Oilfields in Iran's sights, Israel fighting war on multiple fronts

EU Mid-Market Update: Oilfields in Iran's sights, Israel fighting war on multiple fronts and no signs of tensions easing paints an ugly picture and upside risk to crude; US ports strike continue.

Notes/observations

-Middle East escalation takes main focus, as news flow is light during EU cash trade. Israel vows to launch significant retaliation to Iran after Iran fired up to 200 missiles into Israel. Press reports Iran is considering burning oil fields across Middle East related to western exports; No substantial number of casualties reported amid conflicting reports about number of missiles that were intercepted by Israel’s Iron Dome. US forces helped shoot down missiles on back of Pres Biden orders. UK aircraft involved also in passive monitoring role. Crude spiked to 75 for Brent and 72 for WTI on initial reports of Iran firing rockets.

-Iceland unexpectedly cuts rates for first time since pandemic due to fall in underlying inflation and subdued economy; However, noted necessary to maintain appropriately tight monetary stance.

-US East Coast ports strike continues as Longshoremen's Union demands more than $5/hour increase in wages for each of the six years of a new ILA-USMX master contract.

-Elsewhere, macro focus on US ADP employment report at 08:15 ET. Reminder JOLTS job openings beat consensus and nonfarm payrolls looms on Friday.

-Asia closed mixed with Nikkei underperforming -2.3%. EU indices are -0.4% to +0.4%. US futures are -0.2% to -0.3%. Gold -0.4%, DXY +0.1%; Commodity: Brent +2.5%, WTI +2.7%; Crypto: BTC -3.5%, ETH -6.5%.

Asia

- South Korea Sept CPI M/M: 0.1% v 0.4%e; Y/Y: 1.6% v 1.9%e; CPI Core Y/Y: 2.0% v 2.0%e.

- South Korea Sept PMI Manufacturing: 48.3 v 51.9 prior (1st contraction in 5 months).

Mid-East

- Moody’s cut Israel sovereign rating 2 notches to Baa1 from A2; Outlook remained Negative citing intensifying geopolitical risk.

Global conflict/tensions

- Israel military confirmed the launch of over 100 ballistic missiles by Iran towards Israel; Sounds of explosions heard in Jerusalem and Tel Aviv (**Reminder: White House had confirmed it had intelligence that Iran was preparing a ballistic missile attack against Israel; Strike might come in next 12 hours; US was actively supporting defensive preparations to defend Israel from this attack).

- Iran Foreign Min Araghchi stated that Iranian action was concluded unless there was further Israeli retaliation.- Israel said to be planning to launch a "significant retaliation" to Iran’s Oct 1st's missile attack within days that could target oil production facilities inside Iran and other strategic site.

Europe

- ECB's Kazaks (Latvia) stated that was important that markets did not get ahead of themselves on rate expectations; Too soon to say that we were done with inflation.

- SNB President Schlegel stated that recent meeting did not rule out additional interest rate cuts.

Energy

- Weekly API Crude Oil Inventories: -1.5M v -4.3M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.29% at 522.40, FTSE +0.41% at 8,310.64, DAX +0.18% at 19,234.35, CAC-40 +0.51% at 7,612.89, IBEX-35 -0.23% at 11,646.35, FTSE MIB +0.38% at 33,901.00, SMI +0.45% at 12,130.00, S&P 500 Futures -0.12%].

Market Focal Points/Key Themes: European indices open mixed with a bias to the upside that became more dominant through the early hours of trading; speculation of monetary policy easing seen outweighing concerns over geopolitical situation; Israel closed for holiday; among sectors leading the way higher are energy and technology; lagging sectors include real estate and telecom; oil & gas subsector supported over potential Israeli military action against Iranian oil production facilities; musicMagpie to be acquired by AO World; BBVA raises offer for Sabadell; Saga confirms talks with Ageas on potential merger of insurance units; earnings expected in the upcoming Americas session include ConAgra Brands.

Equities

- Consumer discretionary: JD Sports [JD.UK] -3.5% (H1 results, weak commentary on outlook and guidance), Adidas [ADS.DE] +1.5% (read-across from Nike earnings and JD Sports), Air France/KLM [AF.FR] -3.0% (France considers increasing tax on air tickets; Could weigh on customer demand), AO World [AO.UK] +3.0% (to acquire musicMagpie for 9.07/shr in cash), Indra Systems [IDR.ES] +4.0% (reportedly plans selling majority stake in tech unit).

- Financials: Grenke [GLJ.DE] +5.0% (Q3 results), Mercialys [MERY.FR] -5.0% (Jefferies cuts to hold).

- Industrials: Daimler Truck [DTG.DE] +1.5% (outgoing CEO comments).

- Technology: musicMagpie [MMAG.UK] +49.0% (to be acquired).

Speakers

- ECB's Guindos (Spain) reiterated Council stance that risks to growth remained tilted to the downside; recovery to strengthen over time.

- Iceland Central Bank Policy Statement noted that inflation and inflationary expectations remained above target, and strong domestic demand called for caution. Necessary to maintain an appropriately tight monetary stance in order to bring inflation back to target within an acceptable time frame.

- German VDMA Engineering Association: Aug Orders +7% y/y. Domestic (within Euro Zone) Orders -7% y/y while Foreign (outside Euro Zone) Orders +13% y/y

- BOJ Gov Ueda reiterated stance to continue monetary policy appropriately; markets remain unstable. Reiterated its overall economic assessment that economy was recovering moderately amid some weakness. Watching financial markets with sense of urgency and must be vigilant of FX volatility on economy and prices.

Currencies/fixed income

- USD holding on recent gains aided by escalating geopolitical tensions seen reviving fears over a deepening conflict in the Middle East.

- EUR/USD at 1.1065 by mid-session. Pair faces headwinds as analysts now expect ECB to cut rates at every meeting until spring.

- USD/JPY back above 144. BOJ rhetoric was little changed as BOJ Gov Ueda met with the new PM.

Economic data

- (ES) Spain Sept Net Unemployment Change: +3.2K v +12.0Ke; Net Change In Employment M/M: +2.2K v +30.2K prior.

- (FR) France Aug YTD Budget Balance: -€171.9B v -€156.9B prior.

- (IT) Italy Aug Unemployment Rate: 6.2% v 6.5%e.

- (IS) Iceland Central Bank (Sedibanki) cut the 7-day Term Deposit Rate by 25bps to 9.00% to move into easing mode with its 1st rate cut since May 2020.

- (NG) Nigeria Sept PMI (whole economy): 49.8 v 49.9 prior.

- (EU) Euro Zone Aug Unemployment Rate: 6.4% v 6.4%e.

- (BE) Belgium Aug Unemployment Rate: 5.4% v 5.4% prior.

Fixed income issuance

- (DK) Denmark sold total DKK2.665B in 2026 and 2033 DGB Bonds.

- (UK) DMO sold £4.0B in 4.125% July 2029 Gilts; Avg Yield: 3.880% v 3.811% prior; bid-to-cover: 2.93x v 3.29x prior; Tail: 1.2bps v 0.9bps prior.

- (SE) Sweden sold total SEK17.5B vs. SEK17.5B indicated in 3-month and 6-month Bills.

- (GR) Greece Debt Agency (PDMA) sold €600M vs. €500M indicated in 3-month bills; Avg Yield: 2.84% v 3.23% prior; Bid to cover: 1.89x v 2.00x prior.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 5.75%.

- OPEC JMMC Technical meeting.

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

- 05:30 (UK) Bank of England (BOE) Financial Policy Committee (FPC) Minutes.

- 05:30 (UK) BOE Financial Policy Committee (FPC) minutes.

- 05:30 (LT) ECB's Kazaks (Latvia) in Riga.

- 05:30 (IE) ECB's Lane (Ireland, chief economist) chairs panel in Frankfurt.

- 05:30 (DE) Germany to sell €4.5B in 2.60% Aug 2034 Bunds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (IE) Ireland Sept Unemployment Rate: No est v 4.3% prior.

- 06:00 (EU) EU Commission to sell combined €3.5B in 3-month and 6-month Bills.

- 06:00 (CZ) Czech Republic to sell combined CZK6.0B in 2033 and 2044 Bonds.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Sept 27th: No est v 11.0% prior.

- 07:01 (NZ) New Zealand Sept CoreLogic Home Prices M/M: No est v -0.5% prior.

- 07:00 (NL) ECB's Elderson (Netherlands) in Dublin.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (BR) Brazil Aug Industrial Production M/M: +0.1%e v -1.4% prior; Y/Y: 2.2%e v 6.1% prior.

- 08:00 (MX) Mexico July Gross Fixed Investment M/M: +1.1%e v -1.0% prior; Y/Y: +4.8%e v -1.3% prior; Private Consumption Y/Y: 4.4%e v 0.4% prior.

- 08:00 (MX) Mexico Sept Vehicle Domestic Sales: No est v 127.7K prior.

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

- 08:15 (US) Sept ADP Employment Change: +123Ke v +99K prior.

- 09:00 (SG) Singapore Sept Purchasing Managers Index (PMI): No est v 50.9 prior; Electronics Sector Index: No est v 51.3 prior.
(PL) Poland Central Bank (NBP) Interest Rate Decision.

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

- 10:00 (AT) ECB's Holzmann (Austria) in Vienna.

- 10:05 (US) Fed's Musalem gives welcoming remarks.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (DK) Denmark Sept Foreign Reserves (DKK): No est v 638.7B prior.

- 11:00 (MX) Mexico Sept Manufacturing PMI: No est v 48.5 prior.

- 11:00 (MX) Mexico Aug Total Remittances: $5.7Be v $5.6B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

- 11:00 (CO) Colombia Aug Exports FOB: $4.0Be v $4.6B prior.

- 11:00 (US) Fed's Bowman gives keynote speech.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (CA) Canada to sell 5 Year Bonds.

- 12:00 (RU) Russia Q2 Final GDP (3rd reading) Y/Y: 4.1%e v 4.1% prelim.

- 12:00 (RU) Russia Aug Real Retail Sales Y/Y: 5.5%e v 6.1% prior.

- 12:00 (RU) Russia Aug Unemployment Rate: 2.4%e v 2.4% prior; July Real Wages Y/Y: 6.5%e v 6.2% prior.

- 12:15 (US) Fed’s Barker.

- 12:45 (DE)) ECB's Schnabel(Germany) in Freiburg.

- 14:00 (MX) Mexico Sept IMEF Manufacturing Index: No est v 48.3 prior; Non-Manufacturing Index: No est v 50.7 prior.

- 19:00 (AU) Australia Sept Final PMI Services: No est v 50.6 prelim; PMI Composite: No est v 49.8 prelim.

- 20:00 (NZ) New Zealand Sept ANZ Commodity Price M/M: No est v 2.1% prior.

- 20:01 (IE) Ireland Sept PMI Services: No est v 53.8 prior; PMI Composite: No est v 52.6 prior.

- 20:30 (JP) Japan Sept Final PMI Services: No est v 53.9 prelim; PMI Composite: No est v 52.5 prelim.

- 20:30 (SG) Singapore Sept PMI (whole economy): No est v 57.6 prior.

- 21:30 (AU) Australia Aug Trade Balance (A$): 5.5Be v 6.0B prior; Exports M/M: No est v 0.7% prior; Imports M/M: No est v -0.8% prior.

- 21:30 (JP) BOJ Board Noguchi in Nagasaki.

- 22:00 (NZ) (NZ) New Zealand to sell combined NZ$500M in 2031, 2034 and 2041 bonds.

- 23:35 (JP) Japan to sell 10-year JGB Bonds.