Newsquawk European Market Wrap - 31st August 2026

US President Trump said the US will respond to Iranian attacks, reported Fox. WTI Oct and Brent Nov futures remained firmly higher following the weekend resumption of US-Iran strikes. European bourses are set to finish the first trading session of the week mixed; US opened modestly in the red. EQUITIES European bourses finish the first trading session of the week mixed, with the FTSE MIB holding onto earlier gains while the DAX 40 remained the underperformer, albeit volumes and newsflow have been light. On the data front, flash German inflation printed cooler-than-expected, with the harmonised figure coming in at 2.9% Y/Y (exp. 3.1%, prev. 3.2%). However, the German benchmark showed little reaction. Sectors lacked a clear bias. Chemicals topped the sector pile, with Energy and Retail rounding out the top 3 sectors. Tech remained the sector laggard, followed by Real Estate and Health Care. Key stories to start the week: Allianz (-0.4%), considering a GBP 5bln takeover bid of AA according to Sky News; Airbus (-1.4%), FT reports the Co. is mulling the sale of its US space business; Mercedes-Benz (U/C), announces a EUR 1bln share buyback programme; InPost (U/C), Q2 metrics beat but cuts its FY26 adj. EBITDA guidance. US cash equities opened modestly in the red, albeit in light volume. In the tech space, Nvidia announced that it will buy USD 3.5bln convertible bonds in MediaTek (2454 TT) as the two Cos deepen their collaboration. FX USD remained on the back foot, although DXY recovered modestly from its earlier 99.47 base to around 99.56, down 0.1% on the session at the time of writing, with the index finding resistance at its 100 DMA (99.71). The Buck remained softer against most major peers as markets continued to wane from the strength seen post Fed Chair Warsh’s speech on Friday, while month-end flows were also potentially at play, with Barclays looking for moderate USD selling. EUR remained firmer against the softer Buck, with French political developments providing little fresh impetus after PM Lecornu’s 2027 budget comments and the latest Elabe polling. EUR/USD traded on either side of 1.1600, notching a 1.1575-1.1606 range, while Barclays sees moderate EUR buying against the Dollar into month-end. GBP remained modestly firmer against the Dollar despite UK participants being away for the Bank Holiday, with little in the way of fresh UK-specific catalysts. Cable price action was largely a function of the broader softness in the Buck, with the pair in a 1.3622-55 range. JPY remained firmer against the Dollar, although it pared some of its earlier strength. USD/JPY recovered to around 159.87 after falling through 160.00 to an earlier 159.74 low, with the pair still down around 0.1% on the session. Better-than-expected Japanese Industrial Production and Retail Sales provided a supportive backdrop, although the data prompted little immediate reaction overnight. USD/JPY traded on either side of its 100 DMA (159.97). Antipodeans remained firmer against the softer Dollar amid a lack of notable fresh domestic catalysts aside from broader USD weakness and potential weak Chinese PMI data overnight, adding to hopes of Chinese stimulus. FIXED INCOME A contained start for fixed income, with USTs in thin ranges and holding just below the 108-00 handle for the December contract. Focus remains on Chair Warsh’s speech last week, which had a hawkish skew and has contributed to the implied probability of a September 25bps hike increasing to just over 60% currently via CME, vs around 41% one week ago. Bunds spent the morning lower by a few ticks, with no real move to the State CPIs which saw the Y/Y tick up modestly from the prior, in-line with consensus for the mainland. Thereafter, the mainland figures printed a touch cooler than expected and sparked some modest upside, though the benchmark remained shy of the earlier 123.63 peak. More pertinently, Bunds have for the most part been and currently still reside comfortably into the red, lower by near 40 ticks and just off a 123.24 base. Pressure primarily a function of the notable upside in Dutch TTF, after the front-month contract eclipsed EUR 70/MWh this morning. Reminder, Gilts are closed on account of the UK Bank Holiday. For the complex, the main update has been the Conservative Shadow-Cabinet reshuffle, though nothing of note for the benchmark itself when it opens on Tuesday. The EU sold EUR 6.27bln vs Exp. 7bln 2.875% 2031, 3.25% 2036 and 3.625% 2040 EGB Bonds. 2.875% 2031: b/c 1.22x, average yield 3.246%. 3.25% 2036: b/c 1.51x, average yield 3.689%. 3.625% 2040: b/c 1.16x, average yield 4.013%. COMMODITIES WTI Oct and Brent Nov futures remained firmly higher following the weekend resumption of US-Iran strikes, with crude extending materially beyond its earlier highs as geopolitical risk remained elevated. WTI rose from a USD 84.11/bbl low to USD 86.79/bbl before easing to around USD 85.50/bbl, while Brent climbed from USD 89.03/bbl to USD 91.52/bbl before paring to just above USD 90.25/bbl. Both gained during the session after US President Trump said the US will respond to Iranian attacks. Dutch TTF extended its earlier surge as renewed Middle Eastern tensions compounded worries over tight European supply heading into the heating season. TTF rose from EUR 68.01/MWh to a EUR 70.72/MWh high and remained close to the highs, up around 5% on the session at the time of writing. Precious Metals were mixed despite the softer Dollar, with higher energy prices providing a headwind. Spot gold extended below Friday's low to USD 4,397/oz before recovering to around USD 4,450/oz, having earlier reached USD 4,472/oz. Spot silver outperformed, recovering from a USD 65.60/oz low to around USD 66.75/oz after reaching a USD 67.47/oz high. Base Metals were firmer despite the renewed surge in energy prices, with the softer Dollar providing some support alongside disappointing Chinese PMI data overnight reinforcing Chinese stimulus expectations. LME was closed today on account of the UK bank holiday, while COMEX copper rebounded from a USD 6.52/lb low to around USD 6.59/lb, near its USD 6.60/lb session high. The Trump administration is expected on Monday to approve an expanded volume of biofuel waivers for US oil refiners, covering more than 1.8 billion renewable fuel credits, Reuters reported, citing sources. Reports indicate an explosion and fire at the Dora Refinery (140k BPD) in southern Baghdad, Iraq. EUROPEAN DATA German Core Inflation Rate YoY Prel (Aug) 2.4% (Prev. 2.4%). German CPI Prel (Aug YY) 2.9% vs. Exp. 3.0% (Prev. 2.8%. "Energy prices are expected to be up 10.5% on the same month of the previous year. The rise in energy prices therefore accelerated again in August (July 2026: +8.3% on July 2025; June 2026: +3.4% on June 2025).". German HICP Preliminary (Aug YY) 2.9% vs. Exp. 3.1% (Prev. 2.8%). German HICP Preliminary (Aug MM) 0.2% vs. Exp. 0.3% (Prev. 0.9%). German CPI Prel (Aug MM) 0.2% vs. Exp. 0.3% (Prev. 0.8%). NOTABLE HEADLINES TRADE/TARIFFS US Transportation Secretary Duffy and DHS Secretary Mullin to hold a news conference on anti-fraud measures related to the trucking industry in Detroit at 10:30 EDT, POLITICO reported. CENTRAL BANKS SNB's Tschudin said more willingness to intervene on FX if needed. Riksbank Deputy Governor Jansson said Sweden’s inflation outlook has become more uncertain after unexpectedly high inflation readings this summer; Sweden’s economic recovery could prove more persistent than expected. Does not currently see signs that Sweden’s economy is at risk of overheating soon. Still sees an increased risk of modest demand-driven inflation. Have scope to wait before adjusting monetary policy, even if there are some risks of elevated inflation going forward. SNB Sight Deposits w/e Aug 28th (CHF): Domestic 431.29bln (prev. 437.11bln), Total 457.35bln (prev. 463.66bln). GEOPOLITICS MIDDLE EAST US President Trump posted that Iran is a “failed nation,” claiming its military, economy and leadership are in disarray while accusing the government of killing protesters and spreading misinformation. US President Trump said US will respond to Iranian attacks, reported Fox. Senior Iranian source said Tehran’s retaliation for US strikes on Larak showed “no target in the region is beyond Iran’s reach,” warning that Iran would respond to every US attack with force “dozens of times greater", Reuters reported. EU said it will continue working closely with the US, other G7 members and international partners to maintain pressure on Iran. Iran’s Deputy Foreign Minister Gharibabadi said the “aggressive actions” will receive an appropriate response. Iran's IRGC Navy said compliance with regulations issued for the Strait of Hormuz is mandatory and warned against being “misled” by the US, Press TV report. IRGC Navy Commander said no oil will be allowed to pass through the Strait of Hormuz, Mehr News reported. US Treasury Secretary Bessent said Iran is taking sanction seriously, will be going to continue exerting pressure. Pakistan’s PM Sharif met Iranian President Pezeshkian on the sidelines of the SCO summit to discuss recent developments and cooperation between Islamabad and Tehran. US official said US military did not target Kharg Island in overnight strikes, according to reported. Iranian President Pezeshkian said Tehran is still looking to reach an agreement and believes the continuation of the war is not in anyone's interest in the region. The solution to existing problems lies in dialogue and cooperation. Saudi Arabia is reportedly seeking about USD 8bln in loans as the ongoing war strains the country's finances, Bloomberg reported. US claims its latest attack prevented Iranian mine-laying in the Strait of Hormuz were fabricated, Tasnim reported citing sources. Yemeni armed forces reportedly targeted Saudi ships in the Red Sea, ISNA reported citing Yemeni media reported. No further details on the attack. US officials said they are monitoring the Strait of Hormuz and will strike any forces that threaten navigation in the waterway, Al Arabiya reported. UAE Ministry of Defense denied reported that Al Minhad Air Base was targeted by missiles, calling the claims unfounded and saying it remains on high alert and fully prepared to respond to any threats. Iranian oil operations are continuing on Kharg Island, and the oil sector there has not stopped, Al Hadath reported. RUSSIA-UKRAINE Russian President Putin and Chinese President Xi discussed Ukraine at the SCO meeting, but was not the main theme of their discussion. Ukrainian President Zelensky to send top sanctions adviser to Capitol Hill this week in a bid to convince House lawmakers to drop their opposition to the Senate-passed Russia sanctions bill, Punchbowl reported. EU to unveil "one of the biggest" Russia sanctions list in retaliation of hybrid threats; package to come alongside bilateral measures being prepared by Berlin, POLITICO reported, citing sources. Germany looks beyond traditional measures such as expelling diplomats. EU plans to target 1,600 individuals and entities as part of a draft sanctions list. List should be finaliSed by the October gathering of EU leaders. EU diplomat said that countries such as Greece and Spain that have not significantly contributed interceptors to Ukraine will face pressure at this week’s meetings. Iranian President Pezeshkian expected to hold talks with Russian President Putin at Shanghai Cooperation Organisation summit (Aug 31-Sep 1), Al Jazeera reported. OTHER North Korean Foreign Ministry spokesperson said North Korea's nuclear weapons are absolute guarantee of sovereignty and will continue to be strengthened, according to KCNA. said:. Washington’s hostile policy toward Pyongyang has not changed. Anticipating any regional tension relief is futile.