Newsquawk European Market Wrap - 16th October 2026

European bourses were broadly stronger; Tesla (+1.8%) jumps after Musk unveiled a "flying" car. DXY pressured as Fed Chair Warsh avoided any signals for October; Antipodeans outperformed. Fire has been reported in another violating tanker in the Sea of Oman, Mehr News reported. EQUITIES European equities held onto their earlier upside, with the Euro Stoxx 50 set to end the week with gains, despite a tumultuous week for chip and memory names. Outperformance for Friday’s session came in Germany’s DAX 40 (+1.1%), boosted by Rheinmetall (+6.5%) as Ukrainian President Zelensky went to Brussels to discuss the Russian war. Sectors highlighted the positive bias, with Health Care the only sector in the red. Media topped the sector pile, with Autos and Telecoms rounding out the sector gainers. Key stories included: UK Banks, as Chancellor Healey reportedly plans to raise taxes on the sector; Schneider Electric -0.5%, despite Q3 revenue beat and raised its FY26 guidance; Nordex +11%, Q3 revenue and EBITDA topped estimates and lifted its FY EBITDA margin guidance; Brunello Cucinelli +6.2%, Q3 sales beat expectations and raised its FY revenue growth outlook; BE Semiconductor -2.2%, with ASML reportedly developing an advanced chip-bonding tool. US cash equities opened entirely in the green, but came under pressure soon after. Tesla (+1.8%) revealed its Roadster can hit 0–60 mph in under 1 second and use thrusters to land after a ramp jump. The boosters were made by SpaceX, which has increased the speculation of a combination between the two Cos. FX G10s were broadly stronger against the weak USD this morning. The Antipodeans outperformed, largely thanks to a rebound in risk sentiment, whilst the JPY hovered around the unchanged mark. DXY was pressured throughout the London session, in continuation of the action seen in the prior session and as markets digested comments from Fed Chair Warsh. He spoke on a wide range of topics (AI, yields, global economy), but failed to give any guidance regarding the October meeting; as such, money markets further baked in a hold at this month’s confab. The index traded within a 101.57-102.08 range, with the low for today matching its 21-DMA. GBP was firmer, benefiting from the softer USD a little more so than peers. Focus remains on the looming UK Budget (Oct 28), where source reports have generally been welcomed by markets. The latest was via Bloomberg, which suggested that Chancellor Healey could raise taxes on banks. The source added that the move will likely involve increasing the bank surcharge that is added on top of the standard corporation tax rate. It seems as if markets are taking the potential tax on banks as a reliable way to improve the fiscal situation, without having a significant impact on growth. JPY sat at the foot of the pile, unable to benefit from the broader USD pressure. No real driver for the action, but potentially as the slight bounce back in yields widens differentials between US-Japan. In the afternoon, mild JPY strength was seen as BoJ Governor Ueda spoke. He mentioned that he is watching the weak JPY, adding that inflation is “approaching” 2%. FIXED Fixed income benchmarks extended on the earlier downside, as energy benchmarks completely pared back their losses. Even though geopolitical headlines were light, the reports of strikes on Saudi’s Yanbu port and a tanker on fire in the Sea of Oman have managed to lift crude, in turn weighing on the debt space. USTs managed to dip below the PPI low of 105-10+ and fell to a trough of 105-07+ from a peak of 105-22. Little move following the industrial production figure, which printed stronger-than-expected, as focus turns to the US Treasury primary dealer questionnaire. Some analysts expect the Treasury to cut both 20-year and 30-year auction sizes by USD 3bln each, and to be replaced by T-bills. To add, there has also been speculation that the 20-year could be cut altogether. Bunds reside near the lower end of their 121.27-121.72 range, with little movement seen as EZ HICP printed in-line with the prelim figures. A few ECB speakers on the docket today, with Wunsch being the most notable, stating that further tightening would be reasonable given persistent inflation pressures and the resilient EZ economy, while highlighting that current market pricing of three rate hikes seems reasonable. COMMODITIES Crude benchmarks were lower throughout the European session. Initial pressure was perhaps attributed to comments from President Trump, who mentioned that Iran asked the US to halt strikes and negotiations are ongoing. The complex then reversed the losses, to post modest gains into the afternoon. Several factors contributed to the strength, namely; amidst reports of a fire in a burning tanker in the Strait, the Houthis struck Saudi’s Yanbu port, and reports that US fighter jets were flying low over borders with Saudi Arabia. WTI is set to end the London session towards the upper end of a USD 96.85-98.50/bbl range; Brent within a USD 104.91-106.75/bbl range. As for natural gas, prices slipped c. 4% on reports that a force majeure at a natural gas field has been lifted. Spot gold traded flat, in contrast to the yellow-metal initially benefiting from the softer buck. Regardless, price action was relatively muted throughout the day, and set to end the London day at the bottom end of a narrow USD 4,147-4,192/oz range. Base metals held a strong positive tone throughout the day; 3M LME Copper posted gains of c. 1%, and held within a USD 14,292-14,505/oz range. No real driver for the upside today, but moved in tandem with the broader risk tone. Turkish Energy Minister said discussed cooperation possibilities in LNG field with chairman of Russia’s Novatek. reported suggest that a force majeure at a natural gas field has been lifted. Germany's Upper House approves the further release of oil stocks following the G7 agreement. Iran has reportedly managed to export some LPG and jet fuel since July, despite the blockade; Iran is exploring ways to get other shipments out also. South Korea is reportedly to extend oil fuel price cap for another four weeks. Russia and Iran is reportedly discussing gas pipeline route and pricing, TASS reported. Vale (VALE) CEO said China iron ore demand remains solid. Azerbaijan's SOCAR is reportedly looking to resume gas purchases from Gazprom, IF reported. Japanese Chief Cabinet Secretary Kihara said Japan expects October crude procurement to be at the same level as last year. EUROPEAN DATA Irish Trade Balance (Aug) 2.9B (Prev. 4.7B). Italian Trade Balance (Aug) 1.773B vs. Exp. 7.5B (Prev. 8.240B). Italian CPI Final (Sep YY) 4.2% vs. Exp. 4.2% (Prev. 3.3%). Italian CPI Final (Sep MM) 0.7% vs. Exp. 0.7% (Prev. 0.5%). Italian HICP Final (Sep YY) 4.2% vs. Exp. 4.1% (Prev. 3.2%). Italian HICP Final (Sep MM) 2.1% vs. Exp. 2% (Prev. 0.1%). European HICP Final (Sep) 104.31 vs. Exp. 104.30 (Prev. 103.69). European HICP Final (Sep YY) 3.8% vs. Exp. 3.8% (Prev. 3.2%). European Core HICP Final (Sep YY) 2.5% vs. Exp. 2.5% (Prev. 2.4%). European HICP Final (Sep MM) 0.6% vs. Exp. 0.6% (Prev. 0.4%). European Trade Balance (Aug) -16.1B (Prev. 10.7B). Swedish Employed Persons (Sep) 5.292M (Prev. 5.423M). Swedish Unemployment Rate (Sep) 8.6% (Prev. 8.5%). NOTABLE HEADLINES UK PM Burnham is reportedly to announce plans on devolving decision making powers towards regions, rather than from both Westminster and Holyrood, The Guardian reported. UK Ofcom proposes to cap Second Class stamp price for a further year, until March 2028. Chinese Finance Minister met with the EU Economy Commissioner Dombrovskis, ECB President Lagarde and Eurogroup President Pierrakakis. Chinese side is willing to give full play to the role of China-EU financial dialogue and other mechanisms with the EU side. TRADE/TARIFFS China's Commerce Ministry said the EU should not fantasise about gaining benefits through pressure, nor should it underestimate China's determination and ability to safeguard its own interests. Urges the EU to work with China to promote the healthy and stable development of China-EU economic and trade relations. France and Germany said they have reached agreement on a joint approach to securing the future of the European automotive industry. Plan incentives for investment, R&D and EU production. China's MOFCOM is to revise the "Catalogue of Technologies Prohibited and Restricted from Export in China," and temporary registration management will be implemented for the export of related technologies. Taiwan is to curb AI chip exports to China as part of the US trade deal, Bloomberg reported. Servers and high-end chips will be added to the controlled items list. CENTRAL BANKS BoJ Governor Ueda said been watching weak JPY and Middle East in terms of inflation; Stabilization of 2% inflation is increasingly important; Will continue to adjust accommodation. BoJ Governor Ueda said underlying inflation is approaching 2% and the BoJ will continue to raise policy rate in accordance with economic, price and financial developments. There is a risk of underlying inflation overshooting 2% price target. ECB's Wunsch said further tightening would be reasonable given persistent inflation pressures and the resilient EZ economy. Inflation is running at almost 4%, domestic inflation stands at 3% and energy prices are likely to remain elevated for longer than previously expected. Not committing to anything due to the high degree of uncertainty. Market pricing of three rate hikes seems reasonable. RBNZ Chief Economist Conway said there is reasonable confidence that inflation has not become broad-based and that rate hikes help contain spillovers from an energy shock. PBOC's Pan said that the PBOC is to support offshore CNY markets development; to further expand liquidity management tools. SNB's Tschudin said Swiss inflation is slightly higher than it was in June. NBH Governor Varga said that 2026 inflation is to be below 3%. CBRT Inflation Expectations Survey (Oct): Maintains 2026 inflation at 29.6%, lifts end-2027 forecast to 23.3% (prev. 22.7%). 12-month 23.9% (prev. 23.7%). GEOPOLITICS RUSSIA-UKRAINE Turkish Energy Minister said discussed cooperation possibilities in LNG field with chairman of Russia’s Novatek. Russian Ministry of Defence said that the Tu-22M3 long-range bombers flew over neutral waters of the Baltic Sea, escorted by foreign fighters, according to TASS. Ukraine President Zelensky said Ukraine expects additional F-16s to arrive by end of year; Ukraine is dependent on Starlin for the interception of Russian drones, adding that Starlink is not completely restored. Ukraine is not using Starlink to strike inside Russia, it needs it for interception of Russian drones. Would like several negotiation tracks in peace process. Europe is making certain steps regarding own track on peace negotiations. To the US, said if there is no energy ceasefire give us anti-ballistic missiles. Hopes for Ukraine-US talks in coming days. Ukraine asked US for air defences if diesel deal with Russia is in place. Russia does not want talks in any format now. Diesel deal is inappropriate and is sure a gas deal will follow. Russia's Kremlin said that it is impossible to discuss a settlement without the current Ukrainian leadership. EU President of the European Commission Von Der Leyen said that they are working on the 22nd package of sanctions against Russia, adding that no sanctions will be lifted unless Russia stops its war. MIDDLE EAST German Foreign Minister said due to Russia’s warmongering in the Black Sea, food supplies are hanging in the balance. Europe is in Iran's sights, will not tolerate Iran's hostile activities. In a meeting with the Prime Minister of Georgia, Iran's President said that Iran is not seeking nuclear weapons and that destructive propaganda against Iran is a lie, Iran International reported. We have always been ready to talk. They think they can make us surrender, but we will not give in to force. Iran Deputy Oil Minister said Iran we will respond immediately and appropriately to US threats against energy facilities. Iran has reportedly managed to export some LPG and jet fuel since July, despite the blockade; Iran is exploring ways to get other shipments out also. Iranian Ambassador said that "The United States is not demonstrating serious political will to negotiate with Iran", Tass reported. Iranian Ambassador to Moscow's Kazem Jalali. Russia and Iran is reportedly discussing gas pipeline route and pricing, TASS reported. Russian Foreign Minister Lavrov is to visit Iran on October 19, IFX reported. OTHERS US fighter jets were reportedly flying at low altitudes over the border areas with Saudi Arabia and conducting aerial surveillance operations in the western regions of the province, reported Nour News. A new thermal anomaly has reportedly been detected in Saudi Arabia's Yanbu area near a pipeline, according to Press TV. Fire has been reported in another violating tanker in the Sea of Oman, Mehr News reported. "Hours ago, the Army Navy's surveillance teams, in line with their continuous control of the eastern Strait of Hormuz, discovered and identified a violating tanker that was on fire in the restricted area". "This violating tanker also turned off its tracking systems and was trying to cross the restricted area in the Sea of Oman.". A Yemeni missile attack strikes Saudi's Yanbu port, Sabereen reported. IRGC Brigadier General Akraminia said "we have introduced new equipment into our combat formations", Al Mayadeen reported. IRGC Brigadier General Akraminia announces new operational plans to push back more American ships and flee ever further; reiterates that the Army Navy has complete operational control over the Sea of Oman, SNN reported. Explosions reported in the city of Dammam, Saudi Arabia, SNN reported. Iranian Army Commander Major General Amir Hatami said three ships entered the Sea of Oman and were fired upon by Iranian forces, severely restricting maritime traffic. NOTABLE NORTH AMERICAN NEWS US White House Press Secretary said on inflation, US President Trump is doing everything he possibly can. BofA Weekly Flow Show (w/e 14th Oct):. USTs saw USD 3.6bln of inflows; the 16th consecutive week of inflows. USD 39.1bln to US stocks and USD 10bln to tech stocks. USD 53.1bln outflows from cash. NORTH AMERICAN DATA US Manufacturing Production (Sep YY) 1.1% (Prev. 0.9%). US Manufacturing Production (Sep MM) 0.3% vs. Exp. 0.3% (Prev. -0.2%). US Capacity Utilization (Sep) 76.9% vs. Exp. 76.5% (Prev. 76.4%). US Export Prices (Sep YY) 11.6% (Prev. 8.6%). US Import Prices (Sep YY) 8.1% (Prev. 6.7%). US Import Prices (Sep MM) 1.1% vs. Exp. 0.8% (Prev. 0.5%). US Export Prices (Sep MM) 2.2% vs. Exp. 1% (Prev. 1.2%). Industrial Production (Sep YY) 2.2% (Prev. 1.4%). Industrial Production (Sep MM) 0.7% vs. Exp. 0.4% (Prev. 0.1%).