European Market Wrap - 3rd September 2026

• European bourses and US equity futures were broadly in the green.
• Fed's Waller struck a dovish tone by saying he would support holding rates steady at the September meeting.
• Following Waller, yields slipped off best levels and USD was pressured; XAU/USD moved higher.

EQUITIES

• European bourses finished Thursday's trade entirely in the green, with the IBEX 35 the outperformer. Despite upside in energy benchmarks, the positivity in the equity space seemingly came as a read-across from the US amid comments by Fed's Waller (see more below).
• Sectors pointed positively, with the majority of sectors in the green. Media topped the sector pile, with Basic Resources and Health Care closely behind. To the downside remained Consumer Products & Services, with Utilities and Energy rounding out the sector laggards.
• Key movers include: Deutsche Telekom (+2.1%), as Elliott reportedly took a stake in the Co. and pushed to scrap T-Mobile US merger; Soitec (+9.1%), raised its Q2 revenue growth to 50% Y/Y; Crest Nicholson (-11.3%), cut its FY completions figure.
• US cash equities opened entirely in the green, with outperformance in the DJI. In the futures session, equities were supported by comments from Fed's Waller, stating that he would be inclined to keep rates on hold, as recent data has shown signs of improvement in inflation. For equity-specific news: Broadcom (-5.3%) reported Q4 revenue and margin outlooks that missed estimates, while Snowflake (+20.5%) surged after Q2 figures beat forecasts and guided Q3 product revenue above consensus.

FX

• Yen strength was the major theme today with the currency outperforming against all G10 peers, most notably in EUR/JPY, GBP/JPY and USD/JPY -2.0%. Pressure was seen throughout the session in all crosses with USD/JPY falling to a trough just below 155.40, a five point fall since Wednesday’s 160.40 peak.
• The move came absent of a headline driver, but there are several factors which weigh on the pair at the moment. Some suggest potential intervention/rate checks however price action is more gradual, therefore not consistent with previous bouts, while others say the GPIF’s meeting has fuelled speculation it may raise domestic allocation targets. Other factors which have weighed in the past week are the clearer US influence on Japanese policy after Bessent met with various Japanese officials, this hawkish intent also evident in Ueda and Takata's remarks, the latter more so, suggesting a move larger than 25bps. Newsflow throughout the day was light, this morning Bloomberg sources said the BoJ is set to favour a 25bps hike and a "flexible" future pace in policy; a report which sparked a dead cat bounce in USD/JPY which lifted back above 157.00, then resumed the downward trajectory to the aforementioned 155.40 low.
• DXY (-0.6%) was largely driven by JPY moves today with the index set to finish the London session just below 99.00, earlier pressure which could be attributed to falling global yields. Fed’s Waller was on the wires and his remarks sparked a dovish reaction with implied Fed tightening in September falling from 16bps to 12bps. The kicker of his speech was the line “to support holding policy rate steady at September FOMC meeting if August inflation data shows continued progress”, a remark which pushed DXY from 99.14 to a 98.95 trough within fifteen minutes.
• CHF is set to finish the domestic session the second best G10 performer, weaker only against JPY after hotter than expected GDP and CPI data. CPI rose 0.8% Y/Y, above the 0.5% expectation and the 0.4% prior. Despite the hot print, it remains in line with the SNB’s 0.7% forecast for Q3, with OIS markets not showing too much attention and continuing to be certain of a hold in September. Following the inflation print, USD/CHF moved lower by 15 pips within a minute, continuing this action throughout the day to a 0.806 low as the Buck weakened. GDP also indicated a hot Swiss economy in Q2, albeit caveated by the chemical and pharma metrics which surged +10.5% during the period.
• EUR/USD was bid throughout the session and set to remain above the 1.16 handle after rallying following Waller’s remarks. A Handelsblatt piece noted ECB's Schnabel was eyeing a move to the IMF before her term ended. Schnabel is seen as an ECB hawk, and, given her seniority at the ECB has influenced many hawkish debates on the Governing Council over her tenure. A couple pips of weakness were seen in EUR/USD on the though someone less hawkish may replace her, but that was swiftly pared amid the clear, weak USD bias today.

FIXED

• Global fixed benchmarks started the European morning on a strong footing, benefiting from early pressure in the crude complex. Some of that upside was slowly erased in late-morning trade, before then jumping on dovish remarks from the influential Fed’s Waller.
• The bulk of the upside was seen after Waller said that he would support holding the policy rate steady at the September FOMC meeting if August inflation data shows continued progress. Though he caveated this by suggesting that if August inflation data comes in hot, he would consider a September rate hike. Following his initial text release, USTs rose to session highs of 107-26. Thereafter, Waller said that he can give disinflation a chance; we can wait one meeting. There is little cost to waiting one meeting. This spurred another bout of demand in USTs, to make a peak of 107-28. Money markets now assign a 50% chance of a hike this month (prev. c. 60% pre-Waller).
• From a yield perspective, the 10yr briefly slipped beneath the 4.75% mark, going as low as 4.73%. A more decisive breach below the key level would likely require a dovish NFP report on Friday and/or a cool inflation print next Friday. Aside from that, of course, any positive developments in the Middle East would also help yields dip off highs.
• Bunds (+50 ticks) and Gilts (+87 ticks) both benefited from the aforementioned factors, whilst also reacting to lower European gas prices this session. Some attention earlier was on a report in Handelsblatt which suggested that ECB’s Schnabel could leave her role at the Bank before her term ends; the piece suggests that she could move to the IMF.
• UK DMO sold GBP 900mln 1.875%, b/c 3.58x (prev. 3.20x), Real yield 2.496% (prev. 2.165%).
• France sold EUR 13.497bln vs exp. EUR 11.5-13.5bln 1.25% 2036, 3.70% 2036, 0.50% 2040 and 4.10% 2046 OAT.
• Spain sold EUR 5.634bln vs exp. EUR 5-6bln 2.35% 2029, 2.60% 2031 and 3.30% 2036 Bono and EUR 0.639bln vs exp. EUR 0.25-0.75bln 2.05% 2039 I/L Bono.

COMMODITIES

• Crude futures are set to finish the European session higher despite a lack of a single clear driver. The gains follow a three-day rally but amid a lack of military action overnight. On Wednesday, President Trump said renewed Iran strikes would likely be brief, and officials pointed towards steady Strait of Hormuz flows. That being said, Trump added the US was prepared to conduct another attack on Iran. Meanwhile, US Treasury Secretary Bessent said Ukrainian strikes on Russian energy assets and the Iran conflict are driving a global energy shock and higher prices. Some modest downside was seen as Russian President Putin appeared to strike a more conciliatory tone regarding Ukraine. Meanwhile, it was also reported that Houthis have launched a large-scale offensive on all fronts along the western coast. Some of the upside could be a function of the softer Dollar following less hawkish commentary from Fed’s Waller. Brent Nov traded in a USD 94.03-97.62/bbl range (vs yesterday’s 93.52-97.04/bbl range) while WTI Oct resided in a USD 89.57-93.14/bbl parameter (vs yesterday’s 88.97-92.29/bbl band).
• Dutch TTF were also on a softer footing but off worst levels, with the front-month contract remaining elevated above EUR 71.50/MWh where the support was found before moving north of EUR 72/MWh (vs earlier highs of above EUR 74/MWh).
• Precious metals cheered the pullback in the USD as they attempt to trim recent losses, with added gains in the complex amid the aforementioned Waller-induced Dollar decline. Spot gold resided in a USD 4,381-4,496/oz range after topping its 100 DMA (USD 4,358/oz) yesterday. Spot silver resided in a relatively narrow USD 65.21-66.79/oz range, still under Tuesday’s USD 67.08/oz high and below the 100 DMA (USD 67.64/oz)
• Base Metals eventually benefitted from the USD pullback arising from Fed’s Waller, despite elevated energy prices weigh on the growth picture, whilst hawkish central banks also cap gains for the complex. 3M LME copper traded in a tight USD 14,208.88-14,352.08/t range at the time of writing.
• Russian Deputy PM Novak said Russia is experiencing some gasoline shortages.
• Kazakhstan’s August oil and gas condensate production rose 11% M/M, sources say.
• US retail diesel has hit a four-year high, attributed to global supply issues.
• Russia Deputy PM Novak said Russia is to slightly lower oil output in 2026, Tass reported.
• Russian Deputy PM Novak said OPEC's role in the market remains important; will continue to exert significant influence on the oil market because of its high output.

EUROPEAN DATA

• European PPI (Jul YY) 5.8% (Prev. 4.6%).
• European PPI (Jul MM) 1.6% vs. Exp. 1.2% (Prev. -0.3%).
• European S&P Global Composite PMI Final (Aug) 52.0 vs. Exp. 52.1 (Prev. 52.0).
• European S&P Global Services PMI Final (Aug) 51.6 vs. Exp. 51.7 (Prev. 51.7).
• UK S&P Global Services PMI Final (Aug) 52.5 vs. Exp. 52.8 (Prev. 52.1).
• UK S&P Global Composite PMI Final (Aug) 52.5 vs. Exp. 52.5 (Prev. 52.2).
• German New Car Registrations (Aug YY) 2.6% (Prev. 1.2%).
• German S&P Global Services PMI Final (Aug) 49.7 vs. Exp. 48.5 (Prev. 49.8).
• German S&P Global Composite PMI Final (Aug) 51.8 vs. Exp. 51.0 (Prev. 51.3).
• French S&P Global Services PMI Final (Aug) 48.0 vs. Exp. 48.4 (Prev. 49.6).
• French S&P Global Composite PMI Final (Aug) 48.5 vs. Exp. 48.8 (Prev. 49.4).
• Italian S&P Global Services PMI (Aug) 55.2 vs. Exp. 53.6 (Prev. 52.5).
• Italian S&P Global Composite PMI (Aug) 53.6 (Prev. 52.5).
• Spanish S&P Global Composite PMI (Aug) 55.8 (Prev. 56.5).
• Spanish S&P Global Services PMI (Aug) 57.8 vs. Exp. 59 (Prev. 58.3).
• Swedish Services PMI (Aug) 55.8 (Prev. 54.2).
• Swiss GDP Growth Rate (Q2 YY) 2.8% (Prev. 0.5%).
• Swiss GDP Growth Rate Final (Q2 QQ) 1.9% vs. Exp. 1.6% (Prev. 0.6%).
• Swiss CPI (Aug MM) 0.4% vs. Exp. 0% (Prev. -0.1%).
• Swiss CPI (Aug YY) 0.8% vs. Exp. 0.5% (Prev. 0.4%).

NOTABLE HEADLINES

• German Ifo raises its 2026 growth forecast to 1.4% (prev. 0.8%) and 1.2% in 2027 (prev. 0.8%).
• Germany's IFW lifted its 2026 GDP forecast to 1.3% (prev. saw 0.8%), citing acceleration in economic activity and improving business confidence; sees 2027 GDP at 1% (prev. saw 1%) and 0.5% in 2028.

TRADE/TARIFFS

• India's Trade Minister said final trade agreement between US and India will be published as soon as the US can provide India with tariff advantages.

CENTRAL BANKS

• WSJ's Timiraos said "Waller's posture hasn't fundamentally changed since July, but the tilt has, from worried and leaning toward tightening back then to tentatively encouraged and leaning toward holding today.".
• Fed Governor Waller (Voter) Q&Q: With CPI and PPI in hand, have a pretty accurate view of PCE inflation. Policy. Should start to see some lower numbers on inflation, expects a reasonable CPI. Willing to sit, wait and be patient. When you're near a turning point you have to put more weight on near term data. If that reverses in August, he is willing to pull trigger on rate hike. Can give disinflation a chance, we can wait one meeting. There is little cost to waiting one meeting. This is risk management, but not taking big chances. Inflation. He keeps an eye on core inflation, said the headline tends to be a bit noisy. Will let us define what "hot" is. Doesn't want to put any numbers on it, but if 3-month number gets to 2.8, that is fine. Should push aside non-market prices (re portfolio management fees). If increasing potential capacity, increased output is not inflationary. Could see disinflation from AI, potential is rising. AI has not yet shown up in the economic data. Not going to say lets wait until next year, but let's wait to see improvement on inflation. Financial conditions. Mortgage rates and auto loan rates are not low. Looser financial conditions is really a reflection of stock prices. Rates that affect regular Americans are not loose. Bond Market. Can not keep running a 3% structural deficit. Maybe doesn't mean you walk off a cliff, but yields may go up. Yields are going up because of fiscal stuff and AI competition for capital. Some interesting research shows premium for treasuries has gone away, also contributing to higher yields. That has been leading him to raise his neutral rate estimate. Zero population growth brings down yields and real rates. Convenience yield going away is a bad story and raises yields. Term premium is also rising. What the Treasury does next is their business. Short-run interventions do not no much. It is Treasury Secretary's prerogative to do it. Short term moves do not have much impact. Task Forces. Communication. Need to have a rule for how the Fed is going to respond, or you can not forecast. Need reaction function to be consistent. Precise quantities of reaction function might have imperfections, but qualitatively it is important. Have a very different view on reaction function perfection than Warsh. It does not do any good to surprise markets. Giving some idea of what's ahead allows investors to make decisions. The "never explain" was an old model, it is not a good model. Not sure a whole lot will come out of the communications task force. Pushback against scenario views last year was strong. Balance sheet. Will be against any recommendation to go to scarce reserves. Data. Must be wary about trust problem, need to use data people can verify. Inflation task force could be the most interesting.
• Fed's Waller (voter) to support holding policy rate steady at September FOMC meeting if August inflation data shows continued progress. His communicating of reaction function helps public in planning. Considerable uncertainty about how outlook for prices, economy is affected by military conflicts, trade policy, and AI. Inflation:. If August inflation data comes in hot, he would consider a September rate hike. Finally seeing some signs of disinflation’ in recent data. May not take much inflation acceleration to support tighter policy. If August inflation data shows progress has reversed, ‘small adjustment’ to policy rate would help ensure progress resumes. Inflation is significantly elevated above Fed’s 2% target. Elevated energy prices and tariffs not a significant sources of ongoing inflation pressure. Underlying inflation ‘doing better’ than core numbers suggest. Sees some upside risk to inflation, though wage growth is consistent with expectation it is returning to 2%. Personal consumption expenditures and core PCE not best guide for where inflation is. Sees ‘considerable improvement’ with ‘encouraging’ speed in three-month core inflation. Pending revisions to commerce department’s non-market price estimate could lower 12-month PCE by a few tenths of a percentage point. GDP:. GDP growth continuing at ‘solid’ pace, equity price gains should sustain consumption growth. AI investment is ‘legitimate’ part of GDP; AI will ‘reliably’ raise productivity. Labour Market:. Labour market also in satisfactory shape, expects more of the same in august jobs report.
• BoJ accounts show there was no large-scale yen intervention on Wednesday.
• BoJ is reportedly favouring 25bps hike and a flexible future pace, sources suggest.
• ECB's Schnabel could leave her role at the ECB before her term ends to move to the IMF, Handelsblatt reported.
• RBA's Hunter said rate rises earlier this year are working, can see in the data.
• NBP member Duda expects rates to stay unchanged through at least end-2026, with any cut dependent on inflation stabilising at the 2.5% target; noted of a possible temporary rise above 3.5% next year.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian Navy said it struck a Russian support vessel in Sochi port.
• Russian Deputy PM Novak said Russia is experiencing some gasoline shortages.
• Ukraine's FM said President Zelensky recently held talks with a US negotiating team and stressed the dialogue is underpinned by regular contact with the US; there will be a "new dynamic" in peace talks.
• Russian President Putin said attacks on three oil refineries have been repelled; adds that Russia must respond in kind. said there is no need for mobilisation. Russia has no issues in supplying its troops. said contact with the US continues, said Trump is committed to positive and constructive engagement, and Russia has many friends in the US.
• Russian President Putin said that Russia and Ukraine should agree first; he noted that there is an opportunity to reach a peace agreement. Other countries should support it. Contacts with the US continue, adding that we are in favour of restoration of relations with the US. US President Trump is ready for positive and constructive works. There are contacts with Ukraine, these are with special services.
• Russia Deputy PM Novak said Russia is to slightly lower oil output in 2026, Tass reported.
• Russian Deputy PM Novak said OPEC's role in the market remains important; will continue to exert significant influence on the oil market because of its high output.

MIDDLE EAST

• US President Trump clarifies that Commerce Secretary Lutnick had Venezuela on his mind when he said nobody was killed, adds that 18 people were killed in Iran.
• Oman and Qater discuss closer cooperation; It conducted talks with Iran on jointly managing shipping through the strategic Strait of Hormuz.
• Houthis have launched a large-scale offensive on all fronts along the western coast, according to Sky News Arabia, citing Yemeni military sources.
• Israeli Defence Minister Katz said the military will target all of Iran's infrastructure, including energy; an Iranian attack would free Israel from its existing limits.
• Iranian Chairman of the National Security and Foreign Policy Commission said the Strait of Hormuz cannot be opened without Iran’s will, IRIB reported.
• Iran reportedly threatened the US with a large-scale attack if Israel launches an attack on the Ali al-Taher ridge, southern Lebanon, Reuters reported citing sources.
• A senior Yemeni official said Yemen’s armed forces are conducting new military drills in the Red Sea to prepare for a possible confrontation with Israel and the US, IRNA reported.
• Tehran Mayor said countries such as the UAE and Saudi Arabia, are trying to get closer to Iran and receive security guarantees; US guarantees have not been able to provide a credible response to maintain their security and sustainability, Mehr reported.

NORTH AMERICAN DATA

• Revelio Labs Nonfarm Payrolls (Aug): +36.5k (prev. +79.2k, rev. +50.8k).
• US Imports (Jul) 399.3B (Prev. 388.0B).
• US Exports (Jul) 310.7B (Prev. 314.7B).
• US Unit Labor Costs Final (Q2 QQ) 1.2% vs. Exp. 1.3% (Prev. 1.3%).
• US Nonfarm Productivity Final (Q2 QQ) 1.4% vs. Exp. 1.4% (Prev. 0.8%).
• US Initial Jobless Claims (Aug/29) 206.0K vs. Exp. 205K (Prev. 204.0K).
• US Continuing Jobless Claims (Aug/22) 1779.0K (Prev. 1771.0K).
• US Jobless Claims 4-week Average (Aug/29) 207.25K (Prev. 205.75K).
• US Trade Balance (Jul) -88.60B vs. Exp. -90B (Prev. -73.30B).
• US Challenger Job Cuts (Aug) 52.881K (Prev. 33.429K).
• Canadian S&P Global Services PMI (Aug) 46.8 (Prev. 49.1).
• Canadian S&P Global Composite PMI (Aug) 47.8 (Prev. 49.7).
• US Chicago Fed Labor Market Indicator Final 4.08% (Prev. 4.10%).
• Canadian Exports (Jul) 76.14B (Prev. 77.96B).
• Canadian Trade Balance (Jul) 0.77B vs. Exp. 3.6B (Prev. 4.20B).
• Canadian Imports (Jul) 75.37B (Prev. 73.76B).
• Canadian Labor Productivity (Q2 QQ) 1.0% vs. Exp. 0.7% (Prev. -0.4%).