Lack of US data from govt shutdown leaves little to chew on as volatility draws in

EU mid-market update: Lack of US data from govt shutdown leaves little to chew on as volatility draws in; Powell to speak this morning; Macron to announce new PM by Friday's night.

Notes/observations

- European stock indices opened mixed reflecting caution over France's political uncertainty and its potential impact on EU budgets and growth. French budget deadline on Oct 13th. Euro weakened 0.1% amid broader USD strength, but narrowing French German bond yield spreads signals easing perceived political risk, providing mild currency support.

- BOE dissenter Catherine Mann spoke with typically hawkish tones. Gilt yields marginally climbed ahead of the comments. Markets pricing just a 23% chance of a BOE rate cut in 2025.

- US Treasury Sec Bessent and Fed Chair candidate meetings said to have concluded on Tuesday; Bessent said to have grilled contenders about their stance on interest rates and the unwinding of crisis-era stimulus and Blackrock's Rick Rieder performed “very well”. Trump to have his final say on the winner in coming months.

- US Pres Trump said to be travelling to Israel to help finalize full Israel-Gaza agreement. Yesterday, Israel and Hamas agreed to Phase 1 of a US-brokered ceasefire, via talks in Egypt. Includes immediate ceasefire, Israeli withdrawal from ~53% of Gaza, ~48 hostages released by Hamas, Palestinian prisoners freed by Israel, and increased Gaza aid. Israeli cabinet meets today for approval; releases start October 13th. Phase 2 (full war end, reconstruction) planned but uncertain due to past truce failures. Celebrations in Gaza and Tel Aviv; Hamas wary of violations; ongoing strikes reported.

- TSMC’s September revenue hit NT$331B (+31% y/y) with Q3 above estimates, though YTD growth slowed again. Meanwhile, reports that Samsung’s 12-high HBM3E may finally enter Nvidia’s GB300 signal a structural shift from a two-player HBM market to a tri-polar one, redistributing technical risk and pricing power from DRAM dice to advanced packaging, with implications for thermal management, CoWoS capacity, and HBM4 readiness. As for Nvidia - US reportedly approved AI chip exports (several billion dollars worth) to UAE under existing bilateral agreement.

- China will impose export controls on superhard materials, lithium batteries, graphite, and medium-to-heavy rare earths starting Nov 8. The broader rare earth licensing rules take effect Dec 1, just weeks before the late Oct–early Nov APEC summit where Trump and Xi were previously expected to meet, adding geopolitical weight to the timing.

- UK banks underperforming after Lloyds confirms ‘material’ impact is likely from car finance scandal. Separately HSBC >5% lower after disclosing a take-private bid for Hang Seng Bank.

- Notable US premarket earnings from PepsiCo (PEP) at 05:59 and Delta Airlines (DAL) at 06:30 ET.

- Asia closed mixed with Shanghai outperforming +1.3%. EU indices -0.6% to +0.1%. US futures 0.0% to -0.1%. Gold -0.1%, DXY +0.1%; Commodity: Brent +0.3%, WTI +0.4%; Crypto: BTC -0.7%, ETH -3.0%.

Asia

- Australia Oct Consumer Inflation Expectation: 4.8% v 4.7% prior.

- Incoming Japan PM Takaichi yet to reach an agreement with the party’s long-time coalition partner Komeito about continuing their alliance (*8Note: shock exit by Komeito from the coalition might force Takaichi to make concessions to opposition parties to win their backing on a policy-by-policy basis or in a new coalition).

Global conflict/tensions

- Hamas signed ‘first phase’ of Gaza peace deal; cease fire went into effect at 05:00 ET (09:00 GMT).

Europe

- UK Sept RICS House Price Balance: -15% v -18e.

- French Pres Macron to name new PM in the next 48 hours. Majority of lawmakers said to oppose Govt dissolution and saw a possible path to a budget by Dec 31st.

Americas

- US Senate Republicans said to eye piecemeal government reopening.

Trade

- China tightened its rare earth export controls expanding restrictions on processing technology.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.24% at 572.38, FTSE -0.44% at 9,507.26, DAX +0.02% at 24,627.53, CAC-40 +0.02% at 8,061.53, IBEX-35 -0.53% at 15,623.00, FTSE MIB -0.27% at 43,366.00, SMI -0.22% at 12,624.84, S&P 500 Futures -0.04%].

Market focal points/key themes: European indices opened mixed and failed to gain direction in early trading; market focus on developing political situation in France. better performing sectors include telecom and materials; among underperforming sectors are health care and industrials; earnings expected in the upcoming US session include Pepsico and Delta Airlines.

Equities

- Consumer discretionary: HelloFresh [HFG.DE] +8.5% (analyst upgrade).

- Consumer staples: Suedzucker [SZU.DE] +1.5% (earnings).

- Energy: Engie [ENGI.FR] +1.0% (Macron to name new French PM).

- Financials: Lloyds Banking Group [LLOY.UK] -2.5% (provision is likely to be required which may be material).

- Industrials: Rheinmetall [RHM.DE] -1.0% (Gaza peace deal implementation), Aston Martin Lagonda [AML.UK] -1.0% (analyst downgrade), Ferrari [RACE.IT] -1.5% (CMD).

- Technology: ASML [ASML.NL] +1.0% (new CTO; TSMC monthly sales).

Speakers

- BOE’s Mann (hawkish dissenter) stressed that inflation pressures remained persistent while growth outlook remained modest. Argued that policy needed to remain restrictive for longer to squeeze out inflation persistence and rein in expectations.

- Reports circulated that Jean— Louis Borloo as a serious option for new French PM: seen as able to speak to the left, embody a less presidential style of government, and not harbor 2027 ambitions.

- South Africa Central Bank (SARB) Gov Kganyago testified that domestic inflation remained under control and saw food inflation cooling.

- Philippines Central Bank Policy Statement noted that the outlook for domestic growth had weakened while inflation was benign with risks limited. Inflation expectations
remained well anchored and within target range. Remained attentive to emerging risks.

- China Commerce Ministry (MOFCOM) said to impose export controls on superhard materials and lithium batteries; effective Nov 8th.

- Fed Williams (voter) stated that supported further rate cuts; Did not think US economy was on verge of recession.

Currencies/fixed income

- USD remain on firm footing and at multi-month highs during the session as political events continued to shape price action.

- EUR/USD approaching the lower end of 1.16 with focus on France political malaise and budget plans. French Pres Macron to name new PM in the next 48 hours. Majority of lawmakers said to oppose Govt dissolution and saw a possible path to a budget by Dec 31st.

- USD/JPY at 153.00 near 6-month highs as PM-elect Takaichi continued to solidify her coalition. Markets also awaiting who she would name as the next Finance Minister.

- Spot gold tops $4,000/oz.

- 10-year German Bund yield at 2.69%, France 10-year Oat at 3.51% and 10-year Gilt yield at 4.72% 10-year Treasury yield: 4.13%.

Economic data

- (NL) Netherlands Aug Consumer Spending Y/Y: 1.1% v 1.3% prior.

- (NO) Norway Sept PPI including Oil M/M: -1.7% v -0.9% prior; Y/Y: -2.8% v -3.0% prior.

- (DE) Germany Aug Trade Balance: €17.2B v €15.0Be; Exports M/M: -0.5% v +0.2%e; Imports M/M: -1.3% v –0.5%e.

- (DK) Denmark Aug Current Account Balance (DKK): 25.7B v 39.3B prior.

- (JP) Japan Sept Preliminary Machine Tool Orders Y/Y: 9.9% v 8.5% prior.

- (PH) Philippines Central Bank (BSP) cut the Overnight Borrowing Rate by 25bps to 4.75% (not expected).

- (TR) Turkey Aug Industrial Production M/M: +0.4% v -1.7% prior; Y/Y: 7.1% v 5.2% prior.

- (TW) Taiwan Sept Trade Balance: $12.4B v $16.3Be; Exports Y/Y: 33.8% v 38.8%e; Imports Y/Y: 25.1% v 22,5%e.

- (GR) Greece Sept CPI Y/Y: 1.9% v 2.9% prior; CPI EU Harmonized Y/Y: 1.8% v 3.1% prior.

Fixed income issuance

- (IE) Ireland Debt Agency (NTMA) sold total €1.5B vs. €1.0-1.5B indicated range in 2034 and 2055 IGB bonds.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland Sept CPI M/M: No est v 0.4% prior; Y/Y: No est v 2.0% prior.

- 06:00 (IE) Ireland Sept CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y (final): No est v 2.7% prelim.

- 06:00 (ES) ECB's Escriva (Spain).

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (RO) Romania to sell RON400M in 7.25% 2040 bonds.

- 06:25 (FR) ECB’s Villeroy (France).

- 07:00 (ZA) South Africa Aug Manufacturing Production M/M: +0.1%e v -0.5% prior; Y/Y: -0.4%e v -0.7% prior.

- 07:30 (EU) ECB Sept Minutes.

- 08:00 (BR) Brazil Sept IBGE Inflation IPCA M/M: +0.5%e v -0.1% prior; Y/Y: 5.2%e v 5.1% prior.

- 08:00 (MX) Mexico Sept CPI M/M: 0.3%e v 0.1% prior; Y/Y: 3.8%e v 3.6% prior.

- 08:00 (MX) Mexico Sept CPI Core M/M: 0.3%e v 0.2% prior; Y/Y: 4.3%e v 4.2% prior.

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

- 08:15 (CA) Bank of Canada (BOC) Dep Gov Rogers.

- 08:30 (US) Initial Jobless Claims: 228Ke v K prior; Continuing Claims: 1.93Me v M prior.

- 08:30 (UR) Ukraine Sept CPI M/M: No est v -0.2% prior; Y/Y: 12.4%e v 13.2% prior.

- 08:30 (US) Fed Chair Powell.

- 08:35 (US) Fed's Bowman.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 3rd: No est v $713.3B prior.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

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

- 10:00 (US) Aug Final Wholesale Inventories M/M: -0.2%e v -0.2% prelim; Wholesale Trade Sales M/M: 0.6%e v 1.4% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (MX) Mexico Central Bank (Banxico) Sept Minutes.

- 11:00 (IE) ECB’s Lane (Ireland, chief economist).

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 12:45 (US) Fed's Barr.

- 13:00 (US) Fed’s Kashkari.

- 13:00 (US) Treasury to sell 30-year bonds reopening.

- 15:45 (US) Fed's Bowman.

- 17:00 (KR) South Korea Sept Foreign Reserves: No est v $416.3B prior.

- 17:30 (NZ) New Zealand Sept Manufacturing PMI: No est v 49.9 prior.

- 18:00 (AU) RBA Gov Bullock.

- 19:00 (PE) Peru Central Bank Interest Rate Decision: Expected to leave Reference Rate unchanged at 4.25%.

- 19:50 (JP) Japan Sept PPI (domestic CGPI) M/M: +0.1%e v -0.2% prior; Y/Y: 2.5%e v 2.7% prior.

- 19:50 (JP) Japan Sept Bank Lending Y/Y: No est v 3.6% prior; Bank Lending (ex-trusts) Y/Y: No est v 3.9% prior.

- 21:40 (US) Fed’s Daly.

- 23:30 (JP) Japan to sell 3-Month Bills.