Newsquawk European Market Wrap - 10th September 2026

Stocks and fixed income slumped as oil prices surged, with the latest focus shifting towards the Bab al-Mandeb Strait. Brent, WTI, and Dutch TTF prices surged some 3-4% apiece; DXY briefly rose above its 200 DMA as a result. ECB hiked rates by 25bps as expected in a unanimous decision and raised 2027 and 2028 inflation forecasts. EQUITIES European bourses look to end the session entirely in the red, reversing the slight positivity seen at the start of the day. The weakness was primarily driven by energy prices as the Yemeni Houthis began to take control of key strategic points along the Bab al-Mandeb strait, taking control of the Al-Mokha port, Zaqar Island, Mayun Island, Hanish Islands, and the Al-Omari military and strategic base. Sectors finished with a slight negative bias. Energy, unsurprisingly, topped the sector pile, with Insurance and Autos rounding out the top sector gainers. To the downside were Basic Resources, Tech and Construction. Key movers included: AB Foods (-9.7%), guided comparable sales to drop 3% in Q4 while Primark LFL sales guided at -2.6%; Porsche AG (+0.6%), raised Auto Net Cash Flow Margin guidance following the EUR 1bln sale of its Bugatti stake; Novartis (+1.0%), upgraded to hold at HSBC, citing a clearer runway for medium-term growth and potential for margin expansion beyond 2027. US cash equities opened entirely in the red. Focus for the rest of the US session will be on any further geopolitical updates and then Oracle earnings after-hours. FX Snapshot: DXY surged as energy prices return to extreme levels; G10s softer against the greenback, with Antipodeans and JPY the laggards. DXY lifted throughout the European session, supported by the upside in energy prices. Even though a clear driver for the upside in crude prices, which has helped Brent Nov regain the USD 105/bbl mark, was unclear, the continued reporting that the Yemeni Houthis have taken control of Al-Mokha and the surrounding areas helped lift the energy complex. This, in turn, has raised the USD back above the 99.00 handle. A mixed PPI report failed to cause any clear reaction in the index. EUR gradually fell throughout the European morning heading into the ECB policy announcement, in which the Governing Council hiked the deposit rate to 2.50%, as expected. The statement didn't provide any clear forward guidance, but on inflation, it stated that it will remain well above target for an extended period. As such, the Bank's 2027 and 2028 HICP were revised higher; however, it was to a lesser degree than what Goldman Sachs expected. As such, EUR/USD fell a handful of pips to a session low of 1.1610, before seeing some fleeting upside. In the press conference, Lagarde stated that there was no debate of any kind on the future rate path, and that the decision to hike was unanimous. Overall, the ECB announcement and following commentary were as expected, and the downside seen in EUR/USD throughout the event was as a result of USD strength, as the pair fell to a 1.1593 low. NOK had a dovish reaction following its inflation report, in which core inflation M/M printed cooler-than-expected at -0.5% (exp. -0.4%), while the headline figure Y/Y was in line with expectations. FIXED INCOME Global fixed income benchmarks came under marked pressure throughout the European session, as energy benchmarks picked up pace to the upside, resulting in Brent Nov returning above the USD 105/bbl mark. The catalyst was seemingly the Yemeni Houthis beginning to take control of key strategic points along the Bab al-Mandeb strait, taking control of the Al-Mokha port, Zaqar Island, Mayun Island, Hanish Island and the Al-Omari military and strategic base. USTs reached a 107-05+ peak as the European session got underway but have since fallen to a trough of 106-16 as the day continued, with the US 10yr yield topping 4.91%. US PPI failed to steady USTs, with core PPI M/M rising less than expected. However, the headline Y/Y 5.4% was hotter than expected. Italy sold EUR 7.75bln vs exp. EUR 6.5-7.75bln 3.00% 2029, 3.35% 2033 and 2.15% 2072 BTP. 3.00% 2029: b/c 1.56x (prev. 1.57x) & average yield 3.43% (prev. 2.98%). 3.35% 2033: b/c 1.52x (prev. 1.56x) & average yield 3.98% (prev. 3.50%). 2.15% 2072: b/c 1.79x & average yield 4.61%. The UK sold GBP 5bln 4.625% 2030 Treasury Gilt: b/c 3.24x, average yield 4.786%, tail 0.3bps. Japanese MOF Official Sato said the government is not considering buying back JGBs at this point. COMMODITIES WTI Oct and Brent Nov futures extended their upside as the Middle Eastern geopolitical premium intensified, with the latest focus shifting towards the Bab al-Mandeb Strait. Iranian media reported that the Houthis were nearing complete control of the strategic waterway, followed by reports of control over Zaqar and Mayun islands and the Al-Omari military base. Crude rallied on the developments, with WTI extending above its earlier USD 100/bbl (USD 95.37-100.88/bbl range), while Brent moved beyond USD 105/bbl (USD 100.19-105.84/bbl range), with the prospect of disruption around another key global shipping route added to existing Hormuz woes. Dutch TTF remained elevated above EUR 80/MWh, reaching a high of almost EUR 83/MWh, with Middle Eastern supply risks continuing to underpin the complex alongside European heating demand and concerns surrounding winter inventories. The latest escalation around the Bab al-Mandeb added another layer of risk to regional shipping flows after the front-month contract earlier rebounded from just above EUR 78/MWh. Precious Metals extended on declines as the renewed surge in crude supported the Dollar and added to inflation concerns. Spot gold briefly dipped under its 100 DMA (USD 4,340/oz) before moving back above the level to notch an intraday range between USD 4,324-4,435/oz at the time of writing. Spot silver was similarly subdued amid the firmer energy complex, with losses of over 4% intraday. Base Metals extended on losses with the renewed surge in energy prices adding to global growth concerns. It was also reported earlier that the US administration is yet to make a decision on refined copper tariffs amid concerns that higher prices could raise manufacturing costs. 3M LME copper slipped, trading with losses of over 3% at the time of writing, towards the bottom end of a USD 14,234.90-14,870.78/t range. NBP Governor Glapinski said Poland's gold reserves have increased to 648 tonnes and plans to raise its reserve to 700 tonnes. OPEC MOMR (Sep): 2026 demand trimmed, 2027 demand modestly increased; supply forecasts modestly increased. **The US administration is yet to make a decision on refined copper tariffs amid concerns that higher prices could raise manufacturing costs, Reuters. Oman OSP for November-loading crude set at USD 119.30/bbl (prev. USD 87.84/bbl in October). Czech PM Babis said the EU should halt the ETS1 carbon allowances system and delay ETS2 due to the higher energy prices. QatarEnergy signs memorandum of understanding for two offshore blocks in Angola. IEA's Birol said their new report shows global coal demand is now set to rise by 1.2% in 2026. EUROPEAN DATA German CPI Final (Aug MM) 0.2% vs. Exp. 0.2% (Prev. 0.8%). German HICP Final (Aug YY) 2.9% vs. Exp. 2.9% (Prev. 2.8%). German HICP Final (Aug MM) 0.2% vs. Exp. 0.2% (Prev. 0.9%). German CPI Final (Aug YY) 2.9% vs. Exp. 2.9% (Prev. 2.8%). Spanish Consumer Confidence (Jul) 84.1 (Prev. 81.2). Spanish Industrial Production (Jul YY) 2.3% (Prev. 1.1%); M/M 0.6% (exp. 0.2%). Italian Industrial Production (Jul YY) 0.0% vs. Exp. -0.6% (Prev. -0.6%). Italian Industrial Production (Jul MM) 0.7% vs. Exp. 0.3% (Prev. -1.1%). Swedish House Price Index (Aug MM) 3% (Prev. 3%). Swedish Industrial Production (Jul YY) 0.2% (Prev. -1.5%). Swedish Construction Output (Jul YY) 1.1% (Prev. 5.2%). Swedish Industrial Production (Jul MM) -3.6% (Prev. -0.4%). Swedish GDP (Jul MM) -0.8% (Prev. -0.2%). Swedish New Orders (Jul YY) -0.5% (Prev. 29.5%). Norwegian Core CPI (Aug YY) 3.0% vs. Exp. 3% (Prev. 2.7%). Norwegian CPI (Aug YY) 3.3% vs. Exp. 3.2% (Prev. 3.0%). Norwegian Core CPI (Aug MM) -0.5% vs. Exp. -0.4% (Prev. 0.8%). Norwegian CPI (Aug MM) -0.3% (Prev. 1.0%). TRADE/TARIFFS China is extending the anti-dumping probe into pecans from both Mexico and the US. South Korean government is considering artificial intelligence investments as part of its trade agreement with the Trump administration, WSJ reported; A deal could potentially be worth in excess of USD 100bln. CENTRAL BANKS ECB raised its rates by 25bps as expected; ECB reiterates it is not pre-committing to a particular rate path; said inflation is set to remain well above target for an extended period. GUIDANCE: Reiterates that the Governing Council is not pre-committing to a particular rate path. Reiterates that the ECB will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2% target in the medium term and to preserve the smooth functioning of monetary policy transmission. INFLATION: Inflation is set to remain well above target for an extended period. ECONOMIC OUTLOOK: The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth. APP/PEPP: APP and PEPP portfolios are declining at a measured and predictable pace. ECB President Lagarde (statement): said the economy is proving resilient, consumer confidence has rebounded. General. Employment growth continues to slow. Labour market is robust. Private consumption and public spending has been resilient. Medium term consumption should be supported. Near-term growth outlook has improved; will increasingly be bolstered by business and housing investment. Exports held back by trade policies and competitiveness challenges. Fiscal language reiterated. Inflation. Most measures of underlying inflation were broadly stable in July. Unit labour cost growth has been contained by rising labour productivity. Wage tracker points to a modest uptick in negotiated wage growth. Most measures of longer-term inflation measures stand at around 2%. Higher energy prices expected to feed through gradually to core, the improved economic outlook will also factor. ECB Staff Projections: 2026 Headline HICP maintained at 3.0% but raises 2027 and 2028 HICP forecasts. HICP:. 2026: 3.0% (exp. 2.9%, prev. 3.0%). 2027: 2.5% (exp. 2.7%, prev. 2.3%). 2028: 2.1% (exp. 2.0%, prev. 2.0%). Core HICP:. 2026: 2.5% (exp. 2.4%, prev. 2.5%). 2027: 2.6% (exp. 2.6%, prev. 2.5%). 2028: 2.3% (exp. 2.2, prev. 2.2%). GDP. 2026: 0.9% (exp. 0.8%, prev. 0.9%). 2027: 1.4% (exp. 1.3%, prev. 1.2%). 2028: 1.5% (exp. 1.5%, prev. 1.5%). ECB President Lagarde (Q&A): on growth, post-cutoff date for the forecasts would be stronger than expected, would be more than the 0.9% projected. Also been surprised on inflation, has been lower than expected; but, it will be longer-lasting. Decision was unanimous, a "no-brainer". Recent yield moves are not a Europe-specific event. Attentive to the bond market, particularly the long-end. Surprised by economic resilience. Not taking a view onto the direction of policy at future meetings (asked if anyone had talked about moving into restrictive territory). Cannot anticipate the next move given the elevated levels of uncertainty. Neutral Rate. Estimates of that are a work in progress on a constant basis. It is highly conceptual. Not attaching a great importance to the neutral rate. The ECB is once again giving "framework guidance" (when asked about market pricing and if she still feels the market understands the reaction function). Adds, the situation is primarily a supply shock. Not debated any kind of future path. She added she is not seeing second round effects. However, if the shock continues and the energy shock is longer than expected, we will see such effects and it will impact on food inflation. New additional scenarios will be published "tomorrow, or in the next few days" with respect to the forecasts. Will be a "benign", "adverse" and "severe" scenarios. Differences are primarily determined by the price of energy. Against all three scenarios, the 25bps hike taken in September was robust. She said she will not comment on the FX intervention action that has been happening from the US, with respect to EUR selling and JPY purchases. The sale of 0.5bln worth of Euros. BoJ board member Masu said underlying inflation is gradually approaching 2%, but currently does not expect it to rise substantially above that level; when asked about 50bps hike, said the bank should proceed cautiously with hikes. It is essential to stabilize the underlying inflation trend at around 2%. Central bank will closely assess the yen’s appreciation and rising crude oil and global food prices at next week’s policy meeting. Next week’s rate decision remains uncertain and future policy moves will be decided on a meeting-by-meeting basis. Have emergency market operations as a tool, but that is only saved for exceptional moves in JGB markets. CBRT Interest Rate Decision 37% vs. Exp. 37% (Prev. 37%). Recent inflation data and indicators suggest the underlying trend is decelerating. Elevated energy and geopolitical developments pose an upward risk to the inflation outlook. PBOC's Lu Lei said the Bank will refine the RRR framework and conduct open-market operations more flexibly and precisely. CNB's Kubicek said the market view of 4 rate hikes seems excessive, rates may rise some more but timing is unclear. NBH's Governor Varga said the bank is prepared to gradually lower its inflation target. GEOPOLITICS MIDDLE EAST Yemeni Houthis have reportedly established complete control over the Al-Omari military and strategic base, which overlooks the Bab al-Mandeb strait, Mizan reported. Initial reports indicate the arrival of Yemeni Houthis on the strategic island of Mayun in the Bab al-Mandeb Strait, Iranian-backed SNN reported citing sources. Al Mayadeen’s Yemen bureau chief said there has been no official confirmation from the Houthis regarding reported that the city of Mocha and the strategically important Dhubab district have come under its control. Yemeni Houthis took control of Zaqar Island in the international maritime trade waterway in the Red Sea, reported Al Alam citing sources. Yemeni Houthis has taken control of two other cities in addition to the city of Al-Mokha. Yemeni Houthis are on the verge of complete control over the Bab al-Mandab Strait with control over the city of "Al-Mukha", IRNA reported. UKMTO has received a report of an incident 98NM southwest of Al Mukalla, Yemen; "The CSO of a cargo vessel has reported that his vessel has been approached by an unidentified skiff". Iran orders temporary suspension of 10% freight charge on foreign vessels carrying energy products to or from Iran, Fars reported. Israel's Defence Minister Katz said "Any attack on Israel for any reason and everywhere will be met with a powerful response", including damage to energy facilities. Yemeni Armed Forces said they shot down a Saudi armed spy drone over Yemen's Hajjah province while it was carrying out hostile operations, Tasnim reported. Iranian lawmaker said Iran can take "special measures" in response to the IAEA's resolution and may consider action. Iran-backed Houthis have reportedly taken control of the Red Sea City of Mocha; sources suggest that the group are approaching the Bab el-Mandab Strait. Iran reportedly used barter-like arrangement with China to bypass the sanctions on oil sales, sources suggest. UN nuclear watchdog IAEA confirms activity at Iran's Pickaxe Mountain, reported Bloomberg. Yemen's Houthis reportedly reached Red Sea islands of Hanish, reported Yemeni government military sources. Chairman of the Yemeni Leadership Council said Protecting the Yemeni coast is a Yemeni, Arab, and international interest; Attempts to change the military situation near Bab al-Mandab will extend to the Red Sea and the Suez Canal. Yemeni Presidential Leadership Council Chairman al-Alimi said any attempt to alter the military situation near Bab al-Mandeb cannot be tolerated, Al Hadath reported. Pakistan's Foreign Minister said that there are no discussions right now regarding plans to act under the Makkah Defence Agreement; when the time comes, will act on the agreement. Pakistan's Foreign Office spokesperson said the Makkah defence agreement is a defensive alliance focused on deterrence, with expansion not currently planned until its foundations are solidified, journalist Mallick reported. RUSSIA-UKRAINE Russian Kremlin spokesperson said there are currently no substantive discussions underway regarding the possibility of an energy truce with Ukraine. Kremlin said Russia will continue to destroy vessels transporting ammunition for Ukraine in Black Sea. Russia will discuss trade settlements in digital currencies with BRICS+ partners at summit in Japan. Russia's Ryazan oil refinery (~350k BPD) has been idle since a September 6 drone attack, sources say. NATO allies have reportedly caught Russian subs training to debut a secret weapon which could disable critical undersea cables, without leaving evidence, Reuters reported. Ukrainian President Zelensky said Ukrainian forces struck eight infrastructure targets supporting Russian military operations over the past 24 hours, including an oil refinery in Russia’s Yamalo-Nenets region and a seaport in Dagestan. Poland’s Operational Command said military aviation remains active and ground-based air defense and radar systems are on alert due to potential threats to Polish airspace from Russian drone activity in western Ukraine. In connection with the need to ensure freedom of operations for military aviation, the airports in Lublin and Rzeszów have suspended flight operations. OTHERS China's Financial Regulatory Administration said it will vigorously clamp down on "price wars" and similar practices, Xinhua reported. South Korea's Foreign Minister said a meeting with US Secretary of State Rubio will take place in September. NOTABLE NORTH AMERICAN NEWS A US AI safety bill could be introduced next week, Semafor reported citing sources. China's MOFCOM said China and the US are in consultations on arrangement for a USD 30bln reciprocal tariff cut framework, Xinhua reported. NORTH AMERICAN DATA US PPI PCE Components (Aug.):. Portfolio Management PPI: -1.59% (prev. 6.22%). Air Passenger Transport PPI: 0.71% (prev. -2.98%). Physician Care: 0.08% (prev. -0.15%). Home Health & Hospice Care: -0.37% (prev. 0.10%). Hospital Outpatient Care: 0.35% (prev. 0.55%). Hospital Inpatient Care: 0.53% (prev. 0.12%). Nursing Home Care: -0.19% (prev. 0.20%). US PPI (Aug) 157.411 (Prev. 156.563). US PPI Ex Food, Energy and Trade (Aug YY) 4.7% (Prev. 4.7%). US PPI (Aug YY) 5.4% vs. Exp. 5.3% (Prev. 4.8%). US PPI (Aug MM) 0.4% vs. Exp. 0.4% (Prev. 0.1%). US PPI Ex Food, Energy and Trade (Aug MM) 0.3% (Prev. 0.4%). US Core PPI (Aug MM) 0.2% vs. Exp. 0.3% (Prev. 0.3%). US Core PPI (Aug YY) 4.6% vs. Exp. 4.6% (Prev. 4.3%). US Continuing Jobless Claims (Aug/29) 1774K vs. Exp. 1780K (Prev. 1775K). US Jobless Claims 4-week Average (Sep/05) 206.00K (Prev. 207.50K). US Initial Jobless Claims (Sep/05) 206K vs. Exp. 205K (Prev. 207K). BofA Total Card Spending (w/e 5th Sept) +7.8% Y/Y (prev. +3.7% W/W); said that the surge in spending growth was likely due to base effects from the shift in Labour Day timing and a rebound in gas prices. NOTABLE GLOBAL EQUITY HEADLINES Chinese AI chipmakers have reportedly lifted prices amidst higher memory prices, sources suggest; the likes of Huawei have lifted prices by c. 20-50% more than quotes given a couple of months. Cambricon (688256 CH) has reportedly lifted prices by 20-30%.