EUROPEAN OPEN: BAS GY confirms EVK GY takeover talks; UBSG SW drawing merger interest; TTE FP plans USD 2.5bln buyback in Q4; Armani begins talks over 15% stake sale; MBG GY explores separation from Berlin van factory; RXL FP acquires GCG for USD 1.4bln

EUROPEAN OPEN:

• European equities start the week mixed. Overnight, APAC stocks were also mixed amid higher oil prices spurring hawkish rate hike bets, and following mixed geopolitical headlines over the weekend. Chinese shares touched a one-year low as technology stocks sold off after reports Beijing may permit local purchases of Nvidia’s new chips, and proposed US restrictions on Chinese optical firms.
• In trade news, the US and China released lists covering USD 30bln worth of goods for planned tariff cuts, comprising 77 Chinese products and 1,619 US products, without specifying reduction amounts. China’s MOFCOM said about 90% of products covered by the reciprocal arrangement would have tariffs reduced to most favoured-nation rates. The Chinese list includes items such as coal, livestock, meat, seafood, dairy, produce, grains and medical equipment, while the US list features household goods, textiles, toys, appliances and sporting goods. MOFCOM said the sides agreed to form an agricultural working group and set up a communication channel for AI incidents.
• US grain futures fell; Bloomberg said traders await stronger evidence of Chinese purchases after Washington and Beijing announced tariff cuts covering about USD 30bln of imports each. Wheat, corn and soybean futures declined, while soybeans were largely excluded from the tariff reductions.
• Global bond yields and oil prices started the week higher after President Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz, intensifying inflation concerns. December Brent trades near USD 100/bbl. Trump said he rejected a deal, adding that Iran’s conditions were something the US may have agreed to a year ago, and that Tehran has overplayed its hand. Trump added that oil prices will drop once the Iran war ends, adding that a record amount of oil was taken from Hormuz on Saturday night. He also reportedly told Chinese President Xi to stop supporting Iran during their summit. Iran said it would not soften its conditions for reopening the waterway following Trump’s rejection, though negotiations are expected to resume this week.
• US 2yr yields rose to 4.90%, while 10yr yields climbed to 5.20%. Treasury Secretary Bessent also urged the Fed to keep an open mind on rates, arguing AI productivity gains and deregulation will help contain inflation. Swap markets are pricing three more Fed hikes next year, with potential for a fourth. Elsewhere, Japan’s 2yr government bond yield rose to its highest since 1995, near 2%, as investors raised bets on further BoJ rate hikes; OIS imply about a 40% chance of an October hike, with another 25bps rise fully priced by December. Yen weakness and inflation concerns are reinforcing expectations for tighter policy.
• Gold fell beneath USD 4,200/oz as the impasse over the Strait of Hormuz kept energy costs elevated, maintaining pressure on the Fed to tighten policy further, following a decline of over 2% the previous week.
• In data, Chinese industrial profit growth slowed further in August, rising 4.2% Y/Y (prev. 11.2% in July), as technology manufacturing strength was outweighed by weak domestic demand. Profits for the first eight months rose 15.7% (vs 17.6% in January-July). Copper fell as traders assessed weaker Chinese industrial profit growth and demand ahead of the National Day holiday.
• In European politics, France’s conservative Republicans party and its allies were set to retain a Senate majority after Sunday’s election, holding at least 127 and 72 seats respectively, even as the populist National Rally gained ground. National Rally and allies secured at least 14 Senate seats, enough to form a formal group. Elsewhere, EU leaders are reportedly deadlocked over the bloc’s next long-term budget ahead of a 15th October meeting, Politico reports; the impasse raises the prospect that no agreement will be reached by the end of 2026. In the UK, The UK Labour Party Conference is underway; PM Burnham did not rule out that fresh taxes could fund social care reform, while he also announced a help-to-buy scheme for first-time buyers, and indicated he could block a third Heathrow runway. Chancellor Healey is due to speak at the conference today; over the weekend, he noted that the UK has the lowest capital gains tax rate among European G7 countries.
• In central bank speak, ECB’s Sleijpen said the Netherlands should restrain government spending and avoid additional borrowing, warning of higher debt and inflation; he said economic growth of about 1% should improve.

STOCK SPECIFICS:

• MATERIALS: BASF (BAS GY) confirmed exploratory talks with RAG-Stiftung and Evonik (EVK GY) regarding a potential takeover of Evonik; it said the talks remain open, and no outcome has been determined.
• FINANCIALS: At least eight major foreign banks have expressed interest in a possible merger or combination with UBS (UBSG SW), as the bank faces proposed tougher Swiss capital rules, according to Blick. Management has reportedly revived discussions on reducing exposure to Swiss regulation, including via a foreign bank combination; Morgan Stanley (MS) has been cited as a potential suitor.
• ENERGY: EU Energy Commissioner Jorgensen warned member states of a potential energy price crisis driven by the Middle East conflict, and has asked governments to consider demand-cutting measures and continue filling gas storage ahead of winter; he noted that the region’s storage facilities are just over 70% full vs seasonal norms of 86%, and suggested reducing the filling target to 80% to help alleviate price pressures. TotalEnergies (TTE FP), SOCAR and XRG have taken FID for full-field development of the Absheron gas and condensate field. Production is expected to reach 6 BCMA of gas, and 47K BPD of condensate; start-up is planned for 2029. Separately, TotalEnergies is planning a USD 2.5bln buyback in Q4, and then just over USD 2bln in Q1.
• CONSUMER CYCLICAL: Of note for luxury fashion names, Armani is reportedly to begin a 15% stake sale, and is holding talks with LVMH (MC FP), L’Oreal (OR FP) and EssilorLuxottica (EL FP); Armani CEO said that the company would be open to having more than one investor for the stake stale. Mercedes (MBG GY) reportedly wants to separate from its van factory near Berlin, which is drawing interest from KNDS, Handelsblatt reports. Of note for autos more broadly, the Trump administration plans to release new fuel efficiency mandates on Monday, easing Biden-era rules; if the final rule mirrors last year’s proposal, it would lower fuel-economy requirements for 2031 model-year vehicles to 34.5 MPG from about 50 MPG. Entain (ENT LN) maintained its FY26 EBITDA guidance, despite Brazil’s ban on online betting, but sees performance at the lower end of ranges.
• CONSUMER DEFENSIVE: Of note for Swiss food companies, a proposal to increase domestic food production was rejected by voters, receiving less than 28% support.
• TECH: Infineon’s (IFX GY) USD 1.44bln semiconductor plant in Thailand will start production on 1st October. Rexel (RXL FP) agreed to acquire GCG for an enterprise value of approximately USD 1.4bln; the transaction is expected to close by the end of 2026. China has reportedly signalled it may allow domestic companies including ByteDance and Alibaba (BABA) to buy Nvidia’s (NVDA) RTX PRO 5500 chips; the Ministry of Industry and Information Technology reportedly asked companies about purchase plans, and indicated approvals may follow. A US jury ordered Apple (AAPL) to pay Taction more than USD 5.7bln after finding its Taptic Engine infringed two haptic technology patents; Apple denied using Taction’s technology, said the patents were invalid and plans to appeal. SK Hynix (SKHY) shares fell in APAC trade after reports that its subsidiary Solidigm is considering a US IPO as soon as next year that could value the data storage maker at up to USD 100bln. The Korea Corporate Governance Forum had urged SK Hynix in August to drop the plan, citing concerns over the group’s pyramid ownership structure.

DAY AHEAD:

• EVENTS: UK Chancellor Healey will deliver remarks from the Labour Party Conference today.
• DATA: In North America, US Dallas Fed manufacturing index is due (prev. 11.6).
• CENTRAL BANKS: Fed’s Bowman (voter) will give remarks on bank supervision; the subject of her speech signals risks she could avoid remarks on monetary policy/economic outlook. Fed’s Cook (voter) will give remarks on emerging technologies; the subject of her speech signals risks she could avoid remarks on monetary policy/economic outlook; Fed’s Barkin (2027 voter) will participate in a fireside chat. From the ECB, President Lagarde, ECB’s Elderson, ECB’s Machado. From the BoE’s, Ramsden speaks on QT. Elsewhere, Norges Bank’s Longva and Borsum are due.
• OPTION EXPIRIES: UST September 2026 futures expire.
• SUPPLY: EU auctions EUR 7bln of 2029, 2035 and 2048.
• EARNINGS: Notable corporates reporting today includes: JEF.
• WEEK AHEAD: Highlights include: US NFP, PCE, ISM Manufacturing PMI; EZ CPI; RBA policy announcement. This week’s notable corporate earnings includes: MU, ACN, NKE.