IEA accelerates only 20Mbbl of diesel while Hormuz flows run at 68% of baseline

EU mid-market update: Treasuries rally on PPI jump as CoreWeave’s 2031 bonds yield 15.8% and its CDS closes at a record >1,000bps; Anthropic investors float $1.5T against $2T on 45% sequential growth; IEA accelerates only 20Mbbl of diesel while Hormuz flows run at 68% of baseline.

Notes/observations

- Friday opens on a repricing of AI’s funding chain, MSCI’s proposal to eject Indonesia from its emerging-market universe and Kyiv’s return to striking Russian refineries. US tens hold 5.09%, on course for their biggest weekly fall since late July; Jakarta Composite touched 5,193 in its worst session since Jan 1998 as rupiah broke 18,000 per dollar; Brent slips to $105.7 as IEA hurries out its remaining reserve barrels.

-Thursday’s US session ended higher after a weak start: the S&P 500 rose 0.3% to 7,744.06, the Dow 1.1%, the Nasdaq 0.1% and the Russell 2000 1.4%, though the Philadelphia semiconductor index fell for a seventh straight session and Nvidia lost 1.8%. Nasdaq futures had been down about 1% overnight. Health care (+1.8%), financials (+1.4%) and materials (+1.7%) led, while energy fell 1.55%. Europe again outperformed on low AI exposure: the Stoxx 600 rose 0.4% to 640.16, a three-week closing high, with health care up 2.4%, the FTSE 100 up 1.04% to 10,837, the CAC 40 up 0.78% and the DAX up 0.35%. Milan’s FTSE MIB fell 0.68%. ASML fell 4.2%, ASM International 7.2%, BE Semiconductor 6.4%, Infineon 5.2% and Soitec 7.7%, and Legrand and Schneider, both data-centre electrical plays, lost more than 3% in the morning. Ericsson closed up nearly 12%. Mondi fell 7.9% after saying it raised paper prices to offset energy and raw material costs, and Antofagasta lost 4.1%.

- US September PPI rose 1.3% on the month against 0.5% expected, the biggest monthly gain since March 2022, and 6.3% on the year against 5.3%, yet the 10-year Treasury closed at 5.061%, down 12.8bp, after touching about 5.3% on Wednesday. Core PPI rose 0.7% against 0.3% expected, taking the annual rate to 5.0%, the highest since January 2023. Energy rose 10.8% and transportation and warehousing 3.4%, and the BLS tied nearly half of the rise in processed goods to diesel. Retail sales rose 0.8% against 0.3-0.4% expected, but excluding autos and gas stations they rose only 0.25% against about 1.1% in August. Economists lifted core PCE estimates to 0.3-0.4% on the PPI components, with the PCE release due later this month. Yields fell on the hottest producer-price print since 2022, so Treasuries are trading as a hedge against the AI credit scare rather than on inflation. Treasury accepted $6bn of $40.8bn offered in its 2037-2046 buyback, the third week at the maximum.

- Warsh gave no guidance on either remaining meeting, and Fed funds futures marked October hike odds down from about 27% to under 15% in one account of the move, with Goldman now expecting the Fed to skip October and deliver its last hike of the year in December. He called October and December the crystallising moments, said the world has broadly conformed to the Fed’s expectations since September’s hike, and said the Fed needs to think about financial stability and that he may be over-scarred by the global financial crisis. He described the global tightening as synchronous with no free riders, and called AI probably the most consequential change in his lifetime, on a path he expects to be very bumpy. CME had priced a 72% chance of a hold before he spoke, up from 53% a month earlier, with a December hike favoured. The dollar, which had hit an 18-month high, weakened through the remarks, gold held above $4,150 on CTA short covering, and the 10-year is on course for its largest weekly fall in more than a year. Hammack questioned whether policy is tight enough and Daly said more hikes are needed but not urgently, and the Fed enters its blackout period with the meeting on October 27-28, less than a week before the midterms. A chair who declines forward guidance leaves the data between now and October 28 to set the price.

- CoreWeave’s 9.75% notes due 2031 yielded 15.78% on Thursday and its five-year CDS rose 74.5bp to a record, briefly above 1,140bp before settling near 1,088bp, a level Reuters said implies about a 63% chance of default within five years. Some 9% notes traded near 81 cents on the dollar, yielding 15.3%. The shares fell as much as 9.5% before closing up about 5.9% near $70, after Nvidia CEO Huang said the company’s cost of capital is falling and that Nvidia, which holds about 10%, has no need to backstop it. The company’s CEO had told staff on Wednesday that its roughly $104bn backlog more than supports its debt. Oracle rose 3% after losing 8-9% a day earlier, Deutsche Bank’s Zelnick called the selloff a buying opportunity, and BofA kept a $140 target. The equity bounced on a CEO’s comment while the bonds stayed near distressed levels, and euro-area government bonds drew more demand than corporate paper.

- Some investors at Anthropic’s San Francisco investor day discussed a valuation near $1.5 trillion for the November IPO against the roughly $2 trillion expected earlier, per four people cited by Reuters. Third-quarter revenue rose 45% on the quarter to $16.8bn, after growing 147% in the second quarter to $11.6bn from $4.7bn, and the company said it was profitable on an adjusted basis, with a reported adjusted gross margin of 85% and operating margin above 11%. Some investors were disappointed by the sequential slowdown even though the figures eased worries about the cost of building AI. By our arithmetic $1.5 trillion is about 22 times annualised third-quarter revenue against about 30 times at $2 trillion. Investor Gavin Baker said October growth is accelerating, which the company has not confirmed. Reuters said the market’s near-term AI outlook hinges largely on this deal and on OpenAI’s expected listing next year. A lower print would hand the market a second data point on AI funding costs in the same week it repriced CoreWeave’s debt.

- Trump told Newsmax on Thursday that the US may have to go to Pickaxe Mountain, the fortified site near Natanz linked to Iran’s nuclear programme, and that it would be knocked out fast, while saying he would not use nuclear weapons or put troops on the ground. Asked about CNN’s report that the military has planned to use the “mother of all bombs” against Iranian energy and nuclear sites, he said it is non-nuclear, and he said talks with Tehran are under way and the war will end soon. He also said he is discussing denuclearisation with Russia and China. On Ukraine he said there are plenty of other targets besides refineries, that Zelenskyy is harder to deal with than Putin and that Ukraine needs an election. He said that once US munitions are restocked, allies will be allowed to buy, which implies European purchases queue behind US replenishment. He said he trusts no one when asked about Netanyahu, and that he is allowed to self-pardon. Brent is near $105 with a US pause before the November 3 vote priced in and the post-election option now kept open.

- Euro-area bonds rallied with Treasuries: the 10-year Bund fell about 11bp to roughly 3.37%, its lowest in more than five weeks, the OAT fell 14bp to 4.739% and the BTP spread narrowed 4bp to 104bp. France’s spread over Bunds tightened 4.5bp to 137bp. Money markets price the ECB deposit rate at 3.18% by late 2027 from 2.50% now. Allianz Global Investors’ Massimiliano Maxia said fiscal concerns will weigh on government bonds in the medium term, but his firm is tactically adding long maturities, including France. Euro-area August industrial production fell 0.5% on the month against flat expected, and 1.1% on the year against a 0.1% decline expected. BoE Governor Bailey said in Bangkok that above-target UK inflation remains highly frustrating, that it is too early to judge second-round effects, and that so far they look subdued with businesses focused on cost cutting. The press reported that Chancellor Healey plans higher taxes on banks in the October 28 Budget. The ECB is priced for nearly three more hikes while its own officials say second-round effects have not appeared, and the bond rally is a flight to safety rather than a change in that pricing.

- Brent is at about $105.2, down 0.5-0.7%, and WTI near $97.2 after settling more than 3% higher on Thursday, leaving WTI up about 5.9% on the week against 0.4% for Brent and narrowing the spread to about $8 from about $11 on Wednesday’s settlements. DOE data showed crude stocks down 8.6 million barrels against a 0.5 million draw expected, gasoline up 3.5 million and distillates down 2.5 million against a 1.5 million draw expected. Kpler put Hormuz clearance at 11.62 million b/d in the seven days to October 13, 68% of the 17.15 million b/d baseline, and expects a slower and more uneven recovery without a political deal. ING said a full removal of the risk premium needs a US-Iran agreement. The IEA board on Thursday agreed to accelerate release of over 20 million barrels of diesel and the remaining March barrels, with about 330 million of the 400 million barrels already out. The diesel volume is less than a day of global demand and an acceleration of existing pledges, and European gasoil was still around $1,430 a tonne. A French proposal for 50 million barrels each of diesel and crude was not adopted, and the US told members the plans do not go far enough after Trump threatened a diesel export ban if Europe does not draw down.

- EU leaders ended Thursday’s first day in Brussels without the planned press conference, split on energy, the budget and China, as Zelenskyy ended a three-day pause and Ukrainian drones hit the Ryazan refinery. Meloni and Mitsotakis asked for looser fiscal rules to fund temporary, targeted energy relief, six states including Germany proposed a windfall tax on energy companies that lacks traction, and Italy and Sweden clashed over energy rules. Von der Leyen has said EU gas prices are up 140% since late February and diesel has doubled, adding about €100bn of cost. The draft conclusions delay methane rules for oil and gas imports by a year, regret the US decision to lift sanctions on Russian diesel, and ask the Commission to use trade defence tools against Chinese exports, a turn for Germany. Zelenskyy joins on Friday to discuss 2027 funding. He said Ukraine was denied US warnings on ballistic strikes and had Starlink throttled, before Starlink and Starshield were restored, and Putin warned of consequences. Ukraine claims its strikes have taken out more than half of Russian refining capacity. Resumed refinery strikes cut against the diesel relief Washington and the IEA are trying to deliver.

- J.B. Hunt’s Intermodal carried the quarter: revenue rose 20% to $1.83bn on record volume up 8%. Management said truckload capacity is tight, fuel is elevated and volatile, and shippers are converting freight to rail faster than it can take it. Elsewhere costs absorbed pricing: dedicated operating income fell 22% to $81.7m, truckload operating income fell 6% to $7.0m on 37% higher revenue, and final mile fell 76% to $1.6m. The 2026 intermodal bid season delivered low-single-digit increases, and the 2027 season has started with larger increases sought, though only about 10% of the intermodal book reprices in the fourth quarter and about 30% in each of the first three quarters of next year. Monthly volume growth was steady at 9%, 8% and 9% in July, August and September, and some third-quarter cost pressure will carry into 2027. Transportation and warehousing prices rose 3.4% in September’s PPI, and a carrier asking for more than 2026’s gains is trying to pass that on.

- Cross-asset: Jakarta’s benchmark fell about 11% on Friday, its steepest drop since January 1998, after MSCI said Indonesia’s emerging-market classification is no longer appropriate and proposed standalone status. The index fell 8% at the open for a 30-minute halt, is down more than 30% this year with $4.7bn of net foreign selling, and MSCI will consult until April 2027; FTSE Russell kept Indonesia’s status. Elsewhere in Asia, Kospi rebounded 3.6% after Thursday’s 7.6% fall, the Nikkei rose 1.9% to 65,658.59 and the Taiex 0.6%, though TSMC fell 0.4% despite record profit. SemiAnalysis reported that ASML is quietly developing a hybrid bonding tool, which would challenge market leader BE Semiconductor, and TSMC said this week that backend capacity is still somewhat short. Taiwan will fund a $4bn Texas industrial park for Nvidia suppliers. The PBOC fixed the yuan at 6.7220, the strongest since February 2023. Alcoa said most products are sold out or tightly committed, with Europe’s construction demand the weakest segment, and Nordex lifted guidance. Ahead: the first major vote on France’s 2027 revenue budget on October 20, the FOMC on October 27-28, the UK Budget on October 28 and the ECB on October 29.

- Asia closed higher with KOSPI outperforming +2.1%. EU indices -0.1% to +0.9%. US futures +0.0-0.3%. Gold +0.5%, DXY -0.3%; Commodity: Brent -0.6%, WTI -0.9%; Crypto: BTC +1.2%, ETH +3.4%.

Asia

- South Korea Sept Export Price Index M/M: -0.8% v -3.5% prior; Y/Y: 40.9% v 42.7% prior.

- South Korea Sept Import Price Index M/M: 1.7% v -2.2% prior; Y/Y: 17.6% v 15.9% prior.

- South Korea Sept Unemployment Rate: 2.6% v 2.7%e.

- New Zealand Sept Manufacturing PMI: 56.5 v 53.3 prior (12th month of expansion).

- New Zealand Sept Food Prices M/M: 0.0% v 0.3% prior.

- New Zealand Sept Total Card Spending M/M: No est v -0.5% prior; Retail Card Spending M/M: No est v -0.9% prior.

- Singapore Sept Non-oil Domestic Exports Y/Y: 68.4% v 32.2%e v 46.2% prior; Electronic Exports Y/Y: 107.6% v 131.8% prior.

- MSCI’s proposal to reclassify Indonesia indexes from Emerging Market to Standalone Market status; shares slump over 10% (**Note: final decision expected by June 30, 2027).

Global conflict/tensions

- Ukraine has reportedly exhausted its stockpile of U.S.-made Patriot air-defense interceptor missiles.

- President Trump noted that might launch another strike against Iran's nuclear facilities, including a heavily fortified site known as Pickaxe Mountain.

Europe

- ECB's Nagel (Germany) reiterated view that could not exclude that we may need to hike again.

- ECB's Rehn (Finland) reiterated Council stance that growth outlook was better today than at start of year. Not seeing second-round effects on inflation.

- BoE Gov Bailey noted that above-target UK inflation remained enormously frustrating. Too early to form strong views on strength of 2nd round effects.

- UK Chancellor of the Exchequer (Fin Min) Healy said to be planning to raise taxes on banks in the new budget.

- France Fin Min Lescure reiterated view that govt would use guardrails for budget if needed.

- European Stability Mechanism (ESM) Dir Gramegna: Conditions in Euro Zone bond markets remained stable and did not warrant intervention from the bloc’s rescue fund.

Americas

- Fed Chair Warsh noted that the Fed needed to think about financial stability; world had 'a lot' of economic challenge. Reiterated the Fed’s commitment to price stability and again avoided any guidance on future FOMC meetings.

Trade

- US-Mexico trade talks said to have stalled after Commerce Sec Lutnick intervention in which he opposed major tariff cut on Mexico steel, aluminum.

- France said to have agreed to support UK inclusion in the EU’s proposed “Made in Europe” industrial legislation.

Energy

- US said to be considering easing restrictions on Russian- and Iranian-linked “shadow fleet” tankers.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.08% at 10,831.17, DAX +0.79% at 25,582.97, CAC-40 -0.01% at 7,933.99, IBEX-35 +0.72% at 19,315.68, FTSE MIB +0.72% at 49,753.50, SMI +0.06% at 14,358.70, S&P 500 Futures +0.19%].

Market Focal Points/Key Themes: European equity bourses advanced on Friday, the Stoxx Europe 600 locking in a 0.5% gain that extended the previous session’s momentum and put the pan-European benchmark on course for a 1.4% weekly advance—its strongest five-day performance since early August—as a modest pull-back in global yields allowed bargain hunters to re-enter rate-sensitive growth names. The sharpest individual moves were Nordex’s 13.5% surge after preliminary Q3 revenue and EBITDA beat expectations and the wind-turbine maker raised its full-year EBITDA-margin outlook, Aixtron’s 5% rise on stronger-than-expected order intake, Brunello Cucinelli’s 4.5% advance after it lifted FY26 growth guidance to 12%, and the defence duo Hensoldt (+4.5%) and Rheinmetall (+4%) on renewed Russian attacks around Ukraine, set against Lloyds Banking Group’s 2.5% decline on reports of a possible higher UK bank levy plus an RBC downgrade, BE Semiconductor’s 2.5% drop on competitive concerns from ASML’s chip-bonding tool, and NatWest’s 2% fall on the same taxation fears. Technology equities led the rebound after Thursday’s CoreWeave-triggered debt scare had briefly unsettled AI-infrastructure financing assumptions, with ASML, ASM, Soitec and Infineon all recovering more than 1% once sovereign yields retreated from multi-decade peaks. Despite the constructive weekly close, desks remain cautious as the Q3 reporting season accelerates: earlier LVMH weakness on Chinese demand and ASML’s only fleeting relief have left investors still needing broader margin expansion to offset elevated borrowing costs while Fed Governor Warsh keeps policy options deliberately open.

Equities

Consumer discretionary: Brunello Cucinelli [BC.IT] +4.5% (Q3 revenue beat consensus and FY26 growth guidance was raised to 12% from 10%-11%, with 10% growth indicated for FY27), Mercialys [MERY.FR] +2.0% (the shopping-centre landlord confirmed its 2026 outlook) HEALTHCARE: AstraZeneca [AZN.UK] -1.5%, GSK [GSK.UK] -1.0% (large-cap healthcare names gave back part of the prior session's defensive rally as technology and cyclical risk appetite stabilised).

Technology: Aixtron [AIXA.DE] +5.0% (Q3 order intake exceeded expectations and full-year guidance was confirmed), BE Semiconductor Industries [BESI.NL] -2.5% (reports that ASML is developing an advanced chip-bonding tool raised competitive concerns around BESI's TSMC and Intel business), Schneider Electric [SU.FR] -2.0% (shares reversed an opening gain despite a Q3 revenue beat and higher 2026 adjusted-EBITA growth guidance, indicating the upgrade fell short of elevated expectations).

Energy: Nordex [NDX1.DE] +13.5% (preliminary Q3 revenue and EBITDA beat expectations and the wind-turbine maker raised its FY EBITDA-margin outlook), Acciona [ANA.ES] +4.0% (renewables read-through from Nordex's stronger profitability and upgraded wind-equipment outlook).

Consumer staples: Nestlé [NESN.CH] +1.0% (JPMorgan upgraded the shares to Overweight from Neutral).

Industrials / defence: Hensoldt [HAG.DE] +4.5%, Rheinmetall [RHM.DE] +4.0% (European defence shares strengthened after renewed Russian attacks around Ukraine reinforced geopolitical and procurement risk), BAE Systems [BA.UK] +1.0% (won a US Space Force satellite-communications contract), Glencore [GLEN.UK] +1.5% (materials-sector read-through from Alcoa's better-than-expected adjusted earnings and a broader cyclical rebound).

Financial: Lloyds Banking Group [LLOY.UK] -2.5% (reports of a possible UK budget increase in bank taxation compounded an RBC downgrade to Sector Perform from Outperform), NatWest Group [NWG.UK] -2.0%, Barclays [BARC.UK] -0.5% (UK domestic banks weakened on reports the government is considering a higher bank levy in the autumn budget).

Speakers

- EU Council President Costa stated that was not the time to put relief on Russian sanctions.

- EU Commission Pres Von der Leyen stated that was working intensively regarding Ukraine's path to EU.

- BOJ Uchida reiterated that to keep raising rates in response to economy and prices. Both economy and prices were developing as expected. Impact of higher costs were beginning to appear on consumer prices with price trend approaching 2%.

- China PBOC Gov Pan Gongsheng stated that it would further expand liquidity-management tools.

- China Foreign Ministry spokesperson Mao Ning stated that sought balanced trade with India.

- China reportedly moves to lift stock market with selling curbs and buybacks.

Currencies

- USD a touch softer in the session after Fed Gov Warsh did little to dispel expectations that rates would stay on hold this month. EUR/USD at 1.1240 and USD/JPY at 158.05 by mid-session.

- The 10-year German Bund yield last at 3.40%, France 10-year Oat at 4.78% and 10-year Gilt yield at 5.36%; 10-year Treasury yield: 5.08%; 10-year JGB: 2.90%.

Economic data

- (SE) Sweden Sept Unemployment Rate: 8.1% v 8.5% prior; Unemployment Rate (seasonally adj): 8.6% v 8.6%e; Trend Unemployment Rate: 8.7% v 8.7% prior.

- (HU) Hungary Aug Average Gross Wages Y/Y: 8.3% v 7.5%e.

- (AT) Austria Sept Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 3.6% v 3.6% prelim.

- (CZ) Czech Sept PPI (Industrial) M/M: 1.2% v 1.0%e; Y/Y: 3.7% v 3.5%e.

- (TR) Turkey Central Bank (TCMB) Oct Inflation Expectation Survey: 12-month inflation outlook: 23.9% v 23.7% prior.

- (CN) Weekly Shanghai Deliverable Copper Inventories (SHFE): 74.0K v 58.7K tons prior.

- (RU) Russia Narrow Money Supply w/e Oct 9th (RUB): 22.88BT v 22.78T prior.

- (EU) Euro Zone Aug Trade Balance: 6.8-€B v +€1.4B prior; Trade Balance NSA (unadj): -€16.1B v +€14.2B prior.

- (EU) Euro Zone Sept Final CPI Y/Y: 3.8% v 3.8% prelim; CPI Core Y/Y: 2.5% v 2.5% prelim.

- (IT) Italy Sept Final CPI M/M: 0.7% v 0.7% prelim; Y/Y: 4.2% v 4.2% prelim.

- (IT) Italy Sept Final CPI EU Harmonized M/M: 2.1% v 2.0% prelim; Y/Y: 4.2% v 4.1% prelim; CPI Index (ex-tobacco): 104.3 v 103.7 prior.

- (CY) Cyprus Sept CPI Harmonized M/M: -0.4% v +1.5% prior; Y/Y: 5.2% v 5.2% prior.

- (CA) Canada Sept Existing Home Sales M/M: -2.3% v -0.7% prior.

Fixed income issuance

- (IN) India sold INR340B vs. INR340B indicated in 6.94% 2036 bonds; Avg Yield: 7.3955%.

Looking ahead

- (AR) Argentina Sept Budget Balance (ARS): No est v 1.99T prior.

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

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

- 06:00 (IE) Ireland Aug Trade Balance: No est v €4.6B prior.

- 06:00 (IT) Italy Aug Total Trade Balance: No est v €8.2B prior; EU Trade Balance: No est v €1.3B prior.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£1.0B, £3.0B and £2.0B respectively).

- 07:30 (IN) India Forex Reserve w/e Oct 9th: No est v $734.6B prior.

- 08:00 (BR) Brazil Aug Economic Activity Index (Monthly GDP) M/M: +0.4%e v -0.2% prior; Y/Y: 1.1%e v 1.1% prior.

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

- 08:00 (CA) Bank of Canada Dep Gov Alexopoulos.

- 08:15 (CA) Canada Sept Annualized Housing Starts: 232.5Ke v 229.1K prior.

- 08:30 (US) Sept Import Price Index M/M: 0.9%e v 0.7% prior; Y/Y: 8.1%e v 7.0% prior; Import Price Index (ex-petroleum) M/M: 0.5%e v 0.8% prior.

- 08:30 (US) Sept Export Price Index M/M: 0.8%est v 0.6% prior; Y/Y: 9.5%e v 8.6% prior.

- 08:30 (US) Oct New York Fed Services Business Activity: No est v -8.7 prior.

- 08:30 (CA) Canada Aug Int'l Securities Transactions (CAD): No est v 20.7B prior.

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

- 09:00 (IN) India announces upcoming bill issuance (held on Wed).

- 09:15 (US) Sept Industrial Production M/M: 0.4%e v 0.0% prior; Manufacturing Production M/M: 0.3%e v -0.3% prior; Capacity Utilization: 76.5%e v 76.3% prior.

- 11:00 (CO) Colombia Aug Retail Sales Y/Y: 6.6%e v 5.3% prior.

- 11:00 (CO) Colombia Aug Manufacturing Production Y/Y: +1,8%e v -2.3% prior; Industrial Production Y/Y: -1.8%e v -0.3% prior.

- 11:00 (EU) Potential sovereign ratings after European close (S&P on Netherlands; DBRS on European Union; Italy).

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

- 14:00 (US) Sept Federal Budget Balance: -$30.0Be v +$197.9B prior.

- 16:00 (US) Aug Total Net TIC Flows: No est v $83.7B prior; Net Long-term TIC Flows: No est v -$27.9B prior.