European Market Wrap - 23rd September 2026

European bourses were initially firmer but gradually slipped into the red as energy benchmarks gained. USD gained on continued hawkish bets and a potential US diesel export ban; Antipodeans underperformed. Iran Major General Rezaei said as long as Tehran's conditions are not met, Hormuz will not be reopened. EQUITIES European bourses are set to end Wednesday's trade entirely in the red, with underperformance in the DAX 40. Focus has been on the widening of London gasoil/NY Heating Oil spread, after US President Trump said he would back a pause to American diesel exports. Geopolitical headlines have been light today, with focus being on the speech by the Iranian President, scheduled at 17:05BST (according to Iranian media). Sectors highlight the negative bias, with all but Energy in the red. Insurance was the sector laggard, with Construction and Autos rounding out the sector laggards. Top stories include: UBS (-1.6%), Swiss Upper House backed 90% CET1 foreign unit backing but analysts warned of a big hit to the Co.'s EPS by some 10%; Arcadis (-5.6%), WSP Global withdrew its offer to takeover the Co.; JD Sports Fashion (-3.6%), H1 2026/27 revenue came in-line with consensus and affirmed its FY27 guidance; Adyen (-3.2%), named a new CFO; CaixaBank (+1.0%), upgraded to Buy from Neutral at UBS. US cash equities opened lower across the board, with the RUT the clear laggard. Focus in recent trade has been on the release of new AI models, despite calls for the development to be slowed down. Chipmakers continue to fall (Intel -1.9%), following on from the downside in Tuesday's session after OpenAI announced Astra 6. On the data front, US S&P PMIs beat estimates across the board, with the firm highlighting that input costs have surged higher, adding to the Fed's problem that inflation is not under control. FX G10s were lower against the USD to varying degrees, with Dollar strength today facilitated by a) continued hawkish commentary from Barkin and Collins in the prior session, who signalled their openness to further hikes. And b) Trump signalling a diesel export ban – this of course, would result in higher diesel prices for global peers, pressuring G10 currencies, c) higher yields. DXY traded at the upper end of a 100.54-98 range, and now set its sights on a breach beyond the 101.00 mark. Note that the July 30 high was at 101.07. Some strength was seen in the Dollar after a strong US PMI report. The accompanying commentary was also hawkish: "Input costs surged higher on the back of the recent spike in energy prices, adding to a worsening inflation picture." The Antipodeans were the clear underperformers throughout the session, given the downbeat risk tone, which only worsened as the session progressed. The Loonie fared a little better vs peers, given that it is somewhat protected from the recent diesel-related action, as it produces its own diesel. EUR had regional PMIs to digest. The French and German metrics continued to indicate a resilient European economy, despite the Iran war. The French PMI report highlighted that “The pick-up in the PMI price measures seen in September should however, be watched closely, particularly as we approach the winter months, as the risk of energy price inflation spreading to other areas of the economy undoubtedly rises”. The EZ-wide report was similarly strong, with the inner report suggesting that the mixture of higher growth and rising inflation could embolden the ECB to hike once again this year. FIXED Fixed income benchmarks failed to find clear direction as it continued to get pushed around by the price action in the energy complex, with the downside in fixed income coming amid upside in energy prices. Not much in terms of a key driver, but focus will be on the speech by the Iranian President, scheduled at 17:05BST (according to Iranian media). USTs remained contained in the recent coiling pattern, with the ZNZ26 extending below the key 105-24 level on the recent PMI data, bringing the 10yr yield back above 5%. Regarding the data, US S&P PMIs beat estimates across the board, with the firm highlighting that input costs have surged higher, adding to the Fed's problem that inflation is not under control. Bunds saw little reaction following a broadly firmer set of flash PMIs, especially in the Services sector. S&P points to GDP rising at a quarterly rate of 0.4%, highlighting the resilience in the Eurozone economy. To add, the firm added that this economic resilience, combined with geopolitical headwinds and rising prices will likely push the ECB to hike rates. German 10yr yields are currently at weekly highs and returned above 3.50%. However, UK PMIs showed a more mixed picture, where the Manufacturing was strong while both Composite and Services were soft. From the series, the signs of slower growth are notable and one to watch ahead. Gilts rose to a peak of 86.04 before falling in line with its peers, to a trough of 84.99. Germany sold EUR 1.65bln vs Exp. 2bln 3.40% 2047 and 2.90% 2056 Bund. COMMODITIES Focus for energy benchmarks has been on Trump diesel comments and geopolitics. US President Trump suggested that he would back a ban on diesel exports. In the US, diesel prices were flat/lower, whilst European contracts surged c. 3%. However, recent commentary from US Energy Secretary Wright, who stated that a diesel export ban would not work, helped diesel prices to rise a touch from lows. As for geopolitics, the mood music has been positive on both the Russia-Ukraine and US-Iran fronts. On the former, Ukrainian President Zelensky asked Trump to organise a Ukraine-US-Russia trilateral meeting; Trump suggested that Putin is willing to meet. Separately, CNN reported that Ukraine is ready to sign a defence deal with the US this week, but it may be postponed until the US is ready. On the US-Iran front, Trump noted that his top envoys had a constructive meeting with the Iranian delegation. He added that he thinks Iran will do something good. However, some sources familiar with the talks have dampened the recent optimism. Iran has not changed its position, whilst a US source believes that the chance of a deal is limited and major disputes and obstacles remain. Given the optimism surrounding geopolitics, crude benchmarks were initially lower this morning, but since moved off worst levels to trade with incremental gains of c. 1%. WTI traded towards the upper end of a USD 88.71-91.43/bbl range, whilst Brent held at the top end of a USD 94.08-96.73/bbl range. Spot gold traded lower throughout the session, thanks to a stronger USD. The yellow metal made a trough just below the USD 4,300/oz mark, and held within a USD 4,291-4,369/oz range. US Energy Secretary Wright said a diesel export ban would not work; it would raise gasoline and jet fuel prices. Norway's Industry and Commerce Minister said Norway plans to to mine Europe's largest rare earth deposit by 2028, AFP reported. US President Trump's support for the ban of diesel exports was seen to "blindside" industry officials, WSJ reported citing sources; lobbyists rushed to register their opposition to the ban. Russia has cut its 2026 natgas production forecast to 683.1bcm (prev. 688.4bcm) and LNG export forecast to 35mln tonnes (prev. 40.3mln tonnes). ADNOC set October Murban Crude OSP at USD 90.58/bbl. TotalEnergies (TTE FP) has commenced the Ima gas project. Iranian Deputy Oil Minister for Planning said by 22nd September, around 50% of damaged capacity at South Pars has returned to service and production has resumed, with all planned restoration work expected to be completed before winter, Fars reported. Spain is reportedly mulling capping gas prices to curb power bills, according to Cinco Dias. EUROPEAN DATA UK S&P Global Services PMI Flash (Sep) 52 vs. Exp. 52 (Prev. 52.5). UK S&P Global Composite PMI Flash (Sep) 51.7 vs. Exp. 52 (Prev. 52.5). UK S&P Global Manufacturing PMI Flash (Sep) 52 vs. Exp. 51.5 (Prev. 51.7). European S&P Global Composite PMI Flash (Sep) 53.1 vs. Exp. 51.7 (Prev. 52.0). European S&P Global Services PMI Flash (Sep) 53 vs. Exp. 51.5 (Prev. 51.6). European S&P Global Manufacturing PMI Flash (Sep) 52.7 vs. Exp. 52.6 (Prev. 52.7). German S&P Global Composite PMI Flash (Sep) 53.8 vs. Exp. 51.8 (Prev. 51.8). German S&P Global Services PMI Flash (Sep) 52.9 vs. Exp. 50 (Prev. 49.7). German S&P Global Manufacturing PMI Flash (Sep) 53.8 vs. Exp. 54 (Prev. 54.3). Polish Unemployment Rate (Aug) 5.8% vs. Exp. 5.9% (Prev. 5.8%). French S&P Global Services PMI Flash (Sep) 51.4 vs. Exp. 48.4 (Prev. 48.0). French S&P Global Manufacturing PMI Flash (Sep) 50.3 vs. Exp. 50.8 (Prev. 51.1). French S&P Global Composite PMI Flash (Sep) 51.2 vs Exp. 48.7 (Prev. 48.5). NOTABLE HEADLINES Italian Finance Minister Giorgetti said income tax reduction remains the government's priority. Italy expects its public deficit to reach 2.9% of GDP in 2026 and then 2.8% by 2027, BFM reported citing sources. Germany's IG Metall said they demand a 5% pay increase in the electrical sector, with regional talks to start on October 7th and warns of possible strikes from November 1st. The European Commission proposed lifting 2022 rule of law protective measures against Hungary, seeking to unlock EUR 4.2 bln in suspended cohesion funding and restore access to Erasmus+ and Horizon Europe. OECD 2026 GDP Forecasts: US 2.2% (prev. 2.0%), China 4.5% (prev. 4.5%), EU 1.0% (prev. 0.8%), UK 1.1% (prev. 0.9%), World 2.9% (prev. 2.8%). Italy reportedly plans to stick with its commitment to keep deficit beneath the EU's 3% GDP ceiling this year, sources suggest. CENTRAL BANKS ECB's Makhlouf said second-round effects are not being seen yet. Bank of America expects the BoE to deliver 25bps hikes in Nov 2026 and Feb 2027 (prev. saw rates on hold until Nov 2027). South African Interest Rate Decision 7.25% vs. Exp. 7.25% (Prev. 7.00%). SARB Statement: Sees upside risks to inflation and downside risks to growth, fuel-price shock has intensified and global rates are moving higher. Forecasts:. 2026 CPI 4.4% (prev. 4.0%). 2027 CPI 4.0% (prev. 3.8%). 2026 Core CPI 3.8% (prev. 3.8%). 2027 Core CPI 4.0% (prev. 3.7%). 2026 GDP 1.2% (prev. 1.4%). 2027 GDP 1.7% (prev. 1.7%). Rate Path Model:. End-2026 Repo Rate 6.98% (prev. 6.79%). End-202 Repo Rate 6.34% (prev. 6.24%). End-2026 Repo Rate 5.98% (prev. 5.95%). BCB Director David said the neutral rate was probably higher at a given point. RBI Deputy Governor Gupta said the current account deficit will continue to shrink ahead as dependency on oil reduces. Indonesian Interest Rate Decision 5.75% vs. Exp. 5.75% (Prev. 5.75%). GEOPOLITICS RUSSIA-UKRAINE Polish army official said Russian military helicopter made brief incursion into policy airspace from Kaliningrad. Russia has cut its 2026 natgas production forecast to 683.1bcm (prev. 688.4bcm) and LNG export forecast to 35mln tonnes (prev. 40.3mln tonnes). Russia's Kremlin said ground for peace talks with Ukraine are still not in place and no concrete details of any plans of a high-level meeting on Ukraine. Ukrainian President Zelensky would need to come to Moscow. Ukraine Energy Minister met US Energy Secretary Wright to discuss energy security and the impact of the war, emphasising the importance of diplomatic efforts to achieve an energy truce. Russia said its forces hit Ukrainian defence and energy facilities and logistics centres, while Russian forces hit a cargo ship in the Black Sea. Ukrainian official said Russia attacked gas depots and stations in two Kyiv provinces. MIDDLE EAST Iran Major General Rezaei said as long as Tehran's conditions are not met, Hormuz will not be reopened, adding there will be no negotiations. said Iran is not in a hurry to negotiate; its conditions have been drafted and handed to Qatar and Pakistan. Indian Foreign Minister said they raised concerns to US Secretary of State Rubio about the 'Sanctioning Russia and Iran Act'. Yemen's Houthis to target US interests if it supports Saudi-led strikes, reported AFP. A Houthi military adviser told AFP that the group would attack US interests in the Middle East if Washington intervenes in Yemen's conflict in support of Saudi Arabia or tries to unblock the Bab al-Mandab strait. US President Trump's Board of Peace will unveil a six-month USD 2.45bln recovery plan for Gaza in its meeting with members on Wednesday, Axios reported citing sources. Diplomatic sources suggest that "Yesterday's talks between the US and Iran did not achieve the minimum required to resume negotiations", Hayom reported. Iranian member of the Parliament's Industries Commission said that the President meeting with US President Trump "is neither in the interest of Iran's national interests nor in the interest of the Iranian people". Iranian Foreign Ministry spokesperson Baghaei said engagement with the US took place through a Qatari mediator to convey Iran’s conditions, Nournews reported. Conditions included ending the war on all fronts, halting US military actions, the naval blockade and economic war, and releasing Iranian assets. Republican lawmakers reportedly press US President Trump administration on stalled Taiwan aid and arms. US CENTCOM Commander Cooper said the REJTF team is now the world's multinational attack drone unit. Iranian President will likely talk about the Minab school attack at his UN General Assembly speech. UKMTO reported an incident within Strait of Hormuz; Cargo vessel reported being struck by an unknwon projectile, all crew been evacuated with two casualties reported; Vessel is on fire and adrift. "Iranian commercial plane lands in China despite US sanctions", AFP reported. Diplomatic source in Tehran said a meeting between Iranian President Pezeshkian and US President Trump on the sidelines of the UN General Assembly is not on the agenda, journalist Kais reported citing Al-Akhbar. NOTABLE NORTH AMERICAN NEWS US President Trump criticises Canada's immigration and warns of big unemployment in Canada. Chinese President Xi departs China for the US. NORTH AMERICAN DATA US MBA Mortgage Refinance Index (Sep/18) 611.0 (Prev. 627.1). US MBA Mortgage Applications (Sep/18) -1.5% (Prev. -4.1%). US MBA 30-Year Mortgage Rate (Sep/18) 7.12% (Prev. 6.97%). US MBA Purchase Index (Sep/18) 154.9 (Prev. 156.2). US MBA Mortgage Market Index (Sep/18) 227.3 (Prev. 230.8).