US Market Open: Sources suggest that US-Iran exchanges continued since they met in New York; Brent lower as Trump suggests he had productive discussions with Iran

• A US military source told Al-Hadath that US forces received orders to mobilise last Sunday and that thousands of missiles have been replaced and sent to forces.
• Diplomatic sources said US-Iran negotiations and exchanges of messages have continued since the Iranian delegation returned from New York, while the Iranian President said they are compiling proposals.
• US equity futures helped by the more constructive geopolitical tone; Telecoms suffer following the SpaceX acquisition.
• DXY flat; NOK softer following cooler-than-expected inflation.
• Fixed income benchmarks are off earlier highs; Gilts unreactive following Labour's Holborn election win.
• Looking ahead, highlights include Canadian Jobs Report (Sep), US University of Michigan Consumer Sentiment Prelim. (Oct). Speakers include ECB's Cipollone & Schnabel, Fed's Collins. Earnings from Delta Air Lines. Credit Ratings update by the S&P on the UK.

SNAPSHOT

EUROPEAN TRADE

EQUITIES

• European bourses (STOXX 600 +0.9%) start the final trading session of the week entirely in the green. The downside in energy prices is helping support the equity space, after US President Trump refuted reports that the US will not strike Iran before the midterms. Markets will be waiting for next week, when earnings start flowing through, with ASML the European highlight.
• Sectors highlight the positive bias. Basic Resources top the sector pile, with Retail and Financial Services rounding out the sector gainers. On the other hand, Telecoms is the clear laggard, followed by Energy. The driver behind the underperformance in Telecoms comes following SpaceX's USD 8bln acquisition of Grain Management’s 800 MHz spectrum portfolio. This purchase would move Starlink closer to mounting a direct challenge to legacy wireless companies. Deutsche Telekom shares are falling as much as 8%, while US peers are also under pressure premarket (AT&T -7.4%, Verizon -7%).
• US equity futures follow their European peers higher. Sticking with the earnings theme, FactSet estimates that analysts expect S&P 500 earnings growth of +29.5% Y/Y in Q3 (vs +26.7% Y/Y in Q2), marking a third straight quarter above 25% growth.
• SoftBank (9984 JT) is seeking up to USD 100bln from Gulf investors, including the UAE, to establish a fund acquiring companies and improving their operations using AI, according to the FT.
• Click for the session's European pre-market equity newsflow
• Click for the additional news

FX

• Snapshot: G10s are mostly firmer against the USD, with the exception of the JPY. The Antipodeans outperform given the risk tone, whilst the JPY lags. Energy benchmarks are in the red this morning, with attention on Trump pushing back on reports that he would strike Iran before the midterms; moreover, he mentioned that he is having “productive” discussions with Iran. Nonetheless, the situation remains tense with reports suggesting that the US military has drafted options for three days of strikes.
• DXY is a little lower this morning and resides within a 101.92 to 102.14 range, and well off the WTD peak of 102.53; but still remains towards the YTD high. Strength this week was facilitated by higher energy prices and yields, and as EUR faltered on French fiscal woes (more below). Attention for the USD for the remainder of the day will be any updates on the Iran situation, with Foreign Minister Araghchi said to give Iran’s response in the coming days. Domestically, UoM survey is due today and will likely see revisions to higher inflation expectations. Across the northern border, Canadian jobs are to be released today.
• EUR is a touch firmer this morning, and back above the 1.12 mark; nonetheless, the single currency holds towards WTD lows of 1.1161. This week’s pressure has been facilitated by the French fiscal situation, with the draft budget seen as ineffective in solving the fiscal issue. RN’s Le Pen announced her own alternative budget, which spurred some mild strength in the EUR at the time, but has been described as too optimistic, resulting in renewed pressure in the single currency. Overall, the debacle in France will likely keep the EUR pressured for the foreseeable future, with the next sticking point on October 13th, when lawmakers will debate the budget. Traders will keep an eye out for any material changes to the existing draft and/or major friction points, which could result in the use of Article 49.3.
• GBP digests the region’s Holborn & St Pancras by-election, which saw the Labour Party win 45% of the vote. Overall, the results were not expected to spur any material market reaction, but rather provide investors with information on whether the “Burnham bounce” is still in effect. It appears that is the case, and removes one of the hurdles for the PM to call an early election. The next obstacle is the Autumn Budget (Oct 28), and if that passes without issue, the possibility of an early election will only grow.

FIXED INCOME

• Snapshot: Global fixed benchmarks are mixed. USTs (-4 ticks) are off by a couple of ticks, whilst Bunds (+30 ticks) and Gilts (+43 ticks) are in the green, benefiting from easing energy prices. This comes after President Trump suggested he is having “productive” discussions with Iran, and pushed back on reports that he would order strikes on Iran before the midterms (see commodities for details).
• USTs are not faring quite so well as their European counterparts, potentially weighed on by continued hawkish comments from the Fed’s Musalem and Waller, who reiterated the need to raise rates further. Earlier in the week, the US sold 3-year and 10-year notes, which were very well received. This perhaps indicates that the recent surge in yields is offering good value for investors, and bar any resurgence in geopolitical fighting, an early indication that yields could begin to ease from highs. The US 10-year (5.24%) currently holds off near-term highs at 5.36%, but still remains in the territory of multi-year highs.
• Bunds and Gilts are stronger this morning, facilitated by lower energy prices. The latter had the Holborn and St Pancras by-election to digest, though this spurred little action in UK paper at the open. There will be no real impact in the near-term by way of policy, but it shows that PM Burnham has cleared his first hurdle; the next being the UK Budget on Oct 28.
• Back to German paper, they started the morning firmer by c. 60 ticks, but are now off best levels as energy prices moved off lows. EGBs more broadly caught a bid in the prior session for two main reasons: 1) ECB Minutes suggested that yields are doing some of the tightening for it, and 2) Italian PM Meloni securing the final approval for a new electoral reform, which essentially gives a leading coalition a better chance at forming a stable government. This reduces some political risk, which Europe has been subject to in the past week: Germany (coalition talks passed without issue), Spain (called an early election) and most importantly France (increased fiscal debt woes). For the latter, the next sticking point is on October 13, when lawmakers will begin formal debates on the draft budget. The OAT-Bund spread is set to end the week around 135bps (vs last week's peak of 151bps).
• Australia sells AUD 1bln 3.0% November 2033 bonds: b/c 3.77x, avg. yield 5.146%.

COMMODITIES

• WTI Nov and Brent Dec futures are softer after pulling back from Thursday's highs, with the complex pressured by Trump's comments that the US will not attack Iran before the November midterms and that discussions with Tehran remain productive. Nonetheless, the downside remains contained by ongoing supply risks, with the IRGC reiterating restrictions on vessels passing through the Strait of Hormuz, while Tasnim reported a massive fire at Saudi Arabia's Abqaiq oil facility, although this could be a continuation of the smoke also reported in the prior session. Elsewhere, reports suggested US-Iran negotiations have continued through intermediaries, while CENTCOM said primary shipping lanes have been cleared of mines. Elsewhere on the supply front, Gulf of Mexico producers have shut around 63% of oil production ahead of Hurricane Isaias, removing nearly 1.3mln BPD from the market. WTI has fallen from a USD 91.41/bbl high to a USD 90.01/bbl low, while Brent has declined from USD 104.09/bbl to a USD 102.33/bbl trough.
• Dutch TTF is softer alongside the broader pullback in energy prices, although ongoing Middle Eastern supply concerns and uncertainty surrounding shipping through Hormuz remain overall supportive. TTF resides within a EUR 76.27-78.63/MWh range.
• Precious metals are firmer, with spot gold benefiting from lower global yields and a softer DXY following strong demand at yesterday's US 30yr Treasury auction, while the pullback in crude prices has also eased some near-term inflation concerns. Nonetheless, expectations of further Fed tightening remain a potential headwind, with Fed Musalem the latest to suggest additional policy firming will be required. Spot gold has climbed from a USD 4,131/oz low to USD 4,208/oz, moving above yesterday's USD 4,103-4,146/oz range, while spot silver has also gained, rising from USD 59.25/oz to USD 60.61/oz.
• Base metals are overall firmer amid the pullback in energy, with copper attempting to recover from yesterday's losses. The complex has found some support from renewed Chinese demand, low inventories and supply disruption concerns at Antofagasta's Centinela mine in Chile. 3M LME copper resides towards the top of a USD 14,298.53-14,517.80/t range.
• China approved non-state crude oil import quota for 2027 at 257mln metric tons, while it was also reported that China is set to resume October refined fuel exports after a brief halt and approved October fuel exports at around 3.7mln metric tons, according to industry sources.
• Gulf of Mexico oil producers shut 63% of production ahead of a hurricane, while cuts have removed nearly 1.3mln barrels per day from the market, according to NBC citing Marine Minerals Admin.
• NHC said Hurricane Isaias is strengthening, with maximum sustained winds of 101mph.
• Zimbabwe said there is no reason to delay lithium concentrate export ban.

TRADE/TARIFFS

• US Treasury Secretary Bessent may skip the APEC finance ministers’ meeting in Hong Kong to focus on talks with Chinese Vice-Premier He Lifeng in Shenzhen ahead of President Trump’s November visit, according to SCMP citing sources.

NOTABLE EUROPEAN HEADLINES

• The UK Labour Party won the Holborn and St Pancras by-election, taking 45% of the votes, while the Greens came second with nearly 33%.

NOTABLE EUROPEAN DATA RECAP

• Norwegian Core CPI (Sep YY) 3.0% vs. Exp. 3.1% (Prev. 3.0%).
• Norwegian Core CPI (Sep MM) 0.2% (Prev. -0.5%).
• Swedish GDP (Aug MM) 1.1% (Prev. -0.7%).
• Swiss Consumer Confidence (Sep) -36 vs. Exp. -31 (Prev. -33).
• Italian Industrial Production (Aug MM) -1.3% vs. Exp. 0.0% (Prev. 0.6%).

CENTRAL BANKS

• NBP's Kotecki said if inflation projection does not show CPI returning close to 2.5% by end of 2027 or beginning of 2028, a 25bps rate hike will be necessary in November.

NOTABLE US HEADLINES

• Bloomberg sources stated that OpenAI sees run-rate revenue reaching or topping USD 70bln in 2026 and that OpenAI annualised revenue was around USD 50bln at end-September. This followed an FT report stating that OpenAI's annualised revenue is about USD 20bln below what had previously been signalled.

GEOPOLITICS

MIDDLE EAST

• The US military drafted options for three days of strikes as President Trump hesitates, according to NYT.
• A US military source told Al-Hadath that US forces received orders to mobilise last Sunday and that thousands of missiles have been replaced and sent to forces. The military source added that options are always available and are focused on imposing a complete blockade on Iranian ships and ports. Proposals have been presented to Trump to strike Iranian military capabilities along the coast to a depth of 50-80km.
• Diplomatic sources said US-Iran negotiations and exchanges of messages have continued since the Iranian delegation returned from New York, Al-Akhbar reported. The source added that Qatari mediation efforts are intensifying as talks enter a “decisive and highly sensitive” stage that could either pave the way for an agreement or sharply increase the risk of a return to war.
• Iranian President Pezeshkian said they never left the negotiating table despite US attacks, while they are currently compiling proposals, and after the final text is prepared, we will review it through mediators and convey all proposals. It was separately reported that Pezeshkian said they will sit with the mediators to crystallise the final proposal and confirm it, as well as stated that they exchanged proposals with America through intermediaries and introduced some amendments, according to Al Arabiya.
• The IRGC Navy political affairs officer said vessels violating restrictions in the Strait of Hormuz are punished every night.
• Yemeni sources said the pro-government Southern Giants forces are advancing towards the Bab al-Mandab coastal area, Sky News Arabia reported. Al Hadath added that the Southern Giants are close to securing full control of Bab al-Mandab while Saba news reported that an attack by the Saudi enemy's mobilisations south of Bab al-Mandab coming from Lahj was pushed back
• Saudi Arabia ruled out a truce with the Houthis until the Yemeni government regains territory and that they will not bow to Houthi “military blackmail”.
• Saudi's Civil Aviation confirmed that two attacks targeted the King Khalid International Airport in Riyadh.
• Pakistan's PM said they stand firmly and in solidarity with Saudi Arabia and will continue to stand with Saudi Arabia in confronting the Houthi threat, adding that the Houthi militia must immediately cease its attacks on Saudi Arabia.
• Military sources noted several heavy explosions occurred in the southern passage of the Strait of Hormuz, which were caused by oil tankers hitting mines, according to Fars. Furthermore, Arab sources said there were several explosions in the Strait of Hormuz and that a tanker was targeted in the strait.

CRYPTO

• Bitcoin gains amid the broader constructive risk tone and trades at the upper end of its USD 81.53k-82.7k range.

APAC TRADE

• APAC stocks traded mixed following the lacklustre handover from Wall St, where most major indices declined, and the Nasdaq underperformed as tech selling and AI-related concerns were stoked by a report that OpenAI's annual revenue was USD 20bln below previous estimates, at USD 50bln versus USD 70bln, although there have been a couple of reports since that have provided some clarification regarding this.
• ASX 200 was positive with the majority of sectors in the green, although gains were capped amid underperformance in telecoms and with commodity-related industries range-bound.
• Nikkei 225 declined at the open amid tech-related pressure and with the index also not helped by the closures of its tech-heavy counterparts in South Korea and Taiwan, but has since recouped most of the losses.
• Hang Seng and Shanghai Comp diverged amid mixed performances in tech stocks and with the mainland pressured after a paltry liquidity operation by the PBoC, while the subdued spending during the National Day holiday also raises questions regarding domestic demand in the Chinese economy.

NOTABLE ASIA-PAC HEADLINES

• China's Ministry of Finance H1 fiscal policy execution report said it will reasonably accelerate fund disbursements and utilisation, continue optimising the fiscal expenditure structure, and ensure protected spending for priority areas. The Finance Ministry added that they will implement more proactive fiscal policies, deepen fiscal reform and step up risk prevention and resolution in key areas.
• China announced total domestic travel spending of CNY 738.38bln for 7-day Golden Week Holiday.
• Japan's cabinet approved the bill to reduce food consumption tax to 1% (prev. 8%) for a two-year period, according to TBS.

NOTABLE APAC DATA RECAP

• Japanese Household Spending (Aug YY) -3.1% vs. Exp. -3.6% (Prev. -3.6%).
• Japanese Household Spending (Aug MM) 0.1% vs. Exp. 0.5% (Prev. 0.5%).