Oracle guidance missing capex part

EU mid-market update: European indices join broad sell-off after two US regional banks raised concerns about the credit market; Oracle guidance missing Capex part.

Notes/observations

- Markets are under pressure today from resurfacing credit concerns, primarily centered on US regional banks and broader loan quality issues. EU hit by contagion fears. Concerns centered on disclosures of fraudulent and bad loans at banks like Zions Bancorp and Western Alliance, sparking fears of hidden losses in loan portfolios. Also recent auto industry bankruptcies (subprime lenders) exacerbating pressures on credit markets, with wider spreads and higher hedging costs. Seen strain in private credit with 40% of the market showing negative cash flow, halved interest coverage over three years, and rising defaults. An FT piece said banks tapped the Federal Reserve’s short-term lending facility (SRF) for more than $15B over the past two days: Most over 2 days since pandemic

- Wall Street is reliving 2019’s liquidity crunch, not 2023’s credit panic, as quantitative tightening now bites directly into bank reserves with the Fed’s RRP buffer drained. Repo rates breaching the Fed’s ceiling and surging SRF use signal that “ample” reserves are no longer ample - regional banks face rising funding costs, and each Treasury cash rebuild now acts as stealth tightening in a system running short on cushion.

- Fed’s Kashkari in his speech also flagged risks in the fast-growing private credit market; He warned that interpreting the economy has become difficult amid the government shutdown and delayed macro data, saying it is “too soon” to gauge tariff-driven inflation while the labor market shows clearer signs of cooling and softening demand. He cautioned that prioritizing jobs over inflation control could backfire on workers.

- Oracle’s silence on CapEx guidance underscores a deeper fragility beneath the AI boom: hyperscaler-scale ambitions without clear visibility into GPUs, land, or power make its growth narrative harder to underwrite. With only about 10% of AI backlog converting within a year and 60% beyond 36 months, Oracle’s trajectory may look more like a deferred AI promise than a near-term cash engine for analysts - amplifying market fears that the AI capex bubble is stretching faster than the supply chain can deliver.

- Asia closed mixed with Hang Seng underperforming -2.5%. EU indices -0.8% to -2.3%. US futures -0.9% to -1.4%. Gold +0.4%, DXY -0.1%; Commodity: Brent -1.2%, WTI -1.2%; Crypto: BTC -5.5%, ETH -7.7%.

Asia

- South Korea Sept Import Price Index M/M: 0.2% v 0.3% prior; Y/Y: 0.6% v -2.2% prior.

- South Korea Sept Export Price Index M/M: 0.6% v 0.6% prior; Y/Y: +2.2% v -1.1% prior.

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

- Singapore Sept Non-Oil Domestic Exports Y/Y: +6.9% v -2.1%e; Electronic Exports Y/Y: +30.4% v -6.5% prior.

- BOJ Gov Ueda stated that would adjust the degree of our monetary support in accordance to the likelihood of our growth and inflation forecasts materializes; The global economy remained resilient so far.

- LDP and CDP parties agree to hold PM vote on Oct 21st.

Global conflict/tensions

President Trump announced he will hold a second summit with Putin in Budapest.

Europe

- ECB's Scicluna (Malta): Would need to be convinced on another rate cut; We'll have much more data in Dec; Price effects of US tariffs are still unclear.

- BOE’s Greene (hawkish dissenter): EU-UK reset was step in right direction and would help control inflation.

Americas

- Fed's Kashkari (non-voter in 2025; voter in 2026): It's too soon to know the impact of tariffs on inflation; The impact is taking longer than expected.

- Banks tapped the Federal Reserve’s short-term lending facility (SRF) for more than $15B over the past two days; Most over 2 days since pandemic.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.76% at 561.62, FTSE -1.59% at 9,286.45, DAX -2.16% at 23,749.01, CAC-40 -0.89% at 8,116.09, IBEX-35 -1.00% at 15,469.50, FTSE MIB -2.39% at 41,363.00, SMI -1.48% at 12,497.88, S&P 500 Futures -1.14%].

Market focal points/key themes: European indices open down across the board; turbulence in US regional banks spook markets; all sectors start the day in the red; among least negative sector are consumer discretionary and telecom; sectors leading the way lower include financials and industrials; banking subsector under pressure after collapse of BBVA-Sabadell deal and reports Italy planning to raise taxes on banks; Cellnex divests its French data centers to Vauban; reportedly Iberdrola looking to acquire Scottish Power; earnings expected in the upcoming US session include American Express, State Street and Truist Financial.

Equities

- Consumer discretionary: EssilorLuxottica [EL.FR] +12.0% (earnings).

- Financials: Deutsche Bank [DBK.DE] -6.5% (two US regional banks weighed on sentiment and raised concerns about the credit market), Sabadell [BBVA.ES] -6.5% (BBVA's takeover fell short to reach a minimum acceptance threshold).

- Healthcare: Novo Nordisk [NOVOB.DK] -6.5% (Trump: Think cost of GLP-1 weight loss drugs will come down 'pretty fast', we are negotiating for lower prices).

- Industrials: Continental [CON.DE] +7.5% (prelim results), Rheinmetall [RHM.DE] -5.0% (Trump-Putin agreed to meet again), Volvo [VOLVA.SE] -7.0% (earnings).

- Technology: ASML [ASML.NL] -1.5% (Oracle has not provided Capex outlook).

- Telecom: Pearson [PSON.UK] +1.0% (trading update).

Speakers

- BOJ Dep Gov Uchida reiterated its overall assessment that domestic economy was recovering moderately with some weakness. Reiterates stance to raise interest rates if the economy and prices moved in-line with forecasts. Price trend to be in-line with target in 2nd half of outlook.

- Japan's Nippon Ishin no Kai party's Fujita: Believed there was progress in talks with LDP and would enter stage of finalizing details; Not at point where could say we were on track to agreement.

- Japan largest opposition CDP party reportedly to backs its leader Noda in PM vote next week.

Currencies/fixed income

- USD remained on soft footing but did recover slightly ahead of the EU mid-session. The session saw a favor of safe-haven assets (CHF and JPY) amid weakening sentiment on the U.S. credit sector and global trade concerns.

- USD/JPY moved below the 150 level for the first time since Takaichi won the LDP leadership race two weekends ago. Political news continued to be the catalyst for price action. JIP’s co-leader Yoshimura put the chance of a coalition with the LDP at 50-50. Meanwhile, the two major parties, LDP and CDP, agreed to finally hold the PM vote on Oct 21st. OIS overnight chances of a BOJ rate 25bp hike at the October meeting rose slightly to 16.5% vs 12.5% day before and December chances rose to 57.5% vs 53% day before.

- EUR/USD holding above the 1.17 level and well contained in the key 1.15-1.20 trading range. ECB speak continued to highlight that current level of rates was appropriate. Rate divergence keeping the Euro above the 1.15 level early in the week.

- 10-year German Bund yield at 2.55%, France 10-year Oat at 3.33% and 10-year Gilt yield at 4.49% 10-year Treasury yield: 3.96%.

Economic data

- (SE) Sweden Sept Unemployment Rate: 8.3% v 8.4% prior; Unemployment Rate (seasonally adj): 8.7% v 8.7%e; Trend Unemployment Rate: 8.7% v 8.8% prior.

- (HU) Hungary Aug Average Gross Wages Y/Y: 8.7% v 8.9%e- (TR) Turkey Oct Expected Inflation Next 12 Months: 23.3% v 22.3% prior.

- (AT) Austria Sept Final CPI M/M: -0.2% v -0.2% prelim; Y/Y: 4.0% v 4.0% prelim.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 110.2K v 109.7K tons prior.

- (TH) Thailand May Foreign Reserves w/e Oct 10th: $272.2B v $273.8B prior.

- (RU) Russia Narrow Money Supply w/e Oct 10th (RUB): 19.02T v 18.94T prior.

- (EU) Euro Zone Sept Final CPI Y/Y: 2.2% v 2.2% advance; CPI Core Y/Y: 2.4% v 2.3% advance.

- CY) Cyprus Sept CPI Harmonized M/M: -0.4% v +0.8% prior; Y/Y: 0.0% v 0.0% prior.

Fixed income issuance

- (IN) India sold total INR300B vs. INR300B indicated in 2030 and 2074 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2058 Bonds.

- 05:35 (UK) BOE’s Pill (chief economist)- 06:00 (PT) Portugal Sept PPI M/M: No est v -0.6% prior; Y/Y: No est v -4.3% prior.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£1.0B, £2.5B and £3.0B respectively).

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 12-month bills.

- 07:00 (BR) Brazil Oct FGV Inflation IGP-10 M/M: 0.2%e v 0.2% prior; Y/Y: No est v 2.9% prior.

- 07:00 (UK) BOE’s Greene.

- 07:30 (IN) India Forex Reserve w/e Oct 10th: No est v $700.0B prior.

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

- 08:30 (US) Sept Housing Starts: 1,320Me v 1.307M prior; Building Permits: 1.343Me v 1.330M prior; Housing Starts M/M: +1.0%e v -8.5% prior; Building Permits M/M: +0.9%e v -2.3% prior.

- 08:30 (US) Sept Import Price Index M/M: 0.1%e v 0.3% prior; Y/Y: 0.3%e v 0.0% prior; Import Price Index ex Petroleum M/M: 0.2%e v 0.2% prior.

- 08:30 (US) Sept Export Price Index M/M: 0.0%e v 0.3% prior; Y/Y: No est v 3.4% prior.

- 08:30 (CA) Canada Aug Int'l Securities Transactions (CAD): No est v 26.7B prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (DE) ECB’s Nagel (Germany).

- 09:00 (IT) Bank of Italy to Release the Quarterly Economic Bulletin.

- 09:00 (IN) India announces upcoming bill issuance (held on Wed).

- 09:15 (US) Sept Industrial Production M/M: No est v 0.1% prior; Manufacturing Production: No est v 0.2% prior; Capacity Utilization: No est v 77.4% prior.

- 11:00 (EU) Potential sovereign ratings after European close (S&P on Finland, Greece and Netherlands, Belgium and Turkey).

- 12:15 (US) Fed’s Musalem.

- 12:30 (UK) BOE’s Breeden.

- 13:00 (FI) ECB’s Rehn (Finland).

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 16:00 (US) Aug Total Net TIC Flows: No est v $2.1B prior; Net Long-term Tic Flows: No est v $49.2B prior.