Russia feels permutations of pressure as Q3 earnings seasons hits new gear

EU mid-market update: Russia feels permutations of pressure as Q3 earnings seasons hits new gear and anticipation mounts for delayed US CPI tomorrow.

Notes/observations

- Main theme around the geopolitical turns, as pressure is applied on Russia, with EU adopting latest sanctions following the cancelled Trump/Putin meeting that was provisional planned in Budapest. Ukraine in new talks for large amount of Swedish fighter jets (Gripen) and reports that Russian oil supply to India has fallen to near zero. The move leaves Nayara Energy and other Indian buyers exposed to crippling counterparty risk, rerouting Russian flows through costlier shadow channels and effectively lowering Moscow’s netbacks without cutting supply. Zelenskiy reinforced this morning of no territorial concessions.

- Markets seem to continue repricing the AI boom around free cash flow and physical limits rather than hype, as seen in Vertiv’s post-earnings reaction and Oracle’s recent slide despite upbeat AI ambitions. The new phase exposes how circular financing, chip bottlenecks, and grid constraints are testing whether AI’s economics can truly scale beyond storytelling and whether LLM models could bring us to AGI.

- China’s Communist Party 4th Plenum approved the draft of the 2026–31 Five-Year Plan and conducted its largest leadership reshuffle since 2017 amid a sweeping military purge. The plan emphasizes boosting domestic consumption, accelerating breakthroughs in core technologies and clean energy, strengthening defense capabilities, managing local debt risks, and sustaining high-quality economic growth through innovation and openness. Some of the key readouts focus on: Explicit call for “major breakthroughs” in core tech by 2035, stronger push on domestic demand & unified market, anti-corruption extended to military & tech sectors and no GDP target was mentioned.

- Bank of America Institute reported that total card spending rose just 0.3% year-over-year in the week ending October 18, sharply slowing from +3.7% the prior week and below September’s +2.0% average, as consumer activity seem to have cooled amid policy uncertainty. The slowdown was most pronounced in the Washington D.C. area, where spending fell 1.4% y/y, reflecting anxiety over the potential China tariff escalation and prolonged federal shutdown risks.

- Volkswagen said it has alternative suppliers to offset potential disruptions from Nexperia, after analysts warned the Dutch-Chinese chipmaker could trigger a new global shortage of basic semiconductors vital to the auto industry. Nexperia, which produces over 100 billion diodes and transistors annually - roughly 25% of global basic chip supply, 60% of which goes to autos.

- Macro looks to US Sept CPI, scheduled for tomorrow, Fri at 08:30 ET, delayed from Oct 15th due to a government shutdown but prioritized for Social Security COLA calculations.

- Asia closed mixed with Nikkei225 underperforming -1.3%. EU indices -0.4% to +0.5%. US futures -0.2% to +0.2%. Gold +0.5%, DXY +0.1%; Commodity: Brent +4.9%, WTI +5.0%; Crypto: BTC +1.3%, ETH +1.2%.

Asia

Bank of Korea (BOK) left the Base Rate unchanged at 2.50% (as expected) for its 3rd straight pause under the current easing cycle. Decision to keep policy steady was not unanimous (board member Shin Sung-Hwan dissented) . Statement reiterated to adjust timing and pace of any further base rate cuts.

Global conflict/tensions

- US Treasury Dept: Targeting Russian integrated oil & gas companies Rosneft and Lukoil in latest round of sanctions. Indian oil refiners said to be reviewing their Russian oil trade documents to comply with the US sanctions.

Europe

- Italy govt estimates it will collect ~€1.6B through 2026 budget measures. To collect €3.8B through 2028 from IRAP corporate tax hike on banks and insurers. To collect €3.3B over 2026-27 period through freeze of DTA tax credits.

- BOE’s PRA said to have warned that it would be highly risky to ditch the capital requirements on lenders’ holdings of government bo.

Americas

- Trump Administration in Talks to Take Equity Stakes in Quantum-Computing Firms.

- Canada PM Carney: Canada's goal is to double non-US exports over 10 years, which will generate ~C$300B; Tariff uncertainty is restricting investments in Canada.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.22% at 573.54, FTSE +0.45% at 9,557.70, DAX -0.33% at 24,077.49, CAC-40 +0.27% at 8,229.20, IBEX-35 -0.15% at 15,763.50, FTSE MIB +0.50% at 42,421.00, SMI -0.11% at 12,596.29, S&P 500 Futures +0.12%].

Market focal points/key themes: European indices opened generally higher but turned to mixed in the early hours of trading; uncertainty around US-China trade situation seen as theme for markets; better performing sectors include energy and telecom; among underperforming sectors are health care and utilities; oil & gas subsector supported after US sanctions Russian oil companies; Partners group divests its stake in Apex Logistics; Nexans acquires Electro Cables; Leonardo, Thales and Airbus to create space JV; Eiffage to take stake in Gelink; earnings expected in the upcoming Americas session include Intel, T-Mobile, Honeywell and Blackstone.

Equities

- Consumer discretionary: Heineken [HEIA.NL] -1.0% (strategy update), Kering [KER.FR] +8.5% (earnings).

- Consumer staples: Unilever [UNA.NL] +2.0% (earnings)- Energy: RWE [RWE.DE] -1.5% (analyst downgrade).

- Industrials: Volvo Cars [VOLCAB.SE] +32.0% (earnings), Volkswagen [VOW3.DE] +1.0% (Nexperia alternative supplier), Rheinmetall [RHM.DE] +1.0% (US sanctions against Russia).

- Technology: STMicroelectronics [STM.FR] -5.5% (earnings; guidance), SAP [SAP.DE] -2.5% (earnings).

- Telecom: Nokia [NOKIA.FI] +10.0% (earnings).

Speakers

- Swiss National Bank (SNB) Sept Monetary Policy Summary (aka Minutes): Further easing of monetary policy was not appropriate. Current implementation of monetary policy was appropriate under various scenarios. Concluded that monetary policy is currently having an expansionary effect.

- German Council of Tax Experts raised tax estimate through 2029.

- German Fin Min Klingbeil commented that more positive economic outlook was reflected in rising tax revenues. Pressure for budget cuts remained high.

- Russia Foreign Ministry: US sanctions is counterproductive step; Goals in Ukraine remain unchanged.

- BOJ Financial System Report maintained its overall assessment that Japanese banks had sufficient capital bases to withstand various stress events.

- Japan trade union Renco said to seek 2026 wage hike of 5.0% (**Note: Compares with 5.25% avg in 2025).

- China Communist Party 4th Plenum Communique approved draft of next 5-year plan; replaces 11th Central Party Committee members; To greatly revitalize consumption; To boost homegrown tech and core tech breakthroughs.

Currencies/fixed income

- USD held steady in another low volatility session. Focus on the Friday release of US Sept CPI data despite the ongoing govt shutdown.

- EUR/USD hovering around the 1.16 area in quiet trade.

- USD/JPY edging back towards the 152.50 neighborhood as the newly formed Japanese govt looked to build upon its stimulus program. Focus on Friday release of Sept CPI data ahead of nextr week’s BOJ rate decision.

- 10-year German Bund yield at 2.58%, France 10-year Oat at 3.37% and 10-year Gilt yield at 4.43% 10-year Treasury yield: 3.98%.

- Oil was higher after US announced new sanctions against Russia which targeted Russia's two largest oil companies Rosneft and Lukoil.

Economic data

- (NL) Netherlands Oct Consumer Confidence Index: -27 v -32 prior.

- (NO) Norway Sept Trend Unemployment Rate: 4.7% v 4.7% prior.

- (DK) Denmark Oct Consumer Confidence Indicator: -19.5 v -18.7 prior.

- (FR) France Oct Business Confidence: 97 v 96e; Manufacturing Confidence: 101 v 96e; Production Outlook Indicator: -11 v -13e; Own-Company Production Outlook: 18 v 6e.

- (ES) Spain Aug Total Mortgage Lending Y/Y: 25.9% v 31.5% prior; House Mortgage Approvals Y/Y: 7.5% v 25.0% prior.

- (ES) Spain Aug Home Sales Y/Y: -3.4% v +13.7% prior.

- (MY) Malaysia mid-Oct Foreign Reserves: $123.4B v $123.6B prior.

- (TR) Turkey Oct Consumer Confidence: 83.6 v 83.9 prior.

- (ES) Spain Aug Trade Balance: -€6.0B v -€4.0B prior.

- (PL) Poland Sept Unemployment Rate: 5.6% v 5.6%e.

- (TW) Taiwan Sept Industrial Production Y/Y: 15.5% v 14.5%e.

- (TW) Taiwan Sept M2 Money Supply Y/Y: 5.4% v 4.8% prior; M1 Money Supply Y/Y: 5.2% v 14.4% prior.

- (HK) Hong Kong Sept CPI Composite Y/Y: % v 1.1%e.

- (IS) Iceland Sept Wage Index M/M: 0.8% v 0.1% prior; Y/Y: 7.8% v 7.7% prior.

Fixed income issuance

- (IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills.

- (UK) DMO sold £4.75B in new 4.125% Mar 2031 Gilts; Avg Yield: 4.004% v 4.095% prior; bid-to-cover: 2.83x v 2.80x prior; Tail: 0.7bps v 0.4bps prior.

Looking ahead

- (RO) Romania Sept M3 Money Supply Y/Y: No est v 8.3% prior.

- (AR) Argentina Oct Consumer Confidence: No est v # prior.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:30 Poland to sell Fixed-rate Bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR)).

- 06:00 (UK) CBI Industrial Trends Total Orders: -28e v -27 prior; Selling Prices: 5e v 4 prior; Business Optimism: -27e v -27 prior.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 6-month bill.

- 06:00 (RO) Romania to sell RON500M in 8.25% Sept 2032 Bonds.

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One-Week Repo Rate by 100bps to 39.50%.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to cut Key Rate by 25bps to 15.25%.

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

- 08:00 (MX) Mexico Aug Retail Sales M/M: 0.2%e v 0.1% prior; Y/Y: 2.6%e v 2.4% prior.

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

- 08:30 (CA) Canada Aug Retail Sales M/M: +1.0%e v -0.8% prior; Retail Sales (ex-auto) M/M: +1.3%e v -1.2% prior.

- 08:30 (US) Weekly jobless claims delayed.

- 08:30 (US) Chicago Fed National Activity Index delayed.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 17th: No est v $729.5B prior.

- 09:30 (BR) Brazil Sept Tax Collections (BRL): No est v 208.8B prior.

- 09:30 (IR) ECB's Lane (Ireland) Award in Dublin.

- 10:00 (EU) Euro Zone Oct Advance Consumer Confidence: -15.0e v -14.9 prior.

- 10:00 (US) Sept Existing Home Sales: 4.06Me v 4.00M prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 10:30 (ZA) South Africa Central Bank (SARB) semi-annual Monetary Policy Review.

- 11:00 (US) Oct Kansas City Fed Manufacturing Activity: No est v 4 prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

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

- 18:00 (AU) Australia Oct Preliminary PMI Manufacturing: No est v 51.4 prior; PMI Services: No est v 52.4 prior; PMI Composite: No est v 52.4 prior.

- 19:01 (UK) Oct GfK Consumer Confidence: No est v -19 prior.

- 19:30 (JP) Japan Sept National CPI Y/Y: 2.9%e v 2.7% prior; CPI (ex-fresh food) Y/Y: 2.9%e v 2.7% prior; CPI (ex-fresh food/energy) Y/Y: 3.1%e v 3.3% prior.

- 20:30 (JP) Japan Oct Preliminary PMI Manufacturing: No est v 48.5 prior; PMI Services: No est v 53.3 prior; PMI Composite: No est v 51.3 prior.

- 23:30 (JP) Japan to sell 3-Month Bills.