Eyes on the SNB meeting

In focus today

In Switzerland, the big event for markets this week is today's SNB meeting with the decision announced at 9:30 CET and a press conference at 10:00 CET. We expect the SNB to keep the policy rate unchanged at 0%, which is fully in line with both market pricing and consensus. Inflation has largely followed the SNB's June projections, which assumed no changes to the policy rate. This supports the expectation that the SNB will keep the policy rate unchanged.

This morning, we will host a webinar update on China-US trade war, its economic implications and the outlook for CNY and USD. In the afternoon, US durable goods orders and initial trade balance are due for release for August. In the evening, a range of Fed speakers will be on the wires, including Goolsbee, Williams, Schmid, Daly and Bowman.

In Sweden, the producer and import price index will be released for August. This is one of several tools to assess inflationary pressures in the system, which may impact consumer prices down the road, which is something the Riksbank will stay focused on. We will also receive the August outcome for financial market statistics, with a particular focus on developments in household borrowing as well as data on mortgage interest rate levels, among other aspects.

Economic and market news

What happened yesterday

In Germany, the Ifo index unexpectedly fell to 87.7 in September (cons: 89.4) from 88.9, contrasting with yesterday's positive PMI surprise. The current assessment dropped to 85.7 (cons: 86.6) from 86.4, while expectations declined to 89.7 (cons: 92.0) from 91.4, returning to levels last seen four months ago. As the Ifo covers more companies than PMIs, it suggests German activity was weaker than initially indicated in September.

In the US, the trade deal with the EU was formally implemented, reducing tariffs on autos and auto parts to 15% (from 25%) retroactive to 1 August. The deal also exempts EU aircraft, generic pharmaceuticals, natural resources, and hundreds of components from tariffs. Shares in German automakers, including Porsche and BMW, rose on the announcement, easing uncertainty in the auto industry.

The White House instructed federal agencies to prepare mass firing plans ahead of a potential government shutdown on 1 October, diverging from the usual practice of temporary furloughs. The directive aligns with President Trump's push to reduce the federal workforce, with 154,000 employees already set to leave by 30 September. The shutdown risk remains high as Congress struggles to reach a funding agreement.

In Sweden, the NIER Economic Tendency Survey improved in September, with the overall tendency indicator rising to 97.2 from 96.0. Manufacturing confidence increased to 98.6 (previous: 97.0), while consumer confidence rose to 93.2 (previous: 91.1). Price plans for the next three months remained largely unchanged, with increases in retail and construction but declines in manufacturing and services, aligning with historical averages in the latter sectors but staying above normal in construction and trade.

Equities: Sour risk sentiment weighed on equities, pushing most sectors lower. However, energy, utilities, and consumer discretionary sectors posted noteworthy positive returns. In consumer discretionary, this was largely driven by a 4% gain in Tesla, while energy was supported by rising oil prices. S&P 500 ended the day down 0.4%, with Nasdaq down 0.3%. Stoxx600 declined 0.2%. Automakers had a strong session, buoyed by the US Department of Commerce's announcement that auto import tariffs from the EU would be reduced to 15%, retroactively effective from 1 August.

FI and FX: Strong USD performance across the board. USD/JPY was on the verge to take out 149 and EUR/USD re-tested the support just below 1.1730. The Scandies and the antipodeans were the biggest losers against the greenback as lower equities took their toll on risk-sensitive currencies. USD/SEK and USD/NOK were both up some eight figures. Equity futures suggest a mixed opening today. EUR/CHF is flat ahead of the SNB decision at 09:30 CET where we and markets expect the policy rate to be left unchanged at 0.0%.

Treasuries traded poorly and the 5-year auction met lukewarm demand and UST10y ended the US session at 4.15%. Tonight's US7y auction will be watched closely.