Newsquawk European Market Wrap - 1st September 2026

• European bourses and US equity futures under pressure amidst elevated yields.
• UK 10-year yield has soared to levels not seen since the GFC, last at 5.21%.
• Iran's FM spokesperson Baghaei says that it is not possible to talk about a return to the understanding, but noted that Iran remains committed to its NPT.

EQUITIES

• European bourses remained weak throughout Tuesday's session, except the SMI, as gains in Novartis (see more below) offset the broad losses. Upside in global bond yields and energy prices were the primary reasons for the downside in equities, as markets price in near term central bank hikes while reports of two supertankers being hit in the Strait lifted energy.
• Sectors held their negative bias. Energy topped the sector pile, with Health Care and Optimised Personal Care completing the top 3 sectors. To the downside is Basic Resources, followed by Travel & Leisure and Financial Services.
• Key movers included: Novartis (+7.0%), the Co. announced that its remibrutinib significantly reduces relapse rates and shows favourable safety profile in Phase III RMS trials; Air Liquide (+2.1%), FT reported of Elliott building a stake in the Co.; Partners Group (-7.5%), H1 revenue missed and its CEO stepped down into an investment role; Reckitt Benckiser (+3.6%), upgraded at JPMorgan, and its Mead Johnson unit won a federal case regarding its baby formula.
• US cash equities opened entirely in the red, with underperformance in the NDX. Fed's Barr delivered a set of hawkish comments, stating that rates will need to be raised if inflation does not moderate soon, highlighting that inflation remains too high. As a reminder, the US Core PCE held steady at 3.3% Y/Y.

FX

• Yields drove FX action today, where all G10 currencies (excl. NOK) are set to complete the session weaker against the Buck. Geopolitical updates sparked a typical risk-off reaction with DXY marking a 99.65 high and looking to return to that 99.70 peak seen after Warsh on Friday. Earlier in the session saw reports via Maritime Risk firm Marisks, which said two oil supertankers were hit by projectiles in the Strait of Hormuz - since, updates were light but the absence of optimistic rhetoric kept the Buck at highs. Elsewhere, no move was seen to the Final S&P Manufacturing PMI, which was confirmed at 53.9. Despite the multiple bullish factors today, Payrolls will be in focus in the near term, while USD debasement fears or Treasury action in the coming weeks could weigh on the Greenback.
• Continued upside in energy benchmarks (TTF Oct’26 at EUR 72/MWh) continued to weigh on European terms of trade with all CEE, Euro and Sterling weaker against the Buck. No EUR move to this morning’s Final EZ Manufacturing PMIs, which were mostly revised lower, while headline inflation ticked higher to 3.3% as expected. EUR/USD looked to return to the 1.1577 trough which it printed post-Warsh; should this breach, it could look to the 100DMA @1.1570. For CEE, ING this morning wrote that recent hawkish repricing should limit further weakening vs. EUR.
• Cable marked a low at 1.3525, coming off lows in a zone which has proven support since mid-Aug. UK yields were in focus with the 10yr at highs of 5.25%, well above the OBR’s March assumption of 4.5%. A former Treasury official noted that these moves, if applied across the curve, would imply a GBP 6bln increase in debt interest by 2029/30. However, yields are set to finish the session off highs with the 10yr’s earlier peak retreating from 2008 highs, set to finish the session around 5.20%. Parliament returned from recess with Burnham to speak any time after 15:30 BST, though not expected to announce any significant policies.
• NOK was the sole G10 currency stronger against the Buck as its status as a high-yielder and oil exporter attracted demand, with Brent oil and Dutch TTF higher in excess of 2% on the day. USD/NOK -0.3%, set to complete the session at lows.

FIXED

• Global fixed benchmarks were pressured throughout the European session. The complex initially took bearish leads from JGBs overnight, which were hit by Treasury Secretary Bessent pushing the BoJ towards a September hike, and as domestic fiscal concerns drew attention. Thereafter, USTs and EGBs took another leg lower as oil prices climbed on a report that two oil supertankers were hit in the Strait of Hormuz. USTs (-4 ticks) are set to end the London session at the bottom end of a 107-22 to 107-31+ range.
• Yields are set to end the European session towards multi- year/decade highs. The US 10yr (4.78%) resides near the peak made in January 2025. If market pricing continues to price in a Fed hike this month, and fiscal concerns increase, a 5% yield would be the level to watch; CME FedWatch currently implies a 66% chance of a September hike. As for the long-end, the US 30yr (5.26%) holds in close proximity to levels which led the US Treasury to implement its liquidity support. Another round of buybacks could arguably be in the works if the long-end also continues to edge higher.
• Aside from energy dynamics, Bunds (-24 ticks) had domestic data to digest. In the morning, headline EZ inflation rose 3.3% (prev. 2.9%), whilst Services and Core figures moderated. Overall, the continued rise in headline inflation will only cement views that the ECB will deliver a September hike – though the benign core figure will offer two-way arguments for decisions later in the year, and possibly September dissent.
• In the UK, Gilts (-72 ticks) are the clear underperformer this morning. The UK 10yr (5.21%) has reached levels not seen since the GFC. This would be a significant worry heading into the Autumn Budget, which local press is beginning to increase its coverage on. An ex-Treasury official suggested that the 20 yr Gilt is 70bps above what was assumed during the Spring Forecast. They noted that if this increase was applied across the curve, it would result in a GBP 6bln debt increase by 2029/30.
• US Treasury Secretary Bessent said bond yields are showing that inflation expectations are flat to down. Reiterates that the US bond market is the best performer recently. 3-3-3 programme for energy was for crude equivalents.
• Foxconn files for four-parter euroyen noted.
• HSBC mandates a JPY denominated Samurai Bond offering, to price on September 4th. Includes:. 4yr, NC3. 6yr, NC5. 11yr, NC10.
• European Investment Bank to sell 5yr EUR-denominated climate awareness bond.
• Germany sold EUR 4.281bln vs exp. EUR 5.5bln 2.90% 2031 Bobl: b/c 1.56x (prev. 1.48x), average yield 3.09% (prev. 2.89%), retention 22.16% (prev. 24.1%).
• Pakistan has mandated banks for USD-denominated 5yr and 10yr offering.

COMMODITIES

• WTI Oct and Brent Nov extended their gains as shipping risks and doubts over a return to the US-Iran understanding kept the complex underpinned. WTI rose to a USD 88.38/bbl high from USD 86.13/bbl, while Brent reached USD 92.80/bbl from USD 90.70/bbl, both firmer by around 2.5-3%. The latest extension followed reports of tanker incidents alongside the Iranian Foreign Ministry spokesperson's remarks that a return to the prior understanding is currently not possible, which could extend the timeframe of a potential deal vs a return to the prior MoU.
• Dutch TTF extended higher alongside the broader geopolitical risk premium, breaking above earlier resistance around EUR 71.25/MWh and reaching EUR 72.06/MWh, +3% intraday.
• Precious Metals added to their losses as the firmer USD and elevated energy prices weighed on the complex. Spot gold broke below its 100 DMA (USD 4,366/oz) and fell to USD 4,326/oz, where it currently resides -2.7%. Spot silver similarly extended sharply lower to around USD 64.50/oz, down over 3%, having traded as high as USD 67.07/oz earlier.
• Base Metals moved lower as the LME returned from its long weekend, with the firmer USD and broader risk-off backdrop weighing. COMEX copper extended its decline to around USD 6.49/lb session low and -1.5%, after reaching USD 6.64/lb earlier. 3M LME copper turned red and traded towards the bottom end of a USD 14,195.88-14,450.13/t range.
• US Treasury Secretary Bessent said the 3-3-3 programme for energy was for crude equivalents.
• Naftogaz reported that a thermal power plant was hit in Odesa.
• Traders see Russia's seaborne crude exports from western ports seen declining 5% in September, from August, according to reported.
• A Brazilian court overturns a preliminary injunction that had suspended 12% tax on oil exports, according to Estadao.
• India raises windfall tax on petrol exports to INR 1.5 (prev. 0) with effect from September 1st.
• Russia downgraded oil output forecast for this year to a 17-year low and revised fuel exports outlook for 2026 and 2027 due to the war with Ukraine, according to reported. The forecasts, which are expected to be finalised at the end of September and are used in drafting the budget, reduced oil production estimates for 2026-2029 by between 16-20mln T.
• Iraq set floor prices for crude oil cargoes offered via tender for September loadings outside of Hormuz, according to a pricing document.
• Indian PM Modi has told Indians to avoid buying gold unless necessary, Bloomberg reported.
• NHC said Tropical Storm Edouard is expected to strengthen and could approach hurricane strength before reaching the northwestern Gulf Coast on Tuesday, with hurricane conditions possible from High Island to Cameron.

EUROPEAN DATA

• Spanish S&P Global Manufacturing PMI (Aug) 49.5 vs. Exp. 50.1 (Prev. 50.2).
• European CPI Ex Food & Energy (Aug Y/Y) 2.1% (exp. 2.3%, prev. 2.2%).
• European CPI Flash (Aug) 103.7 (Prev. 103.24).
• European HICP Supercore (Aug YY) 2.4% vs. Exp. 2.5% (Prev. 2.5%).
• European HICP (Aug MM) 0.4% (Prev. 0.2%).
• European Unemployment Rate (Jul) 6.4% vs. Exp. 6.3% (Prev. 6.4%).
• European HICP (Aug YY) 3.3% vs. Exp. 3.3% (Prev. 2.9%); Services 3.0% (prev. 3.3%).
• European S&P Global Manufacturing PMI Final (Aug) 52.7 vs. Exp. 52.8 (Prev. 51.9).
• Italian CPI Prel (Aug YY) 3.3% (Prev. 2.9%).
• Italian CPI Prel (Aug MM) 0.5% vs. Exp. 0.2% (Prev. 0.3%).
• Italian HICP Preliminary (Aug MM) 0.1% (Prev. -1.0%).
• Italian HICP Preliminary (Aug YY) 3.2% vs. Exp. 3.2% (Prev. 2.9%).
• Italian Unemployment Rate (Jul) 5.8% vs. Exp. 5.8% (Prev. 5.8%).
• Italian GDP Growth Rate Final (Q2 YY) 1.0% vs. Exp. 1% (Prev. 0.8%).
• Italian GDP Growth Rate Final (Q2 QQ) 0.2% vs. Exp. 0.2% (Prev. 0.3%).
• Italian S&P Global Manufacturing PMI (Aug) 49.6 vs. Exp. 51.5 (Prev. 51.3).
• UK Net Lending to Individuals (Jul MM) 6.3B vs. Exp. 9.2B (Prev. 9.5B).
• UK BoE Consumer Credit (Jul) 2.006B vs. Exp. 1.8B (Prev. 1.865B).
• UK Mortgage Approvals (Jul) 56.05K vs. Exp. 59.4K (Prev. 58.22K).
• UK Mortgage Lending (Jul) 4.29B (Prev. 7.68B).
• UK M4 Money Supply (Jul MM) -0.3% vs. Exp. 0.9% (Prev. 0.9%).
• UK S&P Global Manufacturing PMI Final (Aug) 51.7 vs. Exp. 51.5 (Prev. 51.9).
• UK Nationwide Housing Prices (Aug YY) 1.6% vs. Exp. 2.1% (Prev. 1.4%).
• UK Nationwide Housing Prices (Aug MM) 0.2% vs. Exp. 0.1% (Prev. -0.1%).
• German S&P Global Manufacturing PMI Final (Aug) 54.3 vs. Exp. 54.1 (Prev. 52.2).
• German Retail Sales (Jul MM) -3.4% vs. Exp. 0.4% (Prev. -1.1%).
• German Retail Sales (Jul YY) -2.5% (Prev. -0.2%).
• French S&P Global Manufacturing PMI Final (Aug) 51.1 vs. Exp. 51.5 (Prev. 49.8).

NOTABLE HEADLINES

• Germany's economy minister is publicly resisting a 'secret tax hike' policy, Bild reported.
• UK military reportedly still expects Chancellor Healey to commit to spending 3% of GDP on defence by 2030, Bloomberg's Wickham reported.
• A number of UK retailers, such as Asda, M&S (MKS LN) and Tesco (TSCO LN) have warned PM Burnham against a business rates raid, suggesting that it would undermine their ability to keep prices low and threaten jobs, Sky News reported.

TRADE/TARIFFS

• China Premier Li Qiang said to meet US-China business council delegation. Qiang said the council has long promoted bilateral ties and trade and that, with joint effort, China-US relations remain broadly stable. He cited the May Beijing meeting between Xi and Trump that produced a series of important understandings and said China is willing to work with the US, follow the two leaders' strategic guidance, strengthen dialogue and communication, expand mutually beneficial cooperation, properly manage differences and push to build a constructive strategic-stability relationship to secure more pragmatic outcomes. China is willing to enhance communications with US.
• USTR Greer said Canada “could see additional tariffs and you could see import bans or prohibitions similar to the ones that Canada has imposed on us earlier.”, Politico reported; adds. "ideally, we leave energy markets alone". noted, President Trump has many options in front of him. "There are no negotiations happening on trade right now.”.
• US officials accuse Chinese shipping firm COSCO (1919 HK) of using concealed equipment aboard its vessels to gather military communications intelligence near foreign coastline.
• South Korea and Japan held an economic security dialogue in Tokyo, discussing cooperation on AI, semiconductors, critical minerals and supply chains.

CENTRAL BANKS

• Fed's Barr (voter) said if inflation doesn't moderate soon, will be time for an interest rate hike. Inflation remains too high. Favours steady rates if confident inflation is moderating. Labour market is stable with low unemployment. Economy is growing 'solidly', boosted by AI investment. Persistence of inflation above target creates risk. "At our September FOMC meeting, will again discuss the outlook for inflation and policy stance. If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance. However, if inflation appears not to be moderating sufficiently, then think we should act decisively to raise rates.".
• ECB's Simkus said a hike in September is "not going to be enough", Econostream reported. 50bps hike is not needed. Not "particularly" worried about the increase in long-term bond yields. Expect the updated projections to show the interest rate path to move up a bit.
• ECB's Nagel said he welcomes coordinated intervention on the JPY; adds that he expects consultations on future intervention measures. said he expects consultations on future intervention measures.
• ECB's Nagel said that despite the ongoing Middle East crisis, the global economy remains on a growth trajectory; easing in core and services is good news, and not seeing second-round effects.
• ECB's Kocher said that an ECB hike is needed if upside risks are confirmed in the projection.
• Israel Central Bank cuts the Base Rate to 3.25%, as expected.

GEOPOLITICS

RUSSIA-UKRAINE

• Traders see Russia's seaborne crude exports from western ports seen declining 5% in September, from August, according to reported.
• Iranian President Pezeshkian tells Russian President Putin said that "we can resist US unilateralism"; adds that the US had no right to impose sanctions and violate international law.
• Russia downgraded oil output forecast for this year to a 17-year low and revised fuel exports outlook for 2026 and 2027 due to the war with Ukraine, according to reported. The forecasts, which are expected to be finalised at the end of September and are used in drafting the budget, reduced oil production estimates for 2026-2029 by between 16-20mln T.
• US Special Envoy Witkoff and Kushner are reportedly stepping up their negotiating efforts on Ukraine, according to TASS source.
• Russia’s Foreign Ministry said Moscow will take countermeasures if US weapons are deployed in Japan, Al Jazeera reported.
• Russian Foreign Ministry said a Black Sea ceasefire would only push prospects for a peaceful settlement further away, IFX reported.
• Regional authorities say a fire at Russia's Ust-Luga port has been extinguished.
• Ukraine said Russia struck port infrastructure in the southern Odesa area.

MIDDLE EAST

• Two oil supertankers were reportedly hit by projectiles in the Strait of Hormuz, reported citing Marisks suggest (details light). Bloomberg reported that the VLCC Sidr was hit, and the Senegal Prosperity was also struck. Transiting north-east and east of Khasab, Oman, respectively.
• Iranian Parliament Speaker Ghalibaf said Iran has made military-development gains over the past 15 months equivalent to the previous decade, Tasnim reported. Iran sees improved combat performance and the rebuilding and strengthening of its offensive and defensive capabilities progressing rapidly. "we will be more dominant—both in the qualitative and in the quantitative dimension."
• Iranian Foreign Ministry spokesperson Baghaei said "we are in a situation where it is not possible to talk about a return to the understanding, and the reason is clear because the American side has violated it", Tasnim reported. Full: "We are in a situation where it is not possible to talk about a return to the understanding, and the reason is clear because the American side has violated it. It was the United States that started the war, violated the understanding, and attacked again. It is the United States that must be held accountable by the international community".
• Iranian Foreign Ministry spokesperson Baghaei said Iran remains committed to its Nuclear Non-Proliferation Treaty (NPT) obligations and maintains a principled opposition to nuclear weapons, Nour News reported. Tehran considers nuclear weapons incompatible with its religious teachings and harmful to humanity.
• Iranian Foreign Ministry spokesperson said Asim Munir was neither a positive nor a negative message; Pakistan and some other countries are trying to reduce tensions, IRNA reported. We will decide on how to proceed, taking into account the requirements of the time and the circumstances of the day. In the current situation, given that both the US sanctions and naval blockade continue - as I have repeatedly stated, this action is an example of an act of aggression - and subsequently they escalated the economic war against Iran, in such circumstances, we should naturally focus on defense and resistance against US excesses.
• Iranian MP said Iran should launch pre-emptive attacks on US interests across the Middle East to force Washington to retreat and break its blockade, Iran International reported citing a statement on X.
• Iranian President Pezeshkian said Iran did not initiate the war, it defended itself; Iran continues to consider diplomacy and negotiation as the main path to resolving disputes, Tasnim reported.
• Iran’s Commander-in-Chief of the Army said the country’s air defenses have made rapid progress toward self-sufficiency and the development of domestic defense systems, Al Mayadeen reported.
• Iranian President said that "we will abide by the agreement if America does", Al Jazeera reported citing ISNA; ⁠"Iran will immediately reciprocate if ⁠the US fulfils its commitments under ‌an interim deal signed in June".
• Iranian Foreign Minister Araghchi is set to present a report on Tehran’s meetings with other countries following the first day of talks by the Iranian delegation at the SCO summit, Press TV reported.

NORTH AMERICAN DATA

• US Redbook (Aug/29 YY) 9.6% (Prev. 9.1%).
• US LMI Logistics Managers Index (Aug) 66.6 (Prev. 68.9).