Newsquawk European Market Wrap - 1st October 2026

Stocks in Europe traded lower across the board following an energy spike, but trimmed losses as crude waned. Crude futures reversed overnight losses and rose sharply in the European morning before waning off best levels; Dutch TTF holds onto gains. Iran President Pezeshkian said Tehran will never shy away from dialogue even as the US targeted Iran several times, reported Tasnim. EQUITIES European bourses took a hit at the start of the European session as energy prices climbed c. USD 3/bbl despite a clear driver, however equities have managed to rebound off its earlier lows. Additionally, the lack of tech giants in the EU resulted in its broader underperformance relative to the US, following Micron's strong Q4 results and upbeat forecasts. Sectors point to a slightly negative bias. Media look set to be the clear sector outperformer, with Tech and Travel & Leisure rounding out the sector gainers. To the downside were Banks, Basic Resources and Consumer Products & Services. Top stories included: Zealand Pharma -7.2%, its Phase 3 SYNCHRONIZE-2 trial met primary endpoints, achieving 13.1% weight loss but less than Novo's 15-17% weight loss figure; Sanofi +2.2%, expands its collaboration with Regeneron with a USD 8bln deal; Capgemini +9.7%, read across from Accenture (+21.2%) earnings, which beat Q4 estimates and gave upbeat FY guidance. US cash equities opened higher, with outperformance in the NDX. Reasoning behind the NDX outperformance is surprisingly not related to Micron but was helped by upside in Constellation Energy (+3.7%) and Google (+1.4%). The former announced a 20-year pact with Amazon while the latter released Gemini 4 Argon. FX G10s were mostly lower against the Dollar this morning, which was buoyed by elevated yields. The Aussie fared a little better vs peers (rebounding from recent pressure) and the CHF garnered haven demand. To the downside resided the Kiwi (falling copper prices), whilst the JPY was pressured following the BoJ SOO and weaker-than-expected Tankan survey. DXY traded within a 101.45-101.99 range, and is set to end the London session towards the mid-point of that range. Initial upside was facilitated by elevated yields/higher energy prices, but gave back some of that strength as the yield situation improved throughout the day. On the data front, Jobless Claims spurred some two-way action in the index, which printed a little shy of consensus; sticking with the labour market, Revelio Labs NFP printed at +56.9k (prev. rev. +40k). Attention now turns to the NFP report on Friday, though a significant surprise would likely be required to spur a significant reaction, given that the Fed is broadly focusing on the inflation side of the mandate. EUR was weaker vs USD this morning, and fell below the 1.13 mark for the first time since May 2025. The single currency has been swept away by the broader USD strength, but also has its own domestic issues to worry about, namely in France. PM Lecornu reportedly aims for EUR 43bln in new savings in the budget, with tax changes likely to make up the rest of the expected EUR 54bln savings plan that was previously touted. Most pertinently is that the deficit is seen falling to 5% of GDP by 2027, well above the EU’s deficit-to-GDP ceiling of 3%. This raises three key concerns: a) Will the EU impose fines/sanctions, b) potential use of Article 49.3 – raising political uncertainty, c) French sovereign debt credit rating downgrades. JPY underperformed early doors and throughout the European morning, but managed to come off worst levels into the afternoon. Initial pressure was facilitated by a weaker-than-expected Tankan survey, and a less hawkish-than-expected BoJ SOO. FIXED INCOME Global yields surged in early morning trade, in a move which lacked a clear catalyst, but came alongside a bid in energy benchmarks. Since then, WTI and Brent waned off earlier highs, which allowed yields to also come off peaks. Nonetheless, yields remain at multi-year and, in some cases, multi-decade highs; the UK-30yr briefly topped the 6% mark, for the first time since 1998, whilst the US10yr (5.31%) tested levels not seen since the GFC. USTs are set to end the London session off by a single tick, and towards the mid-point of a 103-28+ to 104-13 range; ultimately well off the days trough. As mentioned, the reversal was seen after energy benchmarks eased. Elsewhere, Bunds (+28 ticks) have entirely reversed earlier losses, whilst OATs (-19 ticks) remained in the red. Focus in France has been on the draft budget bill, which offered some temporary reprieve for French bonds, but given that it intends to reduce the deficit to 5% of GDP (well above the EU’s 3% ceiling), risks remain. France sold EUR 11.999bln vs Exp. 10-12bln 3.70% 2036, 3.80% 2037, 1.25% 2038, 2.00% 2048 OAT. 3.70% 2036: b/c 2.00x (prev. 2.28x), average yield 4.93% (prev. 4.23%). 3.80% 2037: b/c 3.02x (prev. 2.62x), average yield 4.97% (prev. 3.95%). 1.25% 2038: b/c 2.48x (prev. 3.77x), average yield 5.06% (prev. 3.51%). 2.00% 2048: b/c 2.43x (prev. 2.22x), average yield 5.40% (prev. 4.35%). Spain sold EUR 0.52bln vs Exp. EUR 0.25-0.75bln 1.15% 2036 I/L Bono: b/c 2.28x (prev. 1.87x), real yield 1.96% (prev. 1.32%). Spain sold EUR 5.061bln vs Exp. EUR 4.5-5.5bln 1.45% 2029, 3.40% 2036, 2.90% 2046 Bono. 1.45% 2029: b/c 1.98x, average yield 3.43%. 3.40% 2036: b/c 1.64x, average yield 4.176%. 4.90% 2046: b/c 1.73x, average yield 4.562%. South Korea is reportedly mulling additional cut to bond issuance if needed, reported suggest. COMMODITIES WTI Nov and Brent Dec futures reversed overnight losses and rose sharply in the European morning, with the complex supported by the continued lack of progress in US-Iran negotiations and despite any obvious news flow to explain the gains. Amid the lull in pertinent newsflow, the complex did wane off best levels. Focus was also on diesel after the US reportedly told France and Germany to release emergency stocks or face a possible US export ban. WTI initially rallied from a USD 88.79/bbl low to a USD 92.90/bbl high before falling back under USD 91/bbl at the time of writing, while Brent initially surged from USD 96.55/bbl to briefly top USD 100/bbl, printing a USD 100.83/bbl high before waning back under the round figure. Dutch TTF remained firmer throughout the session despite the dip seen in energy prices, with ongoing Middle Eastern uncertainty keeping supply risks on traders’ minds. Syria also reported that three power plants remain out of service following a gas pipeline explosion. TTF has risen from a EUR 71.22/MWh low to a EUR +74.00/MWh high, before finding support above EUR 73/MWh and then moving back to peaks. Precious metals were initially flat/mixed but thereafter turned higher as the rise in crude trimmed, whilst lingering geopolitical uncertainty kept prices underpinned. Spot gold was firmer overall in a USD 4,139-4,193/oz range. Spot silver narrowly outperformed in a USD 59.96-61.44/oz range. Base metals are softer overall as elevated energy prices provide headwinds for growth while mainland China remains closed for the National Day holiday. The complex clambered off worst levels as energy retreated from peaks. 3M LME copper trimmed earlier losses and notched a daily range between USD 14,229.53- 14,491.18/t. Tamoil extends Italy fuel price mitigation measures until October 31st, reported ANSA. German Economy Ministry on diesel reserves, said at this time there are no new requirements from the IEA; does not speculate on possible future events. Crucial that we arrive at coordinated and mutually beneficial solutions with goal of stabilizing markets. Any measures must be based on careful joint assessment of situation within framework of international procedures established for that purpose. HSBC cuts its 2026 average gold price forecast to USD 4,490/oz (prev. USD 4,560/oz); gold likely to face further short-term downside pressure but may be nearing a bottom. USTR Greer said US feels that Europe should release some diesel stockpiles; Europe is sitting on a reserve of diesel. TotalEnergies (TTE FP) CEO said it is invest USD 10bln in Argentina. US President Trump said they will soon be filling up the strategic oil reserve, reported Time Magazine. "We're taking a tremendous amount of oil out [of Venezuela]. We'll soon be filling up our national reserves, national strategic reserves.". EU Commission, UK, France, Italy and Ireland officials are currently holding a call on diesel stock releases, an EU official said. EU Commission spokesperson said they are having high level contacts with the US administration on the ongoing situation of the oil market. The European Union is seeking to form a unified position on releasing diesel reserves, after the US called for diesel stock releases, reported suggest. The US has reportedly told France and Germany to release emergency diesel stocks or face a possible export ban, according to sources. Source adds the US wants the EU to release 120mln barrels of diesel in the next six months. EUROPEAN DATA Swiss procure.ch Manufacturing PMI (Sep) 55.3 vs. Exp. 56 (Prev. 57.1). Swiss Retail Sales (Aug YY) 3.2% vs. Exp. 2.2% (Prev. 2.3%). Swiss CPI (Sep YY) 1% vs. Exp. 1% (Prev. 0.8%). Swiss CPI (Sep MM) 0% vs. Exp. 0% (Prev. 0.4%). UK S&P Global Manufacturing PMI Final (Sep) 51.9 vs Exp. 52 (prev. 51.7). UK Nationwide Housing Prices (Sep YY) 0.8% vs. Exp. 1.3% (Prev. 1.6%). UK Nationwide Housing Prices (Sep MM) -0.2% vs. Exp. 0% (Prev. 0.2%). Italian Unemployment Rate (Aug) 6.2% vs. Exp. 5.7% (Prev. 6.0%). Italian S&P Global Manufacturing PMI (Sep) 50.4 vs. Exp. 50 (Prev. 49.6). European S&P Global Manufacturing PMI Final (Sep) 52.9 vs. Exp. 52.7 (Prev. 52.7). German S&P Global Manufacturing PMI Final (Sep) 53.9 vs. Exp. 53.8 (Prev. 54.3). French S&P Global Manufacturing PMI Final (Sep) 50.6 vs. Exp. 50.3 (Prev. 51.1). Spanish S&P Global Manufacturing PMI (Sep) 51 vs. Exp. 50.1 (Prev. 49.5). Swedish Swedbank Manufacturing PMI (Sep) 58.1 (Prev. 56.1). NOTABLE HEADLINES France's budget watchdog said that the 2027 growth forecast is overly optimistic. French Finance Minister said the target of reducing the budget deficit to 3% of GDP by 2029 remains possible. Will return to the path of consolidation in 2027. Cannot wait until next year to take action. Budget includes EUR 43bln in new measures, and a total of EUR 54 bln including existing measures. German Chancellery has halted Finance Minister Klingbeil's sugar tax draft bill, which targeted EUR 1.2bln from consumers versus EUR 450mln, Bild reported. The UK government is reportedly not planning to overhaul the student loan system in the Autumn budget to cut the cost of living for graduates, the i Paper reported. French PM Lecornu reportedly aims for EUR 43bln in new savings in the budget, BFM TV reported; The government intends to reduce the deficit to 5% of GDP by 2027. Government is forecasting higher revenues from VAT and income tax, and lower revenues for businesses, in the 2027 draft budget. Government wants to put an end to the "windfall" subsidies for renewable energy. Extend the tax on sugary drinks. Savings on welfare support and healthcare. The government wants to lower the 10% tax allowance ceiling for retirees. The government is proposing to freeze family allowances in 2027. The government hopes that this freeze on family allowances will save 500 million euros, and also seeks a 600 million euro reduction in spending on the back-to-school allowance. European Commission officials will, today, present to member nation's governments examples of "reforms, investments and outputs" and discuss the regional aspects of the bloc's budget, Politico reported citing sources. The new system would give the Commission greater control, sidelining some regions. Plan includes bundling agriculture, regional and migration spending into national cash pots called NRPPs. Payments could be conditional on economic reform milestones. TRADE/TARIFFS USTR Greer said US has always been open to a deal with Canada; Gaps remain between the two sides. Question is whether or not Canada wants to get to yes on some of the issues. US President Trump's administration has reportedly been taking steps to use China's dependence on US aviation suppliers as leverage in trade negotiations, sources say. South Korea's Industry Minister said he lodged strong objections with US Commerce Secretary Lutnick over his announcement on the Alaska LNG project. Japan plans to send a business delegation to Beijing next March, looking for talks with Chinese President Xi's leadership, Kyodo reported citing sources. CENTRAL BANKS Fed's Schmid (2028 voter, Hawk) said there is work to do on inflation; energy prices are one of the biggest challenges for monetary policy. Trying to see in the data how much inflation is due to demand and how much is driven by supply shocks. Fed's Collins (2028 Voter) said economic growth is near trend, if not more than that; Labour market is near full employment but inflation is too high. Will not get ahead of the next meeting. Fed's Kashkari (2026 voter, hawk) said economy keeps surprising him how resilient it is; Fed will do what it needs to do to get inflation back to target. Does not know how high rates will have to go to get inflation down. Broad economy is strong but there is weakness somewhere in some places like in housing. If AI proves to be a productive as expected, investment cycle could persist for a long time. Big gap between 2-year yield and short rates. Fed must pay attention to inflation risk premium, if it is large, it might be concerning. Inflation risk premium is a cousin of inflation expectations. Anything adjacent to housing is under a lot of pressure. If we keep raising rates it will put different pressure on different parts of the economy. Consumer spending is strong across the economy. Labour market is broadly healthy, not just an AI economy. 4.1% unemployment rate is good. Not hearing much from his contacts about interest rates, but is hearing a lot about inflation. In regards to Fed responding to one-time shocks, shouldn't react to that, but if its a series of shocks over 5 years, then should do. Don't think labour market pain is needed to achieve goals. FOMC atmosphere has been remarkably consistent under Warsh. US President Trump said 'pretty bad' they keep raising interest rates and reiterates US should pay lowest interest rate. Doesn't blame Warsh on rates. High rates hurting economy more than inflation. Certain levels of inflation help pay off debt. ECB's Nagel said all ECB instruments are for delivering price stability not for certain yield levels. ECB has asked the EU to start finding a successor to ECB's Schnabel. BoE's Mann said UK markets have priced in greater risk premium since Middle East conflict intensifies. Given rising upside risks to inflation, a risk management strategy to monetary policy is appropriate. When there is uncertainty about inflation dynamics and second-round effects, raising Bank Rate to commit to the inflation target can help ensure a sustainable return of inflation to the 2% target, with smaller losses to economic activity. With the ‘sporadic continuance’ of the conflict in the Middle East, uncertainty around the outlook for the economy and inflation risks have remained elevated. Uncertainty about the MPC reaction function should not compound the problem. When a policy decision deviates from the collective, speeches such as this can provide additional clarity on the outlook, risks, and decisions. Cannot take comfort from tighter nominal financial conditions when much of that tightening reflects a higher inflation risk premium and, possibly, a monetary policy uncertainty premium that our own decisions and communications may have contributed to. These premia raise nominal yields without necessarily tightening the real financial conditions that matter for demand and inflation. In her view, real financial conditions are insufficiently tight. The appropriate response therefore is not to rely on risk premia to do the work of policy, but to reduce inflation risk and policy uncertainty through a clearly communicated reaction function and a sufficiently restrictive path for Bank Rate. GEOPOLITICS MIDDLE EAST Iran President Pezeshkian said Tehran will never shy away fro dialogue even as the US targeted Iran several times, reported Tasnim. US President Trump sees a ramping up of bombing Iran after midterms as "possible", reported Time Magazine. Some forms of ammunition are a little bit lower. Full quote:. Reporter: Are you going to ramp up bombing after the midterms? There's been reported of that. Trump: Possible. Iran and Japan Foreign Ministers discuss US talks in a call, Tasnim reported. Israeli Security Cabinet to discuss situation "on all fronts" on Sunday, Al Hadath reported. French Army Spokesperson said a warship escorted around 10 ships through the Bab El-Mandeb strait over the past week. RUSSIA-UKRAINE Russia's Kremlin said Russia's letter to NATO on readiness to resort to nuclear weapons should not be seen as confrontational, Russia wants to ensure Kaliningrad's security; noted that the messages was comes amid a rapid military build up in Europe. OTHERS US officials believe a Chinese invasion of Taiwan in 2027 is increasingly unlikely, according to a report citing people familiar with US thinking. NOTABLE NORTH AMERICAN NEWS US President Trump tells TIME that he likes Anthropic's Amodei a lot. US Senators Hawley (R) and Murphy (D) are planning to introduce AI liability legislation as a bipartisan effort to regulate AI, Axios reported. NORTH AMERICAN DATA Revelio Labs Nonfarm Payrolls (Sept.): +56.9k (prev. +36.5k, rev. +40k). US Chicago Fed Labour Market Indicators (Final) 4.10% (prev. 4.13%). US Continuing Jobless Claims (Sep/19) 1701K vs Exp. 1730K (prev. 1712K, rev. 1719K). US Initial Jobless Claims (Sep/26) 197K vs Exp. 200K (prev. 198K, revised 197K). US Challenger Job Cuts (Sep) 43.281k (prev. 52.881k). BofA (w/e 26th Sept) Total Card Spending +5.6% Y/Y (prev. +6.9%); noted that after a brief reversal last week, lower-income spending growth again outpaced higher income. NOTABLE GLOBAL EQUITY HEADLINES Japan is aiming to speed up its USD 140bln data centre development with Dell (DELL) and Jera, the FT reported.