflation through Autumn will dampen GDP. On the current rate hike pace, he said it is worth keeping for the time being. ECB's Kazaks, speaking to Bloomberg, said the ECB must do everything to avoid second round effects and that all meetings are live meetings. On the neutral rate, he said they are near the upper end of neutral and that quite likely restrictive policy will be needed. Elsewhere, Kazaks told Econostream that the September hike will unlikely to be the last "unless we find ourselves in a very different scenario than the baseline". Kazaks highlighted that an October hike would still be consistent with the September projections. On considering the size of the moves, he said that if the move in inflation is very strong or core inflation is moving up, the ECB can take bigger steps. ECB's Kaasik said more tightening needed if inflation risks materialise but that the exact level of neutral rate is not a big concern now. Geopolitics: Iran Source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar. US State Department said the US will continue to bar Iranian UN mission officials, visiting officials and their dependents from purchasing wholesale club memberships or luxury goods, and urged New York area retailers to avoid complicity in violations. US is reportedly expected to send MQ-9 Reaper drones to South America, CNN reported citing sources. The report added that the plan is part of counternarcotics and counterterror operations and that there are still discussions on whether to send some drones to the Middle East. UKMTO received a report of an incident in the Strait of Hormuz. The CSO of a vessel has reported a tanker being hit by an unknown projectile causing a fire, which was extinguished. IRGC said Togolese-flagged tanker 'Trend' was hit and stopped after a fire, while it stated the tanker violated Hormuz rules and that the US instigated the transit. Houthis are reportedly expanding its minefield in Bab al-Mandab and Dhubab, Al Araby reported. South Korea President Lee said several countries are deploying military assets near the Strait of Hormuz, and added that they won't deploy troops to join conflict but limited actions to safeguard South Korean economic interests and citizens are possible. Geopolitics: Ukraine/Other Turkish President Erdogan and US President Trump may discuss initiatives for negotiations on Ukraine in New York, RIA reported citing sources. US President Trump is making plans for the first-ever meeting with Venezuela's interim President Rodriguez as early as next week, although a meeting is not finalised, according to Axios. North Korea leader Kim's sister said there is no change to the course of strengthening nuclear war deterrence and the US-led multinational drills are the main source of worsening tensions on the peninsula. US Event Calendar 9:15 am: August Industrial Production MoM, est 0.3%, prior 0.2% 9:15 am: August Manufacturing Production MoM, est 0.3%, prior 0.2% 9:15 am: August Capacity Utilization, est 76.4%, prior 76.3% 10 am: August Leading Index, est 0.1%, prior 0.2% DB's Jim Reid concludes the overnight wrap Welcome to the end of the week as I hit day 8 of manflu, a variant passed on by my 11-year-old daughter who was ill with it for precisely 18 hours. In other injury news, I've slightly sprained my wrist awkwardly cutting up a mango! I'll add that to the list of ailments my body is currently processing.   Distracting me as I try to type through the slight pain, the main story overnight is that the Bank of Japan have delivered another 25bp rate hike, taking their policy rate up to its highest since 1995, at 1.25%. This is the second of the year and the 6th since they started hiking in March 2024. The move follows on from the Fed’s hike on Wednesday, and the ECB’s hike last week, which leaves us in little doubt we’re in a globally synchronised cycle of rate hikes again, with more likely ahead from all three. Having said that, it was a more dovish hike than expected, with Ayano Sato and Toichiro Asada calling for a hold on the grounds that Japan’s economic outlook was uncertain. Both dissenters were appointed by Prime Minister Sanae Takaichi to the board. So there is some suggestion that this may infer less political support for the rate hike than has perhaps been indicated by US Treasury Secretary Bessent who has been quite firm on the fact that the US and Japan are aligned. So although the central bank reiterated that it will continue raising rates if economic and inflation conditions evolve as projected, the market has reacted to the two high profile dissenters. The Yen is -0.72% lower at 157.10, having been at around 153.40 at the start of the week and the JGB curve has steepened, with 2yrs -2.2bps and 30yrs +3.2bps.  We'll see what the BOJ press conference brings at 7:30am London time. The BOJ decision came just hours after the release of August inflation data, which showed price pressures remaining broadly stable and close to the central bank’s target. Core CPI, which excludes volatile fresh food prices, rose 1.7% year-over-year in August, slightly below market expectations of 1.8% and down marginally from the previous reading. Meanwhile, core-core CPI, a key measure of underlying inflation closely monitored by the BOJ, remained unchanged at 1.9%. Headline CPI also increased 1.9% year-over-year, matching the pace recorded in the previous month and reinforcing the view that inflation remains relatively stable. The Nikkei (+1.67%) has moved higher on the back of the weaker Yen but Asia is stronger anyway following on from the global rally yesterday. The KOSPI (+2.59%) is leading regional gains, with semiconductor stocks extending yesterday’s rally. Meanwhile, mainland Chinese equities are posting solid advances, with the CSI 300 (+1.05%) and Shanghai Composite (+1.04%) both sharply higher, while the Hang Seng (+0.67%) is recording more modest gains. Elsewhere, the S&P/ASX 200 (-0.02%) is little changed and S&P 500 and Nasdaq futures are both +0.14% higher. The yuan has strengthened to its highest level in more than four years as the PBOC continue to guide the currency higher ahead of next week’s planned meeting between Chinese President Xi Jinping and US President Donald Trump, where trade relations are expected to be a key focus. The offshore yuan is advancing +0.14% to 6.695 per dollar, marking its strongest level since July 2022. The PBOC also set a firmer daily fixing for the eighth consecutive session, the longest such streak since 2023. Those overnight developments come after a very strong session yesterday, with markets rallying thanks to a clear drop in oil prices and a decent batch of US data. Indeed, the S&P 500 (+1.14%) posted its best day in over a month, whilst the 10yr Treasury yield (-9.2bps) saw its biggest daily decline since June as it ended a run of eight consecutive increases. So even though the first half of September was very weak, living up to the month’s bearish reputation, yesterday brought a clear shift in momentum and more positivity on the near-term outlook. The reality is that although seasonals matter, the oil price probably matters more at the moment. And yesterday the oil price decline was the biggest catalyst, with Brent crude having now fallen by more than 3.5% in the last couple of sessions, closing yesterday at $104.82/bbl, and now another -1.35% lower in Asia. In part, the move was supported by the previous day’s news that Saudi Arabia was working to restore the damaged East-West pipeline. But oil then took a further slide after a Reuters report yesterday that China had privately asked Iran to help rein in the Houthis. So that added to hopes that the supply disruption might fade, and Brent crude came down -0.95% on the day. With inflationary pressures coming down, that helped sovereign bonds to rally on both sides of the Atlantic. That was clearest for US Treasuries, as the Fed’s hike on Wednesday added to hopes that inflation would come down over the months ahead. So the 2yr yield (-7.3bps) was down to 4.66%, the 10yr yield (-9.2bps) fell back to 4.93%, and the 30yr yield (-7.7bps) fell to 5.28%. Interestingly, that now leaves the 2s30s yield curve at its flattest level since March 2025, at 62bps. Remember as well that the Fed’s blackout period around the meeting ends today, so we’ll start to hear from officials again and learn how they’re thinking about future rate hikes in the months ahead. Whilst Treasuries were rallying, it was also a strong day for equities, which recovered from the previous day’s declines after the Fed. That was partly thanks to lower energy prices, but we also had a strong batch of US labour market data which cemented the view that the economy remained in good shape. For instance, the weekly initial jobless claims fell to 196k in the week ending September 12 (vs. 207k expected). Moreover, the continuing claims for the previous week fell to the lowest since January 2024, at just 1.730m (vs. 1.779m expected). So that kept up the optimism around US growth, and the S&P 500 (+1.14%) bounced back after a run of 3 consecutive declines. Chip stocks led the gains, with the Philly semiconductor index (+3.14%) posting one of the biggest outperformances yesterday, but there was strength across the tech space, with the NASDAQ up +1.69%. Earlier in Europe, the main story came from the Bank of England, who kept rates on hold at 3.75%. The decision was in line with consensus, and the vote split of 6-3 to hold rather than hike was also expected, so there wasn’t a direct market reaction to that. However, there was a big rally in long-dated gilts after the BoE announced an adjustment in its QT plan, including an end to sales of longer maturity gilts. So they said that the gilts with redemption dates from 2049-2071 would be held to maturity by the Bank, with the purpose of indirectly backing current and future banknote issuance. Moreover, they said that QT sales would be paused until April 2027 as they worked through the operational details for the rest of the plan. So that meant the 30yr yield (-12.1bps) saw its biggest daily decline since May, coming down to 5.74%, whilst the 50yr yield (-17.9bps) saw its biggest decline since February 2023, coming down to 5.20%. Meanwhile, 10yr gilt yields (-7.4bps to 5.22%) extended their two-day move to -16.6bps, the sharpest such decline since last April. On the rates decision, the BoE statement was clear that the Bank might be edging towards a hike, saying that the risk of second-round effects on inflation “is greater the longer higher energy prices persist or are more volatile.” Moreover, they said that “the risks to the inflation outlook are tilted to the upside, and more so than at the time of the July Monetary Policy Report”. Nevertheless, the fact they held, and the vote split remained at 6-3, suggested there wasn’t immediate momentum for a hike, and market pricing slightly dialled back the chance of a hike by the next meeting in November. So on Wednesday, investors were pricing in a 93% chance of a hike by the time of the November meeting, but that was down to 83% by the close yesterday. In turn, that helped yields at shorter maturities to come down as well, with the 2yr yield (-2.2bps) falling to 4.73%. Elsewhere in Europe, the picture was also one of solid gains, as the respite on energy prices lifted assets across the continent. So that meant equities rebounded, with the STOXX 600 (+0.86%) posting its best daily performance in over two months. And for bonds, we saw 10yr yields on bunds (-2.9bps), OATs (-2.3bps) and BTPs (-2.4bps) all fall back as well. Looking at the day ahead, data releases include US industrial production and capacity utilization for August, along with UK retail sales and German PPI for August. We’ll also hear from ECB President Lagarde, the Fed’s Bowman and Schmid, and we’ll get the ECB’s latest Consumer Expectations Survey. Tyler Durden Fri, 09/18/2026 - 08:38

Futures Rise, Oil And Yields Dip Ahead Of First Fed Hike In Three Years Futures are higher into Fed Day where consensus is for a 25bp hike, the first since July 2023, with unknown levels of communication, and the question is what the dot plot shows (see preview here). S&P 500 futures are up by 0.3%, finding relief after days of selling as traders wait Kevin Warsh to deliver an expected interest-rate hike that will help ease fears that inflation may spiral. Nasdaq futures are up 0.6%, with Intel shares jumping 3% in pre-market trading on a report it’s in talks with Korea’s SK Hynix on making memory chips in the US; Software is lower; cyclicals are outperforming defensives as the AI theme is pushing both Tech and Industrials higher. As JPM notes, the market looks to climb the latest Wall of Worry across Fed, AI, and Iran-induced energy inflation. Bond yields are down 2-3bp with USD flat. Commodities are higher led by Metals (Precious over Base) and Ags while crude/fuels are seeing some profit-taking (don't expect it to last). US economic data slate includes September New York Fed services business activity, August retail sales and import/export price indexes (8:30 a.m.), July business inventories and September NAHB housing market index (10am) and July TIC flows (4pm).  In premarket trading, Mag 7 stocks are mostly higher: Meta shares are up 0.6% after Citi opened a 90-day upside catalyst watch on the Facebook parent, seeing a positive roadmap ahead, especially on AI-related products (Alphabet +0.02%, Amazon +0.2%, Apple +0.1%, Microsoft -0.3%, Nvidia +0.4%, Tesla +0.1%) Cryptocurrency-linked stocks are soft a day after the Clarity Act’s failure in a procedural vote sent them tumbling. Alvotech (ALVO) rises 7% as Barclays double upgrades the biotech company to overweight ahead of the FDA’s upcoming decision. Intel (INTC) is up 3% after Reuters reported that SK Hynix is in talks with the chipmaker about a deal that ​would see it manufacture memory chips in the US for the first time. JB Hunt (JBHT) slides 11% after the trucking company flagged rising costs and issued a rare earnings warning at a Morgan Stanley conference. Rocket Pharmaceuticals (RCKT) rises 4% after Needham upgraded the drug developer to buy, citing the FDA’s alignment to continue its rare-disease trial. SimilarWeb Ltd. (SMWB) gains 4% after Needham upgraded the web services firm to buy, citing recent meetings with the company’s management team. In other corporate news SK Hynix is in talks with Intel about a deal that ​would see it manufacture memory chips in the US for the first time, Reuters reports. Brookfield has agreed to buy Reliance Worldwide in an all-cash deal that values the Australian plumbing supplies company at around A$4.1 billion ($2.9 billion). OpenAI is holding early talks with investors about a fresh funding round that would value the company at more than $1.2 trillion ahead of an IPO. Bond markets are steady and stocks are nudging higher as traders prepare for the Federal Reserve decision later. The Fed is expected to lift rates for the first time since 2023, with policymakers increasingly doubtful that inflation will cool sufficiently without tighter policy (see our preview here). Spiking oil prices have added to fears that price pressures are accelerating, contributing to a rise in bond yields to the highest in decades and weighing on stocks. Money markets see a more than 90% chance of a quarter-point hike, with another move fully expected by December. The combination of above-target inflation, rising energy prices, strong employment and a robust economy all call for policy tightening, wrote Kevin Thozet at Carmignac. “The Federal Reserve has little choice but to hike rates on Wednesday, especially since the bond market has been signaling for weeks that higher rates are warranted,” said Carol Schleif at BMO Wealth Management. “The stock market would be disappointed if the Fed didn’t hike.” The Fed’s guidance has “boxed it” into a rate increase that may do relatively little for inflation, according to Bloomberg Economics. The hot August CPI report cemented market expectations of a hike, though much of the inflation gain was due to a single category, wireless phone services. At the same time, Chair Warsh’s preferred gauge suggests inflation breadth has narrowed. The Fed’s quarterly outlook will prove more interesting, with updated economic forecasts and interest-rate projections. However, don’t hold your breath for Warsh’s input as he didn’t join in when officials last submitted expectations in June. Iain Stealey, fixed-income international chief investment officer at JPMorgan Asset Management, said he would be watching for dissent among policymakers, even though his base case is that officials will put up a united front. “If you started to see some dissenters it might call into question how much credibility they’ve got around this sort of fight against inflation,” Stealey told Bloomberg Television. Energy could be back in the headlines later, with the EIA crude oil inventory report due at 10:30 a.m. New York. Norfolk Southern’s CFO compared fuel prices to something out of “science fiction” as the rail freight company warned of a huge cost headwind from diesel. The cost of hiring VLCC tankers to ship US crude to Asia has surged to fresh records this week. The energy shock is becoming a political hot potato — from natural gas prices caught in a perfect storm to AI becoming a midterm test as data centers suck up power supplies. BNEF expects 2035 power-sector gas demand to jump around 50% from 2025 levels. Debates around AI continue at pace. BlackRock’s Larry Fink warned delays in the build-out of AI because of public opposition will make the technology the “domain of large firms,” limiting access. Meanwhile, South Korea’s deputy prime minister said the country can’t afford to slow down the pace of AI development. Intel Corp. outperformed in US premarket trading, rising 3%. The firm is in talks with SK Hynix Inc. for the South Korean chipmaker to produce memory chips in the US for the first time, Reuters reported. Software makers and oil producers lagged. Equity markets will remain choppy over the next few weeks until earnings season arrives, giving investors something more fundamental to trade on, said BMO’s Schleif.  “In the meantime, investors will only have the angst kicked up by midterm election rhetoric and inflation data to watch for hints about whether or not we might see additional rate hikes,” she said. Elsewhere, the US and China are discussing slashing tariffs on goods including American energy and agricultural products ahead of the leaders’ summit next week, while Nvidia’s CEO is slated to attend Trump’s state dinner with China’s Xi. Retail sales data before the US market open will likely give the Fed little reason to worry about demand, according to Bloomberg Economics. The August report is expected to show a strong rebound in nominal sales, with higher prices and seasonal effects adding to the strength, wrote economist Eliza Winger. The Stoxx 600 rises 0.2% as banks bounced back from two days of declines, with miners and utilities leading the way, while autos and consumer stocks are the laggards. Here are the biggest movers Wednesday: Soitec gained as much as 14% as JPMorgan upgraded the shares to overweight and more than doubled the price target, saying raised expectations for the company’s photonics business more than compensate for concerns in mobile Barratt Redrow shares rose as much as 9%, the most since April, after the homebuilder delivered annual adjusted profits ahead of expectations European banks advanced after two days of declines as JPMorgan forecast third-quarter gains for trading revenue and investment-banking fees, a contrast from Bank of America’s warning earlier this week Engcon gained as much as 7.9% after Danske Bank initiated coverage of the Swedish construction equipment firm with a buy rating, saying it is well-positioned to benefit from a recovery in demand as it refocuses on core European markets ISS gained as much as 3.6% after Danske Bank raised its recommendation on the Danish facility services firm to buy from hold, saying it is “well prepared to continue its current strong organic growth trajectory, while also being in a position to lift margins further.” Marks & Spencer fell as much as 4.7% to its lowest since June after BNP Paribas cut its 1H profit before tax estimates Moonpig shares fell as much as 8.5%, weighed down by the UK online gift retailer’s comments on experiences revenue and broader weakness in the country’s retail stocks after inflation rose to a five-month high WH Smith shares slipped as much as 4.7%, before paring the drop, after the travel retailer reduced its profit guidance amid margin pressures Earlier, Asian stocks rose, helped by a rebound in the heavyweight technology sector, with attention turning to the Federal Reserve’s highly anticipated rate decision that’s set to influence the near-term path for global equities. The MSCI Asia Pacific Index was up 0.6%, poised to snap a four-day losing run. Chipmakers SK Hynix, Samsung and MediaTek were the biggest boosts. A subgauge of tech names climbed 1.3% to be the top performer among sector groups. Sentiment also got a boost as oil dipped, though inflation concerns remain elevated with Brent still trading around $108 a barrel. The Fed is widely expected to raise interest rates, marking the first increase since 2023. Stocks are gaining because investors “know there is going to be a move — the Fed aren’t exactly catching investors off guard here,” said Josh Gilbert, lead APAC analyst at Etoro. “A hike looks likely, so the focus shifts to whether this is a one-and-done move.” In FX, the Bloomberg Dollar Spot Index was little changed as traders see the Fed raising borrowing costs for the first time since 2023 to address inflation risks that have risen from booming capital investment and higher energy prices USD/JPY +0.1% to 154.92 EUR/USD little changed at 1.1551  GBP/USD little changed at 1.3481  In rates, treasuries are little changed and the picture in Europe is mixed, with a small rise in yields in Germany but a decline in the UK following inflation data.  Treasuries hold small gains, keeping 10-year yields just below 5%, ahead of an expected Fed rate hike at 2 p.m. New York time and Chairman Warsh’s news conference at 2:30 p.m. Falling oil prices are a main driver after a US industry report pointed to a rise in stockpiles. Gilts outperform led by front-end tenors after UK August inflation data sparked a drop in expectations for Bank of England rate hikes.  US yields lower by 1bp to 3bp with curve spreads narrowly mixed; UK 2-year yield is lower by nearly 9bp, 10-year by about 6bp. IG dollar issuance slate is empty so far and expected to stay muted by the impending Fed decision. Six offerings totaling about $9 billion were priced Tuesday with issuers paying about 3bps in new issue concessions on deals that were 6.3 times covered. Treasury auctions resume Thursday with $19 billion 10-year TIPS reopening In commodities, oil is lower for the session, with Brent is just below $108/barrel, while gold prices have rallied back above $4,300/oz and Bitcoin is slipping below $76,000. WTI crude futures around $103 a barrel are down more than 2% from highest closing level since mid-May, supporting bonds globally; Brent crude fell toward $107 after rising 4% over the previous two sessions US economic data slate includes September New York Fed services business activity, August retail sales and import/export price indexes (8:30 a.m.), July business inventories and September NAHB housing market index (10am) and July TIC flows (4pm) Fed speaker slate resumes Friday with Governor Bowman (9:30am) and Kansas City’s Schmid (11:45am) scheduled so far Market Snapshot Top Overnight News Markets Anticipate Fed’s First Rate Hike Since 2023: WSJ Warsh's words may matter more than the anticipated Fed rate hike: RTRS Bond traders have piled into bearish positions ahead of Wednesday’s Federal Reserve meeting, betting that the Treasury selloff driving yields to their highest in almost two decades will continue: BBG Saudis pound Yemen as Houthis solidify gains in new theatre of Middle East war: RTRS U.S. Is Burning Through Its Supply of Interceptors to Counter Iran’s Attacks: WSJ European Commission President Ursula von der Leyen proposed Canada becoming the first associate member of the European Union: BBG OpenAI Considers Pre-IPO Funding Round at More Than $1.2 Trillion Valuation: WSJ OpenAI's rogue agents probed Hugging Face two months before major hack: RTRS Apple Finally Built a Smarter Siri. It Still Hasn’t Caught Up in the AI Race: WSJ Even as Donald Trump blasts Anthropic PBC’s Dario Amodei over his call to hit the brakes on AI development, the two agree on the need to prevent China from catching the US. But doing that remains difficult in practice: BBG The UK’s strategy to prop up its long-maturity debt by selling less in the wake of the Liz Truss-era crash is failing to pay off. American Businesses Have No Idea How to Set Prices Right Now: WSJ Deep in Trump country, a revolt against corporate money could reshape political spending: RTRS Former Kosovo president Thaci sentenced to 25 years for war crimes: RTRS Support acts quit Ed Sheeran tour in solidarity with pro-Palestinian rapper: RTRS A more detailed look at global markets courtesy of Newsquawk APAC stocks were mixed in choppy trade, albeit with sentiment gradually improving, following the declines on Wall St and recent upside in oil, while participants now await the major central bank rate decisions, beginning with the FOMC later. ASX 200 eked slight gains with strength seen in the commodity-related sectors and with sentiment also helped by M&A news after reports that Brookfield is to acquire Reliance Worldwide for USD 2.8bln, although gains are limited amid weakness in tech, real estate and consumer stocks. Nikkei 225 traded indecisively after mixed data from Japan, in which Exports and Imports topped forecasts, but Machinery Orders disappointed. KOSPI edged higher in two-way trade after swinging between gains and losses, while the tech heavyweights have shown some resilience with SK Hynix mildly underpinned after its union approved the tentative wage agreement in a re-vote. Hang Seng and Shanghai Comp were mixed in range-bound trade, with the Hong Kong benchmark lacklustre as the special administrative region unveiled its first-ever Five-Year plan to align more closely with China, which some fear could be a step away from a free market, while the mainland pared initial losses with the PBoC upping its liquidity efforts. Top Asian News Hong Kong unveiled its first Five-Year Plan to align more closely with mainland China and stated it will adhere to the one country, two systems principle, as well as strengthen the role of the global offshore renminbi business hub. Hong Kong will hold an executive-led system, adopt a holistic approach to development and security, while it will attract China financial firms to the city for business and develop a commodity trading ecosystem. Furthermore, it aims to speed up the Northern Metropolis development and targets GDP growth within a reasonable range in the Five-Year Plan. PBoC Governor Pan said slower loan growth may become a 'new grateful' and that slower credit growth can stabilise debt levels, while China will support local government financing vehicles to resolve debt risks. Furthermore, Pan said they will improve the short-term interest rate adjustment mechanism and further refine policy rates, as well as strengthen the role of policy interest rates. China's Defence Minister said global security governance must be strengthened and they must build an equal and orderly multi-polar world, as well as find a new path to security featuring collaboration rather than confrontation and should uphold multilateralism. Furthermore, he stated that they support regional countries to decide their own future without external interference, while risks should be anticipated and diffused early to prevent minor friction turning into major disputes. European bourses (STOXX 600 +0.3%) are firmer across the board, rebounding from Tuesday's losses. The pullback in bond yields have helped support equities, with energy prices also lower today. Constructive commentary by Iranian FM Araghchi adds to the positive tone, stating that the MoU with the US is in effect and looks forward to returning to a diplomatic solution. Sectors lack a clear bias. Basic Resources top the sector pile, with Utilities and Banks rounding out the sector gainers. To the downside lie Autos, with Optimised Personal Care and Media the sector laggards. Top European News EU Commission President von der Leyen delivered her annual State of the Union address. On the trade front, she said the EU's trade deficit with China has reached its tipping point and are engaged with dialogue with China to rebalance trade, however warns of the use of all tools possible to rebalance trade. With Canada, she announced that they will create a common prosperity and economic security space covering manufacturing, technology, energy, AI, defence and the Arctic and proposed that Canada becomes the first associate member of the EU. For EU defence, she said that it is time for an Article 4-style EU security protocol and announced plans to establish a new European Instrument for military strategic enablers. She also announced that the EU will establish a new European cooperation to help obtain and stockpile critical raw materials. UK Chancellor Healey is said to be considering budget tax rate on higher stakes slot machines, according to FT. Senior German lawmaker Frei said that an energy price relief must come quickly and thinks that energy relief measures should come into effect in October, adding that lower sales tax on gasoline would be an obvious step to take, RTL TV reported. Germany's Economy Ministry said it is continuously assessing the situation and maintaining ongoing dialogue with all market participants in the natural gas sector and welcomed SEFE's intention to step up efforts to fill gas storage. FX G10s trade tentatively against the USD ahead of a key FOMC policy decision later today. EUR and JPY hold marginally afloat, whilst the Loonie slightly lags vs peers. DXY currently holds towards the lower end of a 99.53-99.73 range. Action has been lacklustre throughout the overnight session and for much of the European morning, with traders ultimately awaiting Retail Sales and the Fed policy decision later today. The former will likely spark little reaction given the close proximity to the Fed. On that note, expectations are for a 25bps hike; attention will be on if it is accompanied with hawkish rhetoric/guidance. This could either be provided through a hawkish set of SEPs, a unanimous hike or overt hawkish language at Warsh’s presser. At least one of these would likely be required to give bond traders enough confidence in market stability, to allow yields to edge off highs. Note: A full Fed preview can be found on the Newsquawk Research Suite. GBP had regional inflation metrics to digest this morning. Whilst headline rose from the prior (in-line), Core Y/Y and Services was unchanged from the previous month, indicating no signs of second-round effects. Therefore, the data is unlikely to shift views at the MPC into Thursday’s confab, where rates are expected to be held steady in a 6-3 vote split. Following the data, Cable saw some two-way action, before eventually moving lower as traders curtailed their rate hike bets. Fixed Income Global fixed benchmarks are mixed. USTs (-1 tick) are essentially flat, whilst Bunds (-6 ticks) are under mild pressure. Gilts (+38 ticks) outperform vs peers, following the region’s inflation metrics, which keeps a hold at tomorrow’s BoE meeting in play. USTs are trading lacklustre within a 105-27+ to 106-02+ range. Ultimately, focus remains on the FOMC announcement later today, where rates are expected to be raised by 25bps. Attention for bond traders will be on whether there is a hawkish aftertaste (decision aside), which would likely allow yields to ease off best levels, given that hawkish commentary would signal that the Fed is offering some stability. Currently, the US 10-year sits around the 5% mark, and towards multi-decade highs. Gilts outperform vs peers, benefiting from lower energy prices and following the region’s inflation report. On that point, whilst headline rose from the prior (in-line), Core Y/Y and Services were unchanged from the previous month; there is also a lack of evidence of second-round effects. Therefore, the data is unlikely to shift views at the MPC into Thursday’s confab, where rates are expected to be held steady in a 6-3 vote split. As such, traders curtailed their bets of a rate hike tomorrow, with money markets assigning a c. 30% chance of such a move. Germany sells EUR 2.12bln vs Exp. 2.5bln 3.40% 2047 and 2.90% 2056 Bund. Australia sells AUD 1bln in 3.75% April 2037 bonds: b/c 3.85x, avg. yield 5.3910%. Commodities WTI Oct and Brent Nov futures are softer after yesterday’s renewed rally. WTI trades around USD 104.90/bbl within a USD 103.76-105.63/bbl range (vs yesterday’s USD 101.21-106.75/bbl range), while Brent trades around USD 108.43/bbl within a USD 107.15-108.59/bbl range (vs yesterday’s USD 105.10-109.45/bbl range). Energy benchmarks have come under modest pressure in recent trade following constructive commentary by Iranian FM Araghchi, stating that the MoU with the US is in effect and looks forward to returning to a diplomatic solution. Dutch TTF was initially flat but is now posting mild gains. The Middle East conflict continues to sustain concerns around regional energy flows and European supply security. The contract trades around EUR 80/MWh within a EUR 79.93-83.28/MWh range at the time of writing, with Europe also looking ahead to the winter period. Precious metals are firmer as the pullback in oil and Treasury yields provides some relief ahead of today’s FOMC decision, where markets lean heavily towards a 25bps hike. Spot gold has reclaimed USD 4,300/oz and trades around USD 4,330/oz within a USD 4,276-4,341/oz range, breaking above yesterday’s USD 4,317/oz high (vs yesterday’s USD 4,262-4,317/oz range). The Fed remains the key catalyst, with updated projections and Chair Warsh’s guidance set to provide the space with some impetus. Base metals are modestly firmer as risk sentiment improves and Treasury yields ease ahead of the Fed, although the fundamental backdrop remains less supportive, with this week’s Chinese activity data showing continued weakness in domestic demand despite stronger industrial production, albeit upping calls for support. 3M LME copper resides in a narrow range above USD 14k/t, currently within USD 14,074.40-14,216.15. US Private Inventory Data (bbls): Crude +7.1mln (exp. -1.8mln), Gasoline +1.5mln (exp. -1.2mln), Distillate +1.6mln (exp. +0.8mln), Cushing -0.2mln. Russian plans to expand its diesel-export ban through October, according to Russian press. CBRT Governor said global central banks are rediscovering gold. Aluminium Bahrain CEO Al Baqali said damage to the smelter from the Iranian strike in March has already been repaired. A gold mine collapsed in West Kordofan, Sudan, on Sunday, according to sources. Trade/Tariffs US is pressuring Mexican officials to accept new rules for exports of AI hardware to prevent Chinese companies and other foreign firms from circumventing tariffs, according to WSJ. Geopolitics: Iran Iranian FM Araghchi said "The memorandum of understanding with America is in effect and we want to return to a peaceful solution", adding that Iran is not interested in continuing the conflict and looks forward to returning to a diplomatic solution. Iran's Major General Rezaei said "there will be no negotiations until Iran's conditions are met". IRGC Navy political deputy said no vessel in the Persian Gulf, Strait of Hormuz or Sea of Oman moves outside the supervision of the IRGC Navy, and added that Iran can target any vessel anywhere if it wishes, IRNA reported. Iran said only a single-digit number of ships are currently passing through the Strait of Hormuz, disputing US claims that traffic through the strategic waterway is increasing. It was separately reported that Strait of Hormuz vessel transits fell to four, according to data. Pakistan's military spokesperson said the Mekkah agreement with Saudi Arabia and Turkey will not affect Pakistan's strategic relationship with Iran, and reiterated that the pact is defensive in nature. China's Foreign Minister met with their Iranian counterpart. China encouraged Iran and the US to exercise rationality, urged all parties to take effective measures to reopen the Strait and supported dialogue between Iran and Gulf states. Explosions were heard in Iran's Qeshm which originated from the sea, according to IRNA. Geopolitics: Other Ukrainian President Zelensky said if Russia is prepared to agree to an energy ceasefire, it must bar any attacks on energy infrastructure in any form. Ukrainian media reports explosions in Kyiv, while Polish military aircraft have been activated amid Russian strikes on Ukraine. US mulls purchasing warships from Japan and South Korea to counter China, according to Nikkei. US Event Calendar 7:00 am: Sep 11 MBA Mortgage Applications, prior -2.7% 8:30 am: Aug Retail Sales Advance MoM, est. 0.8%, prior -0.6% 8:30 am: Aug Retail Sales Ex Auto MoM, est. 0.55%, prior -0.3% 8:30 am: Aug Import Price Index MoM, est. 0.5%, prior -0.4% 2:00 pm: Sep 16 FOMC Rate Decision est. 3.75%, prior 3.5% 4:00 pm: Jul Total Net TIC Flows, prior 133.5b 4:00 pm: Jul Net Long-term TIC Flows, prior 172.7b DB's Jim Reid concludes the overnight wrap It’s been a familiar story for markets over the last 24 hours, with a fresh selloff as higher energy prices led to mounting fears about stagflation. Various oil supply issues were the main catalyst, which collectively pushed Brent crude (+2.90%) up to its highest closing level since May, at $108.75/bbl. And in turn, that kept up the pressure on bonds, with the 10yr Treasury yield (+1.5bps) breaking above its 2023 intraday peak in trading, to briefly reach a post-2007 high of 5.04%, before falling back to 5.00% by the close. All that meant it was a rough day for equities too, with the S&P 500 (-0.45%) falling to a 6-week low. To be fair, markets have begun to stabilise a bit overnight, but the Fed are now set to take centre stage, with markets pricing in a 94% chance this morning that they deliver their first rate hike today since 2023.  At the Fed’s last decision in July, markets went into that pricing a roughly 30% chance that the Fed would hike. But even though the decision to hold was broadly expected and in line with the baseline market expectation, there was still a sharp steepening in the Treasury yield curve afterwards given the relative lack of detail from Chair Warsh. Since then, however, Warsh delivered a fairly hawkish message at Jackson Hole in late August, saying that “underlying trends” in inflation had not meaningfully improved, and that if underlying inflation wasn’t getting back to target, then they had “work to do”. So that raised expectations that the Fed would hike at this meeting, which was solidified by the upside surprise in the August jobs report, along with Friday’s core CPI print, which came in higher than expected at +0.3%.  Our US economists are also expecting that the Fed will hike today, as growth remains solid, the labour market has rebounded, and PCE inflation has demonstrated limited evidence of falling back to target. Moreover, forward-looking indicators suggest the inflation overshoot is likely to persist for some time. Nevertheless, with a hike mostly priced in by markets, the key question for them is how Chair Warsh and the latest dot plot frame the tightening cycle. Their view is that forward guidance is unlikely, but they think the median dot should show another rate increase this year, with several officials projecting more than that.  Ahead of the Fed’s decision, there was no let-up in rising oil prices, as fresh supply fears continued to push prices higher. First, Reuters reported that shipping industry sources had said that oil loadings at the Yanbu export terminal in Saudi Arabia had been suspended, leading them to cancel September loadings to some European refiners. And separately, we also had some headlines from Libya that output at three oil fields had been suspended. So that added to fears about wider supply disruption, particularly with no sign of the Strait of Hormuz reopening soon either. In turn, that meant Brent crude (+2.90%) moved up to $108.75/bbl by the close, its highest level since May, while WTI crude (+4.38%) saw an even larger increase to $105.83/bbl. And in a sign that investors were pricing in longer disruption as well, the 6-month Brent future (+1.65%) moved up to its highest since May as well, at $92.06/bbl.  That inflation momentum helped to push up yields to fresh multi-year highs around the world. So in the US, the 10yr yield (+1.5bps) finally closed above 5% for the first time since 2007, at 5.00%. And in trading, it also managed to hit a post-2007 intraday high of 5.04% as well. Moreover, the 10yr real yield (+1.3bps) moved up to a post-2008 high of 2.62%, so this wasn’t just an inflation story. Meanwhile for other maturities, the 30yr yield (+2.2bps) also edged up to a post-2007 high of 5.37%, whilst the 2yr yield (+0.4bps) saw a very modest increase to 4.66%. Long-end yields also weren’t helped by a weak 20yr auction that saw $13bn of bonds issued +2.0bps above the pre-sale yield at 5.42%.  That steepening pattern was even clearer in Europe, partly because investors pared back the chance of an ECB hike in October. So yesterday, market pricing for an October hike came down from 69% on Monday to 56% by the close. That meant front-end yields also came down a bit, with the 2yr German yield (-0.9bps) falling back to 3.25%. But for 10yr yields it was another day of records. So by the close, the 10yr bund yield (+1.9bps) was at a post-2009 high of 3.53%, the 10yr OAT yield (+3.1bps) was at a post-2008 high of 4.50%, and the 10yr gilt yield (+2.0bps) had hit a post-2007 high of 5.39%.  That backdrop of rising energy prices and stagflation fears meant the pressure on risk assets continued yesterday. For instance, the S&P 500 (-0.45%) fell to a 6-week low, although there was a stabilisation in chip stocks after Monday's slump, with the Philly semiconductor index (+0.40%) rising slightly. Nevertheless, the decline was a broad-based one, with two-thirds of the S&P 500 lower on the day. A similar picture was clear in Europe as well, where the STOXX 600 (-0.28%) fell to a 3-month low. Now it’s worth noting this still leaves the S&P 500 within 3% of its record high, and the STOXX 600 less than 4% beneath its high, but there’s been a clear shift in momentum relative to early August. Meanwhile, Bitcoin (-4.06%) saw its biggest decline in three months as well as a digital asset market structure bill failed to pass a procedural vote in the Senate.  Otherwise yesterday, US Treasury Secretary Scott Bessent appeared before the House Financial Services Committee. There weren’t many new headlines, but he did say he’d be meeting his Chinese counterpart, He Lifeng, this weekend. Overnight in Asia, we have seen markets begin to stabilise again ahead of the Fed's decision. In part, that's been helped by a pullback in oil prices, with Brent down -0.77% this morning to $107.91/bbl. So that's helped equities to advance, including the KOSPI (+1.16%), the Nikkei (+0.40%), the Shanghai Composite (+0.50%), CSI 300 (+0.60%) and the Hang Seng (+0.12%). Moreover, US equity futures are also pointing to a positive start, with S&P 500 futures up +0.22%, and the 10yr Treasury yield down -1.6bps at 4.99%. Finally, we had a few data releases out yesterday, including on the UK labour market. That showed the number of payrolled employees was down by -26k in August (vs. -5k expected), although the unemployment rate remained at 4.9% over the three months to July. Otherwise, the German ZEW survey showed expectations rising to a 7-month high of 34.7 in September, although that was beneath the 40.0 reading expected by the consensus. That said, the current situation component rebounded more than expected, up to its highest since mid-2023 at -47.1 (vs. -52.1 expected).  Looking at the day ahead now, the main highlight will be the Federal Reserve’s policy decision and Chair Warsh’s subsequent press conference. Otherwise, we’ll hear from the ECB’s Vujcic and Nagel. Meanwhile, data releases include US retail sales for August, the NAHB housing market index for September, UK CPI for August and Euro Area industrial production for July. Finally, European Commission President Ursula von der Leyen will deliver her State of the Union address. Tyler Durden Wed, 09/16/2026 - 08:29

Futures Drop As Yields, Oil Prices Keep Rising Futures are lower - but well off session lows thanks to some well-time oil sell orders just before US traders walked in to work - as bond yields continue to make new highs, with both Nasdaq and Russell lagging the S&P which feels like more de-risking into tomorrow's Fed release. AS of 8:15am ET, S&P and Nasdaq futures are down 0.1% amid premarket weakness in Mag7 with GOOG / META / MSFT all down at least 90bp but NVDA in the green helping Semis outperform on the move lower. Memory / Korea names are bid despite Kospi closing lower. Energy, Utils, and pockets of Healthcare are higher with the other sectors weaker pre-market. The yield curve is bear steepening as yields continue to march higher in response to oil/energy and growth. The 10Y rose as high as 5.04% before retracing back to around 5.0% USD is stronger. Crude is +2% as the UKR / RU détente on striking energy infra fails to materialize and growing chatter of UK aiding Saudis in fighting the Houthis. Ags are mixed and Metals are weaker, with Base outperforming Precious. Today’s macro data focus is on weekly ADP and Empire Mfg. In premarket trading, Mag 7 stocks are mostly lower: Nvidia +0.5%, Tesla -0.1%, Amazon -0.2%, Meta -0.5%, Apple -0.6%, Alphabet -0.9%, Microsoft -0.9% Cryptocurrency-linked stocks fall on waning optimism that a comprehensive US crypto regulatory bill will progress this week. Dave & Buster’s (PLAY) drops 13% after the restaurant and arcade chain operator reported revenue for the second quarter that missed the average analyst estimate. Eli Lilly (LLY) is up 1.3% after Berenberg upgraded the pharmaceutical giant, with analysts arguing it’s worthy of a more significant valuation premium due to its superior growth profile and the breadth of its pipeline. Enova International (ENVA) falls 18% after the financial services company withdrew its applications with the Office of the Comptroller of the Currency and the Federal Reserve for the acquisition of Grasshopper Bancorp. Etsy (ETSY) rises 3% after Oppenheimer upgraded the online retailer to outperform, citing improvements the company is making to its platform. Forgent Power Solutions (FPS) gains 9% after the power equipment company reported fourth-quarter revenue and adjusted Ebitda above a guidance range given in May. The company’s backlog grew 256% year-over-year. Vera Therapeutics (VERA) jumps 12% after the drugmaker gave updated results from a late-stage trial of its recently approved drug for a kidney disorder. Waystar (WAY), which provides payment-related software to health-care organizations, rises 12% after a Reuters report that said the company is exploring options that include a sale. The report cited sources familiar with the matter. In other corporate news, Enova International withdrew its bank regulatory applications for the acquisition of Grasshopper Bancorp. Dave & Buster’s shares fell in premarket trading after the restaurant and arcade chain operator reported second quarter results below expectations. Elevated bond yields, which overnight hit a new 19 year high of 5.04% before reversing, are setting the tone for markets, placing surging energy costs and mounting debt firmly on traders’ radar. Enthusiasm for the AI trade, the major driver of equity gains this year, also remains tempered as debate rages over whether the technology may inflict catastrophic harm. A surprising note from Goldman found that the momentum trade is shifting notably under the surface.  “Of course the bond selloff is weighing on tech and growth stocks,” said Louis Puga at Societe de Gestion Prevoir. “There are really two worlds at play here: on one side healthy corporate balance sheets and profits, and on the other side countries running big deficits and putting pressure on the bond market.” The weakness in bonds raises the stakes ahead of the Federal Reserve’s interest-rate decision on Wednesday, for which money markets are pricing in more than a 90% chance of a hike. If officials hold off, or Chair Kevin Warsh signals a shallower-than-expected path of tightening, investors may demand even higher yields as protection against inflation. “After years of inflation overshooting target, the Fed’s credibility is under scrutiny,” wrote Jenny Zeng at Allianz Global Investors. Warsh’s “recent comments leave little doubt that restoring price stability remains the priority. September is the meeting where that commitment is put to the test.” A resilient economic backdrop and cautious investor positioning suggest the equity market can absorb more pressure before the rally comes under threat, Bloomberg proposes. “Being early is the same as being wrong, so I’d be careful not to declare the game over too soon,” Rowe says. Still, investors are keen to make protective moves: Hedging demand is ticking higher, with three of the four largest VIX trades this year all taking place in the last two weeks. Underneath the AI rhetoric, the picture is more nuanced. Growth won’t suddenly change and adoption and token use remain high, while any move by leading AI developers to slow the frontier could hand an advantage to some of the hyperscalers. Still, investors are likely to become more selective about picking potential winners.  Monday’s chip drawdown was also reflective of positioning: The latest BofA global fund manager survey revealed that long global semiconductor stocks is the single most crowded trade, according to more than half of respondents. The poll also showed fading exuberance around risk assets, with net 49% of managers now overweight global equities compared with 56% last month. In politics, the Supreme Court refused to clear the Postal Service to enforce new restrictions on mail-in ballots for the midterm elections, rebuffing the Trump administration’s request to intervene. Gavin Newsom said he would not run for president in 2028 if Kamala Harris enters the race, ruling out a potential primary showdown between two of California’s most prominent Democrats. Europe’s Stoxx 600 fell 0.2%. Deutsche Bank slipped more than 2%, echoing declines among US peers after Bank of America warned that trading revenue for the current quarter will be flat. Regional bonds were mixed. Here are the biggest movers Tuesday: Kety shares rose as much as 9.7% after the Polish aluminum products and packaging maker agreed to buy Italy’s Metra from KPS Capital Partners Shares in Acciona Energía and parent Acciona advanced after newspaper Expansión reported that EQT and Norges Bank Investment Management have joined forces to bid for the Spanish renewables company Defense stocks outperformed a struggling broader market on Tuesday morning, with the sector boosted by US inventory shortfalls and news that Japan could raise defense spending Wickes shares rose as much as 9.9%, the biggest intraday gain since May 2025, after the home improvement retailer reported a “significantly improved trend” in the third quarter and said it remains confident it can meet full-year expectations Kier shares rose as much as 4.8%, the most since July, after the UK infrastructure contractor’s FY26 results showed continued growth in orders and the firm announced it would reallocate capital for property investment toward the balance sheet Schott Pharma climbed as much as 5.5%, the most in almost a month, as JPMorgan initiates at overweight with a Street-high €27.1 price target, citing supportive structural trends and the German pharma packaging company’s market leading role Trustpilot shares dropped as much as 20%, the most since December 2025, after the online review platform’s results were “noisier than usual” according to JPMorgan analysts, who noted one-off items that impacted the firm’s top-line and lack of a guidance upgrade European lenders declined following US peers weakness after Bank of America’s CEO said trading revenue will be “relatively flat” compared with last year’s third quarter Lundbeck shares slid as much as 5.9%, the most since February, after Deutsche Bank downgraded the pharmaceutical company to sell, noting headwinds including a patent cliff for Rexulti that are set to weigh on sales in the medium term Deutz shares fell as much as 7% after the German engine manufacturer successfully completed a cash capital increase via accelerated bookbuilding UniCredit shares fell as much as 2.9% after RBC Capital Markets initiated coverage at sector perform, saying there are few catalysts for a rerating of the Italian lender while earnings are clouded by its ongoing attempt to acquire Commerzbank Asian stocks declined, dragged by financials, as headwinds mount for the market on higher oil prices and US 10-year Treasury yields breaching the 5% mark. The MSCI Asia Pacific Index dropped 1%, poised for a fourth-straight session of losses. Asian banks declined, following US peers lower after Bank of America said its trading revenue will be “relatively flat.” Singapore led broad losses across the region, while equities rose in Vietnam. Spiking bond yields and oil prices are weighing on the macro outlook ahead of expected monetary tightening this week in the US and Japan. The Asian benchmark has fallen 3.7% over four days. Asian banks may take some cue after JPMorgan and Morgan Stanley give some color on trading revenue at a conference in New York tonight, said Kieran Calder, head of Asia equity research at Union Bancaire Privee. Meanwhile, Citigroup cautioned that bearish bets have increased across global markets, with Asia having the weakest positioning. On the other hand, BlackRock has returned to an overweight recommendation on emerging-market equities including South Korea and Taiwan, betting that access to scarce resources needed for the AI boom and strong earnings will drive outperformance. “Rising yields and energy prices are creating a risk-off environment,” said Bilal Khan, head of international equity sales, at Arif Habib. “Chip-related stocks did show some resilience earlier in the session before adding to the selloff.” In FX, the Bloomberg Dollar Spot Index rises for a second day, with the yen underperforming. In rates, bond markets continue to decline, with 10-year US Treasury yields hitting the highest since 2007. Yields are higher across the board in Europe too. Treasuries are mixed in early US session with long-end yields still about 2bp cheaper on the day after retreating from session highs as oil gains fade. Yields across tenors reached fresh YTD highs, the 10-year its highest level since 2007.  Front-end Treasury yields are little changed, steepening 2s10s and 5s30s curves by about 2bp; 10-year is back around 5% after peaking at 5.04% Gilts hold similar moves following Telegraph report that the Bank of England could soon stop selling long-dated bonds $13 billion 20-year bond reopening has WI yield near 5.41%, about 21bp cheaper than last month’s new-issue auction, which tailed by half a basis point, IG dollar issuance slate includes a couple of deals. Ten offerings totaling almost $24 billion were priced Monday with issuers paying about 2bp in new issue concessions on deals that were 4.1 times covered. At least five borrowers stood down Monday, setting the stage for another heavy slate Tuesday. US session includes 20-year bond reopening at 1 p.m. New York time. US stock futures are falling. European equities are sinking too, with a drag from financial services and banking stocks, the latter after downbeat comments from Bank of America’s CEO on trading revenue in the third quarter. In commodities, oil prices are up, with Brent rising above $108/bbl as traders weigh ongoing disruptions to supplies, before sliding around the time US traders (but mostly Jane Street) walked into the room.  WTI crude has pared a 2.8% gain to about 1%.Gold is sinking further below $4,300/oz and base metal prices have also dipped. US economic data slate includes weekly ADP employment change (8:15am) and September Empire manufacturing (8:30am); Fed speakers remain in external communications blackout period around the Sept. 15-16 FOMC meeting Market Snapshot Top Overnight News Saudi Arabia has increasingly found itself caught in the middle of the war between the United States and Iran. Now, the kingdom’s leadership is assessing dwindling options on how to respond.  NYT The Defense Department’s inspector general released its first report on the war with Iran on Monday, saying the conflict has resulted in a shortfall of U.S. munitions and “bottlenecks” in supply chains as the Trump administration works to replenish weaponry. NBC Offering a grim assessment of Russia’s relations with the West, President Vladimir Putin pointedly warned European governments not to deploy any troops, including peacekeeping forces, to Ukraine, saying it would mean “war.” WaPo Ukraine on Mon said it would end energy attacks if Russia did the same, but Kyiv is skeptical Moscow will agree to a halt. CNBC Ukraine Strikes Russian Refinery, Drone Plant and Ozon Facility in Massive Overnight Attack: Kyiv Post Japan is considering a new mid-term defense spending target of 3.5% of GDP in line with NATO and other US allies, a move that could send a shockwave through financial markets concerned about Prime Minister Sanae Takaichi’s spending plans. BBG Japan Prime Minister Sanae Takaichi’s cabinet approved a plan to temporarily reduce the consumption tax on food, moving closer to delivering on a key election pledge to ease the burden on households from the soaring cost of living. BBG The Bank of England ​is poised to announce this week that it will stop selling long-dated government bonds which ‌have been hit by a global selloff in debt markets, potentially freeing up some cash for finance minister John Healey: Telegraph  China’s domestic economic indicators weakened further last month, piling pressure on policymakers to take more forceful measures to reinvigorate growth in the world’s second-largest economy. Retail sales grew 0.4% year-on-year in August, data from the National Bureau of Statistics showed on Tuesday, down from 0.6% growth in July and falling short of a median forecast of 0.8% growth. FT Industrial America is contending with a fresh wave of supply chain inflation as Donald Trump’s Iran war pushes up energy costs, tariffs raise import prices and the AI boom strains supplies of crucial electronics. FT There is another factor that could add Treasury bonds volatility into the mix: hedge funds, a growing force in this market. Hedge funds held about $2 trillion of Treasurys at the start of this year, more than double their holdings five years earlier, according to the Treasury Department’s Office of Financial Research, which said hedge funds controlled a record 7% of the market. Data released by the Federal Reserve on Friday suggests that funds’ Treasury holdings remain elevated. WSJ US House Democrats will reportedly challenge US Treasury Secretary Bessent on rising costs at the Financial Services Committee on Tuesday, Semafor reported citing a memo, with questions also to include bonds, tariffs, Russia, Iran and crypto. US Supreme Court rejected Trump administration mail ballot curbs for the Midterms. A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly lower following the recent tech selling that was triggered by calls from industry CEOs for a slowdown in AI development, which President Trump pushed back against, while participants digested mixed Chinese activity data and await major central bank meetings. ASX 200 underperformed amid weakness in the mining, materials, resources and financial sectors, while risk sentiment was also not helped by the rising yield environment. Nikkei 225 was choppy, while Kioxia benefited from reports that Kioxia is weighing a US listing next year. However, the index then stumbled and briefly turned negative before rebounding again. KOSPI saw two-way price action amid the choppy mood in the local tech giants. South Korea's main stock exchange saw its first after-hours trading session, trading between 16:00-20:00 KST. According to data cited by Bloomberg, volatility spikes in individual stocks triggered brief trading halts 1,637 times, over 4x the number during the regular session. This shows the lack of liquidity provided and will therefore remain risky until institutional traders provide more liquidity. Hang Seng and Shanghai Comp were indecisive following several data releases from China, including a continued contraction in House Prices and mixed activity data in which Industrial Production topped forecasts but Retail Sales disappointed, while Fixed Assets Investment weakened and the Urban Unemployment ticked higher. Top Asian News China's stats bureau said August economic activity was generally steady, though the impact of an unfavourable external environment is deepening. NBS stated residents' ability and willingness to spend should be enhanced, while it added the supply of high-quality goods and services should be improved. Japan is said to mull raising defence spending to 3.5% of GDP, according to Bloomberg. However, Finance Minister Katayama stated that she is not aware of the report. Japan Finance Minister Katayama said Japan will include that a food sales tax cut will be limited to two years in upcoming legislation and that Japan will assess tax revenue, review spending and aim to lower the debt-to-GDP ratio in the upcoming budgeting process. Katayama added that Japan will control new debt issuance through the combined initial and supplementary budgets. Furthermore, she said the government will maintain market credibility by reviewing spending and revenue and will not rely on deficit-financing bonds to fund tax cuts. Japanese PM Takaichi is set to reshuffle LDP executives on Wednesday ahead of a cabinet reshuffle on Thursday European bourses (STOXX 600 -0.8%) are entirely in the red, as higher energy prices and yields continue to weigh on equities. Not much in terms of geopolitics overnight, outside of the continued strikes on Saudi airbases by the Houthis. On the data front, the UK jobs report was mixed; payrolls fell more than expected while the unemployment rate held steady. Little reaction was seen in the FTSE 100. Sectors highlight the negative bias, with Retail the only sector printing modest gains. Financial Services is the clear sector laggard, with Basic Resources and Consumer Products & Services following closely behind. Top European News ECB’s Moulin said the current increase in long-term bond yields reflects higher supply and increased inflation expectations and added that the inflation outlook justified recent ECB rate rise. On government debt, he said member states must take steps to reduce budget deficits. Specifically for France, he said that France’s debt agency has no problem selling bonds, with no difficulty for the French Treasury in raising funds. Worldpanel said UK Grocery inflation at 2.3% in 4 weeks to Sep (vs 2.1% in Aug). FX Snapshot: G10s are broadly lower against the USD, which continues to benefit from stronger energy prices and elevated yields. The JPY remains the underperformer on wider yield differentials, whilst high-beta Antipodeans have been pressured by the risk environment. DXY is firmer this morning and trades at the upper end of a 99.47 to 99.68 range. Strength is facilitated by higher energy prices and elevated yields, with the US 10-year topping the 5.00% mark. Should geopols/yields remain stable heading into the FOMC on Wednesday, then the index will likely hover within recent ranges. JPY continues to underperform, paring back a few weeks of strength. As mentioned previously, the next bout of strength for the JPY would likely require a hawkish BoJ this week - one which would see policymakers explicitly guide for a faster pace of rate hikes. Elsewhere, Finance Minister Katayama was on the wires earlier, where she stated that she was not aware of reports that the government plans to boost defence budget spending to 3.5% of GDP (vs current 1.9%). GBP has been hampered by the broad USD strength. Earlier, markets saw the release of a mixed Jobs/Wages report, whereby Unemployment remained steady at 4.9% (exp. 5%), whilst the wages components were in-line. Overall, it will not do much to shift views at the BoE ahead of Thursday’s meeting, where expectations are for rates to remain on hold. Fixed Income Global fixed benchmarks are entirely in the red, and yields have risen to multi-decade/record highs. USTs (-14 ticks) are the clear underperformers, whilst Bunds (-20 ticks) and Gilts (-14 ticks) also remain in the red. USTs are the clear underperformers today. It appears that an accumulation of a) higher energy prices, b) hawkish Fed repricing, c) fiscal stability woes have all caught up to the benchmark. Moreover, there may be some concession heading into the US 20-year auction later today; for reference, the Japanese outing for the same maturity was solid. From a yield perspective, the US 10-year (5.02%) holds beyond the key 5.00% mark, after making a peak of 5.04% earlier this morning. This brings the yield to levels not seen since the GFC. The Fed policy decision on Wednesday should see yields edge off highs (at the long-end), however, a convincing breach below the 5% mark would also likely require a hawkish SEP/commentary. This, in theory, would help ease stability concerns at the long-end; but of course, other factors such as AI-issuance and the Middle East crisis will temper any moves lower. Gilts are pressured alongside peers, given energy dynamics. Earlier, a mixed jobs/wages report had little impact on Gilts at the open; the Unemployment Rate remained at 4.9% (exp. 5%), whilst wages were in-line. On the supply side, The Telegraph reported that the BoE has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts. Bunds follow the above. There was little move to WPI, which saw the M/M top expectations. Thereafter, the German ZEW Survey was released, where Economic Sentiment rose incrementally from the prior, whilst Current Conditions improved. No move was seen in Bunds following the data. The Bank of England has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts, according to the Telegraph. Germany sells EUR 3.817bln vs Exp. 5bln 2.70% 2028 Schatz: b/c 1.26x (prev. 1.49x), average yield 3.27% (prev. 2.85%), retention 23.66% (prev. 23.4%). UK sells GBP 1.25bln 2029 Gilt via Tender: b/c 3.65x (prev. 3.61x), average yield 4.818% (prev. 4.062%). Japan sells JPY 532.1bln 20-year JGBs: b/c 4.01x (prev. 3.98), average yield 3.856% (prev. 3.698%), Tail in price 0.15 (prev. 0.17). Commodities WTI Oct and Brent Nov futures remain firmer as the Middle East conflict continues to underpin the complex, with Saudi Arabia’s East-West pipeline still offline following attacks, Riyadh seeking to boost shipments through the Strait of Hormuz, and Iran reiterating that the Strait remains closed and under its control. WTI trades towards the bottom end of a USD 101.83-103.49/bbl range (vs yesterday’s USD 100.53-104.95/bbl range), while Brent resides close to the current intraday peak within a USD 106.25-107.86/bbl range (vs yesterday’s USD 104.80-109.80/bbl range). Dutch TTF are currently flat and off earlier highs, trading around EUR 82.50/MWh within a EUR 81.76-83.42/MWh range (vs yesterday’s EUR 79.52-84.50/MWh range), with the increasing energy-supply risks continuing to underpin European gas ahead of winter. Precious metals are softer as the firmer USD and high oil prices reinforce expectations of a Fed hike tomorrow. Spot gold has slipped back below USD 4,300/oz and trades within a USD 4,261-4,317/oz range (vs yesterday’s USD 4,253-4,355/oz range), with the 100 DMA at USD 4,328.90/oz). Base metals are subdued amid the firmer USD, softer risk tone and mixed Chinese activity data, with weak retail sales and investment offset somewhat by stronger industrial production. Copper is also pressured by fresh deliveries into LME warehouses signalling easing supply tightness. 3M LME copper trades on either side of USD 14k/t in a USD 13,985.85-14,083.68/t range. Half of Russia’s leading diesel-producing refineries have reduced output following drone strikes. Libya's oil and gas minister said they plan to raise nat gas production to 4bln SCFD within 3-5 years. EPA Administrator said the US is proposing to rescind all major greenhouse gas emission standards for all power plants. Oman November OSP for November delivery set at USD 128.48/bbl. China Steel Association said it condemns overproduction and urges controls and urges for supply-side remedies, and strictly enforces output controls. Central Banks ECB staff committee urged for clarification whether President Lagarde will leave before the end of the term, warning that prolonged uncertainty risks damaging trust in the institution, according to FT. NBP's Zarzecki said there's minimal room for Polish rate changes until end-2026. Geopolitics: Iran Iranian Parliament Speaker Ghalibaf said Iranian forces have full control of the Strait of Hormuz and will prevent enemy vessels from crossing. Iran's top security official Rezaei said don’t get distracted by the US President’s mixed signals from 'no negotiations' to 'we’re ready to talk', while he added that stakes around oil and the straits have changed, damage control won’t stop what’s coming, and there will be no talks until Iran's conditions are met, period! Iran's Foreign Minister Araghchi held a phone call with Lebanon's House of Representatives Speaker Berri and discussed the need to strengthen coordination to confront Israel's efforts to ignite wars against Lebanon and countries in the region. Araghchi stressed Iran's keenness to preserve Lebanon's national sovereignty and territorial integrity in the face of Israeli aggression, while he affirmed Iran's full support for the proud Lebanese resistance in the face of Israeli occupation and aggression. UKMTO said they received a delayed report of an incident in the Strait of Hormuz, stating that a vessel has been struck by an unknown projectile. UN Security Council will hold an emergency meeting on Tuesday regarding developments around the Bab Al-Mandab Strait, according to Fars News Agency. Iranian Foreign Minister Araghchi held talks with the leader of Iraq’s Patriotic Union of Kurdistan (PUK). Geopolitics: Ukraine Sources cited by Russian press said US President Trump's statement on an energy truce is "an impromptu move", and that no decision was made on an energy truce in the latest talks in Moscow between the US delegation and Russian President Putin. Russia Foreign Minister Lavrov said that the US has never offered concessions to Russia over the Ukraine conflict in exchange for Moscow’s assistance in resolving the Iranian issue, Interfax reported. Furthermore, Lavrov said Russia is ready for reasonable compromises on Ukraine. Russia Foreign Minister Lavrov plans to meet US Secretary of State Rubio on the sidelines of the UN General Assembly in New York, RIA reported. Ukraine President Zelensky said Ukrainian forces made new gains at the Syzran refinery and struck a UAV production facility in Taganrog, a UAV preparation and launch base in the Oryol region, and targets in the Black Sea NATO military jets were scrambled in Lithuania due to a drone near Vilnius and a military fighter jet shot down the drone in Lithuanian airspace, according to the National Crisis Management Centre. A Russian presidential aide warned that if Poland enters a war against Russia, Moscow would use its entire military arsenal. US Event Calendar 8:30 am: United States Sep Empire Manufacturing, est. 15, prior 20.6 DB's Jim Reid concludes the overnight wrap As I continue to bravely soldier on through manflu, markets have started the week with a few notable coughs and splutters as inflationary fears and talk of an AI slowdown have led to a difficult 24 hours. Although the weekend talk was all about AI, the broader market driver was a fresh rise in energy prices, with Brent crude (+1.02%) closing at $105.68/bbl, and back above $107 this morning, while European natural gas futures (+3.83%) hit their highest since 2022. So that pushed bond yields to multi-year highs, and we even saw the 10yr Treasury yield (+2.0bps to 4.99%) move above 5% in trading for the first time since 2023. It's back above that level in Asia as I type. The 5% threshold alone would have been a newsworthy day, but we simultaneously saw a huge slump for chip stocks given the AI slowdown headlines, with the Philly semiconductor index (-5.86%) posting its worst day since July. So it was another session where September lived up to its reputation as the worst month of the year for asset performance, with bonds and equities continuing to struggle. Today we'll hear from US Treasury Secretary Bessent in his testimony to the House Financial Services Committee. It'll be interesting to see if he tries to lean in some credible way against the rising tide of bond yields.   Before this, geopolitical headlines were the biggest factor behind yesterday’s selloff. In part, this followed Friday night's closure of Saudi Arabia’s east-west pipeline, which acts as an alternative to the Strait of Hormuz. There was hope this was largely precautionary, but the Associated Press reported officials yesterday who said the repairs could take 3-5 weeks. So with another supply route taken out, that added to fears about a lengthier period of disruption. In addition, as we discussed yesterday morning, the meeting between Iran and other Gulf nations about a temporary shipping lane in the Strait of Hormuz scheduled for Monday was postponed on Sunday. We don’t have the exact details, but Bloomberg reported that a source had suggested this was partly because of Saudi Arabia’s frustration at Iran-backed groups continuing attacks on its territory. So that dampened hopes about traffic resuming through the Strait of Hormuz anytime soon.  We did see a decent turnaround later in the session after President Trump posted that Russia and Ukraine had agreed to halt their strikes on energy targets and made a series of posts about Iran, including that it “wants to make a deal, quickly and badly”. It later appeared that any Russia-Ukraine deal on energy strikes was not actually agreed yet, with Ukraine’s President Zelenskiy acknowledging a “strong US proposal” while saying that Ukraine would suspend its strikes if Russia were to stop attacks on Ukraine’s “energy facilities, critical infrastructure and food supply routes”. Still, with Trump’s posts suggesting an increased sensitivity to higher energy prices, and with Iran’s ILNA citing Pakistani sources that the US was seeking a “step-by-step” agreement with Iran, the rise in oil lost some of its steam. All that meant energy prices extended the large gains we saw last week but closed well off the day’s highs. For instance, Brent crude (+1.02%) settled at $105.68/bbl by the close, after trading as high as $109.80 at the start of the US session, while WTI was +1.34% higher to $101.39/bbl. Brent is another +1.54% higher this morning at $107.31, still comfortably off yesterday's highs but creeping back towards it. Over the other side of the pond, front-end European natural gas futures were up another +3.83% yesterday to a post-2022 high of €82.60/MWh. That backdrop of building inflation meant investors priced in a growing chance of a full-blown hiking cycle for the months ahead. Indeed, the probability of a Fed hike tomorrow was up to 92% by the close last night, from 88% at the end of last week. And looking further out, 90bps of hikes are now priced by the June 2027 meeting, up +2.0bps on the previous day. That contributed to a fresh surge in Treasury yields across the curve, with the 10yr yield briefly moving above 5% for the first time since 2023. Yields did then turn lower, helped by Trump’s post on the energy strikes, but a late sell-off still saw yields end the day at their highest levels since autumn 2023. Ultimately, the 10yr yield (+2.0bps) closed at 4.99%, while the 2yr yield (+3.4bps) saw a larger rise to 4.66%. As mentioned at the top 10yr yields are now back above 5% in Asia, trading at 5.02% as I type.  Over in Europe the fixed income sell-off was more consistent given the continent’s bigger exposure to higher energy prices. Moreover, a hawkish shift in ECB pricing drove a big selloff at the front end in particular. So among others, Germany’s 2yr yield (+6.8bps) jumped to 3.26%, the highest since September 2023, and the 10yr bund yield (+1.2bps) hit a post-2009 high of 3.51%. The larger front-end repricing came amid a larger rise in European inflation expectations, with the Euro 1yr inflation swap (+9.8bps) up to 3.60%, whilst the US 1yr inflation swap (+0.7bps) saw a marginal rise to 2.59%. Elsewhere in Europe, the 10yr OAT yield (+2.0bps) hit a post-2008 high of 4.47%, and here in the UK, the 10yr gilt yield (+2.4bps) hit a post-2007 high of 5.37%. As all that was going on, there was a big selloff in chip stocks yesterday after the weekend calls for some kind of AI slowdown. So the Philly semiconductor index (-5.86%) had its worst daily performance since July. President Trump again pushed back against the prospect of an AI slowdown, as he had initially on Sunday, saying yesterday that the US already had “tremendous CRIMINAL and REGULATORY power over these companies!” And then in a separate post, he said that “the United States is leading, by a lot, every other country. Don’t kill the Golden Goose!” While this helped chip stocks recover a bit, they were back near the day’s lows by the close. That slump helped to drag US equities down more broadly, with the S&P 500 (-0.48%) seeing a decent fall, despite a narrow majority of companies in the index rising on the day. In Europe, the STOXX 600 (-0.49%) registered a similar loss. Markets are lower again in Asia, but losses are relatively contained. As I check my screens, the S&P/ASX 200 (-0.89%), the KOSPI (-0.71%), the Hang Seng (-0.23%) and the Nikkei (-0.16%) are all in negative territory with mainland Chinese stocks just on the negative side. US equity futures are down a couple of tenths of a percent with European futures flat. Early morning data showed that China’s industrial production grew 5.2% year-on-year in August, surpassing market expectations of 4.8% and accelerating from the 4.5% growth seen in July. The stronger-than-expected performance was largely supported by robust external demand, which continued to bolster export-oriented manufacturing despite broader signs of economic weakness. However, industrial production remained the lone bright spot in an otherwise challenging economic landscape. Fixed asset investment for the January-August period contracted by -7.2%, slightly worse than the -7.1% expected decline and deteriorating further from the -6.7% contraction recorded in the previous month. As a key indicator of both public and private capital expenditure in China, the metric has remained firmly in negative territory since April, highlighting persistent weakness in investment activity. Meanwhile, retail sales increased just +0.4% year-on-year in August, falling short of +0.8% expectations and slowing from the 0.6% rise seen in July. The data suggests that consumer spending in the world's second-largest economy remains subdued despite a series of stimulus and support measures introduced by Beijing. Separately, China’s property sector continued to weigh on economic activity, with new home prices declining by -0.17% in August, nearly matching July’s -0.18% drop. The continued fall in housing prices underscores the ongoing challenges posed by the country’s prolonged real estate downturn. Finally, there was very little data yesterday, although we did get Canada’s CPI print for August. That was exactly as expected, with headline CPI remaining at +3.0%, and the various core measures also in line with expectations. Against that backdrop, there was little change in market pricing for the Bank of Canada’s next meeting in late-October, with a 75% chance of a hike priced in by the close. Looking at the day ahead, data releases include UK unemployment for July, the German ZEW survey for September, and the US Empire State manufacturing survey for September. From central banks, we’ll hear from the ECB’s Escriva and Cipollone. Otherwise, US Treasury Secretary Bessent will be testifying before the House Financial Services Committee. Tyler Durden Tue, 09/15/2026 - 08:31