Lagarde's backstop rests on Paris staying inside EU fiscal rules

EU mid-market update: SpaceX's spectrum deal sends US carriers and European telecoms sharply lower; OpenAI's $50B Rev report takes QQQ down 1.35% as Oracle has been supplying natural gas to data centres by truck; SoftBank seeks $100B outside its balance sheet; Lagarde's backstop rests on Paris staying inside EU fiscal rules.

Notes/observations

- Duration relief and a thinner war premium in crude drive the open. US tens at 5.24%, down from Wednesday's 5.31%, lead the bond rally after a clean 30-year reopening and Trump's pledge of no Iran strikes before the midterms, while Brent holds above $100; French tens at 4.81% leave the OAT-Bund spread at 136bp, a few bp inside Tuesday's 139bp.

- A disagreement over OpenAI's revenue perimeter knocked 1.35% off QQQ on Thursday, despite no evidence that the company had actually lost $20B of sales. The FT put September annualised revenue near $50B, against the $70B run rate circulated to investors last month, sending the Nasdaq to session lows and leaving Oracle -5.48%, Broadcom -4.3%, Nvidia -2.9%, AMD -3.9% and Micron -4.8%. QQQ closed at $747.50, down $10.23, on 48.2M shares versus 25.5M Wednesday; the Nasdaq Composite lost 1.25% against a 0.47% decline in the S&P 500. Reuters traced much of the $20B discrepancy to attempts to compare OpenAI with Anthropic, which includes cloud-partner sales that OpenAI excludes; cloud channels account for roughly half Anthropic's revenue and collect around 16% of sales made through them. Bloomberg subsequently reported that OpenAI still expects to reach or exceed $70B annualised revenue by December, driven by enterprise sales, against roughly $50B in September. That leaves a substantial amount of growth to deliver over the final quarter but makes Thursday's purported revenue miss partly a question of reporting methodology and timing. The equity response was nevertheless broad because the earlier number had become a reference point for infrastructure suppliers whose valuation and financing assumptions depend on OpenAI's future capacity consumption.

- The $22B 30Y Treasury reopening stopped at 5.618%, 31bp above September, yet left dealers with only 6.8% of the allocation as the long end rallied from its intraday highs. Indirect bidders took 72.3%, versus 79.5% at the previous reopening but above the recent 69.1% average; direct accounts took 20.9% and bid-to-cover was 2.54 against 2.41 on average. The stop was 0.1bp above the 5.617% when-issued level, effectively on the screws rather than through, and the yield remains the highest 30Y auction stop since 2000. Treasury separately accepted the maximum $6B in liquidity buybacks against $14.9B offered for bonds maturing in 2046–2056, replacing less-liquid outstanding paper with cash while continuing to distribute new benchmark duration. The 30Y yield fell back toward 5.60% from an intraday 5.7315%, while the 10Y retreated toward 5.23%, despite Thursday's oil spike and continuing expectations of another Fed hike. Investors were prepared to absorb duration at these prices, but the cost of capital underlying AI leasing, private-credit structures and sovereign refinancing remains far above the rates at which many of those commitments were originally conceived. Friday's European bond recovery followed the US auction, with 10Y OAT yields easing about 7bp toward 4.825% against a roughly 4.6bp Bund rally.

- Iran's immediate military-risk premium eased after Trump ruled out US strikes before November 3, despite fresh attacks on commercial transport infrastructure and no removal of the blockade. Brent fell approximately 1% toward $103.36/bbl on Friday after approaching $106 during Thursday's escalation, while Iranian officials continued reviewing Washington's response to a proposed reopening arrangement for Hormuz. Washington nevertheless designated another 17 vessels linked to Iranian oil movements, and Saudi authorities confirmed Friday that two attacks on Riyadh's King Khalid International Airport on Thursday killed three people. A separate projectile strike on a chemical tanker north of Qatar extended the disruption beyond the Hormuz passage itself. The distinction between a lower probability of near-term US military strikes and improved commercial route security remains visible in the sanctions, vessel risk and transport restrictions still in force. With US Gulf offshore operators simultaneously shutting around 1.28M bpd ahead of Hurricane Isaias, the fall in Friday's crude price reflects political relief before there is evidence of an equivalent increase in usable supply.

- SpaceX's low-band spectrum deal turned European telecom weakness into an infrastructure-landlord trade, with Deutsche Telekom down 7% while US towers rallied. The company's acquisition of Grain Management's nationwide 800MHz portfolio, reportedly worth approximately $8B and subject to FCC approval, adds a terrestrial coverage component to Starlink Mobile's satellite-based service. T-Mobile, Verizon and AT&T fell roughly 6–7% after hours on Thursday, while American Tower, Crown Castle and SBA Communications rose around 5-7%, reflecting the possibility that SpaceX becomes another major tower customer as well as a mobile competitor. Bernstein estimates a fully developed terrestrial network could require 30,000–120,000 tower locations and $50–130B, far beyond the approximately 1,200-2,000 new US tower structures built annually. Existing towers may therefore become a more economical route to deployment than mass construction, even if a satellite-only service remains unable to match established networks in dense urban environments. Friday's selling in Deutsche Telekom reflects its roughly 54% ownership of T-Mobile US, while Vodafone, Orange and Telefónica fell 2-4% despite having no equivalent direct US ownership exposure. The broader European reaction is discounting future competition before SpaceX has acquired the terrestrial scale required to deliver it.

- Oracle has been delivering natural gas by truck for more than a year at one data centre, while a separate pipeline delay now threatens the timetable of Project Jupiter. Bloomberg reports that trucked gas has supported operations near Salt Lake City while a pipeline was completed, and the approach is being used at an OpenAI campus in Shackelford County, Texas. Oracle is considering a similar workaround in New Mexico after a regulator rejected the original pipeline route, pushing the targeted start of service into next year from this summer. Last month Oracle sent Jupiter's developer, a Blue Owl unit, a force-majeure notice that could defer some payment obligations if the project fails to come online as scheduled in 2028. Gas delivered by road can support an initial phase of generation without providing the continuous fuel volume required for a fully developed multi-gigawatt campus; the workaround's economics depend on delivered gas costs, fleet capacity and the pace of energisation. Oracle has agreed to procure up to 2.8GW of Bloom Energy fuel-cell systems, including 1.2GW already contracted, but those units still depend on usable fuel supply. Thursday's weakness in Bloom Energy alongside Oracle brought the physical delivery problem into the same session as the financial one. A customer contract, financed GPUs and on-site generation can all be in place before sufficient fuel reaches the project.

- France's €340B 2027 bond programme contains €19.4B of additional medium- and long-term redemptions, making today's borrowing rates progressively more expensive for debt issued during the pandemic and energy crises. Agence France Trésor projects a €339.7B financing requirement, up €28B on the updated 2026 figure, with the end of €6.1B in European recovery-fund financing adding to the need for market funding. France's 10Y yield approached 5% after rising almost 80bp since early September, before retreating toward 4.83% Friday; the spread over Bunds remains around 136bp. The government's deficit is still above 5% of GDP, and Eurogroup officials offered no unconditional bond-market intervention commitment Thursday. The ECB's Transmission Protection Instrument includes fiscal compliance, debt sustainability and the assessment of unwarranted market dysfunction among its conditions, with France's corrective action under the excessive-deficit procedure relevant to eligibility. The refinancing arithmetic is more immediate than the long-run debt projection: as lower-coupon bonds mature, a growing share of the outstanding stock must be rolled at yields that are already feeding back into debt-service expectations. Europe's largest sovereign refinancing programme is therefore entering 2027 with both its funding cost and fiscal-policy credibility under greater scrutiny.

- Apple's reported 15–20% reduction in October component orders for the iPhone 18 Pro and Pro Max gives the AI memory shortage a direct consumer-demand consequence. Nikkei says Apple became more cautious on shipments in early September after lifting both premium models' starting prices by $100, to $1,199 and $1,299, partly in response to higher memory costs. The reductions apply to orders against original supplier plans, not confirmed retail sales or a corresponding reduction in Apple's full-year revenue, and the new split launch schedule may also be affecting the comparison. The report nevertheless arrives the morning after Micron fell 4.8% in the broader AI selloff, even though memory scarcity has been supporting producer pricing and expectations for 2027. Capacity allocated to high-margin AI memory can improve supplier economics while increasing the cost of smartphones and PCs, where price increases may destroy part of the end-demand volume. The same supply constraint can therefore support memory manufacturers' pricing power, compress device manufacturers' margins and weaken orders for adjacent components. Apple shares were indicated almost 1% lower premarket, making the read-across to display, camera and assembly suppliers more immediate than another AI benchmark announcement.

- SoftBank's proposed $100B Gulf fundraising follows an $11.1B junk-bond placement carrying yields as high as 9.75%, and comes as public investors have just rejected a highly leveraged AI-infrastructure listing. The FT says Masayoshi Son has approached Gulf investors about financing a vehicle to acquire operating companies and deploy AI and robotics through SoftBank's Roze business; neither the fundraising nor its reported size is committed. SoftBank has already invested approximately $65B in OpenAI, increasing the importance of raising outside capital before that private investment can be monetised. Australia's Firmus meanwhile abandoned its proposed $5B IPO, which had implied around A$30.6B of equity value, after investors learned that a previously planned 1.6GW arrangement with CDC Data Centres was no longer proceeding. Firmus currently operates two leased facilities and had projected $5B of annual earnings within five years, while analysts estimated roughly $30B of debt in the proposed structure. These are different businesses and funding proposals, but their timing exposes the same constraint: large AI investment programmes now require capital from public equity, high-yield credit, private lenders or sovereign investors at terms that can differ sharply. The BoE estimates approximately $700B of data-centre expenditure in 2026–2028 may be financed by private credit, placing increasing importance on project counterparties, guarantees and the timing of cash generation. Firmus loses an expected equity-funding source; SoftBank is seeking a new investor base before undertaking another large acquisition programme.

- Cross-asset: Thursday's AI selloff was substantially more concentrated than the broader US equity decline: QQQ -1.35%, Nasdaq Composite -1.25%, S&P 500 -0.47% and Dow +0.10%, with Oracle -5.48% and semiconductors among the worst performers. Friday's early European rebound has STOXX 600 +0.8% near 630.5, DAX and CAC 40 higher, but telecoms -2.7% following SpaceX's 800MHz spectrum deal and Deutsche Telekom -7%. UST 2Y/10Y/30Y stood around 4.75%/5.23%/5.60% following the long-bond auction, with French 10Y OATs near 4.83% and Bunds around 3.46%; EUR/USD recovered toward 1.123 while remaining lower for the week. Brent eased toward $103/bbl, WTI toward $91 and gold rebounded toward $4,170/oz. Oil's retreat and better long-duration demand are supporting Friday's European session, but Thursday's relative collapse in AI suppliers occurred alongside a fresh wave of prospective chip financing and renewed scrutiny of the revenues expected to service it.

- Asia closed mixed with Hang Seng outperforming +1.8%. EU indices +0.8-1.1%. US futures +0.2-0.9%. Gold +1.3%, DXY -0.1%; Commodity: Brent -1.3%, WTI -1.1%; Crypto: BTC -0.7%, ETH -2.7%.

Asia

- Japan Aug Household Spending Y/Y: -3.1% v -3.6%e (9th straight decline).

- Japan Fin Min Katayama affirmed to reboot spending review, widening scrutiny of public funds and subsidies.

- Fitch affirmed Australia's sovereign rating at AAA; outlook stable.

Europe

- Eurogroup set Oct 28th as the deadline for ECB nominations; Expected to decide on successor for ECB's Schnabel as soon as next month.

- ECB's President Lagarde told the Euro Finance Chief: There was no sense of broadening prices; The ECB was attentive to the markets; The ECB had the tools to counter unwarranted market dynamics.

Americas

- CBO Director Swagel believed the impact of debt concerns on Treasury yields was small. US needed 5-6% GDP rise to stabilize debt via growth. Fiscal trajectory would put pressure on rates.

- OpenAI annualized revenues said to be $20B less than previously signaled.

Energy

- China to resume Oct refined fuel exports after a brief halt.

- Hurricane Isaias moved toward the southern coast of the United States as a Cat 2 storm.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.78% at 10,523.41, DAX +1.02% at 25,060.25, CAC-40 +0.86% at 7,795.78, IBEX-35 +1.24% at 19,164.42, FTSE MIB +0.98% at 49,781.50, SMI +0.99% at 13,771.70, S&P 500 Futures +0.46%].

Market focal points/key themes: European equities opened Friday with a measured recovery attempt, the Stoxx Europe 600 climbing 0.8% after Thursday’s sharp sell-off had driven the regional benchmark to its lowest close in nearly four months, yet the index remained approximately 1% lower on the week as residual fixed-income volatility, hawkish central-bank signals and energy-price shocks continued to restrain risk appetite. The session’s most extreme single-stock moves were Modern Times Group’s 13.5% plunge after it postponed the PlaySimple IPO until 2027 on weak Indian market conditions and Deutsche Telekom’s 7% decline (with Vodafone, Orange and peers also lower) on SpaceX’s acquisition of nationwide U.S. low-band spectrum that raised orbital-competition fears for terrestrial operators, while Frontline advanced 6% on sustained tanker-rate support and software names such as Nemetschek (+4.5%) and RELX (+3.5%) rebounded once oil and yields eased. French 10-year yields had spiked toward 25-year highs on concerns over a near-120% debt-to-GDP ratio and a fractured legislative path to €54 billion in budget cuts, widening the OAT-Bund spread past 140 basis points and transmitting contagion to Italian and Greek paper as well as to French bank equities whose domestic bond portfolios faced mark-to-market pressure. Although CAC 40, FTSE 100 and IBEX 35 each rose roughly 0.8–1.2% in early trade, the combination of Brent’s retreat from above $100, European gas still elevated near €80/MWh, and the Bank of France’s explicit rejection of ECB intervention left continental bourses firmly on track for a second consecutive weekly loss.

Equities

Consumer discretionary: Modern Times Group [MTG-B.SE] -13.5% (postponed the planned PlaySimple IPO until 2027 because of unfavorable Indian capital-market conditions).

Technology: Hexagon [HEXA-B.SE] +3.0% (agreed to acquire geotechnical-software provider Rocscience for $535 million; JPMorgan also upgraded to Overweight from Neutral and raised its target to SEK125 from SEK90), Nemetschek [NEM.DE] +4.5%, RELX [REL.UK] +3.5%, Sage Group [SGE.UK] +3.0%, Experian [EXPN.UK] +2.5% (software and data names rebounded as oil and bond yields retreated and clarification around OpenAI revenue eased overnight technology concerns).

Telecom: Deutsche Telekom [DTE.DE] -7.0%, Vodafone [VOD.UK] -3.5%, Zegona [ZEG.UK] -3.5%, Orange [ORA.FR] -2.5%, Telefonica [TEF.ES] -2.5%, BT Group [BT.A.UK] -2.0% (SpaceX agreed to acquire a nationwide US low-band spectrum portfolio, triggering fears of new orbital competition for wireless operators; Deutsche Telekom owns 54% of T-Mobile US), Airtel Africa [AAF.UK] -2.0% (Airtel Money began conditional London trading following an all-secondary IPO at £1.96 a share that valued the payments unit at £5.3 billion and raised no new capital).

Energy: Frontline [FRO.NO] +6.0% (Middle East supply-route risk continued to support tanker-rate expectations despite the pullback in crude prices), BP [BP.UK] -1.0% (Brent retreated as the immediate risk of a US attack on Iran eased, reducing the Middle East supply premium).

Industrials / Defence: Fresnillo [FRES.UK] +3.0%, Antofagasta [ANTO.UK] +2.5% (London-listed miners led the broader risk-on recovery as sovereign yields eased).

Financials: Swedbank [SWED-A.SE] +1.5%, SEB [SEB-A.SE] +1.5% (Barclays upgraded both banks to Overweight from Equal Weight, raising targets to SEK467 from SEK347 and SEK262 from SEK204, respectively), Tryg [TRYG.DK] +0.5% (Q3 pretax profit beat consensus as insurance-service profit reached a record DKK2.45bn and the dividend increased about 5%), Atrium Ljungberg [ATRLJ-B.SE] -2.5% (Q3 rental income, net operating income and profit from property management missed expectations, while vacancy and leverage increased).

Speakers

- China Finance Ministry said to vow to implement more proactive fiscal policy and roll out effective new policies. Pledged more measures to increase domestic demand and step up countercyclical policy adjustments.

- Malaysia Govt unveiled its 2027 budget which saw 2027 fiscal deficit to GDP at 3.3% vs 3.6% in 2026. Saw 2027 GDP growth between 4.2-5.2% range (4.8-5.3% in 2026) and saw 2027 inflation between 1.8-2.8% range (1.5-2.5% in 2026).

- US Treasury Sec Bessent reportedly might skip APEC in Hong Kong to focus on Trump's Shenzhen visit.

Currencies

- Some risk appetite found some tailwinds as President Trump stated he would not attack Iran ahead of the Nov mid-term elections. Oil prices dipped lower as bond yield fell. USD was a touch softer against most major pairs.

- EUR/USD at 1.1230 by mid-session.

- USD/JPY at 158.30 as dealer believed the pair would likely to remain range bound in the near term within the 155-160 yen range. Risk of intervention in support of the yen should help cap the dollar's gain.

- The 10-year German Bund yield last at 3.46%, France 10-year Oat at 4.82% and 10-year Gilt yield at 5.42%; 10-year Treasury yield: 5.24%; 10-year JGB: 3.00%.

Economic data

- (NL) Netherlands Aug Manufacturing Production M/M: 3.2% v 1.6% prior; Y/Y: 12.0% v 9.0% prior; Industrial Sales Y/Y: 11.6% v 7.0% prior.

- (SE) Sweden Aug GDP Indicator M/M: 1.1% v 0.5%e; Y/Y: 3.5% v 2.7% prior.

- (SE) Sweden Aug Private Sector Production M/M: 0.5% v 0.2% prior; Y/Y: 3.8% v 4.0% prior.

- (SE) Sweden Aug Industrial Orders M/M: 2.0% v -18.7% prior; Y/Y: 5.1% v 7.7% prior.

- (SE) Sweden Aug Industry Production Value Y/Y: 5.8% v 1.7% prior; Service Production Value Y/Y: 3.4% v 4.9% prior.

- (NO) Norway Sept CPI M/M: +0.5% v -0.3% prior; Y/Y: %3.4 v 3.6%e.

- (NO) Norway Sept Underlying CPI M/M: 0.2% v 0.3%e; Y/Y: 3.0% v 3.1%e.

- (NO) Norway Sept PPI (including Oil) M/M: 12.4% v 4.7% prior; Y/Y: 48.8% v 30.1% prior.

- (DE) Denmark Aug Current Account Balance (DKK): 34.5B v 43.3B prior.

- (RO) Romania Q2 Final GDP Q/Q: 0.0% v 0.0% prelim; Y/Y: -0.2% v -0.4% prelim.

- (JP) Japan Sept Preliminary Machine Tool Orders Y/Y: 60.4% v 64.7% prior.

- (CH) Swiss Sept SECO Consumer Confidence: -35.8 v -31.5e.

- (TR) Turkey Aug Industrial Production M/M: -1.0% v -0.9% prior; Y/Y: -1.9% v -0.2% prior.

- (AT) Austria Aug Industrial Production M/M: -0.9% v -0.1% prior; Y/Y: -0.5% v -0.7% prior.

- (CN) Weekly Shanghai Deliverable copper inventories (SHFE): 58.7K v 38.7K tons prior.

- (TH) Thailand Foreign Reserves w/e Oct 2nd: $275.6B v $278.4B prior.

- (IS) Iceland Sept International Reserves (ISK): 923B v 949B prior.

- (IT) Italy Aug Industrial Production M/M: -1.3% v 0.0%e; Y/Y: 0.0% v 2.1%e; Industrial Production NSA (unadj) Y/Y: +3.1% v -0.1% prior.

- (RU) Russia Narrow Money Supply w/e Oct 2nd (RUB): 22.78T v 22.76T prior.

- (GR) Greece Aug Industrial Production Y/Y: +5.8% v -1.2% prior.

- (GR) Greece Sept CPI Y/Y: % v 3.8% prior; CPI EU Harmonized Y/Y: % v 3.7% prior.

Fixed income issuance

- India sold total INR360B vs. INR360B indicated in 2041 and 2076 bonds.

Looking ahead

- 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 (PT) Portugal Aug Trade Balance: No est v -€3.1B prior.

- 06:00 (UK) DMO to sell £6.0B combined 1-month, 3-month and 6-month bills.

- 06:15 (IT) ECB’s Cipollone (Italy).

- 07:00 (IS) Iceland to sell 2029 and 2038 RIKB bonds.

- 07:00 (UR) Ukraine Sept CPI M/M: No est v 0.1% prior; Y/Y: 8.9%e v 8.1% prior.

- 08:00 (PL) Poland Central Bank (NBP) Sept Minutes (2 decisions ago).

- 08:00 (BR) Brazil end-Sept IBGE Inflation IPCA M/M: 0.8%e v -0.3% prior; Y/Y: 4.5%e v 4.2% prior.

- 08:00 (IS) Iceland Sept Unemployment Rate: No est v 3.9% prior.

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

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

- 08:30 (CA) Canada Sept Net Change in Employment: +10.0Ke v -41.7K prior; Unemployment Rate: 6.5%e v 6.4% prior; Full Time Employment Change: No est v -35.9K prior; Part Time Employment Change: No est v -5.8K prior; Participation Rate: 65.0%e v 65.0% prior; Hourly Wage Rate Permanent Employees Y/Y: 2.3%e v 2.0% prio.r

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

- 09:30 (DE) ECB’s Schnabel (Germany).

- 10:00 (US) Oct Preliminary University of Michigan Confidence: 47.6e v 48.1 prior.

- 12:00 (RU) Russia Sept CPI M/M: +0.3%e v -0.1% prior; Y/Y: No est v 6.3% prior.

- 12:00 (RU) Russia Sept CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 5.4% prior.

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

- 12:00 (EU) Potential European sovereign ratings (S&P on UK; Moody’s on Belgium).

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