Brent approaching USD 100/bbl

In focus today

• Today is a quiet day for macro releases, with no tier-1 data scheduled for release. Focus will instead be on broader market developments, particularly the situation in the Middle East.
• In Poland, the National Bank of Poland will announce its rate decision. We expect the policy rate to remain unchanged at 3.75%.

Economic and market news

What happened overnight

In China, August inflation data were broadly in line with expectations, although PPI surprised to the upside. PPI rose to 3.8% y/y from 3.5% y/y in July, mainly reflecting higher energy, crude oil and non-ferrous metal prices amid supply risks linked to the Middle East conflict. Headline CPI increased to 0.8% y/y from 0.5% y/y, in line with consensus, supported by higher energy and vegetable prices, while food prices remained a drag on an annual basis. Core inflation edged up to 1.0% from 0.9%, but remains low, pointing to continued weakness in domestic demand and contained underlying price pressures.

In commodities, Brent crude is nearing the USD 100/bbl threshold, trading around USD 99/bbl this morning and extending yesterday's gains. Supply concerns intensified further overnight after the US said it had destroyed five Iranian oil tankers, while Iran retaliated with strikes on a US-used base in Jordan and vessels near the Strait of Hormuz. Houthi attacks on Saudi energy facilities yesterday also added to supply risks.

In US-Canada trade, tensions intensified as the US announced import bans on alcohol, motorcycles and dairy products from Canada from 29 September. The move follows Canada's retaliatory tariffs on US goods, which took effect on Tuesday, in response to earlier US tariffs of 50% on around USD 20bn of imports from Canada. The US has kept in place the threat of 50% tariffs on cars and auto parts from Canada from 1 January.

What happened yesterday

In the US, NFIB's small business confidence fell 1.1 points to 98.7 in August but remained above its historical average. Hiring plans and the share of firms reporting job openings they could not fill declined slightly but remain elevated compared to a few months ago. Actual employment change over the past three months remained low, despite NFP suggesting strong payrolls growth in August. Labour quality continued to be stated as the most important problem. Bottom-line, forward-looking labour market indicators are looking solid, despite slightly slower hiring expectations, which seem to be affected by a shortage of qualified labour - broadly consistent with our Fed view of a hawkish hold next week.

In Denmark, electricity prices have increased a lot through the recent month. On the back of this, we have revised our expectations for the August CPI print higher and now expect inflation to increase to 2.2%, up from 1.7% in July. The data is released Thursday morning

Equities: Equities traded lower yesterday, with the S&P 500 down 0.6% while the Stoxx 600 finished broadly unchanged. Tech outperformed, led by semiconductors, as US investors returned from the holiday weekend and continued to digest the Astra model release. Energy was also among the strongest sectors, with oil prices approaching USD 100 per barrel.

Healthcare was a notable laggard on both sides of the Atlantic. While several company-specific headlines weighed on sentiment, the sector's weakness was probably also a function of its strong performance since the summer. Although the healthcare rally has aligned well with the timing of our somewhat more cautious equity stance, the performance gap relative to other defensive sectors has become unusually wide. As a result, we continue to prefer expressing our defensive tilt through other defensives, such as consumer staples and real estate.

FI and FX: Brent oil prices rose last night amid reports of new strikes in the Middle East, and reports of explosions on Kharg Island. The front Brent oil futures contract is now just below USD 100 per bbl. US short-end yields moved higher in response last night with the 2Y UST now at 4.40%. With an otherwise thin data calendar, the most interesting agenda item today will be the US Treasury's announcement on the size of the buyback operation to be held tomorrow. US Treasury Secretary Bessent yesterday said that he makes market calls with "pretty good insight", suggesting he is doing so with inside information, challenging markets to bet against him. The comments further boosted the JPY, with USD/JPY going from 154.40 to around 153.40 overnight. In Scandies, EUR/SEK has traded in a relatively narrow range around 11.15 over recent sessions as EUR/NOK continues to grind lower, supported by energy prices.