EU Market Open: Trump suggests that Iran is not doing well, whilst Pakistan continues to mediate; European equity futures set to open slightly higher

• US President Trump said he had meetings regarding Iran and that Iran is not doing well; the Pakistani Interior Minister held consultations in Iran on efforts to advance the peace process.
• US Treasury Secretary Bessent said he will present US President Trump with a US-China AI pact, while Trump is to decide on a US-China AI deal this week.
• APAC stocks mostly gained following the advances on Wall Street, where the Nasdaq outperformed.
• DXY was little changed but held on to the prior day's gains; 10yr UST futures took a breather following recent gains.
• European equity futures indicate a slightly positive cash market open, with Euro Stoxx 50 futures up 0.2%.
• Looking ahead, highlights include US ADP Employment Change Weekly, Italian 2025 Deficit Update, NBH Policy Announcement. UN Meetings: UN General Debate including Trump, Macron, Burnham; Trump-Zelensky meeting; Trump-Burnham meeting; Trump-Gulf Leaders meeting. Comments from ECB's Lagarde & Nagel, Fed's Williams, Jefferson & Barkin. Supply from UK, Germany and the US.

SNAPSHOT

LOOKING AHEAD

• Highlights include US ADP Employment Change Weekly, Italian 2025 Deficit Update, NBH Policy Announcement. UN Meetings: UN General Debate including Trump, Macron, Burnham; Trump-Zelensky meeting; Trump-Burnham meeting; Trump-Gulf Leaders meeting. Comments from ECB's Lagarde & Nagel, Fed's Williams, Jefferson & Barkin. Supply from UK, Germany and the US.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• 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.
• US President Trump said he had meetings regarding Iran and that Iran is not doing well.
• Iran's Foreign Minister Araghchi arrived in New York to attend the UN General Assembly.
• 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.
• Pakistani Interior Minister held consultations in Iran on efforts to advance the peace process.
• Qatar Foreign Ministry spokesperson said Doha is trying to mediate and open the way for talks between Iran and the US, while it is trying to facilitate the achievement of an agreement, even in the short term, between Washington and Tehran.
• French President Macron said he had a constructive discussion with US President Trump on the Red Sea and Ukraine.
• French Foreign Ministry spokesperson told Al Qahera News that they are holding meetings with officials in Iran and the US with the aim of achieving a ceasefire, and are working to restore normal navigation in the Strait of Hormuz.
• Houthi leader said he is ready for a fair deal to end the Saudi conflict, while a Houthi spokesperson said recent Saudi aggression will not go unanswered.
• Saudi airstrike on Yemen's Taiz killed six civilians and wounded eight others, according to Tasnim.
• Satellite images showed seven oil storage tanks were damaged at an oil storage and distribution facility near Riyadh airport following recent Yemeni attacks on Riyadh, according to SNN.
• 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.
• Israeli source told Kan News that Israel is not connected to explosions at a Syrian army weapons depot in the Aleppo region.
• Israel conducted air strikes east of Gaza City, while it was also reported that Israeli artillery shelling targeted towns in southern Lebanon.

US TRADE

EQUITIES

• US stocks rallied on Monday, with much of the upside led by Meta (META), resulting in Nasdaq outperformance. Meta's PT was upgraded at Wells Fargo, with the desk citing a strong start for its Muse AI agent, which in turn supported chip names such as INTC and AMD amid expectations for stronger CPU demand given high Muse usage rates. The majority of sectors were higher, with Communication Services, Technology and Consumer Discretionary outperforming, while Energy, Utilities and Consumer Staples lagged. Crude prices tumbled amid hopes for diplomatic progress at the UN General Assembly this week, with Trump noting he is open to meeting Iranian President Pezeshkian. Participants will also be watching the outcome of the Trump/Xi meeting for any developments on trade, and Treasury Secretary Bessent noted that the US is looking to bring in more everyday items from China, while he added that energy products on the US side and medical devices on the Chinese side could be suitable for tariff reductions.
• SPX +1.49% at 7,765, NDX +2.83% at 30,482, DJI +0.71% at 52,054, RUT +0.52% at 2,875.
• Click here for a detailed summary.

TARIFFS/TRADE

• USTR will hold a hearing regarding the Section 301 investigation into Germany's pharmaceutical policies today.
• US Treasury Secretary Bessent said he will present US President Trump with a US-China AI pact, while Trump is to decide on a US-China AI deal this week. It was separately reported that the US and China are hashing out an agreement to create a hotline over AI, while they are also making deals to exempt agriculture products, medical supplies and some low-tech electronic goods from tariff actions.
• Over two-dozen lawmakers urged President Trump to maintain a ban on Chinese automakers.
• 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.
• China's Vice Finance Minister said he talked about trade, investment and AI with the US.
• Chinese Foreign Minister Wang Yi said China and the EU should not be in a trade war, while he called for enhancing strategic communications with Germany.
• 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.
• EU's von der Leyen said she spoke with Philippines President Marcos and agreed on a free trade deal.
• South Korean Industry Ministry said the final announcement on the US investment plan will be made by US President Trump and funds are to be remitted within 45 days if requested by the US.

NOTABLE HEADLINES

• Fed's Collins (2028 voter) said the renewal of combat in the Iran war was a key reason she supported a rate hike last week and pencilled in another rate hike this year but expects rates on hold in 2027. Furthermore, Collins said she did not see the inflation progress she was hoping to see, and stated that geopolitical developments suggest that we could continue to see additional pressures push on the energy side, according to AP.
• Fed's Musalem (2028 voter) said without further policy restraint, it is more likely inflation will remain substantially above the 2% target 18 months from now, while he added that interest rates likely need to climb further to tame inflation that is both demand- and supply-driven.

APAC TRADE

EQUITIES

• 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.
• US equity futures mostly took a breather, although Nasdaq futures remained underpinned following yesterday's outperformance.
• European equity futures indicate a slightly positive cash market open with Euro Stoxx 50 futures up 0.2% after the cash market closed with gains of 1.3% on Monday.

FX

• DXY was little changed but held on to the prior day's mild spoils amid the ongoing view of another rate hike this year despite the recent pullback in oil prices due to diplomatic hopes. Fedspeak from Goolsbee (2027 voter) and Musalem (2028 voter) reinforced expectations of another hike this year, with the latter arguing that without further policy restraint, it is more likely inflation will remain substantially above the 2% target 18 months from now, while Collins (2028 voter) said the renewal of combat in the Iran war was a key reason she supported rate hikes last week, and has pencilled in another hike this year but expects rates on hold in 2027. In terms of data, the calendar stateside is thin this week, leaving most focus on the UN General Assembly and the Trump-Xi summit.
• EUR/USD was choppy within tight parameters at the 1.1400 handle, while comments from ECB's Lane did little to shift the dial, in which he noted the Eurozone economy should continue growing at a steady but moderate pace if the energy shock does not intensify, and that a second wave of energy price increases will push inflation higher before it falls towards the target from mid-2027.
• GBP/USD eked slight gains but with the upside capped amid a lack of drivers and after the recent retreat from resistance at the 1.3400 level, while it was also reported that US President Trump will challenge UK PM Burnham over Britain’s defence spending when they meet today.
• USD/JPY was kept afloat after returning to above the 157.00 level, despite the prior day's decline in yields and oil prices, while catalysts remained light and Japanese participants are absent again from the market.
• Antipodeans were somewhat mixed, with AUD flat amid a very quiet calendar and with little reaction seen to comments from RBA Governor Bullock, while NZD outperformed with gradual support seen following comments from RBNZ Governor Breman that near-term inflation is expected to be somewhat higher if elevated oil prices persist, and that the RBNZ remains focused on the inflation outlook ahead of the October policy decision.
• PBoC set USD/CNY mid-point at 6.7459 vs Exp. 6.6989 (prev. 6.7487).

FIXED INCOME

• 10yr UST futures took a breather following recent gains and amid a quiet calendar, while the latest comments from Fed speakers did little to support yields. Demand was also contained ahead of incoming supply and with the closure of overnight cash treasuries trade as Tokyo markets remained shut for holidays.
• Bund futures marginally pulled back after advancing yesterday as yields and oil prices declined, while participants await ECB speakers, as well as Bobl and Bund issuances scheduled over the next couple of days.

COMMODITIES

• Crude futures continued to rebound from the prior day's trough amid reports Libya's 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, but with the upside gradual in the absence of any major geopolitical escalation and ahead of the UN General Assembly. Iran's Foreign Minister has arrived in New York for the key gathering, while US President Trump noted he had meetings on Iran and stated that it was not doing well.
• US President Trump proposed USD 5bln to kickstart an investment fund to rebuild Gulf energy sites, according to WSJ.
• US Energy Secretary Wright, Interior Secretary Burgum and other White House officials were working on the issue of diesel prices through the weekend, according to Agricultural Secretary Rollins, who expects an announcement “very soon on some potential actions.”
• Saudi Aramco loaded 14mln barrels of crude onto seven VLCCs from Gulf terminals on Sunday, with the tankers in the vicinity of Ras Tanura port on Sunday, according to reports citing satellite images.
• 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.
• Spot gold was choppy with the precious metal fading its earlier gains amid an uneventful dollar.
• Copper futures continued to edge higher alongside the positive global risk sentiment.
• US is seeking to phase out Russian uranium supplies to prepare for a full import ban.

CRYPTO

• Bitcoin pulled back overnight after the prior day's rally, with prices back beneath USD 85,000.

NOTABLE ASIA-PAC HEADLINES

• 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.

GEOPOLITICS

MIDDLE EAST

• Factions pledged to cease any military activity that violates the Iraqi state, while the committee tasked with inventorying weapons in Iraq has reached understandings stipulating that the inventory will end in June 2027, according to Al Arabiya citing sources.

RUSSIA-UKRAINE

• US President Trump will meet with Ukraine President Zelensky in New York on Tuesday at around 13:00EDT/18:00BST, although it was separately reported that an informed Ukraine source does not expect any breakthroughs regarding the meeting between US President Trump and Ukrainian President Zelensky, while attention will be on energy de-escalation, according to Ukrainian media.
• Ukraine President Zelensky said Ukraine is ready for a ceasefire if Russia agrees to one too, according to CBC News.
• Russian President Putin reportedly plans to attend Chinese President Xi's APEC summit, but skip the G20 summit with US President Trump.
• EU's Kallas said the EU needs to impose greater costs on Russia as Moscow takes greater risks, while she noted they are aiming for a swift rollover of EU sanctions.
• 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.
• Latvia's National Armed Forces said NATO Baltic air policing mission fighters had been activated due to a possible threat in Kraslava airspace.

OTHER

• White House official said US President Trump, Denmark's PM Frederiksen and Greenland's PM Nielsen will meet on Tuesday, with the leaders expected to formalise their new agreement to secure and defend the security of Greenland and the US, according to Fox.
• US will reopen a military base in southern Greenland and establish presence at a second site in eastern Greenland, according to sources.
• US, Japan and South Korea released a joint statement affirming a free and open Indo-Pacific and committing to the denuclearisation of North Korea.
• North Korea said it tested a new combat weapon system, while it was also reported that North Korea's culture minister is visiting Russia, according to KCNA.

EU/UK

NOTABLE HEADLINES

• US President Trump will challenge UK PM Burnham over Britain’s defence spending when the pair meet for the first time in New York on Tuesday, according to The Telegraph.
• 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.
• ECB's Lane said the Eurozone economy should continue growing at a steady but moderate pace if the energy shock does not intensify, while he added that a second wave of energy price increases will push inflation higher before it falls towards target from mid-2027.