US job openings and last-minute US shutdown talks on the agenda

In focus today

Focus shifts to flash September inflation data from France, Germany and Italy. The core inflation measure will be key, particularly after Spain's data yesterday showed weaker-than-expected core inflation despite a rise in headline inflation. Large base effects from energy prices and travel-related services are likely to drive yearly inflation growth, making monthly price changes the critical metric to watch.

In Sweden, August retail sales will be released at 08:00 CET. While May's data was exceptionally weak, recent months have shown gradual improvement. That said, level-wise July was still below April and the weak overall performance among households over the last few years is the main reason why the Swedish economic recovery has failed to materialize. While the Riksbank moderated its GDP profile, the 2025 estimate at 0.9% y/y rests on the assumption that household consumption picks up sharply in the fourth quarter.

In the US, the August JOLTs labour turnover report is due in the afternoon. The number of job openings is a key measure of labour demand for the Fed, and we will also closely follow the number of involuntary layoffs for potential signs of more acute labour market weakening.

Today is the last opportunity for negotiations to finalise a funding bill before the US government shutdown begins on Wednesday. Limited progress over the weekend and in yesterday's discussions has kept the likelihood of a shutdown high.

Overnight, the Bank of Japan's quarterly business Tankan survey is released. This is a huge survey holding extensive information about the economy and key input ahead of the 30 October BoJ policy meeting. While PMIs suggest the economy gained momentum in Q3 after a strong H1 with GDP growth above 1.5%, the weaker September PMI signals some loss of steam.

Economic and market news

What happened overnight

In China, PMIs came out better than expected. Both the official and private versions were released and beat expectations with a rise in the official NBS PMI manufacturing from 49.4 to 49.8 (cons: 49.6) and a lift in the RatingDog PMI manufacturing seeing from 50.5 to 51.2 (cons: 50.2). The RatingDog index was the highest since February and the increase was driven by a turn higher in export orders rising from 49.4 to 51.0. Service PMI from RatingDog fell slightly from 53.0 to 52.9. It is still a decent level, though. The numbers suggest that the weakness in PMI over the summer was partly affected by extreme weather. It also confirms that Chinese exports are still coping well despite the higher tariffs from the US. China still suffers from weak domestic demand, though, centred in consumption and construction and there is a need to provide more stimulus to put this part of the economy on a stronger footing if China wants to meet its' goal of stabilising housing and making consumption a stronger growth pillar. The data may lower the sense of urgency, though, for Chinese leaders. Chinese stocks moved higher initially but has come down again to be broadly flat.

In Australia, the RBA maintained rates unchanged, as widely expected. RBA's forward guidance was to the hawkish side, as it did not signal plans for imminent cuts over the coming meetings either. Recovering private demand, still tight labour markets, easing financial conditions and lower trade uncertainty favoured keeping rates at the current level. Markets are now pricing in less than a 40% chance of a rate cut in November, down from around 55% before the meeting. AUD/USD also shifted higher to around 0.66 after the decision, we maintain our 12M forecast at 0.69.

Israel-Palestine conflict, Trump hosted Israeli Prime Minister Netanyahu at the White House to back a US-sponsored 20-point peace plan for ending the Gaza war. Netanyahu endorsed the proposal, citing alignment with Israel's objectives, including staged withdrawal, hostage exchange, and Hamas disarmament. However, with Hamas excluded from the agreement and significant political hurdles remaining, its success is uncertain.

What happened yesterday

In the euro area, Spanish inflation data for September came in below expectations. While headline HICP inflation rose as anticipated to 3.0% y/y (from 2.7% in August), core CPI inflation declined to 2.3% y/y (from 2.4% y/y), contrary to an expected rise to 2.5% y/y. The weaker core inflation print is particularly notable, signalling a dovish outlook for upcoming inflation data from other countries. In contrast, Belgian core inflation rose to 2.6% y/y, highlighting a divergence from Spain's weaker performance. Given the similar historical correlations of euro area inflation with Spain and Belgium, the focus now shifts to French and German data due tomorrow.

In Sweden, the Riksbank minutes showed that the Board remains aligned on the recent rate cut, viewing inflation as likely to abate soon while acknowledging the weak domestic economy. There is little concern about upside inflation risks from the government's budget, and no further rate cuts were discussed, indicating a higher threshold for additional easing. Anna Breman's upcoming departure is expected to shift the board slightly towards a more hawkish stance.

In Norway, retail sales rose by 0.2% m/m in August, following a 0.6 % jump in July, bringing the 3M/3M growth rate down to 0.8%. Supported by higher real wage growth and lower mortgage rates, retail sales appear to remain on an upward trajectory, albeit at a slower pace. These figures do not point to any immediate need for a rate cut but are also not strong enough to challenge expectations of further cuts in 2026.

Equities: Equities extended gains yesterday, in a session dominated by wait-and-see sentiment as we approach 1 October and the US government shutdown deadline. Notably, banks underperformed, while the long end of the curve rallied in both the US and Europe, helped in part by a softer-than-expected Spanish inflation print. Energy was the clear laggard, down sharply as oil sold off 3.5% on renewed expectations that OPEC+ will ramp up production from November. In the US yesterday, Dow +0.2%, S&P 500 +0.3%, Nasdaq +0.5%, Russell 2000 +0.04%. Asian trading this morning shows a mixed picture, with Taiwan and New Zealand in leading advances. US and European equity futures are broadly flat.

FI and FX: EUR/USD starts the week drifting above 1.17 as the USD broadly softens with USD/JPY dropping close to a full figure during yesterday's session to around 148.50. This week, the focus is firmly on US labour market data. With Powell recently stressing that as little as +0-50k job growth may be enough to keep unemployment steady, markets will scrutinise today's JOLTS, the ADP report, weekly claims, and especially Friday's payrolls report for signals on the Fed's next move. US yields started the week on a subdued note, with attention firmly on labour market data and the risk of a US government shutdown. The curve bull flattened as the long end outperformed: the 2Y Treasury yield slipped 1bp, while the 10Y and 30Y yields declined 3bp and 4bp, respectively. In Europe, Bunds mirrored the US dynamic, also undergoing a bull flattening move. The rebound in oil prices last week proved temporary. The price on Brent crude plunged back down below USD68/bbl yesterday. The move looks to have followed indications that OPEC+ this week could agree on further output hikes.