Oil and defense stocks dominate volatility as Trump pushes Gaza peace plan closer

EU mid-market update: Oil and defense stocks dominate volatility as Trump pushes Gaza peace plan closer; Deadline is midnight tonight to avoid partial US govt shutdown.

Notes/observations

– End of month data barrage saw UK GDP revised slightly higher (UK assets little fazed), a miss in German retail sales, cooler French flash CPI and elevated German unemployment claims while state CPI’s point to national reading close to the consensus of 2.4% YoY at 08:00 ET. European yields are stable.

– US govt shutdown starting 12:01 a.m. Wed, Oct 1 is now the base case after Monday’s no-deal White House meeting, with the key snag being ACA subsidies; unlike 2018, OMB has told agencies to prep for actual layoffs (RIFs) rather than just furloughs, contingency plans are scattered across agencies, and Commerce will keep “national security” trade probes running.

– If funding lapses, Social Security, Medicare, TSA, air-traffic control and the Fed stay open while BLS and BEA/Census data go dark (no payrolls, CPI, PPI, JOLTS, GDP, PCE, retail sales, housing starts), leaving traders to lean on ADP, ISM/S&P PMIs, jobless claims and Fed H.8/H.4.1.

– Punchbowl says “based on the unhinged, offensive Trump tweet from Monday night, we’re in for a long shutdown”, adding that “Dems trying to drive a wedge between Trump and the Hill GOP; Republicans say it’s unclear precisely what Democrats’ bottom line is to keep the government open – or reopen it”.

– China PMIs showed export resilience but weak domestic demand in consumption, construction, and services; Analysts see more stimulus may needed for housing.

– Amid UK Labour conference and ahead of Autumn budget, ministers reiterate compliance to fiscal rules, but gilt market is suggesting structural demand is weak, requiring greater fiscal headroom.

– Japanese Yen could be winner of safe-haven flows as US govt shutdown looms and pivot to hawkish comments by dovish BOJ member yesterday.

– Notable EU Corp News: Asos is down -10% on FY EBITDA guidance being seen in lower end of £130-150M range, Valneva +5% on vaccine data, Pandora announced CEO transition.

– Reminder: Trump attending major Pentagon meeting this morning with top commanders; Pentagon pushes to double or even quadruple missile production rates for potential China conflict.

– Asia closed mixed with NZX50 outperforming +1.2%. EU indices -0.2%. US futures -0.2%. Gold -0.5%, DXY -0.2%; Commodity: Brent -0.8%, WTI -0.8%; Crypto: BTC -0.8%, ETH -0.8%.

Asia

– Reserve Bank of Australia (RBA) keeps cash rate target unchanged at 3.60%; as expected.

– China Sept Official Manufacturing PMI: 49.8 v 49.6e; (6th month of contraction).

– China Sept RatingDog Manufacturing PMI: 51.2 v 50.2e (second month of expansion); PMI Services 52.9 v 52.6e (32nd month of expansion); PMI Composite: 52.5 v 51.9 prior.

– Holiday travel in China is expected to hit a record high – China Securities Times.

– China has deployed a working prototype of a global defence system similar to the US’ proposed Golden Dome; Reportedly it is the first missile defence system known to reach planet-wide coverage – SCMP.

– Indonesia said to promise $2.0B “Christmas stimulus” as economy ‘flags’.

– Japan sells ¥2.7T vs. ¥2.7T indicated in new 2-year JGB bonds; Avg Yield: 0.9490% v 0.8630% prior; Bid-to-cover: 2.81 v 2.84x prior (below 12-month avg of 3.79x and weakest since Sept 2009).

– S&P affirms Australia AAA rating; Outlook Stable.

– India records best monsoon season in 5 years, 8% above normal – India Meteorological Department (IMD).

Europe

– France reportedly mulls raising flat tax in 2026 budget – French press.

– EU Commission Pres Von der Leyen: Reiterates two-state solution is only viable option to lasting peace between Israel and Palestians.

– Finland FSA maintains Countercyclical capital buffer (CCyB) at 0% (zero).

– Spain Econ Ministry: Treasury cuts 2025 net debt issuance target by €5.0B from €60B to €55B due to strong economic growth.

– Poland Finance Ministry on debt management strategy: See 2025 public finance sector debt ratio to GDP at 59.8%; See 2026 at 65.4% and 2029 at 75.3%.

– Czech Govt approves 2026 budget plan.

Americas

– US VP Vance: Thinks we’re heading to a Govt shutdown because of Democrats; Democrats did have a few ideas that Trump and I found reasonable; We have to keep central services functioning in light of a shutdown [**Note: would be first US govt shutdown since 2018].

– Reportedly Senate Min leader Schumer (D-NY) would not support 7-10 day stopgap – Punchbowl.

– House Speaker Johnson: Pres Trump meeting with lawmakers (relating to govt shutdown) went ‘well’ – Fox News interview.

– The confirmation hearing for US President Trump BLS selection is ‘next week’ – US financial press.

– White House: Trump to sign executive orders on Tues at 3 PM ET.

– Louisiana Gov Landry (R-LA) reportedly requests to activate National Guard – Axios.

– US said to have deported planeload of 100 Iranians after deal with Iran – NYT.

Global conflict/tensions

– Foreign Ministers from Saudi Arabia, UAE, Egypt, Qatar along with other nations issue joint statement saying the welcome Trump’s efforts to end Gaza war.

Trade

– EU Trade Commissioner Sefcovic: Discussed steel issue with US Commerce Sec Lutnick.

– Japan Chief Trade Negotiator Akazawa: Japan’s US investment agreement is Not unequal – press.

– WSJ: Trump tariffs on Lumber, Cabinet and Furniture ‘initially less than previewed’.

– Follow Up: US Trump administration tightens export controls on China companies – FT.

– US Commerce Dept aims to impose anti-dumping duties on Vietnam’s molded fiber products, with the rate ranging from 1.38% to 212.27%; Tariff order is expected to be issued on Nov 15th – press.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.22% at 554.32, FTSE -0.19% at 9,281.89, DAX -0.22% at 23,734.24, CAC-40 -0.36% at 7,852.50, IBEX-35 -0.04% at 15,341.20, FTSE MIB -0.18% at 42,476.00, SMI 0.00% at 12,017.73, S&P 500 Futures -0.19%].

Market focal points/key themes: European indices opened lower across the board and remained under pressure through the early part of the session; concerns over potential US government shutdown seen weighing on risk appetite; among better performing sectors are financials and communication services; sectors leading the way lower include energy and materials; oil & gas subsector underperforming after Brent fell below $68/bbl; Falcon Oil to be acquired by Tamboran; focus on German flash CPI coming out later in the day; Coty considering spinning off consumer beauty units; earnings expected in the upcoming US session include Nike.

Equities

– Consumer discretionary: Adidas [ADS.DE] +1.0% (hearing pre-close call with analysts), Kering [KER.FR] -3.0% (China PMI data), Asos [ASC.UK] -7.5% (trading update), Pandora [PNDORA.DK] -2.0% (new CEO), Card Factory [CARD.UK] -4.5% (earnings).

– Energy: Falcon Oil & Gas [FOG.UK] +9.5% (to be acquired).

– Financials: UBS [UBSG.CH] +1.0% (objections to Switzerland’s ‘extreme’ capital measures; no clarity yet on capital return policy for 2026), Close Brothers [CBG.UK] -4.0% (earnings).

– Industrials: Rheinmetall [RHM.DE] -1.5% (Gaza peace plan).

– Materials: BHP Group [BHP.UK] -3.0% (China bans all BHP iron ore cargoes as pricing dispute deepens).

Speakers

-ECB’s De Guindos (Spain): Current level of interest rates is adequate.

-RBA Gov Bullock: Labour market remains solid, still a little tight – post rate decision press conference.

-Japan Fin Min Kato: Election results were extremely severe for the LDP; Koizumi can counter multiple challenges including inflation.

Economic data

-(CN) China Q2 Final Current Account Balance: $128.7B v $135.1B prelim.

-(IS) Iceland Aug Final Trade Balance (ISK): -33.6B v -44.0B prior.

–(IT) Italy Sept Preliminary CPI M/M: -0.2% v -0.2%e; Y/Y: +1.6% v +1.6%e; CPI EU Harmonized M/M: 1.3% v 1.2%e; Y/Y: 1.8% v 1.7%e.

-(GR) Greece Aug PPI Y/Y: -1.7% v -0.5% prior.

-(GR) Greece Aug Retail Sales Value Y/Y: 2.1% v 1.8% prior; Retail Sales Volume Y/Y: 4.0% v 3.0% prior.

-(HK) Hong Kong Aug M3 Money Supply Y/Y: 4.0% v 6.2% prior; M2 Money Supply Y/Y: 4.0 v 6.2% prior; M1 Money Supply Y/Y: 16.2% v 18.7% prior.

-(ES) Spain July Current Account Balance: €6.3B v €5.0B prior.

-(DE) Germany Sept CPI North Rhine Westphalia M/M: 0.2% v 0.1% prior; Y/Y: 2.3% v 2.0% prior.

-(NO) Norway Central Bank (Norges) Oct Net FX Transactions (NOK): -276M v -276M prior.

-(IT) Italy Aug PPI M/M: -0.7% v +0.6% prior; Y/Y: 0.5% v 2.4% prior.

-(CZ) Czech Aug M2 Money Supply Y/Y: 2.8% v 3.0% prior.

-(DE) Germany Sept CPI Hesse M/M: 0.2% v 0.0% prior; Y/Y: 2.6% v 2.4% prior.

-(DE) Germany Sept CPI Bavaria M/M: 0.4% v 0.1% prior; Y/Y: 2.4% v 2.1% prior.

-(DE) Germany Sept CPI Brandenburg M/M: 0.1% v 0.0% prior; Y/Y: 2.6% v 2.5% prior.

-(DE) Germany Sept CPI Saxony M/M: 0.2% v 0.0% prior; Y/Y: 2.2% v 2.2% prior.

-(DE) Germany Sept CPI Baden Wuerttemberg M/M: +0.2% v -0.1% prior; Y/Y: 2.7% v 2.5% prior.

-(PL) Poland Sept Preliminary CPI M/M: 0.0% v 0.2%e; Y/Y: 2.9% v 3.0%e.

-(DE) Germany Sept Unemployment Change: +14.0K v +8.0Ke; Claims Rate: 6.3% v 6.3%e.

-(TR) Turkey Aug Final Trade Balance -$4.2B v -$4.2B prelim.

-(AT) Austria Aug PPI M/M: -0.3% v 0.2% prior; Y/Y: -1.3% v -0.8% prior.

-(CZ) Czech Q2 Final GDP Q/Q: 0.5% v 0.5% prelim; Y/Y: 2.6% v 2.6% prelim.

-(TR) Turkey Aug Unemployment Rate: 8.5% v 8.1% prior.

-(CH) Swiss Q2 Foreign Exchange Transactions (CHF): 5.1B v 0.1B prior (biggest sales of the franc in more than three years).

-(CH) Swiss Sept KOF Leading Indicator: 98.0 v 96.2 prior.

– (FR) France Aug PPI M/M: -0.2% v +0.5% prior; Y/Y: 0.1% v 0.5% prior.

– (FR) France Aug Consumer Spending M/M: 0.1% v 0.2%e; Y/Y: -0.8% v -0.3%e.

– (FR) France Sept Preliminary CPI M/M: -1.0% v -0.9%e; Y/Y: 1.2% v +1.3%e.

– (HU) Hungary Aug PPI M/M: -0.8% v 0.0% prior; Y/Y: 2.3% v 4.5% prior.

– (HU) Hungary Aug Trade Balance: €0.6B v €0.6Be.

– (SE) Sweden Aug Retail Sales M/M: 0.9% v 0.4% prior; Y/Y: 4.4% v 2.8% prior.

– (DK) Denmark Q2 Final GDP Q/Q: 1.0% v 1.3% prelim; Y/Y: 1.6% v 1.9% prelim.

– (DE) Germany Aug Import Price Index M/M: -0.5% v -0.2%e; Y/Y: -1.5% v -1.4%e.

– (DE) Germany Aug Retail Sales M/M: -0.2% v +0.6%e; Y/Y: -1.1% v +2.3%e.

– (ZA) South Africa Aug M3 Money Supply Y/Y: 6.2% v 6.8% prior; Private Sector Credit Y/Y: 5.8% v 5.2%e.

– (UK) Q2 Current Account Balance: -£28.9B v -£25.0Be.

– (UK) Q2 Final GDP Q/Q: 0.3% v 0.3%e; Y/Y: 1.4% v 1.2%e; Final Private Consumption Q/Q: 0.1% v 0.1% prelim; Government Spending Q/Q: 1.3% v 1.2% prelim; Gross Fixed Capital Formation Q/Q: +0.5% v -1.1% prelim; Exports Q/Q: -0.2% v +1.6% prelim; Imports Q/Q: 0.0% v 1.4% prelim.

-(FI) Finland Aug GDP Indicator Y/Y: -0.5% v 0.0% prior.

– (FI) Finland Aug Retail Sales Volume Y/Y: -1.2% v +0.6% prior.

– (JP) Japan Aug Annualized Housing Starts: 711K v 750Ke; Y/Y: -9.8% v -5.2%e; Construction Orders Y/Y: +38.9% v -19.0% prior.

– (UK) Sept Lloyds Business Barometer: 42 v 54 prior; Own Price Expectations: 63 v 65 prior.

– (UK) Sept BRC Shop Price Index Y/Y: 1.4% v 1.2%e.

Fixed income issuance

– (DK) Denmark sells total DKK200M in 3-month and 6-month Bills.

Looking ahead

– 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

– 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2033, 2039 and 2042 bonds.

– 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

– 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR).

– 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q: No est v -0.7% prior; Y/Y: No est v -0.9% prior.

– 06:00 (US) Fed’s Jefferson at Bank Conference.

– 06:00 (EU) ECB allotment in 3-month LTRO tender.

– 06:00 (IT) Italy July Industrial Sales M/M: No est v 1.2% prior; Y/Y: No est v 0.3% prior.

– 06:00 (IE) Ireland Sept Preliminary CPI EU Harmonized Y/Y: No est v 1.9% prior.

– 06:00 (PT) Portugal Sept Preliminary CPI M/M: No est v -0.2% prior; Y/Y: No est v 2.8% prior; CPI EU Harmonized M/M: No est v -0.1% prior; Y/Y: No est v 2.5% prior.

– 06:30 (IN) India Aug Fiscal Deficit YTD (INR): No est v 4.684T prior.

– 07:30 (BR) Brazil Aug Nominal (overall) Budget Balance (BRL): No est v -175.6B prior; Primary Budget Balance: No est v -66.6B prior; Net Debt % GDP: No est v 63.7% prior.

– 07:30 (CL) Chile Central Bank Traders Survey.

– 07:50 (UK) BOE’s Lombardell with Sweden Central Bank (Riksbank) Gov Thedeen at Bank Conference.

– 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

– 08:00 (DE) Germany Sept Preliminary CPI M/M: No est v 0.1% prior; Y/Y: No est v 2.2% prior.

– 08:00 (DE) Germany Sept Preliminary CPI EU Harmonized M/M: No est v 0.1% prior; Y/Y: No est v 2.1% prior.

– 08:00 (ZA) South Africa Aug Trade Balance (ZAR): No est v 20.3B prior; Monthly Budget Balance: No est v -150.8B prior.

– 08:00 (BR) Brazil Aug National Unemployment Rate: 5.6%e v 5.6% prior.

– 08:00 (CL) Chile Aug Unemployment Rate: No est v 8.7% prior.

– 08:00 (CL) Chile Aug Retail Sales Y/Y: No est v 5.7% prior.

– 08:00 (CL) Chile Aug Commercial Activity Y/Y: No est v 6.5% prior.

– 08:00 (CL) Chile Aug Industrial Production Y/Y: No est v 1.0% prior.

– 08:00 (CL) Chile Aug Manufacturing Production Y/Y: No est v 2.7% prior.

– 08:00 (CL) Chile Aug Total Copper Production: No est v 445.2K prior.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:55 (US) Weekly Redbook LFL Sales data.

– 09:00 (US) July FHFA House Price Index M/M: No est v -0.2% prior.

– 09:00 (US) July S&P Corelogic House Price Index (20-City) M/M: No est v -0.3% prior; Y/Y: No est v 2.1% prior; House Price Index (overall) Y/Y: No est v 1.9% prior.

– 09:00 (RU) Russia Q2 Final Current Account Balance: No est v $7.3B prelim.

– 09:45 (US) Sept Chicago Purchase Managers Index (PMI): No est v 41.5 prior.

– 10:00 (US) Aug JOLTS Job Openings: No est v 7.181M prior.

– 10:00 (US) Sept Consumer Confidence: 95.8e v 97.4 prior.

– 10:01 (AU) Australia Sept Cotality Home Value M/M: No est v 0.8% prior.

– 10:30 (US) Sept Dallas Fed Services Activity: No est v 6.8 prior.

– 11:00 (CO) Colombia Aug National Unemployment Rate: No est v 8.8% prior; Urban Unemployment Rate: 8.3%e v 8.4% prior.

– 11:00 (MX) Mexico Aug Net Outstanding Loans (MXN): No est v 7.062T prior.

– 11:30 (US) Treasury to sell 6-week and 52-week bills.

– 12:00 (US) Q3 USDA Quarterly Corn Stocks: No est v 4.6B prior.

– 13:00 (DE) ECB’s Nagel (Germany) in London.

– 14:00 (CO) Colombia Central Bank Interest Rate Decision.

– 16:30 (US) Weekly API Crude Oil Inventories:

– 17:45 (NZ) New Zealand Aug Building Permits M/M: No est v 5.4% prior.

– 19:00 (AU) Australia Sept Final PMI Manufacturing: No est v 51.6 prelim.

– 19:50 (JP) Japan Q3 Tankan Large Manufacturing Index: 15e v 13 prior; Large Manufacturing Outlook: 13e v 12 prior; Large All Industry Capex FY Estimate: 11.2%e v 11.5% prior.

– 19:50 (JP) Japan Q3 Large Non-Manufacturing Index: 33e v 34 prior; Large Non-Manufacturing Outlook: 27e v 27 prior.

– 19:50 (JP) Japan Q3 Small Manufacturing Index: 1e v 1 prior; Small Manufacturing Outlook: -2e v -2 prior.

– 19:50 (JP) Japan Q3 Small Non-Manufacturing Index: 14e v 15 prior; Small Non-Manufacturing Outlook: 9e v 9 prior.

– 20:00 (KR) South Korea Sept Trade Balance: No est v $6.5B prior; Exports Y/Y: 1.3%e v 1.2% prior; Imports Y/Y: -4.0%e v -4.1% prior.

– 20:01 (IE) Ireland Sept PMI Manufacturing: No est v 51.6 prior.

– 20:30 (US) Fed’s Jefferson gives Keynote Speech.

– 20:30 (SG) Singapore Q3 Preliminary URA Private Home Prices Q/Q: No est v 1.0% prior.

– 20:30 (JP) Japan Sept Final PMI Manufacturing: No est v 48.4 prelim.

– 20:30 (KR) South Korea Sept PMI Manufacturing: No est v 48.3 prior.

– 20:30 (TW) Taiwan Sept PMI Manufacturing: No est v 47.4 prior.

– 20:30 (ID) Indonesia Sept PMI Manufacturing: No est v 51.5 prior.

– 20:30 (PH) Philippines Sept PMI Manufacturing: No est v 50.8 prior.