European Market Wrap - 21st September 2026

• European bourses were broadly firmer this morning; US equity futures also stronger, NQ +1.3%.
• G10s are mixed vs USD; Antipodeans gained, whilst the JPY lagged.
• Crude benchmarks slipped more than USD 3/bbl, despite ongoing supply disruptions.

EQUITIES

• European bourses are set to end the first trading day entirely in the green, supported by lower energy prices and constructive US-China trade comments. Outperformance comes from the FTSE MIB (+1.4%), with Germany's DAX 40 (+1.2%) closely behind as it shook off the weekend's political woes from Chancellor Merz's CDU.
• Sectors highlighted the positive bias, with all but Energy and Utilities printed gains. Tech held the top spot, with Banks and Basic Resources rounding out the sector gainers.
• Key movers included: Novo Nordisk (-5.2), its 2030 ambitions failed to meet investor expectations; Porsche (-2.4%), as Handelsblatt reported of further jobs cuts but has been pushed back on since; Kuehne+Nagel (+5.2%), partnered with Amazon (AMZN); Societe Generale (+2.6%), targets ROTE to between 13-14% in 2029 (2026 target of "around" 11%); Galderma (+2.1%), raised its FY26 net sales growth guidance to between 19-21% (prev. guided 17-20%).
• US cash equities opened higher across the board, with outperformance in the NDX. Warner Bros (+7.2%) and Paramount (+4.2%) printed decent gains pre-market and held onto the upside as cash trading got underway after reports that Paramount and California’s AG are discussing settlement concessions over a lawsuit that is blocking the merger between the two media Cos.

FX

• Snapshot: G10s were mixed against the USD, which remained steady throughout the session. The Antipodeans benefited from the risk tone, whilst the JPY lagged a touch.
• DXY was essentially flat for the majority of the session, trading within a 100.17-100.37 range. From a US perspective, Goolsbee (2027 Voter) said that strong demand may be adding to inflation, whilst adding that restoring price stability will not be “painless”. Aside from that, US-specific news flow was lacking.
• EUR had regional factors to digest, though ultimately remained flat for the session. In Germany, a disastrous state election result for Chancellor Merz’s CDU increases the chance of future political instability in the region. However, the state election has little impact on the federal government. Attention now is on whether Chancellor Merz is forced to resign, though he recently stated he intends to stay and “fight on”.
• JPY was the slight laggard this morning, with Japanese traders away on holiday until Thursday. Some of the pressure may just be a bit of an unwind of the strength seen late on Friday, when the Nikkei reported that the BoJ conducted a rate check. It appears that officials are working to prevent USD/JPY from heading back towards 160.00, though continued expectations of policy divergence between the Fed and the BoJ may make this a hard task.

FIXED

• Global fixed benchmarks were stronger this morning. All benefited from the fall in energy benchmarks, despite ongoing supply disruptions and further threats from President Trump. USTs (+6 ticks) and Bunds (+78 ticks) jumped, whilst Gilts (+83 ticks) outperformed.
• A lack of news flow for US paper this morning, with USTs trading within a 105-25+ to 106-06 range. Some of the optimism today may be attributed to positive mood music between the US and China. Trump had previously touted that he had a good relationship with China, whilst US Treasury Sec. Bessent mentioned that he had good discussions with China.
• Bunds ultimately took the lead from the energy space today, and ultimately out-tugs the negative implications from a poor CDU state election performance. 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. Updates that come amid the nation revising its deficit expectation for 2026, to 5.4% of GDP vs 5.1% in 2025 and the goal of 4.6%. Accompanying this, PM Lecornu announced ambitions to limit the deficit by 2027; however, this still leaves the nation far from the EU EDP level of 3%, and thus exposes it to penalties and/or rating revisions.

COMMODITIES

• WTI Nov and Brent Dec futures extended their downside after initially advancing at the open on weekend escalation, including a Houthi attack on a Saudi Aramco facility in Yanbu and reports that Trump was considering “blowing up” Iran. Prices subsequently reversed as the immediate escalation failed to develop further and Trump signalled openness to meeting Iran’s President. De-escalatory developments also included Gulf states calling for a reset with Iran, Pakistan reiterating its commitment to US-Iran mediation and Trump remaining willing to engage in talks. Nonetheless, Iran reiterated that Hormuz will remain closed until its seven conditions are met, the IRGC said the war is not over, UKMTO reported a tanker was struck by an unknown projectile in the Strait, and a Houthi official threatened a broader regional escalation. WTI fell to a USD 92.52/bbl low from a USD 97.22/bbl high while Brent fell to a USD 96.21/bbl low from a USD 100.22/bbl high and was similarly down around USD 3/bbl.
• Dutch TTF extended its downside alongside the broader energy complex as hopes for diplomatic progress helped offset continued Middle Eastern supply risks. TTF fell to a EUR 73.21/MWh low from a EUR 80.55/MWh high and traded around EUR 74.08/MWh, down almost 7% intraday.
• Precious Metals were mixed as the Dollar remained firm despite the sharp pullback in energy. Spot gold fell to a USD 4,340/oz low from a USD 4,383/oz high, with the 100 DMA at USD 4,319/oz. Spot silver fared better, rising to a USD 67.05/oz high from a USD 65.74/oz low before easing to around USD 66.55/oz, remaining around its 100 DMA (USD 66.40/oz).
• Base Metals remained firmer despite the cautious broader backdrop, extending some of last week’s gains and supported by the generally positive tone across Chinese markets ahead of the Trump-Xi summit and following constructive US-China trade discussions in New York. COMEX copper traded near session highs around USD 6.66/lb, while 3M LME copper traded towards the top end of a USD 14,540.50-14,799.78/t range.
• BofA expects an aluminium supply deficit this year before shifting to a modest surplus next year, which is seen widening as additional Indonesian supply comes online in H2 2027; aluminium prices could rebound in the coming weeks but face downside pressure.
• Oil supertankers were observed at Saudi Arabian export installations in the Gulf over the weekend, Bloomberg reported citing satellite data.
• Libya’s Sharara (300k BPD) oil output drops by more than half after a pipeline shutdown, according to reported.
• German government spokesperson said the government will not cap fuel prices at any cost; said the government needs to reassess its reform plans.
• 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.
• 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.
• French Finance Minister Lescure said France’s strategic oil stocks are full.
• Kazakhstan oil shipments to Ust-Luga were recorded at 200k metric tons in August, Interfax reported.

EUROPEAN DATA

• Sweden Origo Inflation Expectations Survey: 1-year CPIF 2% (prev. saw 1.7%); 2-year CPIF 2.1% (prev. saw 2.1%).

NOTABLE HEADLINES

• Bundesbank monthly report noted that the German economy will expand modestly in Q3 and recover in Q4; German inflation will remain elevated due to energy and healthcare factors.

TRADE/TARIFFS

• USTR Greer said Canada's economic growth is slow and he prefers the US model. Canada wants to double down on globalization, and we don't.
• USTR Greer said they are developing rules of origin with Mexico and repeats the probe into excess capacity is ongoing. US-China Trade:. Focus is on stability. Talks were positive and constructive.
• Indian Trade Minister said a trade agreement with New Zealand will provide duty-free access to New Zealand for 100% of India's exports.
• Japanese PM Takaichi has delayed her trip to the US to monitor the effects of the typhoon, BBC reported.
• China reportedly purchases more US soy cargoes ahead of the President Trump-Xi meeting.

CENTRAL BANKS

• Fed's Goolsbee (2027 Voter) said that a mix of supply and demand pressures on inflation has more impact on PCE than destination. Markets:. Historically US long rates are not particularly high and does not think they reflect a loss of confidence in the US. Guidance:. Without the Fed’s Summary of Economic Projections, the world will still be looking to understand officials’ reaction functions. The job of a central banker is not to respond to markets or the President, but to economic conditions. Fed should be open to making the SEP more informative. Fed remains very credible and everyone takes the job extremely seriously. Not thinking about any coming hikes as reversing last year’s cuts. Inflation:. Components of inflation will matter to the Fed’s analysis, with services inflation not seen as tied to the oil price shock but as a product of strong demand. The Fed’s only choice if supply-shock inflation proves persistent is to reduce aggregate demand. District contacts are relaying concerns that sound like traditional demand overheating. Inflation data earlier this year seemed to show supply shocks waning; now some inflation is coming from demand. If inflation is mostly demand-driven, the rate response will have to be more aggressive and more front-loaded. The Fed is now more in the “action scenario” given the mix of inflation pressures. Labour Market:. Business contacts report the labour market is getting tighter and alternative measures tell the same story. Current unemployment rate is “pretty close” to full employment. Month-to-month job growth is not a good measure of labour market health when there is doubt about population growth due to immigration policies.
• Fed's Goolsbee (2027 voter) said the Fed must have courage to fight inflation. Is optimistic Fed can get back to 2% inflation as long as there is no more evidence of demand overheating. Arguments the Fed should cheapen federal borrowing costs are one of the reasons that Fed independence is important. Evidence on whether inflation reflects demand overheating or supply shocks remains conflicting and he is still sorting that out. If fiscal policy is driving up inflation the Fed has to take it into account. Does not think estimates of the neutral rate are helpful in short-run monetary policy decisions. 2% inflation target is still realistic, even in a world of repeated supply chocks. Market expectations reflect faith that inflation target will be met. If there is convincing evidence inflation is heading back to 2%, we have no problem with rates going back down. Fed does not currently have an employment problem, but it does have an inflation problem. Wants evidence to show that inflation is going away.
• Fed's Goolsbee (2027 Voter) said strong demand may be adding to inflation along with energy, tariff and other supply shocks. There is "no ambiguity" on what the Fed would do if demand is overheating. Evidence is needed that supply-driven inflation is fading, or it is hard to see a credible path back to 2% inflation. Supply shocks are proving to have a persistent impact on inflation and must be accounted for in setting monetary policy. Restoring price stability will not be painless.
• China's PBoC Governor reiterates plan to implement moderately loose monetary policy.
• BCB Economist Poll: Year-end Selic rate view 13.50% (prev. 13.75%), 2027-end Selic rate view 12% (prev. 12%).

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said there is dialogue with US President Trump and the US to end the conflict, solutions are possible and will be discussed on the sidelines of the UN General Assembly.
• Russian Foreign Ministry said Russia is maintaining close contact with Ankara over Turkey’s proposal to end the Black Sea conflict.
• US President Trump posted "Russia has unfortunately lost control of its Diesel Oil Industry due to its War with Ukraine". Full Post: "A large number of their Diesel refineries have been blown up and are, at least temporarily, out of commission. This ridiculous and never ending War with Ukraine must be ended. The whole World suffers as 25,000 people, mostly soldiers, are being killed each month. What a shame! President DJT".
• Russia's Press Secretary Peskov said there have been no progress in negotiations on Ukraine yet but remains open to further talks, IFX reported.
• 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.

MIDDLE EAST

• US President Trump spoke on the phone with the Yemeni President Al-Alimi on Sunday, according to source reported; Yemen requested US support for government against Houthis but Trump made no pledge of military support.
• Pakistan said its mediation between the US and Iran reflects its commitment to resolving disputes through dialogue, Al Arabiya reported.
• Yemen’s National Delegation met the UN envoy in Muscat and said Saudi Arabia has refused to end the blockade of Yemeni airports and ports, adding that a solution remains possible through addressing humanitarian demands, Al Mayadeen reported.
• Gulf states have called for a reset on Iran, with the United Arab Emirates urging a “new mindset” and Qatar advocating for a regional “security framework” with Tehran, FT reported.
• USTR Greer said nothing is off the table regarding Iran-related sanctions.
• Iranian spokesperson reiterates the Strait of Hormuz will remain closed until Iran’s seven conditions under the Islamabad agreement are met, SNN reported.
• Iran's IRGC spokesperson said there is no communication between the IRGC and the US, adding that the IRGC does not engage in diplomacy, IRIB News reported.
• Iran's IRGC spokesperson said the war is not yet over, Press TV reported.
• UN Ambassador to US Waltz said US President Trump remains willing to engage in talks and that Iran must return to the negotiating table.
• Yemeni Houthi official warns Egypt, Turkey and Pakistan will likely be targeted in the next stages. Houthi Official said: The targeting of Iran by the enemies will not be limited to the country's borders and, according to him, the next efforts will be to target Egypt, Turkey and Pakistan.
• Pakistani Interior Minister's trip to Iran is unrelated to Iran-US matters and will focus on bilateral relations and cooperation; Pakistan is not carrying a message between Iran and the US, Tasnim reported.
• Pakistani Interior Minister travels to Iran today, IRNA reported.
• IRGC Spokesperson said US intelligence centers are within our reach, Tasnim reported.
• Pakistan Interior Minister has arrived in Tehran, IRNA reported.
• UKMTO has received a report of an incident involving a vessel transiting the Strait of Hormuz, reported at 07:30 UTC; tanker conducting an inbound transit was struck by an unknown projectile. Vessel is reported to be continuing to its next port of call under its own power.
• Source in Pakistan’s Interior Ministry said Minister Naqvi is heading to Tehran to discuss mediation efforts and ending the stalemate, Al Jazeera reported.

NOTABLE NORTH AMERICAN NEWS

• US President Trump said WH is not instituting assault on the free press; it is instituting an assault on the "FAKE NEWS".