German IFO misses consensus suggesting its economic upswing was taking a pause

Notes/observations

- 10-year German Bund yield fell to 2.73% after September IFO business climate index misses consensus at 87.7 vs 89.2. Eurozone government bond yields also edge lower.

- EU defense sector jumped on Trump comments about Russia-Ukraine conflict, suggesting NATO should shoot down any Russia aircraft/drones that incur into airspace.

- Euro down couple tenths and USD higher on Fed Powell cautious commentary about rate cuts.

- Notable EU Corp News: JD Sports H1 pretax profit slightly softer; guidance maintained. Apparel +6%, footwear -1%. Iberdrola EBITDA €18B by 2028, Metso Corp 2026-30 strategy updated, CTP NV FY25 EPRA EPS confirmed.

- Asia closed mixed with Hang Seng outperforming +1.4%. EU indices -0.2% to -1.0%. US futures +0.0-0.3%. Gold +0.2%, DXY +0.4%; Commodity: Brent +0.4%, WTI +0.4%; Crypto: BTC -0.4%, ETH -0.5%.

Asia

- Japan Sept Preliminary PMI Manufacturing: 48.4 v 49.7 prior (3rd month of contraction); PMI Services: 53.0 v 53.1 prior.

- Australia Aug CPI Y/Y: 3.0% v 2.9%e; CPI Trimmed Mean Y/Y: 2.6% v 2.7% prior.

- South Korea Aug Retail Sales Y/Y: 3.7% v 9.1% prior.

- South Korea Sept Consumer Confidence: 110.1 v 111.4 prior.

- Sweden Central Bank (Riksbank): First Dep Gov Anna Breman to leave Riksbank on Oct 10th (Fri); To become Gov of RBNZ from Dec 1st, 2025.

Taiwan

- Taiwan ruled that China beer and steel imports were "dumped".

Global conflict/tensions

- President Trump stated that Kyiv could "win all of Ukraine back in its original form. Position had changed "after getting to know and fully understand the Ukraine/Russia military and economic situation"
German Foreign Min Wadephul noted that Trump remarks on Ukraine- Russia showed he was drawing conclusions from Putin's lack of response from talks.

Europe

- ECB's Cipollone (Italy) stated that was ready to act as needed in any direction. Well positioned to manage incoming events. Risks to inflation were `very balanced'.

Americas

- Fed Chair Powell described policy as mildly restrictive and said that the Fed was in a good place to respond. One-time price increases likely to be felt over several quarters; Recent price increases largely reflected tariffs; Reiterated that rate cut was another step towards neutral stance.

- Pres. Trump rejected meeting with "Minority Radical Left Democrats", citing unserious demands for over $1 trillion in new spending.

- Results coming in for the special election for a House seat in Arizona. Incumbent Democrat Raul Grijalva (deceased) daughter Adelita Grijalva has been projected to win this heavily Democratic-leaning district. Result narrows the Republican advantage in the House to 219-214.

Trade

- Canada PM Carney noted that discussions with US President Trump about Canada-US trade would roll into the review process of the USMCA. Negotiations with 'Americans' were ongoing.

Energy

- Weekly API Crude Oil Inventories: -3.8M v -3.4M prior.

- Iran Supreme Leader Khamenei stated that the country did not need nuclear weapons and did not intend to produce them; Negotiation with the US was a dead end.

- IAEA Dir Gen Grossi noted that its inspectors on way to Iran, their access would depend on the political will of Iran govt.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.3% at 553, FTSE -0.2% at 9206, DAX -0.3% at 23568, CAC-40 -0.3% at 7847, IBEX-35 -0.3% at 15128, FTSE MIB -0.3% at 4143, SMI -1.0% at 11985, S&P 500 Futures +0.2%].

Market Focal Points/Key Themes: European indices opened lower across the board and remained under pressure through the early part of the session; risk appetite seen muted after softer than expected data yesterday; better performing sectors include utilities and telecom; among sectors leading the way lower are materials and consumer discretionary; reportedly Alibaba to partner with Nvidia on physical AI; earnings expected in the upcoming US session include KB Home.

Equities

- Industrials: Envipco [ENVI.BE] -3.0% (launches €50M private placement); Metso [METSO.FI] -2.5% (announces updated strategy 2026-2030 with new financial targets; targets annual Sales growth 7%).

- Real Estate: CTP NV [CTPNV.NL] +2.5% (Targets €1.0B annaulized rental income by 2027 - capital markets day).

Speakers

- Swiss KOF Institute Autumn Economic Forecasts which maintained 2025 GDP growth at 1.4% while cutting 2026 GDP growth from 1.5% to 0.9%. KOF maintained 2025 CPI at 0.2% (below target, SNB has a 2% inflation target ) and maintained 2026 CPI at 0.5%.

- Sweden NIER Think Tank Economic Forecasts raised the 2025 GDP growth from 0.7% to 0.9% while maintaining 2026 GDP growth at 2.6%. It raised the 2025 CPIF from 2.5% to 2.7%.

- Denmark Central Bank (Nationalbanken) updated its economic outlook which cut 2025 GDP growth forecast from 3.6% to 2.0% and cut 2026 GDP growth forecast from 2.3% to 2.0%.

- Russia govt spokesperson Peskov noted that domestic economy remained resilient; Current stage of war with Ukraine was most intens.

- China govt said to provide policy support for service export.

- Former Bank of Japan (BOJ) Board Member Adachi: BOJ hike to 0.75% would do little to harm Japan's economic growth.

Currencies/fixed income

- USD remained steady following Tues comments from Fed Chair Powell as he described policy as mildly restrictive and said that the Fed was in a good place to respond.

- USD/JPY hovered around the 148 area. Domestic politics remained an overhang on the prospects for looser fiscal policy once a new LDP leader was voted.

- EUR/USD staying below the 1.18 level. German IFO survey missed consensus suggesting that the economic upswing was taking a pause.

- 10-year German Bund yield at 2.73% and 10-year Gilt yield at 4.66% 10-year Treasury yield: 4.10%.

Economic data

- (FI) Finland Aug PPI M/M: +0.1%t v -0.1% prior; Y/Y: +0.8% v -1.5% prior.

- (JP) Japan Aug Final Machine Tool Orders Y/Y: 8.5% v 8.1% prelim.

- (ES) Spain Aug PPI M/M: -0.4% v +0.9% prior; Y/Y: -1.5% v +0.4% prior.

- (SE) Sweden Sept Consumer Confidence: 93.2 v 92.0e; Manufacturing Confidence: 98.6 v 97.0 prior; Economic Tendency Survey: 97.2 v 97.0e.

- (CZ) Czech Sept Consumer Confidence: 103.5 v 100.0e; Business Confidence: 101.6 v 100.6e.

- (TR) Turkey Sept Real Sector (Manufacturing) Confidence: 100.8 v 100.6 prior; Real Sector Confidence (unadj): 100.2 v 100.6 prior; Capacity Utilization: 74.0% v 73.5% prior.

- (TW) Taiwan Aug Industrial Production Y/Y: 14.4% v 14.9%e.

- (DE) Germany Sept IFO Business Climate: 87.7 v 89.4e; Current Assessment: 85.7 v 86.6e; Expectations Survey: 89.7 v 92.0e.

- (CH) Swiss Sept Expectations Survey: -46.4 v -53.8 prior.

Fixed income issuance

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

- (UK) DMO sold £4.75B in 4.375% Mar 2030 Gilts; Avg Yield: 4.095% v 4.022% prior; bid-to-cover: 2.80x v 3.15x prior; Tail: 0.4bps v 0.1bps prior.

- (SE) Sweden sold total SEK6.0B vs. SEK6.0B indicated in 2035 and 2038 bonds.

- (NO) Norway sold total NOK2.0B vs. NOK2.0B indicated in 2030 and 2039 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 2.10% Aug 2027 BTP bonds; Avg Yield: 2.23% v 2.20% prior; Bid-to-cover: 1.57x v 1.56x prior.

- (IT) Italy Debt Agency (Tesoro) sold total €2.5B vs. €2.0-2.5B indicated range in inflation-linked 2031 and 2039 BTP bonds (BTPei).

- (GR) Greece Debt Agency (PDMA) sold €M vs. €500M indicated in 6-month Bills; Avg Yield: % v 1.74% prior; bid-to-cover: x v 1.84x prior.

Looking ahead

- (CO) Colombia Aug Retail Confidence: No est v 27.2 prior; Industrial Confidence: No est v 6.7 prior.

- (US) Aug Final Building Permits: No est v 1.312M prelim; M/M: No est v -3.7% prelim.

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

- 05:30 (DE) Germany to sell €4.0B in 2.5% Nov 2032 bunds.

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

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

- 06:00 (CZ) Czech Republic to sell combined CZK8.0B in 2034, 2036 and 2044 Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Sept 19th: No est v 29.7% prior.

- 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 86.2 prior.

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

- 08:00 (CL) Chile Aug PPI M/M: No est v 1.2% prior.

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

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-Week Repurchase Rate unchanged at 3.50%.

- 09:00 (BE) Belgium Sept Business Confidence: No est v -8.9 prior.

- 09:00 (CZ) Czech Central Bank (CNB) post rate decision press conference.

- 10:00 (US) Aug New Home Sales: 650Ke v 652K prior.

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

- 11:30 (US) Treasury to sell 2-Year FRN Reopening.

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

- 12:00 (RU) Russia Aug Industrial Production Y/Y: No est v 0.7% prior.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 12:30 (UK) BOE's Greene.

- 13:00 (US) Treasury to sell 5-Year notes.

- 15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: No est v -0.7% prior; Y/Y: 2.8%e v 6.4% prior.

- 16:10 (US) Fed's Daly Keynote Remarks on Monetary Policy.

- 19:50 (JP) Japan Aug PPI Services Y/Y: 2.9%e v 2.9% prior.

- 19:50 (JP) Japan BOJ July Minutes (2 decisions ago).

- 21:30 (AU) Australia Aug Job Vacancies Q/Q: No est v 2.9% prior.

- 23:00 (TH) Thailand Centrhal Bank to sell THB20B in 2027 Bonds; Avg Yield: % v 1.3685% prior; bid-to-cover: x v 4.22x prior (July 16th 2025).

- 23:35 (JP) Japan to sell 40-Year JGB Bonds.