AI slowdown debate hits semis/industrials

EU mid-market update: AI slowdown debate hits semis/industrials; "Hot enough" CPI corners Fed into Sept hike as Treasury struggles to cap 5% long end; Saudi bypass route's repairs seen >1 month.

Notes/observations

- The weekend AI selloff is being traded as “slower models = fewer chips and grids”. Anthropic’s Amodei called for a slower frontier pace; Altman agreed that labs need to “pace the frontier,” Musk agreed, and OpenAI pushed its IPO beyond 2026 while it works on control and alignment. That wiped 6%+ from SK Hynix and Kioxia, double digits from SoftBank at one point and roughly 4% from ASML. But OpenAI disclosed only a week ago that it has already reached its internal milestone of an automated AI research intern and is measuring progress toward recursively accelerated research; slowing release cadence does not necesseraly mean switching off those clusters. In fact, external evaluations, adversarial training, agent sandboxes, interpretability and repeated long-horizon experiments can be brutally compute-intensive precisely because the model is not allowed to ship immediately. The real semiconductor risk is farther out: if GPT-7-class training runs are deliberately spaced farther apart, the industry loses the assumption that each six-month capability jump automatically pulls another step-function in HBM and accelerator demand. The counterforce is geopolitical. Trump rejected a slowdown explicitly because of China, and OpenAI and Anthropic still distrust each other enough that a voluntary pacing agreement has something close to a prisoner’s-dilemma structure. The market is pricing a capex pause; the more plausible near-term outcome may be the same capex redirected from shipping capability into proving that the next capability is safe enough to ship.

- The Fed enters Wednesday in an odd place: markets are more certain about a hike than the committee itself probably is. August core CPI printed 0.3% m/m, enough to push September pricing to roughly 87%, pull Goldman off its hold call and make JPMorgan expect both September and December; JPM also lifted its estimate of the long-run funds rate to 3.25%. Yet Goldman still expects cuts next year and describes this week’s hike as driven partly by the market’s own repricing rather than a wholesale change in the inflation outlook. That matters given the internal arithmetic we have been tracking: futures can move from 50% to 87% overnight; a governor cannot. Warsh still has to assemble seven actual votes out of a committee where several July holders have only conditional reasons to move. Trump then made the institutional problem unusually naked over the weekend, saying America should have the lowest interest rate in the world regardless of the data. With Brent around $107 and U.S. diesel above $6.20, a Warsh hold would now risk being read not simply as dovish but as presidential accommodation; the bond market may therefore have made a hike politically easier even before Warsh has completely won the committee.

- The Iran–Gulf Hormuz meeting has been postponed for lack of regional consensus, while Saudi Arabia’s problem looks to be much worse than “one pipeline went down.” The wartime export system had become a chain of substitutes: Hormuz fails → move crude west through Petroline → hold it at Yanbu → send it through Bab el-Mandeb. Every link now has a question mark. The East-West system had been carrying roughly 4mb/d around Hormuz, Saudi output had already collapsed to 6.2mb/d in August from 10.9mb/d in February, and Reuters’ sources say Yanbu holds only 5–7 days of export inventory; backup stocks at Ain Sukhna and Sidi Kerir in Egypt exist, but their roughly 18m and 20m-barrel storage systems are not full. Repair estimates range from an earlier partial restart to five–six weeks. Marhelm is now citing Saudi sources saying more than a month because spare parts themselves are scarce and supply chains badly disrupted; that detail is not officially confirmed, but satellite evidence does show substantial damage and it explains why this strike may not resemble April’s three-day repair.Saudi redundancy has ceased to be redundancy; it has become a sequence of increasingly scarce single points of failure.

- Trump’s reaction to the China-Iran intelligence story is a useful revealed preference ahead of Xi’s September 24 visit. U.S. officials reportedly believe Chinese entities supplied satellite imagery to Iran before the July Jordan attack that killed three U.S. troops; Reuters could not verify the underlying report, and importantly there is no allegation that Beijing itself directed the transfer. Trump nevertheless had an obvious opportunity to turn it into leverage and instead brushed it aside—“they basically do what we do”—while stressing that Xi has behaved reasonably. That is an unusually expensive grievance to quarantine if the administration wanted confrontation. It suggests the White House currently values arriving at the summit with the negotiating channel intact more than accumulating every available charge against Beijing. This really matters because Washington is simultaneously trying to get China to reduce a roughly $1.2T external surplus, engage on frontier-AI safety and maintain pressure on Iran. Trump also commented that he would be comfortable with Chinese automakers building cars inside the U.S. if they employ Americans.

- The ECB’s next inflation problem is increasingly gas and food rather than Brent. Kazimir says his attention has shifted toward gas and electricity because Europe entered the Iran shock with storage already unusually low after governments delayed filling in the hope that prices would fall; countries are now trying to rebuild inventories with benchmark gas at a four-year high. The next leg is food: drought, El Niño, expensive diesel and fertiliser are all moving in the same direction even though current food inflation still looks deceptively benign. Kazaks is correspondingly explicit that 2.5% is not a ceiling and rates may need to move into restrictive territory before energy enters wages. The nasty sequencing is that oil hit first, gas is being repriced now, and food arrives later—so measured inflation can keep discovering new sources even if the original oil impulse stops worsening. Markets now put roughly 60% on another ECB hike in October, with a further move by year-end essentially priced.

- Sweden’s election has produced a government problem rather than a policy revolution. With almost all ordinary votes counted, Magdalena Andersson’s centre-left bloc has a provisional 176–173 majority, fewer than 30,000 votes separating the camps, while overseas and late ballots are still due before Wednesday’s final count; the Social Democrats remain largest at just over 28%, but actually lost ground, while the Sweden Democrats fell below 18% and lost roughly 11 seats despite entering the campaign expecting their first cabinet posts. The awkward part begins if 176 survives: Andersson needs both the Centre Party and the Left, whose disagreements on taxation, nuclear power and redistribution are larger than the three-seat margin, so Sweden could replace a formally right-wing government with another minority arrangement whose fiscal programme is negotiated vote by vote. That is why the immediate SEK/rates impact should be modest—SEB had already judged the blocs’ differences as more about the composition of taxes and spending than the aggregate fiscal impulse—but the election does weaken the Sweden Democrats’ route into government without reversing Sweden’s NATO, Ukraine or defence commitments. In that sense voters may have changed who arbitrates domestic policy much more than Sweden’s external policy direction.

- One smaller European story is worth watching because it touches the continent’s chronic capital problem. Euronext CEO Stéphane Boujnah has revived the idea of combining with Deutsche Börse, arguing that Europe needs market infrastructure of “planetary scale”; both shares are up roughly 2–2.5%, although there are no talks and the antitrust obstacles would be formidable. The timing is better than on previous attempts. Europe is simultaneously trying to finance defence, grids, AI, data centres and industrial reshoring while its savings remain fragmented across national markets and much of its risk capital still migrates to the U.S. A Euronext–Deutsche Börse deal would not create a Capital Markets Union by itself, but it would attack one of the less glamorous reasons Europe struggles to finance these projects: the plumbing through which European capital is listed, cleared and traded is still national long after the spending requirements became continental.

- Cross-asset: Asia closed lower: Nikkei -1.0%, KOSPI -3.2%, MSCI Asia ex-Japan -1.1%, CSI 300 -0.5%, with AI/semis the main drag. Europe is roughly flat overall rather than +0.3–0.7%: STOXX 600 ~0.0%, with tech -1.4% offset partly by energy +0.4%. U.S. futures are softer: S&P -0.5%, Nasdaq -1.3%. DXY +0.2%; gold -0.4% around $4,329. Commodities have reversed Friday’s decline sharply: Brent +~3.0% around $107.5–107.8, WTI +~2.9% around $102.9. Crypto is firmer on a 24h basis: BTC +1.1% around $77.8k, ETH +0.5% around $2.52k.

Asia

- New Zealand Aug Performance Services Index: 51.2 v 50.6 prior.

- Japan July Final Industrial Production M/M: -0.2% v +0.1% prelim; Y/Y: 3.9% v 4.1% prelim.

- Indonesia Central Bank Gov Damayanti: Sees 2026 GDP growth iould still reach toward the end of our range between 5.2% to 6.0%.

Taiwan

- China said to have warned that it could cancel a planned September 24th summit between President Xi Jinping and President Trump if the US approved additional arms sales to Taiwan.

Global conflict/tensions

- Planned Monday meeting between Iran and Gulf nations on a temporary Hormuz shipping lane was postponed.

- Iran noted that an understanding with Oman on a temporary shipping route through Hormuz to be announced "soon,"

Europe

- ECB's Kocher (Austria): High oil prices could force more rate hikes.

- Italy Fin Min Giorgetti stated that the country needed to keep its public finances in check especially when interest rates are rising.

- Fitch affirmed Italy sovereign rating at BBB+; Outlook Stable.

- Sweden's election remains too close to call, with left-wing parties holding a one-seat lead as most votes have been counted.

- President Trump reportedly raised the possibility of Irish reunification during private discussions with Irish leaders, (**Note: leaders of Scotland, Wales, and Northern Ireland are set to meet in Cardiff to sign a joint declaration calling for the right to hold independence referendums).

Trade:

- President Trump said he plans to remove US tariffs on Irish whiskey following his three-day visit to Ireland.

Energy

- Saudi Arabia's East-West pipeline shut after drone strikes launched from Iraq (**Note: pipeline is a key Hormuz bypass carrying up to 7M bpd thus approx. 4% of global supply).

- Trump urged Ukrainian President Zelenskyy to stop targeting Russian oil refineries, arguing that the attacks are contributing to a diesel fuel shortage.

Speakers/fixed income/FX/commodities/erratum.

Equities

Indices [FTSE +0.60% at 10,714.68, DAX -0.53% at 25,422.50, CAC-40 -0.67% at 8,124.69, IBEX-35 -0.67% at 19,706.43, FTSE MIB -0.99% at 51,994.50, SMI +0.94% at 13,904.70, S&P 500 Futures -0.69%].

Market focal points/key themes: European equities opened the week under pressure from a fresh oil-price spike, postponed Middle East diplomacy, and abrupt AI-sector warnings ahead of major central-bank decisions, leaving the STOXX 600 and DAX essentially flat while the CAC 40 slipped 0.2% and the FTSE 100 rose 0.5%. Semiconductor and AI-linked names led the declines after OpenAI and Anthropic executives jointly called for a temporary slowdown in advanced model development, with Soitec plunging 12%, Aixtron dropping 8%, ASM International and Technoprobe each falling about 7.5%, Infineon losing 6.5%, and ASML and BE Semiconductor down more than 4–5%. Brent crude jumped another 3% toward $112 a barrel on attacks against Saudi infrastructure, Houthi advances near Red Sea routes, and the abrupt postponement of Hormuz reopening talks, reinforcing inflation fears and lifting market odds of a 25-basis-point Fed hike this week to 86%. Defensive and energy-linked stocks provided the main offsets, as North Atlantic Energies gained 5.5% on sustained oil strength above $100, while Wolters Kluwer rose 5%, Capgemini 4.5%, and insurers such as Aviva and Prudential each advanced about 3% on higher bond yields.

Equities

- Consumer discretionary: Campari [CPR.IT] +4.0%, Diageo [DGE.UK] +2.0%, Heineken [HEIA.NL] +1.5% (defensive beverage stocks outperformed during the AI-led risk-off rotation).

- Financials: Aviva [AV.UK] +3.0%, Prudential [PRU.UK] +3.0%, Swiss Re [SREN.CH] +2.0% (elevated bond yields following the ECB rate increase and oil-driven inflation warning supported insurers' reinvestment-income outlook).

- Industrials: Prysmian [PRY.IT] -5.0%, Schneider Electric [SU.FR] -4.5%, Legrand [LR.FR] -4.5%, NKT [NKT.DK] -3.5%, Kingspan [KRX.IE] -3.0% (data-centre electrification, cabling and construction beneficiaries weakened as investors reduced exposure to the AI infrastructure-capex trade).

- Materials: Anglo American [AAL.UK] -5.0%, Glencore [GLEN.UK] -4.0% (China-sensitive miners tracked the Asian risk-off move and weaker sentiment toward industrial-metals exposure).

- Technology: Wolters Kluwer [WKL.NL] +5.0%, Capgemini [CAP.FR] +4.5%, TeamViewer [TMV.DE] +3.5% (rotation into services and information stocks as calls from leading AI executives to slow model development eased near-term disruption fears), Soitec [SOI.FR] -12.0%, Aixtron [AIXA.DE] -8.0%, Technoprobe [TPRO.IT] -7.5%, ASM International [ASM.NL] -7.5%, Infineon [IFX.DE] -6.5%, ASML [ASML.NL] -4.5% (European semiconductor names followed the Asian AI selloff after leading model developers called for slower development; SK Hynix, Kioxia, SoftBank and other regional AI-linked stocks fell sharply).

- Telecom: Nokia [NOKIA.FI] -5.0%, SAP [SAP.DE] -3.0% (AI-sensitive networking and enterprise-technology exposure was de-risked alongside the broader global technology selloff).

Speakers

- ECB's Kazaks (Latvia) noted that the case was building for more tightening. Interest rates might need to wade into restrictive territory". ECB could move 'stepwise' and 'without rush'.

- ECB's Kazimir (acting Slovakia member) stated that would not hesitate to hike further if needed; EU inflation could turn out higher than already elevated projections and the development of natural gas and power prices was becoming a key concern.

- ECB's Simkus (Lithuania) stated that could not exclude action at any meeting; December was natural time to assess situation more.

- Indonesia govt announced Cabinet reshuffle which named Nazara as its new Finance Minister (repalced Purbaya); pledged continuity in policy.

- Iran Foreign Ministry spokesperson noted that Saudi Arabia insisted that regional meeting between Iran and GCC in Oman on Strait of Hormuz not take place. Talk of activity at Pickaxe Mountain had no basis. It welcomed China's constructive role in region's stability and added that the US was the biggest obstacle to diplomacy.

Currencies

- FX markets were focusing on several fronts as oil prices remained elevated and key rate decisions were on the docket. Markets braced for potential rate hikes from the Fed and BOJ this week.

- Dealers noting of fighting in the Middle East worsening and pushing oil well above $100 per barrel. The situation upending the path for rates amid bouts of steep selloffs in long-end bonds.
Dealers noted that markets appeared heavily conditioned for a hawkish week on the central bank front. - The caveat being the bigger FX surprise risk was probably not who hiked rates but who failed to validate current pricing.

- EUR/USD at 1.1535 as the greenback took on a safe-haven tone. Recent ECB hawkish speak unable to fester any Euro strength.

- USD/JPY at 154.50 area ahead of Fridays BOJ rate decision.

- GBP/USD holding below 1.35 as BOE was seen keeping its powder dry at Thursday’s policy decision.

- The 10-year German Bund yield last at 3.53%, France 10-year Oat at 4.50% and 10-year Gilt yield at 5.39%; 10-year Treasury yield: 4.96%; 10-year JGB: 2.98%.

Economic data

- (FI) Finland Aug CPI M/M: -0.2% v +0.2% prior; Y/Y: 2.2% v 2.1% prior.

- (SE) Sweden Aug Final CPI M/M: -0.3e v -0.3% prelim; Y/Y: 0.3e v 0.3% prelim.

- (SE) Sweden Aug Final CPIF M/M: -0.3e v -0.3% prelim; Y/Y: 0.7e v 0.7% prelim.

- (SE) Sweden Aug Final CPIF (ex-energy) M/M: -0.6% v -0.6% prelim; Y/Y: 0.5% v 0.5% prelim; CPI Level: 124.85 v 124.82e.

- (CH) Swiss Aug Producer & Import Prices M/M: +0.7% v -0.1% prior; Y/Y: -0.7% v -2.1% prior.

- (IN) India Aug Wholesale Prices (WPI) Y/Y: 9.9% v 9.9%e.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 451.6B v 452.6B prior; Domestic Sight Deposits: 427.2B v 425.0B prior.

- (CZ) Czech July Current Account Balance (CZK): -34.2B v -35.0Be.

- (HK) Hong Kong Q2 Industrial Production Y/Y: 2.3% v 3.1% prior.

- (HK) Hong Kong Q2 PPI Y/Y: 13.1% v 17.7% prior.

- (CN) China Aug YTD New Yuan Loans (CNY): 10.440T v 10.784Te.

- (CN) China Aug YTD Aggregate Financing (CNY): 23.910T v 24.372Te.

- (CN) China Aug M2 Money Supply Y/Y: 7.5% v 7.6%e; M1 Money Supply Y/Y: 4.1% v 4.1%e; M0 Money Supply Y/Y: 11.2% v 11.6% prior.

Fixed income issuance

- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills.

Looking ahead

- 05:15 (DE) ECB’s Schnabel (Germany).

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

- 05:30 (DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel Aug Trade Balance: No est v -$3.9B prior.

- 06:00 (IL) Israel to sell combined ILS2.4B in 2030, 2031, 2034, 2035 and 2052 bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 06:30 (IN) India Aug CPI Y/Y: 4.9%e v 4.5% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (PL) Poland July Current Account Balance: -€2.5Be v -€2.2B prior; Trade Balance: -€1.8Be v -€1.5B prior; Exports: €30.6Be v €32.0B prior; Imports: €32.4Be v €33.5B prior.

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

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:30 (CA) Canada Aug CPI M/M: 0.0%e v 0.5% prior; Y/Y: 3.0%e v 3.0% prior; CPI (ex-food/energy) Y/Y: No est v 1.9% prior; CPI Core- Median Y/Y%: 2.0%e v 2.0% prior; CPI Core- Trim Y/Y%: 1.9%e v 1.9% prior; Consumer Price Index: 169.8e v 169.9 prior.

- 08:30 (CA) Canada July Manufacturing Sales M/M: -0.2%e v +0.1% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.8-7.2B in 3-month, 6-month and 12-month bills.

- 09:00 (IT) ECB’s Cipollone (Italy).

- 11:15 (EU) ECB Chief Lagarde.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea Aug Export Price Index M/M: No est v 1.0% prior; Y/Y: No est v 49.1% prior.

- 17:00 (KR) South Korea Aug Import Price Index M/M: No est v -1.0% prior; Y/Y: No est v 18.7% prior.

- 18:45 (NZ) New Zealand Aug Total Card Spending M/M: No est v 1.0% prior; Retail Card Spending M/M: No est v 1.3% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 71.9 prior.

- 21:30 (CN) China Aug New Home Prices M/M: No est v -0.2% prior; Used Home Prices M/M: No est v -0.3% prior.

- 22:00 (CN) China Aug Retail Sales Y/Y: 0.8%e v 0.6% prior; Retail Sales YTD Y/Y: No est v 1.2% prior.

- 22:00 (CN) China Aug Industrial Production Y/Y: 4.8%e v 4.5% prior; Industrial Production YTD Y/Y: No est v 5.3% prior.

- 22:00 (CN) China Aug YTD Fixed Urban Assets Y/Y: -7.2%e v -6.7% prior.

- 22:00 (CN) China Aug Surveyed Jobless Rate: 5.2%e v 5.2% prior.

- 22:00 (CN) China Aug YTD Property Investment Y/Y: -20.1%e v -19.2% prior; Residential Property Sales Y/Y: No est v -13.2% prior.

- 23:00 (KR) South Korea July M2 Money Supply M/M: No est v 0.7% prior; L Money Supply M/M: No est v 0.8% prior.

- 23:00 (ID) Indonesia July External Debt: No est v $453.4B prior.

- 23:35 (JP) Japan to sell 20-Year JGB Bonds.