US Payrolls reopened the hike debate

EU mid-market update: AfD wins Saxony-Anhalt without a majority ahead of the Sept 20th votes; US payrolls reopened the hike debate; OPEC+ adds no Oct barrels; USD/JPY lowest since Feb.

Notes/observations

- A shortened week front-loads the risk into Thursday and Friday. US markets are closed, so thin books make this morning's European moves less informative. China's trade and inflation data land Tuesday, and the US inflation prints late in the week following jobs report last Friday.

- Sunday's Saxony-Anhalt result moved German political risk from a polling curiosity to a dated event. AfD more than doubled its 2021 share to win the state outright while Merz's CDU fell to under half its prior vote, the first far-right win in a German state since the war. It cannot govern alone and no party will join it, so nothing changes administratively; the federal arithmetic does, with the AfD ahead of the CDU/CSU nationally and Weidel pressing for an early federal ballot. Berlin and Mecklenburg-Vorpommern vote on 20th Sept, which tests whether Sunday was regional or structural. German industrial output fell sharply in July against expectations of a small gain and turned negative on the year, autos taking most of it. The focus is on the Bund: the wider deficit already conceded must be delivered by a chancellor whose mandate has visibly thinned, and expansion negotiated from weakness prices differently from expansion negotiated from strength. France shows where that ends, with OATs now wider to Bunds than BTPs. The periphery is the mirror image: Fitch lifted Portugal a notch, Greece is spending its room on 2027 tax cuts and wages, and euro-zone investor confidence hit its best since early 2022.

- Hormuz escalated and de-escalated in the same session, and OPEC+ has removed the cushion under either outcome. Tehran will designate a sanctioned exclusion zone running from the US Navy's blockade line into the Gulf, while telling Oman it is days from signing maps for a temporary corridor. Transits stayed in single digits; energy was the only European sector firmly bid. The new element is supply: with the rollback of the 2023 voluntary cuts complete, OPEC+ held October production at September levels and does not meet again until 4th October, so no incremental barrel is scheduled against a Gulf disruption, the curve is hostage to the corridor. Gas has its own swing factor into a heating season with storage below last year's: the Witkoff and Kushner rounds in Moscow and Kyiv covered a winter energy package including US LNG and aimed at ending the war before the cold, the most concrete movement in months, not in the curve.

- The weekend reaction to Astra has been unusually binary: Jensen Huang said “AGI has arrived,” after Brockman had already said he thinks “we’re there,” and Huang disclosed that Astra was trained on more than 100,000 Grace Blackwell NVLink72 systems, with another 400,000 Nvidia GPUs coming online. But Astra has not obviously put Anthropic behind: OpenAI’s own tables make Astra look dominant, while Artificial Analysis still ranks Claude Fable 5.1 ahead on its independent intelligence index, roughly 66 versus 61, and some users are finding Fable stronger on sustained coding, judgment and long-horizon work. That makes Anthropic’s impending IPO disclosure unusually well timed: its S-1 had been expected as soon as this week, although Reuters now says the filing may slip toward late September, and investors will finally see the economics behind the closest alternative frontier stack just as the industry is arguing over whether OpenAI has crossed AGI at all. The more interesting race may therefore remain three-sided rather than collapsing into Astra versus China: OpenAI has the spectacular benchmark discontinuity, Anthropic may still have the stronger model on some independent and real-world measures, and China is trying to close both gaps with much cheaper inference and rapidly improving domestic hardware.

- Japan’s hawkish turn is starting to acquire its own market mechanics. USD/JPY sliced through 155 in thin European trading and fell as much as 1.3% to 154.30 (lowest since Feb), with traders saying there were simply very few bids below the old support while U.S. markets were shut for Labor Day; that makes the speed of the move partly a liquidity accident, but not the direction. The backdrop has changed sharply in only a week: Takata has floated consecutive hikes and steps larger than 25bp, Ueda has left September live, Bessent has said Abenomics has run its course, and even Takaichi adviser Takuji Aida - previously a reflationist brake on tightening - now expects a September hike and another by January. The significance of 155 giving way so easily is that speculative yen shorts are now confronting a policy path rather than another finite intervention episode: once the market believes the BoJ can tighten again within months rather than semesters, levels such as 155 cease to be merely technical supports and become places where the old carry regime is forced to defend itself. Monday’s holiday-thinned drop probably exaggerates the move, but if USD/JPY cannot reclaim 155 once U.S. liquidity returns, the market will have learned something more important than today’s 1.3%: the marginal buyer of dollars against yen may finally have disappeared before the BoJ has even delivered the hike.

- Jaguar Land Rover has put a headcount on what tariffs and a lost China cost. Around 4.0K roles go inside a two-year, $2.3B programme cutting cash breakeven to roughly 300K vehicles, after full-year pre-tax profit collapsed from billions to nothing on tariffs, Chinese demand and a cyber outage.

- Asia closed %. EU indices %. US futures %. Gold %, DXY %; Commodity: Brent %, WTI %; Crypto: BTC %, ETH %.

Asia

- Japan Ministry of Defense plans to build and test AI powered satellites to accelerate counterstrike decisions - Nikkei.

- TM Toyota aims to boost profit outside auto-sales to ¥3.00T (~+40%) by FY30 - Nikkei.

- Japan end-August Foreign Reserves: $1.21T v $1.29T prior [record m/m decline].

- Japan Defense Minister Koizumi to retain post; PM Takaichi’s cabinet changes are expected to focus on growth - Nikkei [update].

- Philippines Defense Secretary: US gave Manila 'definite assurances' commitments remain unchanged.

- China unveils plan to strengthen rural investment.

- South Korea Pension Fund (NPS) suspends FX hedging amid strengthening Won - market sources.

- New Zealand ruling coalition leads in poll [elections are due in Nov] - Local press [update].

- China MIIT targets completing advanced telecom network by 2030; To promote 6G and 10 GB network deployment - press.

- China Aug Foreign reserves: $3.438T V $3.427TE.

- Japan seeks talks between Takaichi-Trump in late-Sept - Japanese press.

Europe

- Eurozone Sept. Sentix investor confidence: 5.1 V 2.0E (highest since Feb 2022).

-Germany July industrial production M/M: -1.1% V 0.2%E; Y/Y: -1.6% V 0.0%E.

- AUug LOYDS house price index M/M: -0.2% V 0.0% PRIOR; Y/Y: -0.4% V 0.1% prior (the first annual decline since November 2023).

- Germany's AfD party scored a historic victory in the eastern state of Saxony-Anhalt, seen at 44.5% (vs. 20.8% in 2021) in state election - ARD/ZDF Poll [**Note: first far-right victory in German state since World War 2].

- Airbus reportedly reaches pre-agreement with Spanish unions - press.

- Reportedly UK police have stopped Reform UK Leader Nigel Farage from taking stage for keynote speech at party conference over security concerns - press.

- Fitch raises Portugal sovereign rating one notch to A+ from A; Outlook Stable.

- Jaguar Land Rover to cut about 4,000 jobs as sales fall amid tariff impacts - London Times.

- Greece PM announces tax cuts and wage increases of €2.2B for 2027.

- REC: UK hiring accelerated for the first time in 4 years; cites Aug data - financial press.

- Sweden Aug Preliminary CPI M/M: -0.3% v -0.1%e; Y/Y: 0.3% v 0.5%e.

- Jaguar/Land Rover (JLR) to cut 'thousands' of jobs in $2.3B cost-saving overhaul - press.

Americas

- White House has vetted candidates for the four, bipartisan open commissioner positions at the CFTC, but still not clear if the positions will be filled - CNBC.

Conflict/Tensions

- US Treasury issues new Iran-related sanctions - US Treasury website.

- Trump Admin is drafting a post-war Middle East strategy focused on regional efforts to contain Iran and expand normalization of relations between Israel and its neighbors [Abraham Accords] - Axios.

- IRGC says it targeted three vessels on unauthorized routes through the Strait of Hormuz; Claims ballistic missiles were launched at US aircraft carrier and destroyer.

- US CENTCOM: As of September 6th, US forces have redirected 92 commercial vessels, disabled 3 and boarded 2 to ensure compliance in blockade against Iran - post on X.

- Iran's Top Security Official: Restricted zone will be announced outside the Strait of Hormuz in the coming days; Zone will begin from line of US Navy's blockade and extend to areas in the Gulf - State TV/Media.

- Russian Defense Ministry: Russia hit vessel with military cargo in Ukraine's port of Chornomorsk - IFX.

- Iran official: Negotiations with Oman on Hormuz reached final stages; To reach accord on temporary Hormuz route in coming days.

- Russia Official: Favorable conditions for dialogue on strategic stability with U.S. Have not been established - Russian press.

Trade/Energy

- EU Industry Chief Sejourne ditches proposal to use trade measures to curb aluminum scrap exports - Cabinet statement.

- OPEC+ agrees to maintain output targets following the completion of the phased rollback of the 1.65M bpd voluntary cuts from 2023, as expected, commencing in October, 2026.

- South Korea chooses $22.3B Texas gas plant as the first US project - Daily.

- China reportedly to levy up to 99.2% import deposit on Japanese silicon imports - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.11% at 10,819.25, DAX -0.22% at 25,991.10, CAC-40 +0.06% at 8,283.82, IBEX-35 -0.21% at 20,008.08, FTSE MIB +0.18% at 52,193.50, SMI -1.09% at 14,238.90, S&P 500 Futures -0.01%].

Market focal points/key themes: European equities opened the week essentially flat, with the STOXX 600 edging down 0.1% near multi-week lows, as investors stayed cautious amid escalating military tensions in the Persian Gulf—triggered by U.S. strikes on Iranian tankers and Iran’s planned restricted zone near the Strait of Hormuz—and the looming European Central Bank policy meeting. Crude prices rose another 1%, extending a nearly 10% weekly surge that pushed Brent almost to $100 per barrel and heightened fears of disrupted flows representing roughly 20% of global seaborne oil and gas, while money markets fully priced a 25-basis-point ECB hike after Eurozone CPI accelerated to 3.3% on energy costs, keeping Bund yields elevated. Among notable movers, SigmaRoc surged 12% on strengthened H1 profitability and a €110 million earnings-accretive acquisition of Lithuanian dolomite producer Dolomitas, while Nordex jumped 10.5% after a BofA upgrade to Buy with a €54 target citing upside to consensus margins and supportive German and U.S. orders (lifting Acciona 3.5% via its 47% stake). On the downside, TOMRA Systems plunged 7.5% after France rejected mandatory deposit-return systems, Schindler fell 3% on a Goldman Sachs downgrade to Sell over weaker China exposure, and Novartis dropped 3% after its pelacarsen Phase III trial missed the primary cardiovascular-events endpoint despite lowering Lp(a). Global focus now turns to the U.S. CPI report later this week, which will shape Federal Reserve rate expectations following stronger-than-expected August jobs data, as well as potential Anthropic’s S-1.

Equities

- Consumer discretionary: Lottomatica [LTMC.IT] +5.0% (new CIRSA work identifies €200–300m of steady-state incremental online EBITDA by year three, importantly on top of rather than inside the previously announced merger synergies).

- Energy: Nordex [NDX1.DE] +10.5% (BofA upgraded to Buy with €54 target; argues consensus earnings and Nordex's own medium-term margin ambitions still leave meaningful upside, with German momentum and U.S. orders supportive), BP [BP.UK] +1.5% (direct oil-price read-through as Brent rises more than $1/bbl on renewed U.S.–Iran tensions and supply-risk concerns, lifting the European energy basket).

- Financials:

- Healthcare: Novartis [NOVN.CH] -3.0% (pelacarsen's pivotal Phase III Lp(a)HORIZON trial missed its primary cardiovascular-events endpoint despite reducing Lp(a), impairing the economics of a drug previously viewed as a potential multibillion-dollar product).

- Industrials: TOMRA Systems [TOM.NO] -7.5% (open -7.5% → now -7.5%; [L━━━━●━H]; France rejected mandatory deposit return systems adoption).

- Technology: ASML Holding [ASML.NL] +1.5% (semiconductor-equipment sympathy after strong overnight Asian chip moves including Tokyo Electron and other AI-linked names; no fresh ASML-specific catalyst identified), Infineon Technologies [IFX.DE] +3.0% (Warburg upgraded to Buy; move reinforced by semiconductor sympathy after a strong Asian chip session).

- Telecom: Nokia [NOKIA.FI] +3.5% (likely networking/AI-infrastructure sympathy alongside the strong Asian technology tape; no fresh Nokia-specific announcement found this morning, so the read-through is not being presented as confirmed company causality).

- Materials: SigmaRoc [SRC.UK] +12.0% (H1 profitability/margins strengthened and the group agreed the €110m acquisition of Lithuanian dolomite producer Dolomitas; the deal is expected to be earnings-accretive from 2027).

Speakers

- (UK) Chancellor Healey: To build on Reeve's move to recover fiscal discipline; Borrowing costs are at a historic high - (first major economic speech).

- (US) FHFA Dir Pulte: Studying the use of just one credit report, which would bring savings.

- (US) NEC Dir Hassett: Jobs numbers were 'blockbuster'; Argument for Fed holding steady 'pretty strong'; Respect independence of Fed.

- (UK) Reform UK Leader Farage: Reform UK has done nothing wrong; Channel 4 videos appear to be substantially edited - party conf comments.

- (US) Pres. Trump: We should have the LOWEST RATE of any country in the World; lower the rate or I’ll stop trading with countries with which we have a deficit; The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change.

- (US) Treasury Sec Bessent: Jobs data show that economy not just being driven by AI building boom - press interview.

- (US) Fed's Hammack (voter, hawkish dissenter): Reiterates time to act on rate hikes; Reiterates Fed policy is not restrictive and inflation is too high - LinkedIn post.

- (US) Fed's Hammack (voter, hawkish dissenter): Reiterates time to act on rate hikes; Reiterates Fed policy is not restrictive and inflation is too high - LinkedIn post.

- (KR) North Korea PM Kim Jong Un: New warship can carry out annihilating retaliatory strikes on the enemy at any time; New warship is proof of change in just 2-3 years - KCNA.

- (PH) Philippine Finance Chief Frederick Go: BSP intervenes when FX volatility is beyond what's comfortable.

Economic data.

- (EU) Eurozone Q2 final GDP Q/Q: 0.6% V 0.4%E; Y/Y: 1.2% V 1.0%E.

- (GR) Greece Q2 GDP Q/Q: 0.3% v 0.2% prior; Y/Y: 1.9% v 2.0% prior;- GDP NSA (unadj) Y/Y: 1.8% 2.0% pr.

- (HK) Hong Kong Aug Foreign Reserves: $442.9B v $447.9B prior.

- (EU) EURO ZONE SEPT SENTIX INVESTOR CONFIDENCE: 5.1 V 2.0E (highest since Feb 2022).

- (AU) Australia Aug Foreign Reserves (A$): 106.0B v 106.7B prior.

-(RO) Romania Q2 Preliminary GDP (2nd reading) Q/Q: 0.0% v 0.0% advance; Y/Y: -0.4% v -0.4% advance.

- (AT) Austria Aug Wholesale Price Index M/M: 0.9% v 0.8% prior; Y/Y: 8.2% v 6.9% prior.

- (ES) Spain Q2 INE House Price Index Q/Q: 3.4% v 3.5% prior; Y/Y: 12.2% v 12.9% prior.

- (MY) Malaysia End-Aug Foreign Reserves: $132.0B v $132.7B prior.

- (CZ) Czech July Industrial Output Y/Y: 3.1% v 0.4%e.

- (CH) Swiss Aug Foreign Currency Reserves (CHF): CHF 770.1B v CHF 768.1B prior.

- (CZ) Czech July Trade Balance (CZK): -8.5B v -16.0Be.

- (CH) Swiss Aug Unemployment Rate: 3.0% v 3.0%e.

- (HU) Hungary July Industrial Production M/M: 1.7% v 1.6%e; Y/Y: 4.7% v 3.4%e.

- (NO) Norway July Industrial Production M/M: -7.1% v +7.6% prior; Y/Y: -1.8% v +9.1% prior.

- (UK) AUG LLOYDS HOUSE PRICE INDEX M/M: -0.2% V 0.0% PRIOR; Y/Y: -0.4% V 0.1% PRIOR (the first annual decline since November 2023).

- (SE) Sweden Aug Budget Balance (SEK): +61.9B v -9.2B prior.

- (ZA) South Africa Aug Net Reserves: $73.7B v $71.8B prior; Gross Reserves: $76.0B v $73.5B prior.

- (DE) GERMANY JULY INDUSTRIAL PRODUCTION M/M: -1.1% V 0.2%E; Y/Y: -1.6% V 0.0%E.

- (SE) Sweden Aug Preliminary CPI M/M: -0.3% v -0.1%e; Y/Y: 0.3% v 0.5.

- (JP) Japan July Preliminary Leading Index CI: 117.9 v 118.0e.

- (SE) Sweden Sept SEB Housing-Price Indicator: 41 v 44 prior.

- (TH) Thailand Aug CPI M/M: 0.6% v 0.5%e; Y/Y: 2.5% v 2.4%e.

- (SG) Singapore July Retail Sales M/M: 0.9% v 0.9% prior; Y/Y: 1.5% v 3.1%.

Fixed income issuance

- (PH) Philippines sells total PHP38.7B vs PHP42-60.0B indicated in 1-month, 3-month, 6-month and 12-month bills.

- (KR) South Korea sells KRW3.2T vs. KRW3.2T indicated in 3.5% 3-Year Bonds; Avg Yield: 3.875% v 3.34% prior.

- (TH) Thailand sells THB20B vs. THB20B indicated in 6-month bills; Avg Yield: 0.92989% v 0.94454% prior; bid-to-cover: 2.33x v 2.25x prior.

Looking ahead

- 05:30 (DE) Germany to sell combined €5.0B in 3-month and 9-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel to sell bonds.

- 07:30 (CL) Chile Aug Trade Balance: No est v $2.0B prior; Total Exports: No est v $10.2B prior; Total Imports: No est v $8.3B prior; Copper Exports: No est v $5.4B prior.

- 07:30 (CL) Chile Aug International Reserves: No est v $52.7B prior.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

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

- 08:00 (PL) Poland Aug Official Reserves: No est v $295.0B prior.

- 08:00 (MX) Mexico Aug Vehicle Production: No est v 302.7K prior; Vehicle Exports: No est v 261.5K prior.

- 08:00 (CL) Chile July Nominal Wage Y/Y: No est v 7.7% prior.

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

- 09:00 (RU) Russia Aug Official Reserve Assets: No est v $720.3B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.5-7.1B in 3-month, 6-month and 12-month bills.

- 10:30 (TR) Turkey Aug Cash Budget Balance (TRY): No est v -395.7B prior.

- 16:00 (US) Weekly Crop Progress Report.

- 18:45 (NZ) New Zealand Q2 Manufacturing Activity Q/Q: No est v 2.8% prior; Manufacturing Volume Q/Q: No est v 3.6% prior.

- 19:00 (KR) South Korea Q2 Preliminary GDP (2nd reading) Q/Q: 0.6%e v 0.6% advance; Y/Y: 3.7%e v 3.7% advance.

- 19:00 (CO) Colombia Aug CPI M/M: 0.3%e v 0.2% prior; Y/Y: 6.2%e v 6.0% prior.

- 19:00 (CO) Colombia Aug CPI Core M/M: 0.4%e v 0.2% prior; Y/Y: 6.3%e v 6.1% prior.

- 19:01 (UK) Aug BRC Sales Like-For-Like Y/Y: No est v 1.0% prior.

- 19:30 (JP) Japan July Labor Cash Earnings Y/Y 3.9%e v 4.0% prior (revised from 3.4%); Real Cash Earnings Y/Y: 1.8%e v 2.2% prior (revised from 1.6%); Cash Earnings - Same Sample Base Y/Y: 4.3%e v 4.8% prior (revised from 4.0%); Scheduled Full-Time Pay - Same Base Y/Y: 2.9%e v 2.9% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: No est v 74.9 prior.

- 19:50 (JP) Japan Q2 Final GDP Q/Q: 0.4%e v 0.3% prelim; GDP Annualized Q/Q: 1.8%e v 1.1% prelim; GDP Nominal Q/Q: 1.3%e v 1.2% prelim; GDP Deflator Y/Y: 2.6%e v 2.6% prelim.

- 19:50 (JP) Japan Q2 Final Private Consumption Q/Q: 0.0%e v 0.0% prelim; Business Spending Q/Q: -0.7%e v -1.2% prelim; Inventory Contribution to GDP: 0.3%e v 0.3% prelim; Net Exports Contribution to GDP: 0.5%e v 0.5% prelim.

- 19:50 (JP) Japan July Current Account Balance: ¥2.842Te v -¥92.3B prior; Trade Balance (BoP Basis): -¥374.2Be v -¥135.2B prior; Adjusted Current Account: ¥2.511Te v ¥1.397T prior.

- 19:50 (JP) Japan Aug Bank Lending Y/Y: No est v 5.4% prior; (ex-trusts) Y/Y: No est v 5.9% prior.

- 20:01 (IE) Ireland Aug Construction PMI: No est v 53.0 prior.

- 20:30 (AU) Australia Sept Westpac Consumer Confidence Index: No est v 88.9 prior.

- 21:00 (PH) Philippines July Unemployment Rate: No est v 4.9% prior.

- 21:30 (AU) Australia Aug NAB Business Confidence: No est v -6.0 prior; Conditions: No est v 4.0 prior.

- 23:35 (JP) Japan to sell 5-year JGB Bonds.