Yen remains strong with no confirmation of intervention from Japan or US yet

EU mid-market update: Yen remains strong with no confirmation of intervention from Japan or U.S. yet; Potential GPT-6 release in coming days; European data supportive for an expected 25bps hike by ECB next week.

Notes/observations

- European case for another hike is starting to come from its own data rather than from the oil shock alone. German Chancellor Merz is reported to be meeting the ECB ahead of next week's Berlin Council, with the market overwhelmingly positioned for a further increase after August inflation accelerated (futures pricing in 100% chance of 25bps hike). Two German institutes marked up their forecasts on the same morning, IFW and IFO both lifting 2026 by roughly half a point, IFO raising 2027 as well, crediting fiscal stimulus on defense and infrastructure, recovering industrial orders and export demand, while both warned the recovery is fragile, naming the Iran war and the fading of that stimulus as the risks. Swiss inflation printed clearly above expectations at its fastest annual pace in two years, and Q2 growth beat clearly on both measures. Service PMIs split the region sharply: Italy at its strongest since April 2023 and at the top of the estimate range, Spain clearly below consensus but still expanding well, France confirming an eighth month of contraction with new business collapsing back below the line, Germany still contracting in services though revised up from the flash, and the euro-zone and UK aggregates each confirming expansion marginally softer than their previews. Corporate tape read defensively with Crest Nicholson cutting completions and swung earnings guidance to a loss while flagging slippage in covenant talks.

- Japan is repricing faster than anywhere, and it has become a currency story before it is a bond one. Press reports the BoJ is leaning toward a quarter-point move this month on upward price risks while staying flexible on the pace thereafter, the natural sequel to Takata's attempt to dismantle the assumption of fixed-interval steps. Bessent's cryptic line that he knows what the Japanese are planning landed in the New York afternoon and the yen has extended through Tokyo, breaking below 157, with July's joint intervention still fresh in memory. Bond signal is more ambiguous: thirty-year yields fell hard into the auction, but demand was tepid, with the cover ratio slipping and the tail widening despite the MOF clearing at a materially higher yield than August's sale. Domestic bid is the swing factor, pension funds favor domestic bonds by the widest margin since 2008, GPIF's unusual meeting has revived speculation over its even-quarters allocation, and the FSA is surveying banks on unrealised JGB losses. An extraordinary Diet in early October, after a reshuffle, puts consumption tax back in play.

- Iran has pushed retaliation onto Kuwait, Hegseth is extending Middle East deployments into 2027, and the US escorted forty commercial vessels carrying 18M barrels through Hormuz on Tuesday, a convoy is not a normal transit régime, and Trump's claim of control of the strait removes the diplomatic off-ramp rather than the risk premium. Novak's signal that Russia will trim 2026 output and may cut the fiscal-rule price to $50 points the same way on supply.

- Broadcom put the first genuinely useful long-dated numbers on the custom-AI-chip cycle. It raised FY27 AI-chip revenue to about $115B from >$100B and now sees roughly $230B in FY28, after Q3 AI sales more than tripled to $16.7B and bookings exceeded $30B in the quarter. Hock Tan says Broadcom already has visibility into >10GW for Anthropic, >5GW for OpenAI and 3GW for Meta, and has secured enough supply for next year. That converts the increasingly abstract gigawatts being announced by model companies into a semiconductor revenue bridge: if those powered campuses are real, a large portion of the custom-silicon demand is already mechanically implied before the chips themselves are ordered.

- The GPT-6/Astra release is now likely a live event for today/tomorrow, although OpenAI has still not formally announced the public launch. API probes report that gpt-6-astra returns a 404 rather than the 400 produced by unrecognised model names, suggesting the identifier is registered but gated; OpenAI meanwhile confirmed on September 1 that Astra has crossed its first-ever Critical cybersecurity capability threshold and remains an upcoming model. The semiconductor read-through could be unusually non-linear: Astra reportedly does more reasoning through recurrent depth, repeatedly transforming an internal state before emitting another token, which can trade additional arithmetic for slower KV-cache growth and therefore less HBM capacity/bandwidth per unit of useful reasoning—potentially better for NVDA AMD compute utilisation but less obviously bullish for MU Samsung SK Hynix than another generation built mainly around ever-longer explicit CoT; the offset is that cheaper reasoning could explode total agent volume fast enough to overwhelm the lower memory intensity per task. The timing is unusually awkward for regulation: OpenAI has just told Congress it is building automated shutdown procedures after the Hugging Face escape, while the G20 simultaneously backed a U.S.-led presumption against new AI-specific rules and Lutnick pushed governments toward fair use for training data. If Astra ships as GPT-6, the interesting discontinuity may therefore be below the benchmark table: reasoning itself starts moving from a token-and-memory problem toward a compute-depth problem just as the industry is deciding how much of that hidden computation must remain observable.

- Ahead: OPEC+'s seven-country group on the 6th, the ECB on the 10th, the BoJ on the 18th, US payrolls tomorrow, and a Korean Finance Ministry market review the same day.

- Asia closed mixed with ASX200 outperforming +0.5%. EU indices +0.1-0.6%. US futures +0.1-0.2%. Gold +1.2%, DXY -0.3%; Commodity: Brent +0.3%, WTI +0.4%; Crypto: BTC +1.5%, ETH +1.2%.

Asia

- China Aug Ratingdog Services PMI: 51.4 v 50.6e (42nd month of expansion).

- Japan Aug Final Services PMI: 52.5 v 52.3 prelim (confirmed 22nd month of expansion).

- Australia Aug Final Services PMI: 53.2 v 52.9 prelim (confirmed 3rd month of expansion).

- Australia July Trade Balance (A$): 1.9B v 1.5Be; Exports M/M: -3.3% v +10.1% prior; Imports M/M: -2.5% v +0.7% prior.

- New Zealand Q2 Terms of Trade Index Q/Q:-9.0% v -1.9%e.

- New Zealand Aug ANZ Commodity Price M/M: -0.4% v -4.0% prior.

- Japan sold ¥600B vs. ¥600B indicated in 30-year JGB Bonds; Avg Yield: 4.0790% v 3.9370% prior; Bid-to-cover: 3.79x v 3.86x prior **Note: B/C remained above the 12-month avg).

- RBNZ Gov Breman testified that a gradual removal of monetary stimulus was appropriate to return inflation to target while still supporting growth and employment.

Global conflict/tensions

- US continued targeting Iranian radar systems and mine-laying capabilities.

- Pres Trump stated that oil prices will come down; Renewed campaign in Iran would not last long; Struck Iran as they were trying to rebuild their radar and missile systems; US in control of Strait of Hormuz (**Note: WSJ reported Trump was having discussions with senior aides about whether to declare the Iran war over, US officials noted Trump favored the idea).

- US Def Sec Hegseth said to have extended Mideast deployments into 2027; 50k troops remain on hand to give Pres Trump options.

- UAE President said to have received phone call from US President Trump, both leaders discussed 'cooperation'.

Americas

- Fed’s Beige Book reported “modest” economic growth across 10 of 12 districts.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.19% at 10,776.40, DAX +0.24% at 25,904.36, CAC-40 -0.04% at 8,277.13, IBEX-35 +0.62% at 19,902.07, FTSE MIB +0.43% at 52,015.50, SMI -0.03% at 14,358.90, S&P 500 Futures +0.11%].

Market focal points/key themes: European equities inched higher on Thursday in an attempt to stabilise after a punishing weekly sell-off, supported by a global bond-market relief rally and dovish remarks from New York Fed President John Williams. The pan-European STOXX 600 rose 0.12%, snapping a three-session losing streak after touching an over one-month low on Wednesday, while Germany’s DAX gained 0.2% and both France’s CAC 40 and London’s FTSE 100 finished flat. The modest rebound followed a turbulent start to September marked by a sovereign-debt rout that pushed German 10-year Bund yields to 2011 highs of 3.37% and U.S. 10-year yields toward 4.80%, alongside crude prices above $90 a barrel driven by U.S.-Iranian kinetic strikes in the Strait of Hormuz. Williams’ “wait and see” stance on a potential September rate hike, reinforced by a soft U.S. ADP print of just 38,000 private-sector jobs in August, eased pressure on yields, while standout stock moves included Gem Diamonds surging 50% on a sharp H1 profit swing, HUTCHMED rising 15.5% on a major GSK licensing deal, Soitec climbing 10% after lifting growth guidance on AI demand, and Crest Nicholson dropping 13% after a profit warning.

Equities

- Consumer discretionary: Jet2 [JET2.UK] +3.0% (summer booked passengers +8.8% YoY, accelerating from +7.1% reported in July despite Middle East disruption; winter seat capacity +8%, while fuel remains ~93% hedged), Zumtobel Group [ZAG.AT] +2.5% (Q1 revenue €264.1m, essentially matching the lone €264.0m published estimate; adjusted EBIT rose to €8.2m from €6.6m, margin to 3.1% from 2.5%, and net profit swung to +€4.2m from –€4.0m; FY outlook retained), Crest Nicholson [CRST.UK] –13.0% (FY26 operating result now expected at approximately £10m loss vs previous £5–10m profit; completions cut to 1,350–1,400 from 1,400–1,500 amid weaker affordability/price competition, with lender-covenant amendment discussions also slipping).

- Healthcare: Nanobiotix [NANO.FR] +1.5% (likely U.S.-listing catch-up rather than a new Paris catalyst; NBTX ADS gained ~6.1% Wednesday and another ~3.2% after hours, leaving the Paris ordinary shares converging toward the U.S. move).

- Technology: Soitec [SOI.FR] +10.0% (Q2 FY27 revenue-growth guidance lifted to ~50% from >30% at constant FX/scope; Photonics-SOI revenue expected at roughly 3x last year's level as AI/data-centre optical demand accelerates).

-Materials: Gem Diamonds [GEMD.UK] +50.0% (open +28.0% → now +50.0%; [L━━━●━━H]; H1 underlying EBITDA swung to ~$8.6m from a loss and balance-sheet leverage improved sharply; exceptionally large reaction in a small-cap with materially elevated turnover).

-Telecom: Deutsche Telekom [DTE.DE] +1.5% (Elliott reportedly built a significant stake and opposes a full combination with T-Mobile US, favouring alternatives including larger buybacks/value extraction; unusually meaningful move for a €140bn-class large cap).

Speakers

- German Chancellor Merz said to be planning to meet with ECB ahead of the upcoming Council meeting held in Berlin on Thurs, Sept 10th.

- German IFW Economic Institute updated its outlook which raised the 2026 GDP growth forecast from 0.8% to 1.3% while maintaining 2027 GDP growth forecast at 1.0%.

- Germany IFO Institute updated its economic forecasts which raised 2026 GDP growth from 0.8% to 1.4% and raised 2027 GDP growth from 0.8% to 1.2%.

- Russia Dep PM Novak noted that Russia to slightly cut oil production in 2026 and govt might cut fiscal rule oil price to $50/bbl. Stressed that would be increasing oil output once refineries complete maintenance.

- Japan's Top FX Diplomat Mimura reiterated stance that would continue to stand ready on FX (**Note: BOJ accounts indicated no major yen intervention on Wed, Sept 2nd).

- Malaysia Central Bank Policy Statement noted that the current level of OPR was consider be consistent with outlook of continued price stability. To remain vigilant to ongoing developments and assess balance of risks. Inflation was expected to remain elevated. Economy’s sound fundamentals was expected to keep growth resilient in 2027.

- China Commerce Ministry (MOFCOM) spokesperson reiterated govt stance to take necessary measures to safeguard its own interests. Called for US to correct its erroneous practices and lift sanctions against relevant Chinese companies and citizens.

Currencies

- USD softer against the major pairs.

- EUR/USD back above the 1.16 level with dealers expecting ECB to hike by 25bps at next week’s meeting. Euro also supports by improving PMI Services data for the EU region.

- Yen currency was firmer on prospects of more aggressive tightening by BOJ coupled by increased speculation about potential portfolio rebalancing by domestic pension funds. Dealers also noted that US Tsy Sec Bessent might have spooked Yen traders. JPY added onto Wed’s gains, which initially came after hawkish remarks from the BOJ’s Takata. Dealers noted that US officials had been arguing that higher Japanese yields were necessary to stabilize the yen and curb capital outflows. BOJ accounts indicated no major yen intervention on Wed, Sept 2nd.

- European government bonds pared some of their recent rise as Brent crude and gas prices pulled back.

- The 10-year German Bund yield last at 3.37%, France 10-year Oat at 4.25% and 10-year Gilt yield at 5.25%; 10-year Treasury yield: 4.80%; 10-year JGB: 2.99% (**Note: yields moving away from recent decade highs).

Economic data

- (RU) Russia Aug Services PMI: 51.3 v 49.0 prior (1st expansion in 6 months); Composite PMI: 50.6 v 49.6 prior.

- (CH) Swiss Aug CPI M/M: 0.4% v 0.0%e; Y/Y: 0.8% v 0.5%e (highest annual pace in two years).

- (CH) Swiss Aug CPI EU Harmonized M/M: 0.1% v 0.3% prior; Y/Y: 0.9% v 0.7% prior; CPI Core Y/Y: 0.4% v 0.3%e.

- (SE) Sweden Aug Services PMI: 55.8 v 54.3 prior (6th month of expansion).; Composite PMI: 55.9 v 54.7 prior.

- (CH) Swiss Q2 GDP Q/Q: 1.9% v 1.7%e; Y/Y: 2.8% v 2.2%e; GDP (Final Sport Adj) Q/Q: 1.5% v 1.5% prelim.

- (CZ) Czech Q2 Average Real Monthly Wage Y/Y: % v 5.0%e; Nominal Monthly Wage Y/Y: % v 8.1% prior.

- (TR) Turkey Aug CPI M/M: 1.8% v 1.9%e; Y/Y: 31.5% v 31.6%e; CPI Core Index Y/Y: 30.1% v 30.1%e.

- (TR) Turkey Aug PPI M/M: 2.6% v 1.5% prior; Y/Y: 28.0% v 27.8% prior.

- (MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 2.75% (as expected).

- (ES) Spain Aug Services PMI: 57.8 v 58.8e (4th month of expansion); Composite PMI: 55.8 v 57.4e.

- (ZA) South Africa Aug PMI: 50.5 v 50.3 prior (3rd consecutive expansion).

- (IT) Italy Aug Services PMI: 55.2 v 53.4e (3rd month of expansion and highest since Apr 2023); Composite PMI: 53.6 v 53.1e.

- (FR) France Aug Final Services PMI: 48.4 v048.4 prelim (confirmed 7th month of contraction); Composite PMI: 48.5 v 48.8 prelim.

- (DE) Germany Aug Final Services PMI: 48.7 v 48.5 prelim (confirmed 5th month of contraction); Composite PMI: 51.8 v 51.0 prelim.

- (EU) Euro Zone Aug Final Services PMI: 51.6 v 51.7 prelim (confirmed 2nd month of expansion); Composite PMI: 52.0 v 52.1 prelim.

- (UK) Aug Final Services PMI: 52.5 v 52.8 prelim (confirmed the 2nd month of expansion); Composite PMI: 52.5 v 52.5 prelim.

- (UK) Aug Official Reserves Changes: $5.3B v -$0.3B prior.

- (EU) Euro Zone July PPI M/M: 1.6% v 1.3%e; Y/Y: 5.8% v 5.5%e.

- (IS) Iceland Q2 Current Account Balance (ISK): -120.3B v -28.8B prior.

- (CY) Cyprus Aug CPI M/M: +0.9% v -0.7% prior; Y/Y: 3.5% v 2.9% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.634B vs. €5.0-6.0B indicated range in 2029, 2031 and 2036 SPGB bonds.

- (ES) Spain Debt Agency (Tesoro) sells €639.0M vs. €250-750M indicated range in 2.05% Nov 2039 Inflation-linked bonds (SPGBei); Real Yield: 1.822% v 1.715% prior; bid-to-cover: 1.74x v 1.85x prior.

- (FR) France Debt Agency (AFT) sold total €13.497B vs. €11.5-13.5B indicated range in 2036, 2040 and 2046 Bonds.

- (UK) DMO sold £900M in 1.875% Sept 2049 inflation-linked Gilts (UKTi); Real Yield: 2.494% v 2.165% prior; bid-to-cover: 3.58x v 3.20x prior.

Looking ahead

- 05:30 (US) Aug Challenger Total Job Cuts: No est v 33.4K prior; Y/Y: No est v -46.1% prior.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

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

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 9-month Bills; Avg Yield: % v 3.696% prior, bid-to-cover: x v 2.42x prior (May 28th 2026).

- 06:30 (SE) Sweden Central Bank (Riksbank) Gov Thedeen.

- 07:00 (ZA) South Africa July Electricity Production Y/Y: No est v -8.1% prior; Consumption Y/Y: No est v -2.8% prior.

- 08:00 (MX) Mexico Aug Consumer Confidence: 44.9e v 45.0 prior.

- 08:01 (NZ) New Zealand Aug Cotality Home Value M/M: No est v -0.3% prior.

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

- 08:30 (US) Q2 Final Nonfarm Productivity: 1.4%e v 1.4% prelim; Unit Labor Costs: 1.3%e v 1.3% prelim.

- 08:30 (US) Initial Jobless Claims: 205Ke v 203K prior; Continuing Claims: 1.79Me v 1.778M prior.

- 08:30 (US) July Trade Balance: -$90.3Be v -$73.3B prior; Exports M/M: -0.3%e v -0.9% prior; Imports M/M: +1.2%e v -1.8% prior.

- 08:30 (CA) Canada July Int'l Merchandise Trade (CAD): 3.2Be v 3.9B prior.

- 08:30 (CA) Canada Q2 Labor Productivity Q/Q: No est v -0.5% prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:30 (US) Fed's Waller.

- 09:00 (BR) Brazil Aug Services PMI: No est v 49.7 prior; Composite PMI: No est v 48.8 prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 28th: No est v $761.2B prior.

- 09:30 (CA) Canada Aug Services PMI: No est v 49.1 prior; Composite PMI: No est v 49.7 prior.

- 09:45 (US) Aug Final S&P Services PMI: 56.8e v 56.8 prelim; Composite PMI: 56.0e v 56.0 prelim.

- 10:00 (US) Aug ISM Services Index: 54.1e v 54.1 prior.

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

- 10:30 (US) Atlanta Fed GDP Now.

- 11:00 (CO) Colombia July Exports: $4.8Be v $4.2B prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 18:45 (NZ) New Zealand Q2 Volume of All Buildings Q/Q: +1.0%e v -3.5% prior.

- 19:00 (KR) South Korea July Current Account Balance: No est v $49.7B prior; Balance of Goods (BOP): No est v $47.9B prior.

- 19:30 (JP) Japan July Household Spending Y/Y: -1.6%e v -3.3% prior.

- 21:00 (PH) Philippines Aug CPI M/M: 0.5%e v 0.1% prior; Y/Y: 6.0%e v 6.2% prior.

- 22:35 (CN) China to sell 1-year and 20-year Additional Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.