Trump and Modi to resume talks – US PPI today to lead CPI tomorrow

EU mid-market update: Tensions erupt in Eastern Europe after Poland downs Russian drones enroute to Ukraine; Trump and Modi to resume talks; US PPI today to lead CPI tomorrow.

Notes/observations

- Poland shot down nearly a dozen Russian drones that were inbound to Ukraine. Falling debris causing damage. Marks first direct involvement. Poland accused Russia of repeated airspace violations, calling it aggression. Poland rhetoric is heated as they gather all information and consult with NATO under Article 4 (one step before Article 5).

- French Pres Macron named long-time ally Sébastien Lecornu as new French PM; Opposition leaders condemned move; France set to face nationwide protests in coming days and weeks and Fitch sovereign rating update on Friday.

- Treasury yields have edged higher ahead of US Aug PPI today and CPI tomorrow. Market expects Fed to cut rates gradually by 25bps into 2026 until 3.0-3.5%. Inflation seen above 3% through 2026.

- With recent breakout of gold, analysts forecast up to $3,800 by year-end and near $4,000 by June.

- BOFA Institute says August total card spending rose 1.7% y/y (vs 1.8% average in July), highlighting resilient consumption despite soft labor data; they see the spending-jobs divergence as temporary and base case a jobs rebound, noting spending historically leads employment at the margin.

- Notable Corp News: TSMC monthly sales growth accelerated for the first time in 4 months; Inditex H1 results slightly disappointed but Aug 1st to Sept 8th sales were +9% YoY. Novo Nordisk to cut ~9,000 jobs, book DKK8B restructuring cost, and lower FY25 EBIT growth outlook to 4–10%. Airbus, Thales, Leonardo may announce space merger plan this month.

- Apple Event was mostly in line (premarket -1.5%), lacking any major breakthrough in product design or AI, but couple new iPhone models were announced, including thinner ‘iPhone Air’. Didn't share any updates on Apple Intelligence, its suite of AI features that has been suffering from delays.

- Asia closed higher with KOSPI outperforming +1.7%. EU indices -0.1% to +0.1%. US futures -0.2% to +0.1%. Gold +0.5%, DXY +0.0%; Commodity: Brent +1.0%, WTI +1.1%; Crypto: BTC -0.7%, ETH -0.9%.

Asia

- South Korea Aug Unemployment Rate: 2.6% v 2.5%e.

- China Aug CPI Y/Y: -0.4% v -0.2%e; PPI Y/Y: -2.9% v -2.9%e.

Global conflict/tensions

- Poland closed four airports on Tuesday night local time, due to "unplanned military activity related to ensuring state security”. Poland’s armed forces later said the Russian drones repeatedly violated Polish air space, while the government deemed the drone incursion to be an ‘act of aggression.’

Americas

- US Supreme Court said it would expedite the Trump administration’s appeal against the ruling that its ‘reciprocal’ and fentanyl-related tariffs were illegal, with oral arguments to begin in early November.

- US district judge temporarily blocked President Trump from firing Fed Governor Lisa Cook, granting Cook’s request to remain in her role as litigation proceeds

- Chile Central Bank (BCCh) left the Overnight Rate unchanged at 4.75% (as expected).

Trade

- President Trump said that the US and India are “continuing negotiations” to address trade barriers and that he looks forward to speaking to his “very good friend” Indian PM Modi in coming weeks.

Energy

- Weekly API Crude Oil Inventories: +1.3M v +0.6M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.17% at 553.35, FTSE +0.06% at 9,248.05, DAX +0.14% at 23,766.22, CAC-40 +0.13% at 7,759.24, IBEX-35 +0.84% at 15,150.75, FTSE MIB -0.13% at 41,954.00, SMI -0.09% at 12,272.53, S&P 500 Futures +0.17%].

Market Focal Points/Key Themes: European indices opened higher across the board and remained upbeat through the early part of the session; geopolitical situation the focus of the markets, with Poland and French situations top of mind for traders; among better performing sectors are consumer discretionary and technology; lagging sectors include telecom and materials; Oracle earnings overnight supports tech sector; retail subsector supported following Inditex’s earnings; Edison and Shell enter long-term LNG deal; EU regulator approves Deliveroo’s acquisition by DoorDash; focus on US PPI late in the day; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: Inditex [ITX.ES] +7.5% (earnings; Aug-Sept sales acceleration), Hellofresh [HFG.DE] -3.5% (analyst downgrade).

- Consumer staples: AB Foods [ABF.UK] -10.0% (trading update).

- Healthcare: Novo Nordisk [NOVOB.DK] +2.5% (cuts outlook again and reduce workforce).

- Industrials: Rheinmetall [RHM.DE] +1.5% (First shots fired by the Polish army over its own territory since the end of the Cold War; Commission starting new Ukraine military investment program), Alstom [ALO.FR] +6.5% (contract in US).

- Technology: ASML [ASML.NL] +1.0% (TSMC monthly sales accelerate), SAP [SAP.DE] +2.5% (Oracle results and outlook).

Speakers

- EU Commission Pres Von der Leyen delivered her State of Union speech in EU Parliament and noted that was starting a new Ukraine military investment program. Needed more sanctions on Russia to force negotiation. Working on 19th package.

- NATO said not to be treating the Russian drone incursion into Polish territory as an attack [**Note: Poland is NATO country).

- Poland Pm Tusk stated that the country was at its closest to armed conflict since WWII but added there was no reason to claim it was in a State of War.

- China Fin Min Fo'an reiterated stance that govt to make 'full use' of a proactive fiscal policy; vowed to stabilize employment and foreign trade.

- US said to be considering severe restrictions on medicines from China.

Currencies/fixed income

- USD trying to regain its mojo but dealers noted it would likely continue to struggle amid persistent dovish Fed expectations. Market awaiting US PPI data release later in the session.

- EUR/USD hovered around the 1.17 area all session. Some political drama on Poland had little FX impact for the time being as NATO was not treating the Russian drone incursion by 6-10 drones into Polish territory as an attack.

- GBP/USD at 1.3535 in a quiet session. UK 10-year Gilts settling down little changed in the session.

- USD/JPY covered from Tuesday soft tone to move back above 147 neighborhood. Focus to remain on the next PM and impact on the fiscal front. Politics offsetting for now the recent press reports that kept the door open for another BOJ rate hike before the end of 2025.

- 10-year German Bund yield at 2.65% and 10-year Gilt yield at 4.62% 10-year Treasury yield: 4.08%.

Economic data

- (NL) Netherlands July Manufacturing Production M/M: -1.4% v -0.2% prior; Y/Y: -1.1% v -0.1% prior; Industrial Sales Y/Y: -2.6% v +2.4% prior.

- (FI) Finland July Industrial Production M/M: -1.8% v -0.8% prior; Y/Y: -4.2% v +0.5% prior.

- (SE) Sweden July GDP Indicator M/M:-0.2% v -0.2%e; Y/Y: 2.0% v 2.7% prior.

- (SE) Sweden July Private Sector Production M/M: -1.7% v +2.7% prior; Y/Y: 3.8% v 5.5% prior.

- (SE) Sweden July Industrial Orders M/M: -2.4% v +4.2% prior; Y/Y: -1.4% v +0.9% prior.

- (SE) Sweden July Industry Production Value Y/Y: 3.8% v 12.8% prior; Service Production Value Y/Y: 4.7% v 3.2% prior.

- (SE) Sweden July Household Consumption M/M: 0.2% v 0.6% prior; Y/Y: 2.4% v 2.6% prior.

- (NO) Norway Aug CPI M/M: -0.6% v +0.8% prior; Y/Y: 3.5% v 3.5%e.

- (NO) Norway Aug CPI Underlying M/M: -0.7% v -0.%e; Y/Y: 3.1% v 2.9%e.

- (DK) Denmark Aug CPI M/M: -0.7% v +1.5% prior; Y/Y: 2.0% v 2.3% prior.

- (DK) Denmark Aug CPI EU Harmonized M/M: -0.7% v +1.7% prior; Y/Y: 1.9% v 2.2% prior.

- (ES) Spain July Industrial Production M/M: -0.5% v -0.2%e; Y/Y: 2.5% v 2.6%e; Industrial Output NSA (unadj)Y/Y: 2.3% v 4.5% prior.

- (AT) Austria July Industrial Production M/M: 0.8% v 0.9% prior; Y/Y: 1.8% v 0.6% prior.

- (CZ) Czech Aug Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 2.5% v 2.5% prelim.

- (CZ) Czech July Import Price Index Y/Y: -3.0% v -0.5% prior; Export Price Index Y/Y: -2.4% v -0.1% prior.

- (TR) Turkey July Industrial Production M/M: -1.8% v +0.8% prior; Y/Y: 5.0% v 8.5% prior.

- (IT) Italy July Industrial Production M/M: 0.4% v 0.1%e; Y/Y: +0.9% v -0.1%e; Industrial Production NSA (unadj) Y/Y: +0.9% v -0.7% prior.

- (GR) Greece Aug CPI Y/Y: 2.9% v 3.1% prior; CPI EU Harmonized Y/Y: 3.1% v 3.7% prior.

- (GR) Greece July Industrial Production Y/Y: -0.5% v +1.0% prior.

Fixed income issuance

- (IN) India sold total INR210B vs. INR210B indicated in 3-month, 6-month and 12-month bills.

- (SE) Sweden sold total SEK6.0B vs. SEK6.0B indicated in 2031 and 2045 bonds.

- (NO) Norway sold total NOK3.0B in 2030 and 2035 bonds.

- (UK) DMO sold £4.0B in 4.0% Oct 2031 Gilts; Avg Yield: 4.208% v 4.401% prior; bid-to-cover: 3.27x v 2.74x prior; Tail: 0.2bps v 0.7bps prior.

- (IT) Italy Debt Agency (Tesoro) sold €9.0B vs. €9.0B indicated in 12-month bills; Avg Yield: % v 2.012% prior; Bid-to-cover: x v 1.41x prior.

Looking ahead

- (CO) Colombia Aug Consumer Confidence: No est v 2.2 prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €2.5B in 2040 and 2041 bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2035 and 2042 OT bonds.

- 05:30 (CH) Switzerland to sell 2032 and 2040 Bonds.

- 05:30 (PL) Poland to sell Fixed-rate Bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal Aug Final CPI M/M: No est v -0.2% prelim; Y/Y: 2.8%e v 2.8% prelim.

- 06:00 (PT) Portugal Aug Final CPI EU Harmonized M/M: No est v -0.1% prelim; Y/Y: No est v 2.5% prelim.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 06:00 (CZ) Czech Republic to sell combined CZK9.5B in 2030, 2032 and 2040 bonds.

- 06:00 (CZ) Czech Republic to sell €500M in 6-month bills.

- 07:00 (US) MBA Mortgage Applications w/e Sept 5th: No est v -1.2% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:00 (CZ) Czech Central Bank (CNB) comments on CPI data.

- 07:30 (CL) Chile Central Bank Economist Survey.

- 07:45 (CH) SNB President Schlegel at banking assoc.

- 08:00 (IS) Iceland Aug Unemployment Rate: No est v 3.4% prior.

- 08:00 (HU) Hungary Central Bank (MNB) Minutes.

- 08:00 (BR) Brazil Aug IBGE Inflation IPCA M/M: -0.2%e v 0.3% prior; Y/Y: 5.1%e v 5.2% prior.

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

- 08:30 (US) Aug PPI Final Demand M/M: 0.3%e v 0.9% prior; Y/Y: 3.3%e v 3.3% prior.

- 08:30 (US) Aug PPI (ex-food/energy) M/M: 0.3%e v 0.9% prior; Y/Y: 3.5%e v 3.7% prior.

- 08:30 (US) Aug PPI (ex-food/energy/trade) M/M: 0.3%e v 0.6% prior; Y/Y: No est v 2.8% prior.

- 09:00 (CL) Chile Central Bank (BCCh) Quarterly Monetary Policy Report.

- 10:00 (US) July Final Wholesale Inventories M/M: 0.2%e v 0.2% prelim; Wholesale Trade Sales M/M: 0.2%e v 0.3% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia Aug CPI M/M: -0.2%e v +0.6% prior; Y/Y: 8.3%e v 8.8% prior.

- 12:00 (RU) Russia Aug Core CPI M/M: No est v 0.3% prior; Y/Y: No est v 8.5% prior.

- (CO) Colombia Aug Consumer Confidence: No est v 2.2 prior.

- 12:00 (CA) Canada to sell 2-year Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

- 15:00 (AR) Argentina Aug National CPI M/M: 2.0%e v 1.9% prior; Y/Y: 33.7%e v 36.6% prior.

- 19:01 (UK) Aug RICS House Price Balance: -10%e v -13% prior.

- 19:50 (JP) Japan Q3 BSI Large All Industry Q/Q: No est v -1.9 prior; BSI Large Manufacturing Q/Q: No est v -4.8 prior.

- 19:50 (JP) Japan Aug PPI (domestic CGPI) M/M: -0.1%e v +0.2% prior; Y/Y: 2.7%e v 2.6% prior.

- 20:00 (KR) South Korea Sept Exports 10 Days Y/Y: No est v -4.3% prior; Imports 10 Days Y/Y: No est v -13.6% prior.

- 21:00 (AU) Australia Sept Consumer Inflation Expectation: No est v 3.9% prior.

- 22:00 (JP) Japan Aug Tokyo Avg Office Vacancies: No est v 3.2% prior.

- 23:45 (TH) Thailand Aug Consumer Confidence: No est v 51.7 prior; Economic Confidence: No est v 45.6 prior.