Samsung's record profit misses consensus while TSMC beats guidance

EU mid-market update: Indirects take 80.3% of the 10-year at 5.30% as Waller leaves October open for a pause; SpaceX CDS reaches 195bp alongside Broadcom's $50B-plus chip financing search; Samsung's record profit misses consensus while TSMC beats guidance.

Notes/observations

- The 10-year drew 80.3% indirect demand at 5.30%, with dealers left holding just 2.5% of the $39B reopening. Wednesday's auction stopped 1.7bp through the 5.317% when-issued yield on a 2.77 cover against a six-auction average of 2.54, with indirects taking 80.3% against 74.1% normally, directs 17.1% and dealers 2.5% against 8.8%. The 5.300% stop was 46.6bp above September's 4.834%, when indirects had already taken 79.2% and cover reached 2.71; the secondary-market yield had touched 5.368% before the auction and retreated toward 5.28% afterward. Tuesday's $58B 3-year had drawn just 57.6% indirect participation against 65.9% normally, with directs absorbing 31.7% and dealers 10.7%. The week's first two auctions put considerably more end-investor demand into ten years than three, ahead of Thursday's $22B long-bond reopening against September's 5.308% 30-year stop.

- Waller separated the next hike's timing from its necessity, less than a day after the Fed minutes identified AI borrowing in both Treasury term premium and inflation. The governor said Thursday that further increases would probably be required to return inflation to 2%, but that hikes need not occur at consecutive meetings, leaving October 27–28 open for a pause before December 8–9. He cited strengthening second-half activity, the unresolved Iran energy shock and demand from AI infrastructure, without specifying a terminal rate; he also defended conditional policy signals against Chair Warsh's preference for less forward guidance. Wednesday's minutes showed all 12 voting members backing September's move to 3.75–4.00%, most expecting another increase by year-end, several judging policy only mildly restrictive or not restrictive, and a couple raising their estimates of neutral. The staff's August PCE estimates were 3.8% headline and 3.4% core under the previous methodology, falling to 3.6% and 3.2% under the BEA revision; several participants nevertheless saw AI demand adding to core goods inflation as tariff effects waned. Fed funds pricing had already reduced October hike odds to roughly 17–20%, with December the preferred meeting.

- SpaceX's five-year CDS reached 195.4bp as Broadcom began assembling more than $50B for OpenAI chips and Oracle sought another financing package. The SpaceX contract reportedly widened as much as 14.5bp Wednesday to its highest level since active trading began in June, while its 6.65% 2056 bond widened 12bp to a 238bp Treasury spread. SpaceX is discussing $40B of Nvidia financing, reportedly comprising $30B of IG securities and $10B of bank loans, against projected annual revenue of about $44.5B; Broadcom has approached Apollo and Blackstone over funding for OpenAI's Nexus custom-chip programme, while Oracle is in talks with Apollo and Goldman Sachs about a separate hardware purchase. The Broadcom and SpaceX amounts alone exceed $90B, although the former remains an early-stage financing discussion and Oracle's requirement has not been quantified. The Fed's trading desk recorded a roughly 35bp increase in 2–10Y Treasury yields between meetings and specifically cited competition from private AI debt issuance as a contributor to term premium; hyperscaler spreads remained wide given both the volume and duration of borrowing. SpaceX's credit spread has moved before its proposed $40B package has been placed.

- Samsung's group operating margin reached 55.1% as TSMC beat Q3 sales guidance, but Largan says the smartphone order peak has passed. Samsung's preliminary KRW107.4T operating profit rose 20.0% q/q and 783% y/y, against KRW108.67T expected on the supplied tape; revenue of KRW195T missed the KRW201.9T estimate, leaving a 55.1% margin against 52.2% in Q2. Memory pricing and HBM shipments drove the record quarter, while broker estimates put combined losses in parts of the consumer-device business above KRW1T; Samsung will not disclose divisional results until October 29. TSMC's September sales rose 54.6% y/y to NT$511.9B, completing a record NT$1.49T quarter against NT$1.46T expected, equivalent to $46.7B against July guidance of $44.6–45.8B. September was nevertheless 0.6% below August's NT$514.8B, and Largan told its earnings call Thursday that October shipments should be roughly flat with September before falling in November as customers revise orders lower. Taiwan's September trade surplus meanwhile reached $23.6B against $19.0B expected, up from $22.3B in August. TSMC's full margin and customer-mix disclosures arrive October 15.

- France's 10-year approached 4.9% against Bunds near 3.5%, while Britain's 30-year gilt briefly crossed 6% three weeks before the budget. The OAT-Bund spread was around 139bp after Wednesday's renewed French selloff, reversing Tuesday's relief following Le Pen's fiscal proposals and taking French borrowing costs close to their post-2002 highs. Italy and Greece also weakened, although France underperformed as the government continued negotiating a 2027 budget built around a deficit reduction from 5.4% to 5% of GDP. The UK's 30-year yield reached 6.036%, a 28-year high, and the 10-year approached 5.48%; Bank of America estimates UK borrowing could exceed previous projections by £15B in both the current fiscal year and 2027/28. The rise coincided with oil returning above $100/bbl and longer-dated Treasury yields trading near 2002 levels, while France's spread over Bunds widened independently of the global duration move.

- The IEA's proposed 100M-barrel acceleration is already inside March's 400M-barrel commitment, and European diesel rose as much as 8% after the agency confirmed it. The G7 had discussed delivering the outstanding volumes over four months, with diesel prioritised in the first 20 days, but Wednesday's IEA meeting approved no additional collective release. Members have supplied approximately 325M barrels under the March agreement, with roughly 100M of previously pledged volumes still available because some countries have exceeded their initial allocations; the IEA retains 1.1B barrels of publicly held emergency stocks, including more than 200M barrels of diesel. European diesel futures reached $1,435.25/t before retreating to $1,389.50/t, still up 4.5%, while Brent settled Wednesday at $100.20/bbl and WTI at $88.28. The agency agreed to prioritise diesel to the extent possible, without publishing a binding product split or country-by-country delivery timetable. France has separately proposed supplying 10M barrels of diesel, according to Reuters.

- Hurricane Isaias has shut in more than 511K bpd of US Gulf oil production, or ~25% of offshore output, before reaching the coast. The Marine Minerals Administration's Wednesday survey also recorded 350.25 MMcf/d of gas shut in, or 16.37%, with personnel evacuated from eight production platforms, just 2.16% of the Gulf's 371 manned platforms. Shell has suspended production at Mars, Olympus, Ursa, Vito and Appomattox, while Chevron initiated shutdowns at four operated facilities, keeping five others running normally. NOAA reconnaissance confirmed that Isaias strengthened into a 75mph hurricane with central pressure falling to 981mb, with further intensification expected before landfall along the northern Gulf Coast late Friday or early Saturday. Storm-surge forecasts reach 5–7 feet along parts of the Mississippi, Alabama and Florida coasts. The 511K bpd represents approximately 3.6M barrels over a full week at the current shut-in rate, although production at undamaged facilities can resume after inspections. Separately, Tropical Storm Simon has prompted a tropical-storm watch along southwestern Mexico's Pacific coast.

- Seven commodity vessels crossed Hormuz on Tuesday against more than 20 on Sunday and Monday, while 6.7M bpd of exports through bypass routes kept regional crude flows close to pre-war levels. Kpler's latest count, published Thursday, was the lowest since July 23; passages recovered to ten Wednesday, although more vessels entered than exited over the preceding two days. Crude moving through the strait fell 27% from the previous week's wartime high to at least 10.1M bpd, or 74% of pre-war throughput, with much of the decline attributable to fewer ship-to-ship transfers in the Gulf of Oman. Exports through the Gulf of Oman coast and Red Sea, meanwhile, reached 6.7M bpd, more than twice their pre-war level. LSEG independently counted eight Tuesday crossings against Kpler's seven commodity vessels, including five oil tankers and an LNG carrier loading at Qatar's Ras Laffan for Pakistan; neither count includes all vessels running dark. A tanker was struck by projectiles about 94km north of Qatar's Madinat ash Shamal Wednesday, with casualties reported. The pre-war Hormuz traffic benchmark was approximately 125 large commercial vessels daily, across all vessel classes.

- Takaichi's ¥40T ceiling for annual JGB issuance would permit ¥7.3T more borrowing than the existing FY26 plan, even before the proposed consumption-tax cut is reconciled. The prime minister told parliament Thursday she would aim to keep sales around FY25's ¥40T level, against ¥32.7T budgeted for FY26, while acknowledging that a consumption-tax reduction would cost ¥4.3T in annual revenue. That tax cost is equivalent to 59% of the difference between the current plan and the proposed ceiling; ministry spending requests have already reached approximately ¥143T. The ¥600B 30-year JGB auction attracted ¥1.747T of competitive bids against ¥450.7B accepted competitively, taking cover to 3.88 from 3.79 previously. The weighted-average yield rose to 4.109% from 4.079%; the lowest accepted price of 101.05 yielded 4.121%, against 4.109% at the average price of 101.21. The bond carries a 4.2% coupon and matures September 20, 2056.

- Cross-asset: UST 2Y traded around 4.76%, 10Y near 5.32% and 30Y around 5.7%, against the $22B long-bond reopening; October Fed hike odds remained below 20% after Waller's remarks. SpaceX five-year CDS had touched 195bp, with its 2056 bond at approximately T+238bp, as Broadcom and Oracle negotiated additional chip financing. Brent reached roughly $104.18/bbl and WTI $91.70 during Thursday trading, against Wednesday's $100.20 and $88.28 settlements, with diesel still elevated following the IEA meeting. France's 10-year approached 4.9%, UK 30-year gilts had touched 6.036%, and Germany's latest export figure fell against expectations. DXY was around 102.32, EUR/USD near $1.1191 and USD/JPY 158.22; Japan's Nikkei lost approximately 1.1%, South Korea 2.1% and MSCI Asia-Pacific 1.2%, despite Samsung's record profit and TSMC's revenue beat.

- Asia closed lower with KOSPI underperforming -2.6%. EU indices -1.2% to -0.4%. US futures -0.4% to -0.7%. Gold +0.4%, DXY +0.1%; Commodity: Brent +3.9%, WTI +4.0%; Crypto: BTC -0.9%, ETH -1.2%.

Asia

- South Korea Aug Current Account Balance: $46.1B v $42.1B prior.

- Japan Aug Current Account Balance: ¥4.062T v ¥3.17Te.

- Australia Oct Consumer Inflation Expectation: 5.3% v 4.9% prior.

Global conflict/tensions

- White House said to have asked the Pentagon to develop strike options against Iranian targets that could be exercised ahead of the November 3rd midterm elections (strikes could come before Israeli elections on October 27th).

- Yemen Houthi militants launched more attacks on two Saudi airports.

-Yemen Houthis stated that Saudi airspace would be target of military operations except over Mecca, Medina.

Europe

- UK Sept RICS House Price Balance: -32% v -30%e (1st decline in 4 months).

Americas

- Aug Consumer Credit: $8.3B v $15.0Be.

- FOMC Sept Minutes policymakers did not see an urgent need to raise interest rates at their October meeting.

- Oracle, Broadcom and SpaceX said to seek debt issuance to pay for AI Chips.

Trade

- China said to reject the EU’s request to voluntarily limit its rapidly growing hybrid vehicle exports.

Energy

- NHC: Isaias becomes a hurricane in the Gulf of America (as expected).

- Tehran intensified its attacks on shipping in the Strait of Hormuz and Iran-backed Houthis expanded strikes on targets in Saudi Arabia.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.52% at 10,403.97, DAX -0.75% at 24,917.11, CAC-40 -0.82% at 7,705.48, IBEX-35 -1.14% at 18,900.42, FTSE MIB -1.23% at 49,358.50, SMI -1.08% at 13,659.60, S&P 500 Futures -0.37%].

Market Focal Points/Key Themes: European equities extended losses on Thursday, with the FTSE MIB falling 1.23%, the IBEX 35 down 1.14%, the Euro Stoxx 50 off 1.12%, the SMI declining 1.08%, the CAC 40 slipping 0.82%, the DAX dropping 0.75% and the FTSE 100 down 0.52%, pushing the Stoxx Europe 600 toward its lowest level since mid-June amid a toxic mix of surging U.S. corporate bond supply, renewed Middle East energy shocks and a hawkish Federal Reserve signal. Reports that major U.S. technology groups including SpaceX and Broadcom are preparing roughly $80 billion in mega-debt issuance sparked fears of capital crowding-out and wider credit spreads, while fresh drone and missile attacks on Persian Gulf and Red Sea shipping reignited oil and gas risk premia just as European winter heating demand begins. The most notable individual movers were Metro Bank and Premier Foods, each rising 4.5% in relative rebounds, and Imperial Brands, up 3.5% after confirming guidance and announcing a £1.5 billion FY27 buyback, against OPmobility’s 18.0% collapse after it cut 2026 operating-margin guidance and planned 770 European job cuts, and Princes Group’s 5.0% decline amid broad mid-cap selling. FOMC minutes showed a majority of policymakers still viewed another rate hike as likely before year-end, while Bank of France Governor Emmanuel Moulin described the nation’s fiscal position as “serious” yet ruled out any need for ECB support, leaving French banks such as Société Générale and BNP Paribas each more than 2% lower.

Equities

Consumer discretionary: OPmobility [OPM.FR] -18.0% (cut 2026 operating-margin guidance to €430–450m, citing weaker auto-production forecasts, customer adjustments and hydrogen-project delays; plans 770 European job cuts), THG [THG.UK] -3.5% (consumer-growth stocks sold off amid rising yields and weaker global risk appetite).

Healthcare: Fagron [FAGR.BE] -1.0% (Q3 revenue broadly matched consensus, but North American Compounding Services missed expectations amid the industry-wide IV-bag recall).

Technology: NCC Group [NCC.UK] -4.0% (extended weakness during the UK mid-cap risk-off move; no fresh company-specific catalyst identified), Infineon Technologies [IFX.DE] -2.5%, ASML [ASML.NL] -2.5% (European technology stocks weakened as hawkish Fed minutes, surging sovereign yields and prospective mega-debt issuance by US AI groups pressured valuations).

Energy: Harbour Energy [HBR.UK] +2.5% (Brent crude jumped nearly 4% as escalating Middle East tensions raised supply-risk concerns).

Consumer staples: Premier Foods [PFD.UK] +4.5% (outperformed the weak UK tape; no fresh company-specific announcement identified), Imperial Brands [IMB.UK] +3.5% (confirmed FY26 guidance and announced a £1.5bn FY27 buyback after completing its £1.45bn FY26 programme), J Sainsbury [SBRY.UK] +2.5% (positive read-through from Tesco's profit-guidance upgrade and stronger shareholder returns), Tesco [TSCO.UK] +2.0% (raised FY adjusted operating-profit guidance to £3.15bn-£3.30bn from £3.0bn-£3.3bn and increased its buyback to £950m from £750m), Princes Group [PRN.UK] -5.0% (largest liquid FTSE 250 faller amid broad mid-cap selling; no fresh company-specific announcement identified).

Industrials / Defence: Costain [COST.UK] -3.5% (industrial and construction shares weakened as higher oil and bond yields pressured cyclical risk appetite), Babcock International [BAB.UK] -2.0% (Goldman Sachs initiated coverage at Neutral as UK industrial and defence shares weakened), Rolls-Royce [RR.UK] -2.0% (industrial risk reduction as higher oil prices, elevated yields and weaker Asian equities weighed on the broader tape).

Financials: Metro Bank [MTRO.UK] +4.5% (sharp relative rebound after the prior-session UK bank selloff; no fresh company-specific announcement identified), CMC Markets [CMCX.UK] +2.5% (renewed bond and equity volatility supported the trading-platform volume outlook), HSBC [HSBA.UK] -2.0% (global bank and Asia-exposed shares remained under pressure despite a South Korean court upholding its clearance on short-selling charges).

Materials: Anglo American [AAL.UK] -2.5%, Rio Tinto [RIO.UK] -2.0%, Fresnillo [FRES.UK] -2.0% (miners tracked weaker Asian markets and broad materials-sector risk reduction), Antofagasta [ANTO.UK] -2.0% (Chile labour unions warned that an ongoing strike could affect copper output within weeks, although guidance was unchanged).

Speakers

- ECB's Sleijpen (Netherlands): Energy shock is quite persistent.

- ECB's Moulin (France) region being faced with an inflationary shock; inflation was 100% energy related. Geopolitical shock transmitting into a financial shock.

- ECB’s Dolenc (acting Slovenia member) noted that ECB rates could prevent price shocks from spreading. Reiterated stance that timing and size of future rate moves to be determined on a meeting-by-meeting basis. Inflation risks were to the upside. Persistently elevated inflation and the lack of resolution of conflicts in the Middle East, Ukraine and elsewhere, supports the case for moving policy rates towards a more restrictive territory.

- SNB Dep Gov Martin noted that inflation pressures had slightly increased since Jun. CHF currency (Franc) has been relatively stable since 2020. Did not need to change rates at this time.

- France Fin Min Lescure stressed that it still had investor demand for French government bonds.

- Fed’s Waller stated that saw no need for rate hikes at consecutive meetings; 2027 dots might reflect hikes early in year and then cuts.

- EU Trade Commissioner Sefcovic noted that EU businesses needed improved access to China market. Goal of upcoming China trip to start rebalancing China trade deficit.

- Japan PM Takaichi stated that would work to keep JGB sales around FY25's ¥40T level [**TTN Note: ~¥40T would still exceed the ¥32.7T planned for FY26].

Currencies

- USD maintained a steady tone as oil prices and bond yield rose amid continued tensions in the Middle East.

- Greenback also aided after Wed FOMC Sept Minutes noted that board members expected another rate increase by year-end. For the upcoming Oct Fed meeting markets currently pricing an 81.7% probability of a hold at 3.75–4.00%.

- EUR/USD staying below the 1.12 level as France's fiscal position continued to be a headwind on Euro price action.

- UK govt gilts rose as accelerating oil prices raised concerns about inflation and the possibility of interest-rate rises by the Bank of England. Markets currently pricing an over 80% chance of a BOE rate increase in November and fully expect four rate hikes by September 2027.

- The 10-year German Bund yield last at 3.50%, France 10-year Oat at 4.91% and 10-year Gilt yield at 5.48%; 10-year Treasury yield: 5.33%; 10-year JGB: 3.08%.

Economic data

- (SE) Sweden Sept Maklarstatistik Housing Prices: 3.9% v 3.9% prior.

- (NL) Netherlands Aug Consumer Spending Y/Y: 2.1% v 1.2% prior.

- (FI) Finland Aug Industrial Production M/M: -1.3% v -1.0% prior; Y/Y: 0.8% v 4.6% prior.

- (DE) Germany Aug Trade Balance: €19.5B v €19.0Be; Exports M/M: -0.8% v +0.9%e; Imports M/M: 0.9% v 2.8%e.

- (FI) Finland Aug Preliminary Trade Balance: -€1.2B v -€0.7B prior.

- (CZ) Czech Aug Retail Sales (ex-auto) Y/Y: 4.3% v 4.2%e.

- (CZ) Czech Sept Unemployment Rate: 5.0% v 5.1%e.

- (TW) Taiwan Sept Trade Balance: $23.6B v $18.7Be; Exports Y/Y: 60.9% v 46.6%e; Imports Y/Y: 51.7% v 44.0%e.

Fixed income issuance

- None seen.

Looking ahead

- (EU) Eurogroup meeting.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rates unchanged at 6.50%.

- 05:15 (UK) BOE’s Greene.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills; Avg Yield: % v 5.08% prior; bid-to-cover: x v 1.39x prior (Sept 24th 2026 (**Note: bi-monthly issuance).

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

- 06:00 (IE) Ireland Sept CPI M/M: No est v 0.7% prior; Y/Y: No est v 3.7% prior.

- 06:00 (IE) Ireland Sept Final CPI EU Harmonized M/M: No est v 0.2% prelim; Y/Y: No est v 3.9% prelim.

- 06:00 (IE) ECB’s Lane (Ireland, chief economist).

- 06:00 (RO) Romania to sell RON 500M in 12-month bills.

- 06:00 (RO) Romania to sell RON 500M in 6.9% 2036 bonds.

- 06:30 (UK) BOE’s Pill (chief economist).

- 06:45 (GR) ECB's Stournaras (Greece).

- 06:45 (HU) Hungary Central Bank (MNB) Gov Varga.

- 07:00 (ZA) South Africa Aug Manufacturing Production M/M: -0.3%e v +2.2% prior; Y/Y: 0.4%e v 1.1% prior.

- 07:00 (CL) Chile Sept CPI M/M: 0.5%e v 0.6% prior; Y/Y: 4.2%e v 4.1% prior.

- 07:30 (EU) ECB Sept Minutes).

- 08:00 (MX) Mexico Sept CPI M/M: 0.4%e v 0.2% prior; Y/Y: 3.5%e v 3.3% prior.

- 08:00 (MX) Mexico Sept CPI Core M/M: 0.2%e v 0.2% prior; Y/Y: 3.8%e v 3.9% prior.

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

- 08:15 (UK) BOE Gov Bailey.

- 08:30 (US) Initial Jobless Claims: 200Ke v 197K prior; Continuing Claims: 1.70Me v 1.701M prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 2nd: No est v $742.7B prior.

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

- 09:00 (UK) BOE’s Lombardelli.

- 10:00 (US) Aug Final Wholesale Inventories M/M: 0.7%e v 0.7% prelim; Wholesale Trade Sales M/M: No est v 0.8% prior.

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

- 10:45 (US) Fed's Kashkari.

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

- 11:30 (US) Treasury to sell 4-week and 8-week bills.

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

- 13:40 (US) Fed’s Musalem.

- 14:00 (US) Treasury liquidity buyback targets coupons maturing 2037-2046.

- 19:30 (JP) Japan Aug Household Spending Y/Y: -3.6%e v -3.6% prior.

- 23:30 (JP) Japan to sell 3-month bills.