US tariff and Fed risks keep markets on edge

EU mid-market update: US tariff & Fed risks keep markets on edge; Modi reaffirmed India’s “special and privileged” partnership with Russia; US jobs report week with plenty of investor conferences.

Notes/observations

- European defense stocks lifted as UK secures £10B deal to supply Norwegian navy with anti-submarine warships and Merz comment that Ukraine war could drag on for years.

- Spreads across European bond yields have widened as French fiscal turmoil raises bond investor concerns, analysts warn pressures extend beyond France. Gilt yields higher as well. Catalysts coming from France’s Sept 8th confidence vote and UK autumn budget around end-Oct; Later today France PM Bayrou was said to meet with opposition parties.

- In a 7-4 en banc ruling, the U.S. Court of Appeals for the Federal Circuit said President Trump exceeded his authority by using IEEPA to impose global tariffs, but kept the duties in force through Oct 14 while appeals proceed, applying to the Liberation Day, reciprocal, and extra India tariffs but not to the de minimis cancellation. With a mid-October deadline to seek Supreme Court review and tariffs still being collected, a final outcome may even slip to winter or early spring 2026 after any cert decision, with a ruling weeks or months after that.

- At the Tianjin SCO summit, PM Modi reaffirmed India’s “special and privileged” partnership with Russia — saying the two had stood by each other in difficult times — and voiced hope both sides would move toward ending the Ukraine war soon. President Xi Jinping urged “integration, not decoupling,” pledging an SCO AI application cooperation center and platforms for energy/green/digital economy, a joint addition of 10 million kW each of photovoltaic and wind capacity over five years.

- Gold breaks out of range into record high, move attributed to safe-haven demand, Fed independence concerns, Trump tariffs, and upcoming US jobs data with lowest consensus estimate since end-2020; Note: last week, Fed’s Waller admitted that in the weeks after the July jobs report's reference period, prelim estimates from ADP show continued deterioration.

- Next week, the markets should expect annual prelim benchmark BLS revision to Mar 2025 on Sept 9th.

- US Congress comes back after Aug recess this week with the need to confirm new Fed Board member Miran and many bills to pass ahead of funding deadline; Betting markets now pricing almost 50% chance that US govt shuts down end-Sept due to funding expiration.

- Bitcoin hits two-month low at $107.3K as Nvidia’s slight earnings miss and China AI progress continue to drag on tech stocks and risk appetite; Overnight, Alibaba’s 19% surge in Hong Kong crystallized a larger thesis: China’s AI catch-up will be decided less by a single heroic chip and more by the rapid industrialization of a software-first, inference-first stack. China Europe Capital’s Abraham Zhang called Alibaba’s AI progress and apparent chip breakthrough a “watershed moment” for China’s entire AI value chain.

- Traders will keep eye on investor conferences scheduled this week and next with US airlines and Walmart updating on recent trends.

- As soon as today, D.C. court is expected to issue remedies in the Google search antitrust case — potentially banning default-payment deals, imposing persistent choice screens across iOS/Chrome/Android (major exposure to Apple’s roughly $20B in 2022 default fees) and GenAI access points, and even ordering a Chrome divestiture.

- Asia closed mixed with Hang Seng outperforming +2.2%. EU indices +0.2% to -0.4%. US futures +0.1%. Gold +0.8%, DXY -0.2%; Commodity: Brent +1.0%, WTI +1.1%; Crypto: BTC +1.1%, ETH +0.3%.

Asia

- China Aug PMI Manufacturing (Govt Official): 49.4 v 49.5e (5th month of contraction)).

- China Aug RatingDog (formerly Caixin) PMI Manufacturing: 50.5 v 49.8 prior (moved back into expansion).

- Japan Aug Final Manufacturing PMI: 49.7 v 49.9 prelim (confirms 2nd month of contraction).

- Australia Aug Final Manufacturing PMI: 53.0 v 52.9 prelim (confirms 8th month of expansion and highest since Sept 2022).

- South Korea Aug PMI Manufacturing: 48.3 v 48.0 prior (8th month of contraction).

- China Pres Xi speech at Shanghai Cooperation Organization Summit in Tianjin, China.
Noted that the SCO Summit had set a model for a new type of international relations. To work with all parties to draw a blueprint for high quality development.

- New Zealand PM Luxon stated that expected economy to grow in H2.

Global conflict/tensions

- Russia Pres Putin spoke at SCO and appreciated China/India efforts to resolve Ukraine crisis; root cause of crisis must be addressed and security balance established.

- Europe said to have a pretty precise plan to send troops to Ukraine; Pres Trump reassured that there would be an American presence as part of the backstop.

Europe

- UK Chancellor Reeves (Fin Min) said to be considering raising the threshold at which businesses start paying VAT in an effort to boost growth.

- Germany Chancellor Merz: Ruled out tax increases in Germany; We re incurring a lot of debt.

- S&P raised Portugal sovereign rating to A+ from A; Outlook positive.

- French PM Bayrou trying to shore up support ahead of confidence vote. acknowledged talks this week may fail to save him.

Americas

- US markets closed for Labor Day holiday.

- US Federal Appeals court ruled (6-4) that many of Pres Trump's global tariffs were illegal. Ruling won’t take effect until Oct 14th to give the admin time to ask the US Supreme Court to take up the case.

- Pres. Trump: ALL TARIFFS ARE STILL IN EFFECT! Today a Highly Partisan Appeals Court incorrectly said that our Tariffs should be removed, but they know the United States of America will win in the end.

Trade

- China negotiator Li Chenggang met US officials between 27-29 Aug; China/US should manage differences; expand cooperation thru equal dialogue and consultation.

- Indonesia said to begin anti-dumping probe into China hot rolled coils.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.34% at 552.02, FTSE +0.32% at 9,216.43, DAX +0.48% at 24,035.24, CAC-40 +0.43% at 7,737.39, IBEX-35 -0.28% at 14,906.93, FTSE MIB +0.49% at 42,404.00, SMI +0.12% at 12,224.08, S&P 500 Futures +0.13%]

Market focal points/key themes: European indices open generally higher and remained upbeat through the early part of the session; court ruling on tariffs in the US seen supporting risk appetite in Europe; among sectors leading the way higher are health care and industrials; lagging sectors include utilities and financials; Genuit acquires Monodraught; Swatch dismisses rumors of intention to go private; UK CMA initiates inquiry into Greencore-Bakkavor deal; BBVA amends offer for Sabadel to include dividend; US, Canada closed for holiday.

Equities

- Energy: Orsted [ORSTED.DK] +3.0% (Equinor to participate in rights issue).

- Healthcare: Novo Nordisk [NOVOB.DK] +3.0% (Wegovy cuts risk of heart attack, stroke or death by 57% compared to tirzepatide) - Industrials: Rheinmetall [RHM.DE] +2.5% (Germany Chancellor Merz: It is possible Ukraine war will drag on for years, no clear end now), Volkswagen [VOW3.DE] +1.0% (U.S. Court of Appeals for the Federal Circuit rejected the tariffs and gave Pres Trump a mid-October deadline to appeal to the Supreme Court before the ruling takes effect), Rolls-Royce [RR.UK] +2.5% (SNR unit denies rumors of IPO) - Technology: ASML [ASML.NL] -0.5% (TSMC to raise prices; Fed Register: US govt revokes authorizations for China units of Intel, SK Hynix and Samsung to receive US chipmaking equipment unless they obtain licenses), TeamViewer [TMV.DE] +11.0% (hearing analyst upgrade) - Materials: Genuit [GEN.UK] +3.5% (acquisition).

Speakers

- ECB chief Lagarde: Any EU area government falling is a worry. French banking system is not a source of risk in of itself; in better shape compared to 2008 financial crisis. Needed to be discipline in public finances. Looking attentively at the French bond spread situation.
UK govt confirmed former BOE Dep Gov Shafik to join PM Starmer's staff as Chief Economic Adviser.

Currencies/fixed Income

- USD Index at a 5-month low. Greenback weighed down by expectations that the Fed was likely to cut interest rates in Sept. Dealers have recently questioned th extent of support among officials and future actions. Focus on Friday’s release of US jobs data.

- EUR/USD remained locked within tight ranges. Better EU PMI readings was off-set by European fiscal concerns. Dealers noted that although France was currently the focus, other countries were also facing similar pressures from the fiscal side. ECB was seen as unlikely cutting rates at its upcoming Sept decision as Core CPI remained above target.

- Precious metals remained firm with gold not too far from recent record highs. Silver back above the $40/oz level for the 1st time in 15 years.

- USD/JPY at 147.15

- 10-year German Bund yield at 2.69% and 10-year Gilt yield at 4.71% 10-year Treasury yield: 4.22% (cash market closed for US holiday).

Economic data

- (NL) Netherlands July Retail Sales Y/Y: 5.0% v 3.4% prior.

- (NL) Netherlands Aug Manufacturing PMI: 51.9 v 51.9 prior.

- (UK) Aug Nationwide House Price Index M/M: -0.1% v +0.1%e; Y/Y: 2.1% v 2.7%e.

- (RU) Russia Aug Manufacturing PMI: 48.7 v 47.3e (3rd month of contraction).

- (CH) Swiss July Real Retail Sales Y/Y: 0.7% v 3.9% prior.

- (SE) Sweden Aug PMI Manufacturing: 55.3 v 54.4 prior.

- (HU) Hungary July PPI M/M: 0.0% v -0.1% prior; Y/Y: 4.5% v 5.1% prior.

- (HU) Hungary Aug Manufacturing PMI: 48.9 v 50.5 prior.

- (PL) Poland Aug Manufacturing PMI: 46.6 v 46.8e.

- (TR) Turkey Aug Manufacturing PMI: 47.3 v 45.9 prior.

- (TR) Turkey Q2 GDP Q/Q: 1.6% v 0.6%e; Y/Y: 4.8% v 4.1%e.

- (ES) Spain Aug Manufacturing PMI: 54.3 v 52.1e (4th month of expansion).

- (TH) Thailand Aug Business Sentiment Index: 47.5 v 45.8 prior.

- (CH) Swiss Aug PMI Manufacturing: 49.0 v 47.0e; PMI Services: 43.9 v 41.8 prior.

- (CZ) Czech Aug Manufacturing PMI: 49.4 v 50.1e.

- (IT) Italy Aug Manufacturing PMI: 50.4 v 49.8e (1st expansion in 17 months).

- (FR) France Aug Final Manufacturing PMI: 50.4 v 49.9 prelim (confirmed 1st expansion in 32 months).

- (DE) Germany Aug Final Manufacturing PMI: 49.8 v 49.9 prelim (confirmed 38th month of contraction).

- (EU) Euro Zone Aug Final Manufacturing PMI: 50.7 v 50.5 prelim (confirmed 1st expansion in 38 months and highest since June 2022).

- (NO) Norway Aug PMI Manufacturing: 49.6 v 51.1 prior.

- (GR) Greece Aug Manufacturing PMI: 54.5 v 51.7 prior.

- (IT) Italy July Unemployment Rate: 6.0% v 6.2% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 472.3B v 469.5B prior; Domestic Sight Deposits: 444.7B v 442.5B prior.

- (PL) Poland Q2 Final GDP Q/Q: 0.8% v 0.8% prelim; Y/Y: 3.4% v 3.4% prelim.

- (UK) Aug Final Manufacturing PMI: 47.0 v 47.3 prelim (confirms 11th month of contraction).

- (UK) July Net Consumer Credit: £1.6B v £1.3Be; Net Lending: £4.5B v £3.5Be.

- (UK) July Mortgage Approvals: 65.4K v 64.0Ke.

- (UK) July M4 Money Supply M/M: 0.1% v 0.3% prior; Y/Y: 2.9% v 3.3% prior; M4 (ex-IOFCs) 3-month annualized: 3.4% v 3.0% prior.

- (HK) Hong Kong July Retail Sales Value Y/Y: 1.8% v 2.9%e; Retail Sales Volume Y/Y: 1.0% v 2.3%e.

- (NG) Nigeria Aug PMI (whole economy): 54.2 v 54.0 prior.

- (EU) Euro Zone July Unemployment Rate: 6.2% v 6.2%e.

- (BE) Belgium July Unemployment Rate: 5.8% v 6.0% prior.

- (ZA) South Africa Aug Manufacturing PMI: 49.5 v 50.8 prior (moved back into contraction).

- 05:00 (CY) Cyprus Q2 Final GDP Q/Q: 0.5% v 0.5% prelim; Y/Y: 3.6% v 3.6% prelim.

Fixed income issuance

- (NO) Norway sells NOK2.0B vs. NOK2.0B in 6-month Bills; Avg Yield: 3.98% v 3.91% prior; bid-to-cover: 1.60x v 1.95x prior.

Looking ahead

- (IT) Italy Aug Budget Balance: No est v €14.2B prior.

- (RO) Romania Aug International Reserves: No est v $72.9B prior.

- (ZA) South Africa Aug Naamsa Vehicle Sales Y/Y: No est v 15.6% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €3.0B in 6-month BuBills; 6-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (PT) Portugal July Retail Sales M/M: No est v -0.1% prior; Y/Y: No est v 5.5% prior.

- 06:00 (IE) Ireland Aug Preliminary CPI Y/Y: No est v 1.6% prior.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (CZ) Czech Aug Budget Balance (CZK): No est v -168.2B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (DE) ECB’s Schnabel (Germany).

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:30 (CL) Chile July Economic Activity Index (Monthly GDP) M/M: No est v -0.4% prior; Y/Y: 1.9%e v 3.1% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.5-7.1B in 3-month, 6-month and 12-month bills.

- 09:00 (BR) Brazil Aug Manufacturing PMI: No est v 48.2 prior.

- 11:00 (CO) Colombia Aug PMI Manufacturing: No est v 51.9 prior.

- 11:00 (MX) Mexico Aug Manufacturing PMI: No est v 49.1 prior.

- 11:00 (MX) Mexico July Overseas Cash Remittances: $5.3Be v $5.2B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

- 11:00 (PE) Peru Aug CPI M/M: 0.2%e v 0.2% prior; Y/Y: 1.6%e v 1.7% prior.

- 12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v -5.1% prior.

- 13:00 (EU) ECB chief Lagarde.

- 14:00 (MX) Mexico Aug IMEF Manufacturing Index : No est v 45.5 prior; Non-Manufacturing Index : No est v 49.1 prior.

- 18:45 (NZ) New Zealand Q2 Terms of Trade Index Q/Q: No est v 1.9% prior.

- 19:00 (KR) South Korea Aug CPI M/M: 0.2%e v 0.2% prior; Y/Y: 1.9%e v 2.1% prior; CPI (ex-food/energy) Y/Y: 1.9%e v 2.0% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 86.0 prior.

- 19:50 (JP) Japan Aug Monetary Base Y/Y: No est v -3.9% prior.

- 20:30 (MY) Malaysia Aug PMI Manufacturing: No est v 49.7 prior.

-21:30 (JP) BOJ Deputy Gov Himino in Hokkaido.

- 21:30 (AU) Australia Q2 Current Account Balance (A$): -16.0Be v -14.7B prior; Net Exports of GDP: +0.1%e v -0.1% prior.

- 23:35 (JP) Japan to sell 10-year JGB Bonds.