EU Market Open: APAC stocks were ultimately mixed, with US-Iran showing little progress; European equity futures indicate a positive cash market open

• US-Iran talks and efforts by mediators this week yielded little progress, raising the odds of renewed combat, while Qatar will continue efforts despite growing frustrations with both sides, according to Axios.
• An Iranian diplomatic source said Iran will only be ready to discuss the nuclear issue after the Strait of Hormuz issue is resolved and Washington lifts the blockade.
• APAC stocks were ultimately mixed; European equity futures indicate a positive cash market open.
• DXY took a breather after gaining yesterday; 10yr UST futures edged higher overnight following the prior day's steepening.
• Crude futures were constrained after sliding yesterday following several downside catalysts; Spot gold was little changed beneath the USD 4,200/oz level.
• Looking ahead, highlights include German Retail Sales (Aug), French CPI (Sep), German State/National CPI (Sep), Italian CPI (Sep), US PCE Price Index (Aug/Q2), GDP Final (Q2), Atlanta Fed GDP. Speakers include ECB’s Elderson & Schnabel, Fed’s Barkin, Cook, Goolsbee & Kashkari. Supply from Germany, US Treasury buyback announcement (10-20yr; liquidity support), Earnings from Micron, Accenture & McCormick.

SNAPSHOT

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IRAN CONFLICT

• US President Trump said Iran is doing very poorly and he doesn't know if they will give up yet.
• US-Iran talks and efforts by mediators this week yielded little progress, raising the odds of renewed combat, while Qatar will continue efforts despite growing frustrations with both sides, according to Axios.
• US OFAC sanctioned 10 individuals and entities across multiple jurisdictions under Operation Economic Outcast for procuring weapons and components for Iran's Ministry of Defence and armed forces.
• Mediators push to break the US-Iran deadlock, and negotiators were expected to hand over the latest amended draft of a proposed interim agreement to Iran on Tuesday, according to FT.
• Iranian diplomatic source said Iran will only be ready to discuss the nuclear issue after the Strait of Hormuz issue is resolved and Washington lifts the blockade, while Iran will be ready to discuss the nuclear dossier only after a number of conditions are met, according to Russia's RIA.
• IRGC claimed in a recent letter to the American people that it had destroyed more than 200 drones, 30 fighter jets, 12 tankers and transport aircraft and one AWACS, according to Fars News Agency.
• A drone reportedly fired at an offending ship in the southern route of the Strait of Hormuz.
• Iranian Foreign Ministry said regarding Israeli PM Netanyahu's visit to the UAE that all countries in the region should be careful about the consequences of this trip, according to Fars News.
• Israeli PM Netanyahu was reportedly urging the UAE to engage in the war on Yemen in exchange for restoring some of Abu Dhabi's regional roles, according to Al Mayadeen.
• Saudi source denied that Saudi Arabia was involved in the Israel-UAE talks.
• Yemeni sources said Saudi forces conducted a missile attack on the Sahar district in Yemen's Saada.
• Houthi source told Al-Mayadeen that any attempt to establish Saudi-backed groups and troop buildups will be met with targeting, while the source stated daily Saudi airstrikes are indiscriminate, target civilian infrastructure and will not go unanswered.
• Israeli army conducted a new bombing in the city of Khiam in southern Lebanon, while Israel also conducted attacks on eastern areas of Gaza City.
• IDF is prepared for a wide range of scenarios in the near and far theatres, while no concrete, well-founded information has emerged so far that directly links Election Day in Israel to escalation.

US TRADE

EQUITIES

• US stocks were mixed, with most major indices in the red although the tech-heavy Nasdaq 100 outperformed and closed with gains as Oracle saw strength amid reports that OpenAI's annual recurring revenue is reportedly close to USD 70bln, a steep increase from earlier reports of an annualised run rate over USD 40bln by mid-2026. Sectors were varied, as Utilities and Communication Services sat atop of the breakdown, while Energy lagged amid the losses in the crude complex after some more positive US/Iran rhetoric, as well as a couple of other bearish oil reports, including Trump backing Russia sanctions relief on prisoner release, and would create a path for the US to sign lucrative deals involving Russian oil, diesel, rare earth minerals, while the US DoE offered up to 40mln barrels from SPR.
• SPX -0.17% at 7,671, NDX +0.21% at 30,339, DJI -0.26% at 51,355, RUT -0.35% at 2,808.
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TARIFFS/TRADE

• US Trade Representative Greer said tariff caps will be considered when setting tariffs in the Section 301 excess‑capacity probe.
• US Agriculture Secretary Rollins said they will have more agricultural products going to China.
• China's MOFCOM warned that if the European side persists in introducing discriminatory restrictions on Chinese enterprises or products, China will resolutely respond in the interests of Chinese industry. It also said regarding reports of some EU member states mulling more forceful trade measures on China, that the tools mentioned are typical protectionist and unilateralist measures and will disrupt the stability of China-EU trade.
• EU trade chief Sefcovic said they are pushing for reforms to tackle excess industrial capacity in G20 and WTO frameworks, while they are working for greater cooperation with the US and other allies to secure supply chains and prevent weaponisation of critical minerals.

NOTABLE HEADLINES

• Fed’s Barr (voter) said there is a need to recalibrate policy, with a base case that further policy adjustments are likely needed, while he stated that risks to achieving the inflation target have increased and risks to the labour market have reduced. Furthermore, Barr expects GDP growth to pick up a bit in H2 from 2% in H1 and said inflation is a clear concern, with the Fed having been knocked off course to its 2% goal. Barr also said he is seeing some elevated wage rates in the skilled trades and that, taking the longer view, the Fed needs to be sure to do what it takes to bring supply and demand into balance.
• Fed's Williams (voter) said he sees no need for urgency after the September rate hike, while he added that US economic momentum is strong and may be strengthening. Williams stated AI investment issues are an increasingly big issue for inflation, and he sees US GDP at 2.25% this year and unemployment at 4% over 2027, as well as stated that Fed policy can make sure the impact of supply shocks is not long-lasting.
• Fed's Goolsbee (2027 voter) said expectations of productivity gains from AI in the future create a high danger of overheating now and noted that nothing in the Federal Reserve Act says to make sure the bond market is happy or stock markets are not surprised. Goolsbee also stated that the Fed needs to revisit the logic of looking through supply shocks.
• Fed's Musalem (2028 voter) said central bankers needn't make promises, but should tell the public how and why the central bank makes policy decisions. He also stated that a well-articulated framework should include two or three likely scenarios, and that central banks should avoid communications and actions with no framework to make sense of them.
• US President Trump released the White House Accord on Super Intelligence following the meeting with AI executives on Tuesday, while the document noted that every company is responsible for developing its own technology safely and each should apply four layers of controls and audits, including implementing strong internal controls to oversee model capabilities and alignment.
• US President Trump said the AI meeting was very good and very productive, while he added the US has a big lead in AI and will keep the lead. Trump also announced he would sign the AI renaming order and stated that AI leaders are to work with local communities on data centres.
• US President Trump said he will be naming an AI czar in the next three or four days and that he discussed the Xi meeting in great detail with tech firms, while it was later reported that Trump said Jay Clayton would be a good AI czar, according to Axios.

APAC TRADE

EQUITIES

• APAC stocks were ultimately mixed following the recent drop in oil prices and upside in long-term US yields, while participants digested a slew of data at month- and quarter-end.
• ASX 200 rallied with nearly all sectors in the green and real estate leading the advances as softer-than-expected headline monthly CPI data and a wider contraction in building approvals lessened the odds for an RBA November rate hike.
• Nikkei 225 gapped above the 66,000 level and continued to advance with the index shrugging off disappointing Industrial Production and Retail Sales data, in which the former showed a surprise contraction.
• KOSPI traded indecisively amid weak data and tensions with North Korea after a DMZ landmine explosion injured South Korean officers, while South Korea's military stated that North Korea's fortification works increased tensions in the Korean peninsula and that it should apologise for its fortification works.
• Hang Seng and Shanghai Comp were mixed, with the Hang Seng indecisive and the mainland mildly underpinned following the encouraging Chinese PMI data, in which headline official Manufacturing PMI matched estimates at 50.1, and Non-Manufacturing topped forecasts and returned to expansion territory at 50.2 (exp. 49.3), while RatingDog Manufacturing and Services PMIs were both stronger-than-expected. In addition, the PBoC recently announced support measures including a 25bps cut to the Pledged Supplementary Lending facility rate to 1.50% from 1.75%, while participants look ahead to the National Day holidays and the week-long closure in the mainland beginning tomorrow.
• US equity futures were marginally higher following the mostly subdued performance on Wall St, while participants await key data including the latest PCE price index.
• European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.7% after the cash market closed with gains of 0.3% on Tuesday.

FX

• DXY took a breather after gaining yesterday amid a rise in long-term yields, albeit with some of the gains pared following dovish remarks from Fed's Williams, who sees no need for urgency after the September rate hike and noted there is time to gather more information to provide greater clarity on the underlying economic trends and associated risks, while participants now await a slew of data including final Q2 GDP and the Fed's preferred PCE inflation gauge.
• EUR/USD was lacklustre after having trickled lower for most of the prior day despite hawkish-leaning rhetoric from ECB officials, but with a floor seen after dovish comments from Fed's Williams.
• GBP/USD struggled for direction after recently giving up ground to the greenback and with the currency not helped by PM Burnham's vow to scrap the pensions triple lock, while UK final Q2 GDP is due today.
• USD/JPY briefly retreated beneath the 157.00 handle and breached a weekly low, despite the lack of obvious drivers behind the move and disappointing domestic activity data, although the pair then rebounded
• Antipodeans were somewhat mixed with NZD/USD flat, while AUD/USD was pressured following a slew of data, including softer-than-expected headline monthly inflation and a worse-than-feared contraction in building approvals, but with the downside stemmed as participants also digested encouraging Chinese PMI releases.
• PBoC set USD/CNY mid-point at 6.7351 vs Exp. 6.7025 (prev. 6.7411)

FIXED INCOME

• 10yr UST futures edged higher overnight following the prior day's steepening, in which the short-end had rebounded on dovish remarks from Fed Williams, who sees no need for urgency after the September rate hike, while he argued there is time to gather more information to provide greater clarity on the underlying economic trends and associated risks in support of setting the appropriate monetary policy.
• Bund futures kept afloat after benefitting from the recent pullback in oil prices, while participants await looming German supply and data, including Retail Sales and CPI figures.
• 10yr JGB futures were choppy amid the positive risk mood in Tokyo stocks and weak data from Japan, while the 2yr JGB auction results were mostly stronger-than-previous.

COMMODITIES

• Crude futures were constrained after sliding yesterday following several downside catalysts, including US President Trump backing a strategy to ease Russia sanctions in exchange for the release of political prisoners, which could pave the way for deals involving Russian oil, diesel, rare earth minerals, and other commodities. In addition, the US DoE offered up to 40mln barrels from the SPR, while Qatar stated mediation efforts are ongoing and focused on building common ground between the US and Iran, although a more recent article by Axios stated US-Iran talks and efforts by mediators this week yield little progress, raising odds of renewed combat.
• US Private Inventory Data (bbls): Crude +1.0mln (exp. -1.1mln), Gasoline +3.0mln (exp. -0.5mln), Distillate -0.3mln (exp. +0.0mln), Cushing +0.2mln.
• OPEC+ is likely to stick with the plan for steady quotas, according to delegates.
• US reportedly offers up to 40mln barrels from strategic oil reserve.
• US President Trump will unveil a USD 54bln Alaska LNG plan amid midterm woes.
• White House held crunch talks on a diesel export ban as midterms near, according to FT.
• White House urged the EU to draw down from diesel emergency inventories in a bid to lower global prices. It was also reported that the Trump administration said several EU member countries have not released as much oil and refined products from reserves as they promised.
• EU Energy Commissioner said they have discussed possible oil release with IEA's Birol, and still need to have talks with member states and IEA on these issues.
• Spot gold was little changed beneath the USD 4,200/oz level amid a steady dollar and ahead of a deluge of US data releases, including the Fed's preferred inflation gauge.
• Copper futures pared the majority of its earlier gains of the day amid mixed risk appetite and despite encouraging Chinese PMI data releases.

CRYPTO

• Bitcoin marginally declined in choppy range-bound trade above the USD 83,000 level.

NOTABLE ASIA-PAC HEADLINES

• South Korea's Finance Ministry said it is watching bond market developments closely and plans to use excess tax revenue to lower bond issuance if required, while it will conduct other stabilising measures including treasury bond buybacks if bond yields rise excessively.

DATA RECAP

• Chinese NBS Manufacturing PMI (Sep) 50.1 vs. Exp. 50.1 (Prev. 49.8)
• Chinese NBS Non-Manufacturing PMI (Sep) 50.2 vs. Exp. 49.3 (Prev. 49.0)
• Chinese RatingDog Manufacturing PMI (Sep) 52.1 vs. Exp. 51.6 (Prev. 51.5)
• Chinese RatingDog Services PMI (Sep) 51.6 vs. Exp. 51.1 (Prev. 51.4)
• Chinese RatingDog Composite PMI (Sep) 52.4 (Prev. 52.1)
• Japanese Retail Sales (Aug YY) 2.7% vs. Exp. 3.3% (Prev. 3.7%)
• Japanese Industrial Production Prel (Aug MM) -1.7% vs. Exp. 1.7% (Prev. -0.2%)
• South Korean Industrial Production (Aug YY) -2.2% vs. Exp. 4% (Prev. 4.0%)
• Australian CPI (Aug YY) 4.0% vs. Exp. 4.1% (Prev. 3.5%)
• Australian RBA Trimmed Mean CPI (Aug YY) 3.6% vs. Exp. 3.6% (Prev. 3.6%)
• Australian Building Permits Prel (Aug MM) -6.1% vs. Exp. -2% (Prev. -3.6%)

GEOPOLITICS

OTHER

• US President Trump said North Korean Leader Kim will be fine as long as he is around.
• South Korean military said North Korea fortification works increased tensions on the Korean peninsula and that North Korea should stop fortification works immediately, while it added that North Korea should apologise for its fortification work and that South Korea military personnel were seriously wounded by North Korean mines.
• North Korea said South Korea is fabricating baseless findings regarding a mine blast in the demilitarised zone that injured troops, while it warned that South Korea could encounter a miserable and catastrophic situation.
• China's military stationed readiness patrols over the Scarborough Shoal's sea and airspace.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said inflation staying above 2% is an equality problem.
• BoE's Taylor said the right policy response is to be vigilant but disciplined and monetary policy should not react mechanically to movements in energy prices if those movements remain primarily relative-price shocks. Taylor added that the case for further rate increases is not compelling to him unless energy prices remain high for an extended period and also generate clearer signals of a transmission into broader inflation persistence.
• France is to issue EUR 340bln of medium and long-term bonds next year, net of buybacks.
• ECB's DeMarco said stronger core inflation could be grounds to act and would not exclude a rate hike in October, while the recent rise in long-term bond yields is quite worrying.

DATA RECAP

• UK Lloyds Business Barometer (Sep) 41 (Prev. 53)