In focus today

In the euro area, focus turns to the consumer confidence indicator for September. Confidence has been stuck at a low level for the last four months, which limits growth in private consumption. As the tariff uncertainty has been reduced and inflation returned to the 2% target, we expect gradual improvements in confidence.

Economic and market news

What happened over the weekend

In tech and tariffs, discussions between the US and China on TikTok's US operations appear to have advanced, with White House officials saying China's ByteDance would retain one board seat while Americans hold six. The White House also claims that a deal "signed in the coming days" will put the algorithm in US hands, clashing with Beijing's recent claims that the algorithm will remain in Chinese hands.

Donald Trump and Xi Jinping spoke over the phone on Friday, agreeing to meet in person at the Asia-Pacific Economic Cooperation (APEC) forum starting 31 October in South Korea. While the tone of the call was reportedly positive, and Trump said they had made progress in advancing the TikTok deal, the call yielded little concrete news on the state of tariff discussions. Trump also said he would visit China in early 2026, which could suggest that the trade negotiations will be extended even further beyond the current 10 November deadline. We will discuss the outlook for the trade war, how it is impacting US and Chinese economies and its implications for CNY and USD in a webinar this Thursday.

In the US, President Trump hailed Charlie Kirk as a "martyr for American freedom" at his memorial service on Sunday, using the platform to blame the "radical left" for his murder while vowing to carry on Kirk's conservative legacy. Critics warn Trump's rhetoric risks deepening partisan divides and escalating political tensions.

Furthermore, Trump appointed his former attorney Lindsey Halligan as US Attorney for the Eastern District of Virginia, replacing Erik Siebert. The appointment comes amid Trump's criticism of Attorney General Pam Bondi and calls for more aggressive investigations into political rivals, including James Comey and Letitia James.

In geopolitics, Britain, Canada, Australia, and Portugal formally recognised the State of Palestine on Sunday, in a move intended to promote a two-state solution amidst the ongoing Gaza war. While Palestinian leaders welcomed the decision as a step towards independence, the Israeli PM Netanyahu condemned the move. The recognition is expected to heighten tensions with Israel and its ally, the US, as similar announcements are anticipated during the UN General Assembly this week.

Recent Russian airspace violations in Estonia, Poland, and most recently the Baltic Sea, drew a muted US response. This comes after Pentagon officials in August said that under Trump, the US military would be shifting its attention to other priorities, like defence of the homeland. Analysts warn that US disengagement risks emboldening Russia and straining NATO unity, as European diplomats' express frustration over Trump's inconsistent stance.

In the UK, retail sales data released on Friday surprised to the upside, rising 0.7% y/y in August (cons: 0.6% y/y), despite a downward revision to July's growth to 0.8% y/y.

In China, the PBoC kept the 1Y and 5Y loan prime rates (LPR) unchanged, in line with market expectations. While there is pressure for more stimulus, broad-based rate cuts may not be the preferred tool for China as they are also concerned about fuelling a liquidity-driven equity bubble. We expect more targeted stimulus measures coming soon.

Equities: US equities rose yet again on Friday cementing the strong end to the week, following the FOMC decision on Wednesday, and setting new highs. S&P500 was up 0.5%, with Nasdaq up 0.7% on Friday. Stoxx600 was a touch lower. The tech sector was yet again the driver for the higher equities amid higher US yields as well. Inflation expectations moderated somewhat towards the end of the week, contributing to the cyclical outperformance vs. defensives stocks by almost 1.5% in the final two trading sessions. Overnight, futures are slightly lower.

FI and FX: It is going to be an eventful week with central bank meetings (Sweden - no change, and SNB - no change) as well as key economic data such as the Flash PMIs from Europe and US, US PCE data, inflation data from Japan.