Cautious optimism ahead of Fed Chair Warsh speech at Jackson Hole

EU mid-market update: Cautious optimism ahead of Fed Chair Warsh speech at Jackson Hole; WSJ reports that Nvidia paused some AI cloud deals amid antitrust worries.

Notes/observations

- Warsh has to hand the market a reaction function this morning, and there is no consensus on which one it will be. His opening remarks are the only event that matters into the weekend, and the uncertainty is unusually basic: July's FOMC left the reaction function undescribed, September hike pricing is alive but still a minority view, and the Treasury's decision to at least double long-end buyback operations from early September has blurred the read on whether the authorities are leaning against yields or merely smoothing them. Miran used an FT op-ed to warn against drawing the wrong conclusion from Treasury yields, a pointed intervention from the dovish dissenter who resigned into Warsh's chairmanship. Rajan, from the Fed's own task force, went the other way and said plainly the Fed should be hiking to curb inflation. Consensus is that Warsh sidesteps the bond market entirely.

- WSJ reports that Nvidia has paused new deals under its July-launched AI Compute Partnership, a financing program that backstopped credit for smaller AI cloud providers (neoclouds) buying its GPUs by guaranteeing to rent unsold capacity itself while taking roughly 50% of any revenue those chips generated above a negotiated hourly threshold, typically over six-year terms. Internal staff flagged the structure’s antitrust exposure and the company’s attempts to dictate customer behavior—such as restricting rentals to approved end-users and favoring capacity spread across many small AI firms rather than one large tenant—prompting the freeze last week after less than two months. Early partners had included Australian operators Sharon AI (up to 40,000 Grace Blackwell GPUs) and Firmus (scaling toward 170,000 GPUs), and Nvidia had already disclosed tens of billions in related commitments that could shrink once providers found other customers. The company insists the broader model remains active and may be redesigned or folded into other financing vehicles, even as it continues larger residual-value supports and has faced mounting scrutiny over circular deals that amplify demand for its own chips.

- Europe's own data split cleanly, with prices firmer than activity. France was the worst of it, Q2 growth revised down to a standstill from a modest expansion, private payrolls still contracting, and August CPI above forecast on the harmonized measure, and Lescure called the first post-heatwave figures horrible, warning the revision carries into Q3. Spanish inflation also beat marginally, with headline running at more than double the ECB's target, and Spanish, Swedish and Norwegian retail sales all fell on the month after strong priors. Against that, Swedish Q2 growth beat clearly, the Swiss KOF indicator jumped sharply past expectations off an upwardly revised prior, German unemployment rose by less than feared, and the Lloyds barometer reached its highest since March. Kazaks kept it simple: inflation must not be allowed to take root.

- Sovereign supply is doing the tightening that the central banks are still debating. Takaichi will lift the annual cap on newly issued JGBs to ¥40T from ¥32.7T, paired with Katayama's proposal to bind spending to predictable revenue, billed as the biggest fiscal reform since the war, and a fourteen-year road map for AI, chips and energy. Bond market answered within hours: the two-year auction cleared with its weakest tail-demand measure since 2016 and a bid-to-cover well below the prior, average yield sharply higher, as BoJ tightening expectations crowd the short end. Kihara pre-committed any extra budget to urgent measures only; Katayama insisted policy is not aimed at the currency and that yen credibility follows growth. The same theme runs at lower amplitude through Europe, a twelve-auction gilt calendar for the fourth quarter, Healey naming fiscal discipline his first priority, Denmark finding extra room through 2035, while S&P's affirmations of China and New Zealand were maintenance, not improvement. Channel here is the long end: JGB supply repricing is the most reliable exporter of duration risk into bunds and gilts, and it lands in the same week the Fed's own signal is missing.

- OpenAI said to be quietly adding “Persistent mode” to the command-line version of its Codex agent, a high-compute setting in the reasoning-effort menu that instructs the system to keep working on tasks indefinitely “until put to sleep,” unlike current modes that time out after minutes or hours. The feature includes built-in limits so it does not expand the agent’s permissions and still requires user approval for any changes outside the local system, with the code living in Codex’s shared core—suggesting broader rollout beyond the terminal. This matches comments from this week’s Time interview, in which OpenAI leaders described Astra (their automated research intern) as enabling “persistent agents” that toil for sustained periods, with executives noting they are close to shipping a product built around that concept amid claims of nearing AGI by year-end.

- Ahead: Warsh mid-morning New York time, Canadian Q2 GDP and Chicago PMI, Iceland's accession referendum tomorrow, German state elections from the 6th.

- Tail risks: CENTCOM says the Hormuz mines are cleared, but transits remain below their ten-day average while Tehran drafts conditions for reopening; Venezuela is weighing an OPEC exit; Kazakh output has normalised after the CPC terminal attacks; Ukraine struck the Yaroslavl refinery again; A super El Niño is rated more than 90% likely into year-end, already flagged by the BSP as an inflation risk; and PayPal fell sharply as its buyout consortium walked.

- Asia closed mixed with KOSPI underperforming -1.8%. EU indices +0.2-0.9%. US futures -0.3% to +0.1%. Gold +0.1%, DXY +0.1%; Commodity: Brent -0.2%, WTI -0.3%; Crypto: BTC -0.8%, ETH -1.8%.

Asia

- Japan Aug Tokyo CPI Y/Y: 1.9% v 1.9%e; CPI (Ex-Fresh Food) Y/Y:1.8% v 1.8%e; CPI (Ex-Fresh Food, Energy) Y/Y: 2.0% v 2.0%e.

- Japan July Jobless Rate: 2.4% v 2.5%e.

- S&P affirmed China’s sovereign rating at A+ with a stable outlook.

- S&P affirmed New Zealand sovereign rating at AA+; Outlook stable.

- Japan MOF sold 2-Year JGB Bonds; Avg Yield: 1.7080% V 1.483% prior; bid-to-cover: 2.97x v 3.63x prior.

Global conflict/tensions

- Iran Supreme Leader advisor noted that Iran and Oman agreed to corridor the Strait of Hormuz; Part of it lies in Omani waters and part in Iranian waters; Ships would transit through designated central channel in the Strait if US met Iranian conditions.

- Iran National Security Council Rezaei noted that gov t was preparing a formal list of conditions for reopening the Strait of Hormuz at the request of mediators; ending regional war said to be among the condition.

- Trump administration has repeatedly told mediators it had no interest in going back to the terms of the memorandum of understanding (MOU) it reached with Iran in June (**Reminder: US current policy appeared to prefer squeezing Iran economically and was willing to wait to see if the strategy would bear fruit).

Europe

- UK Aug Lloyds Business Barometer: 53 v 49 prior.

Americas

- Pres Trump planned to sign order renaming Lake Ontario to Lake America.

Energy

- CENTCOM Commander stated that international shipping lanes were open; confirmed successfully cleared sea mines laid in Strait of Hormuz. No ships moved from Iran port without US permission.

- Venezuela said to be evaluating leaving OPEC amid its deepening economic and energy ties with the US.

- Pres Trump expected to convene meeting with US refiners and fuel retailers next week to highlight efforts to bring down gas prices.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.25% at 10,819.46, DAX +0.69% at 26,538.32, CAC-40 +1.11% at 8,412.03, IBEX-35 +0.53% at 19,987.28, FTSE MIB +0.87% at 52,722.00, SMI +0.29% at 14,426.60, S&P 500 Futures -0.05%].

Market focal points/key themes: European equities staged a selective Friday rebound—STOXX 600 up 0.6%, with the DAX, CAC 40 and FTSE 100 all finishing higher—yet remain on track for a third consecutive weekly decline of roughly 0.4%, the longest such streak since April 2025, as elevated sovereign yields, residual energy-price volatility linked to Strait of Hormuz tensions, and hawkish ECB guidance continued to weigh on broader risk appetite. Earlier in the week, a renewed surge in global bond yields had pushed euro-zone borrowing costs toward multi-month highs, compressing valuations particularly in rate-sensitive real-estate and growth segments, while wholesale gas and crude benchmarks stayed elevated until late diplomatic signals offered limited relief; Isabel Schnabel’s insistence that rates must rise further to anchor inflation reinforced the restrictive policy backdrop. Selective fundamental strength emerged in industrials and resources—Goodwin jumped 13% on record profits and a progressing asset-sale process, Ackermans & van Haaren rose 8.5% after upgrading its full-year outlook, and Frontline advanced on record tanker earnings—while French banks recovered modestly from Thursday’s political sell-off and Zurich Airport lagged on slower Indian project ramp-up concerns. With U.S. and European sovereign markets tightly correlated, investors are now focused on Fed Chair Kevin Warsh’s Jackson Hole keynote for any signal on the persistence of restrictive policy or balance-sheet strategy, knowing a hawkish tone could quickly reprice yields higher and further tighten financial conditions across the continent.

Equities

- Consumer discretionary: Hays [HAS.UK] +5.5% / PageGroup [PAGE.UK] +3.0% (shared recruiter-sector bid; no fresh Friday company-specific RNS or major broker catalyst identified after the morning scan—the simultaneous moves make this look more like sector/re-rating flow than new fundamental information), Flughafen Zürich / Zurich Airport [FHZN.CH] –3.0% (record H1 operating performance is being outweighed by the forward read-through: Noida Airport ramp-up is slower than expected amid geopolitical uncertainty; group EBITDA margin was broadly flat while depreciation and financing costs rise as the Indian project enters operation), STRABAG [STR.AT] +7.5% (H1 revenue €9.15bn vs €8.65bn consensus, ~6% beat; EBIT €174m vs €166m, ~5% beat; FY output raised to ~€23bn from ~€22bn and EBIT-margin guide to 5.5–6% from 5–5.5%).

- Energy: Energean [ENOG.UK] +1.5% (shares higher while company is in exclusive talks for BP's Egyptian upstream portfolio, potentially a ~$1bn transaction; would materially diversify Energean away from its Israel concentration—news originally crossed before Thursday's close, so this is continuation rather than a fresh overnight catalyst).

- Financials: Societe Generale [GLE.FR] +1.0% / BNP Paribas [BNP.FR] +1.0% / Crédit Agricole [ACA.FR] +1.0% (shared rebound from Thursday's 4–5% French political/fiscal selloff; no fresh bank-specific catalyst—the CAC itself is recovering ~1%), Ackermans & van Haaren [ACKB.BE] +8.5% (H1 net profit €339.6m, +24%; FY outlook upgraded to >10% net-profit growth; €524m net cash plus new €93m Grieg Aqua investment).

- Industrials: Goodwin [GDWN.UK] +13.0% (record FY trading profit £77.5m, +118%; revenue +27% to £280m; ordinary dividend +18% to 330p; sale process for much of Mechanical Engineering progressing with multiple interested parties).

Speakers

- UK Chancellor of the Exchequer (Fin Min) Healey stressed that govt's 1st priority was fiscal discipline.

- France Fin Min Lescure noted that economic figures coming out after summer heatwave were 'horrible and to also have impact on Q3 data. Harvests would be `extremely difficult' in some regions.

- Iranian Foreign Min Araghchi stated that had creative discussion with Qatar PM. Putting diplomacy back on track was not impossible. Reiterated stance that US must build trust and uphold commitments and acknowledge Iranian rights.

- China Finance Ministry (MOF) reiterated stance to achieve 2026 targets; To implement macroeconomic policies in H2. Long term positive fundamentals remain unchanged.

Currencies

- FX markets locked into tight range despite a data-filled EU session. Fed Chair Warsh at Jackson Hole is the main event. Market participants watching for any offer about the economy, recent volatility in bond markets, and the risks facing both US and global markets.

- EUR/USD at 1.1650 area and little phased by various growth, inflation and confidence data released in the session.

- USD/JPY staying above the 159 level and continued to consolidate its intervention moves from a few weeks back.

- The 10-year German Bund yield last at 3.26%, France 10-year Oat at 4.11% and 10-year Gilt yield at 5.05%; 10-year Treasury yield: 4.67%; 10-year JGB: 2.92%.

Economic data

- (FI) Finland Q2 GDP Q/Q: 0.4% v 0.8% prior; Y/Y: 1.6% v 1.2% prior.

- (FI) Finland July GDP Indicator Y/Y: 1.4% v 1.9% prior.

- (DE) Germany July Import Price Index M/M: 0.2% v 0.3%e; Y/Y: 6.8% v 6.9%e.

- (FI) Finland Jun Final Trade Balance: €2.0B v €1.9B prelim.

- (SE) Sweden Q2 GDP Q/Q: 1.6% v 1.4%e; Y/Y: 3.3% v 2.5%e.

- (SE) Sweden July Retail Sales M/M: -0.2% v +1.4% prior; Y/Y: 6.2% v 7.7% prior.

- (NO) Norway July Retail Sales M/M: -0.7% v +1.6% prior.

- (NO) Norway Aug Unemployment Rate: 2.1% v 2.1% prior; Unemployment Rate (seasonally adj): 2.1% v 2.1%e.

- (HU) Hungary July Trade Balance: €0.1 v €1.2B prior.

- (HU) Hungary July Unemployment Rate: 4.5% v 4.4%e.

- (FR) France Q2 Final GDP Q/Q: 0.0% v 0.2% prelim; Y/Y: 0.5% v 0.7% prelim.

- (FR) France Aug Preliminary CPI M/M: 0.7% v 0.7%e; Y/Y: 2.4% v 2.4%e.

- (FR) France Aug Preliminary CPI EU Harmonized M/M: 0.8% v 0.7%e; Y/Y: 2.7% v 2.6%e.

- (FR) France July Consumer Spending M/M: 0.5% v 0.0%e; Y/Y: 1.4% v 0.6% prior.

- (FR) France Q2 Final Private Sector Payrolls Q/Q: -0.1% v -0.1% prelim; Total Payrolls: -0.1% v 0.0%e.

- (ES) Spain Aug Preliminary CPI M/M: 0.7% v 0.6%e; Y/Y: 4.3% v 4.2%e.
- (ES) Spain Aug Preliminary CPI EU Harmonized M/M: 0.6% v 0.7%e; Y/Y: 4.5% v 4.6%e; CPI Core Y/Y: 2.9% v 2.9%e.

- (ES) Spain July Adjusted Retail Sales Y/Y: -0.3% v +0.6% prior; Retail Sales (unadj) Y/Y: -0.2% v +2.6% prior.

- (CH) Swiss Aug KOF Leading Indicator: 106.7 v 103.0e.

- (AT) Austria July PPI M/M: 0.3% v 0.1% prior; Y/Y: 3.3% v 2.8% prior.

- (SE) Sweden Aug Consumer Confidence: 98.0 v 97.2 prior; Manufacturing Confidence: 107.1 v 107.5 prior; Economic Tendency Survey: 105.1 v 104.6 prior.

- (CZ) Czech Q2 Preliminary GDP (2ndreading) Q/Q: 0.4% v 0.4% advance; Y/Y: 1.9% v 2.0% advance.

- (TR) Turkey Aug Economic Confidence: 100.6# v 99.8 prior.

- (TR) Turkey July Trade Balance: -$7.3B v -$7.4Be.

- (CN) Weekly Shanghai Deliverable Copper Inventories (SHFE): 72.4K v 89.5K tons prior.

- (TH) Thailand May Foreign Reserves w/e Aug 21st: $284.7B v $280.9B prior.

- (DE) Germany Aug Net Unemployment Change: +4.0K v +4.8Ke; Claims Rate: 6.4% v 6.4%e.

- (RU) Russia Narrow Money Supply w/e Aug 21st (RUB):22.41 T v 22.36T prior- (IT) Italy Jun Industrial Sales M/M: -1.0% v +0.5% prior; Y/Y: 3.1% v

5.2% prior.

- (PT) Portugal Aug Consumer Confidence: -20.5 v -22.6 prior; Economic Climate Indicator: 2.9 v 2.8 prior.

- (EU) Euro Zone Aug Economic Confidence: 98.4 v 97.5e; Industrial Confidence: -5.3 v -5.1e; Services Confidence: 5.8 v 4.9e; Final Consumer Confidence: -15.5 v -15.5 prelim.

- (IT) Italy Aug Consumer Confidence: 94.5 v 94.6e; Manufacturing Confidence: 89.9 v 90.0e; Economic Sentiment: 96.9 v 95.7 prior.

Fixed income issuance

- (IN) India sold INR340B vs. INR340B indicated in 6.94% 2036 bonds; Avg Yield: 6.9136%.

- (IT) Italy Debt Agency (Tesoro) sold total €6.5B vs. €5.75-6.5B indicated range in 5-year and 10-year BTP bonds.

- (IT) Italy Debt Agency (Tesoro) sold €2.0B vs.€1.5-2.0B indicated range in floating rate 2034 and 2035 bonds (CCTeu).

Looking ahead

- (MX) Mexico July Public Balance (MXN): No est v -418.7B prior.

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

- 05:30 (BE) Belgium Aug CPI M/M: No est v 0.6% prior; Y/Y: No est v 3.6% prior.

- 05:30 (IN) India to sell INR340B in 6.94% 2036 bonds; Avg Yield: %.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2043 and 2058 Bonds.

- Sells ZAR in 4.25% I/L 2031 bonds; Clearing Yield: %; bid-to-cover: x.

- Sells ZAR in 5.125% I/L 2043 bonds; Clearing Yield: %; bid-to-cover: x.

- Sells ZAR in 5.125% I/L 2058 bonds; Clearing Yield: %; bid-to-cover: x.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 2042 and 2047 DSL bonds via ORI auction.

- 06:00 (PT) Portugal July Retail Sales M/M: No est v 2.0% prior; Y/Y: No est v 2.7% prior.

- 06:00 (IE) Ireland July Retail Sales Volume M/M: No est v 0.4% prior; Y/Y: No est v 0.6% prior.

- 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.0B respectively).

- To sell combined £B in 1-month, 3-month and 6-month Bills on Fri Sept 4th (£B, £B and £B respectively).

- 06:30 (IN) India July Industrial Production Y/Y: 6.0%e v 7.3% prior.

- 07:00 (BR) Brazil Aug FGV Inflation IGPM M/M: -0.3%e v -1.2% prior; Y/Y: 2.1%e v 2.8% prior.

- 07:30 (BR) Brazil July Total Outstanding Loans (BRL): No est v 7.356T prior; M/M: No est v 0.7% prior; Personal Loan Default Rate: No est v 7.6% prior.

- 07:30 (IN) India Forex Reserve w/e Aug 21st: No est v $716.9B prior.

- 08:00 (ZA) South Africa July Monthly Budget Balance (ZAR): -164.0Be v 80.1B prior.

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

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

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:30 (CA) Canada Jun GDP M/M: 0.2%e v 0.3% prior; Y/Y: 2.0%e v 1.7% prior; Quarterly GDP Annualized: +3.4%e v -0.1% prior.

- 09:00 (CL) Chile July Unemployment Rate: 9.4%e v 9.4% prior.

- 09:00 (US) Fed's Hammack.

- 09:45 (US) Aug Chicago Purchase Managers Index (PMI): 57.9e v 57.6 prior.

- 10:00 (US) Aug Final University of Michigan Confidence: 51.0e v 51.0 prelim.

- 10:00 (US) BLS 2026 Preliminary Benchmark Payrolls Revision: +185Ke v -911K prior.

- 10:00 (US) Fed Chair Warsh at Jackson Hole.

- 10:30 (AT) ECB's Kocher (Austria).

- 11:00 (US) Aug Kansas City Fed Services Activity: No est v 14 prior.

- 11:30 UK) BOE Gov Bailey.

- 11:55 (DE) ECB’s Schnabel (Germany) at Jackson Hole.

- 12:00 (EU) Potential sovereign ratings after European close (S&P on Portugal); Fitch on France; DBRS on Netherlands).

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

- 13:30 (BR) Brazil July Total Formal Job Creation: +115.0Ke v +145.2 prior.