Newsquawk European Market Wrap - 25th September 2026

Risk on trade on hopes of a re-opening of the Strait of Hormuz, following overnight commentary from the Iranian President. European and US equities gained, whilst pressure in crude benchmarks weighed on yields. DXY was pressured by strength in JPY after jawboning from several Japanese officials. EQUITIES European bourses began the day in the green and are set to finish it with notable gains, Euro Stoxx 50 +0.6%. A bullish bias that emanated from increased hopes of a re-opening of the Strait of Hormuz, following overnight commentary from the Iranian President. Sectors hold a strong positive bias. Basic Resources lead, followed by Banks despite the yield moves and Travel & Leisure on the welcome energy and fuel price implications of movement towards US-Iran diplomacy. Major movers include: UBS, +2.3%, after Semafor scooped that they are considering merging with a foreign firm after the Upper House reserves ruling; Airbus, -0.8%, after finding a non-safety related defect on over 500 A321neos. Stateside, futures pointed to and have delivered a firmer open, ES +0.2%. Continuing the positive European risk tone. Specifics include Akamai coming to a deal with Anthropic for USD 11.6bln; Costco beating in Q4, but hit by a slowdown in membership. FX USD has followed the energy, and by extension, yield complex across the day and thus the index has been under modest pressure. Pressure has become more pronounced amid ongoing jawboning by Japanese officials, with Finance Minister Katayama on multiple occasions in addition to PM Takaichi. DXY hit a 100.93 low, despite starting the day well above the 101.00 mark and briefly hitting a 101.35 peak, just shy of Thursday’s 101.40 WTD best. For the JPY, that was hit by the alluded-to Japanese commentary, slipping from 158.50 at the start of the European day to a 157.31 session low at the time of writing. Next best are Sterling and Aussie, despite a lack of specific drivers in recent trade. GBP is looking ahead to the Labour conference next week, for insight from PM Burnham and Chancellor Healey into the Autumn Budget. Antipodeans benefit from the generally constructive readout from the US-China diplomatic events, though we still await any concrete/significant policy announcement from it. Japanese Finance Minister Katayama said she discussed the trend of the Yen's continued depreciation in the FX market during an online meeting with US Treasury Secretary Bessent, Kyodo reported. FIXED A modestly bullish end to the week for fixed income, though the WTD view is still one of marked yield upside, particularly in the UK and US. USTs are set to end the week with downside of nearly a full point. A week that was characterised by further yield upside given geopolitical and, pertinently, diesel updates. The 30yr hit a 5.50% peak, firmer by 20bps on the week at that point, while around 5bps off highs as it stands, the move remains significant and resilient. Further out, the general view is that the move has further to run given the US economic backdrop, continued Middle East uncertainty and associated supply disruption (and elevated shipping costs, added to by record low Rhine levels), potential US diesel measures, AI spend and a credibly hawkish Fed. Factors which are all indicative of further yield upside. Gilts spent much of the day with slight outperformance, providing some respite to UK yields, but nonetheless the 10yr yield remains firmer by c. 25bps MTD, despite the BoE holding the Bank Rate in September. EGBs followed the above across the day. Specifics for the complex were light. Focus on the above points, ECB official changes that are expected over the next few months and regional energy updates. Again, the week has been characterised by marked yield upside, essentially cementing another near-term hike and keeping October as a live gathering. COMMODITIES Crude benchmarks under pressure across the session, hit by the growing diplomatic hopes around US-Iran negotiations and by extension the Strait of Hormuz. Overnight, the US and Iran reportedly discussed a phased deal to reopen Hormuz and end the US blockade. WTI and Brent end the European session lower by c. USD 2.00/bbl, but around USD 0.60/bbl clear of the earlier USD 92.04/bbl and USD 97.75/bbl respective lows. More generally, the complex also awaits an update on the US President’s diesel proposal, a point which continues to divide the Republican camp into the midterms on whether it would be an effective move or not. Elsewhere, Dutch TTF found some relief on the above and then more specifically on: European Commission saying its gas supply is stable; Russia resuming flows to Armenia; Gazprom increased gas production while the Houthi’s have, according to the FT, informed bloc that European ships will not be targeted within the Red Sea. Spot gold is modestly firmer, caught between the constructive risk tone and the pullback in yields from WTD highs. Base metals cheered the risk tone, however the absence of China from the market has capped any real move. Libya's NOC said forced closure of the valve on the Sharara-Zawiya crude pipeline has led to a loss of 720k barrels of output. Gazprom increased gas production by 3.4% in H1to 216.55bcm, Interfax reported; Gas supplies to China via power of Siberia pipeline in H1 2026 exceeded H1 2025, Tass reported. EU Energy Chief signals delay to methane rules for imports. Kremlin said it will tie a diesel solution to Black Sea shipping security; sanctions must be lifted to end Russia's diesel export ban. Iraq has reportedly cut Basra medium and heavy crude prices to attract demand, sources say. Puntland Maritime Police Force said the US-sanctioned tanker "SIBU 1", seized by Somali pirates in August, has been rescued. Russian gas supplies have restarted to Armenia, Ifx reported. EU Commission said that gas supply remains stable; to reconvene on October 8. EUROPEAN DATA European Loans to Households (Aug YY) 3.1% vs. Exp. 3.2% (Prev. 3.1%). European M3 Money Supply (Aug YY) 3.5% vs. Exp. 3.5% (Prev. 3.4%). European Loans to Companies (Aug YY) 4.2% (Prev. 4.4%). Spanish GDP Growth Rate Final (Q2 QQ) 0.7% vs. Exp. 0.7% (Prev. 0.6%). Spanish GDP Growth Rate Final (Q2 YY) 2.6% vs. Exp. 2.7% (Prev. 2.7%). French Non Farm Payrolls (Q2 QQ) -0.1% (Prev. 0%). French Private Non Farm Payrolls Final (Q2 QQ) -0.1% vs. Exp. -0.1% (Prev. -0.1%). Swedish Household Lending Growth (Aug YY) 3.3% (Prev. 3.2%). Swedish PPI (Aug YY) 6.8% (Prev. 6.4%). Swedish PPI (Aug MM) 0.9% (Prev. 0.1%). German GfK Consumer Confidence (Oct) -30.6 vs. Exp. -27.4 (Prev. -26.8). NOTABLE HEADLINES Italy has reportedly updated EU safe defence loan plan for just above EUR 8bln. TRADE/TARIFFS Mexico's Valesco said US and Mexico will hold a round of USMCA talks in the "next weeks". USTR Greer said US President Trump is comfortable on where the US is on Canada; there is still a lot of strong trade with Canada; Canada wants a deal. USTR Greer said we will release details on Monday regarding negotiations with China and the US. China and US in a managed trade situation, had progress. Reached agreements with China on subset of goods we can trade. UK PM Burnham to meet with German Chancellor Merz in October. CENTRAL BANKS Fed's Williams (Voter) said cannot ignore persistent supply shocks; labour market is not a source of inflationary pressure, adding that tariffs generally do not produce sustained inflation. Fed should ensure shocks don't become entrenched. BoE's Bailey said they are currently seeing quite subdued pass through of energy prices, but it remains early. noted the tightening of financial conditions. Cannot wait for full evidence on 2nd round effects. SNB's Schlegel said that inflation pressure is slightly higher than in June. CNB Minutes: Governor Michl emphasises the need to remain hawkish; assessed the current monetary policy stance as appropriate; so far no second-round effects. GEOPOLITICS RUSSIA-UKRAINE Kremlin said it will tie a diesel solution to Black Sea shipping security; sanctions must be lifted to end Russia's diesel export ban. Russian Kremlin said there are no details on a near-term trilateral meeting with the US and Ukraine, but once could take place. Russian gas supplies have restarted to Armenia, Ifx reported. Ukraine President Zelenskiy said that the US proposed a "technical meeting" with Ukraine and Russia in UAE; waiting on the date. Russia's defense ministry said it bombed a drone assembly site in the Kyiv region. Explosion heard near Ukraine's capital of Kyiv after a Russian drone attack. MIDDLE EAST Houthi's have told the EU they will not target European ships within the Red Sea, FT reported citing sources; letter was sent in September. Assured the EU that Houthi activity would not impact navigation through Bab al-Mandeb. US Ambassador to China Perdue said the US doesn't support Taiwan independence; Trump made clear any help China gives Iran totally unacceptable; Trump and Xi had very candid and open conversation. Iranian Foreign Minister Araghchi said Iran is determined to defend its interests and national security in the Strait of Hormuz, ILNA reported. Iranian Leader Adviser Mokhber said if Iran cannot have flights and receive airport services, then no one in the region can either, Nour News reported; Al Arabiya reported the advisor threatened to target civilian aircraft in neighbouring nations. IRGC Spokesperson Mohebbi said "in the event of a new attack, we will use different weapons", YJC reported. "In the event of a new attack, Iran will make changes to its defense and counter-response methods, including changing the geography of the conflict, using new equipment and weapons, and choosing different targets.". "Iran has some capabilities and strategic goals that have not been used so far, and if necessary, these capacities will be used.". Yemeni Houthi official warns the coming period will be more painful for Saudi Arabia if its actions against Yemen continue, ISNA reported. Russian and Iranian Foreign Ministers say there is no alternative to a diplomatic solution to the war in Iran, Al Arabiya reported. Sources say a return to the June 18 memorandum of understanding between Iran and the US is no longer sought by either side, with both seeking amendments to some clauses, further complicating negotiations, Al-Akhbar reported. Israel's channel 12 noted that the army will enter a new phase of fighting in southern Lebanon in the coming days. said:. Army has completed operation to destroy Hezbollah's infrastructure in the Yellow Line area. Iraq's Deputy Parliamentary Speaker said talks in Baghdad were on halting attacks on Kurdistan oil, Al Hadath reported. It is not in Iraq's interests to have problems with neighbours or the US. Earthquake of magnitude 4.0 reportedly hits Isfahan, Mehr News reported. Iranian Brigadier General Sheikh said "we seek to expand our capabilities and reconsider our tactics and technologies", via Al Mayadeen. Israeli military will enter a new phase of fighting in southern Lebanon in the coming days, Israeli Channel 12 reported cited by Sky News Arabia. The army completed the process of destroying Hezbollah’s infrastructure in the Yellow Line area. NOTABLE NORTH AMERICAN NEWS US President Trump said very productive meeting with President Xi for both the USA and China. Full post: Very productive meeting with President Xi for both the U.S.A. and China. Tremendous things will be happening. Like almost everyone else, he seemed to like calling the poorly and inaccurately named Artificial Intelligence to a far more accurate and important name, SUPER INTELLIGENCE. That would be “SUPER!” Everyone last night agreed, also. President DJT. NORTH AMERICAN DATA US Non Defense Goods Orders Ex Air (Aug) 1.6% vs. Exp. 0.5% (Prev. 0.2%). US Durable Goods Orders Ex Transp (Aug MM) 0.3% vs. Exp. 0.6% (Prev. 0.4%). US Durable Goods Orders (Aug MM) 0% vs. Exp. -0.4% (Prev. 1.1%). US Durable Goods Orders ex Defense (Aug MM) 0.1% (Prev. 1.4%).