Chinese equities selloff as global bonds tentatively stabilize ahead of next US jobs report

EU mid-market update: Chinese equities selloff as global bonds tentatively stabilize ahead of next US jobs report; Day 1 of investor conf season reveals consumers' stress now has week-to-week volatility with some trading down to smaller value packs.

Notes/observations

- In China, tech stocks drove another sharp selloff, with the Shanghai Composite falling for a third day and the ChiNext suffering its steepest drop since April. Reports circulated that China is considering curbs on stock speculation, including removal of short selling curbs. Heavyweights like Cambricon and Hua Hong Semiconductor tumbled double digits, underscoring fragile sentiment amid tariff uncertainty.

- By contrast, the bond markets are breathing again after this week’s rout in long-dated yields. Eurozone and U.K. yields eased, and U.S. Treasuries steadied. Softer U.S. job openings data reinforced expectations that the Fed could begin cutting rates as early as September, keeping Friday’s payrolls firmly in focus.

- Ahead of Japan's Akazawa visit, Japan and the US are reportedly in the final stages of an agreement to reduce tariffs on Japanese automobile imports from the current 27.5 % to 15 %, expected to take effect within 10–14 days after the issuance of a U.S. presidential executive order.

- For European data, Sweden’s mixed inflation data left the door open for a September rate cut, highlighting how fragile growth is still shaping policy paths.

- After weak JOLTS data yesterday, it is worth reminding that three things make tomorrow’s US jobs report day unusual: an ultra-low 75k-80k consensus (ex pandemic - lowest consensus since Nov 2011), explicit Fed guidance last week, and big annual revisions due next Tuesday.

- Jet2’s bleak outlook in an AGM update sparked a brutal selloff, with shares plunging as much as 25% before settling lower. Its warning on weak booking visibility rippled through peers, dragging easyJet, IAG, Lufthansa and Ryanair lower; BYD has reportedly cut its 2025 sales target to 4.6 million vehicles from 5.5 million (about a 16% cut) amid tougher competition, per internal communications cited by financial press, noting the goal may change, after telling analysts only in March it was targeting 5.5 million.
- BofA Institute said total US card spending rose +2.8% y/y in the week ending Aug 30 (vs +3.5% Aug 9 and +1.8% in July), with pre-Labor Day spending up 1.9% y/y ex-timing effects - signaling a Q3 rebound, though some of the jump may reflect holiday timing.

- TTN Summary of Day 1 of Investor Conf Season: Consumers are under stress and trading down to smaller value packs, prompting elevated promotions and week-to-week volatility; online players are destocking more aggressively, tariffs are nudging general-merchandise costs into low single-digit inflation, yet middle and upper-income demand, back-to-school, and DIY/repair spend remain resilient. CLX: "low end of our range for Q1" after August ERP "bumpiness" - now "shipping well above consumption"; even "food" was "more bumpy" and "the consumer is definitely under stress," driving trade-down to smaller/value packs. CL: "retailers - especially online players - destocking more aggressively"; HD: "prices will move... more in the back half of the year"; WMT: "this quarter started off in the same strong fashion" despite a "steady march up in general merchandise costs" and "over 7,000 rollbacks."

- Asia closed mixed with Nikkei225 outperforming +1.5%. EU indices -0.3% to +1.4%. US futures -0.1% to +0.2%. Gold -0.4%, DXY 0.0%; Commodity: Brent -1.0%, WTI -1.1%; Crypto: BTC -0.5%, ETH +0.7%.

Asia

- South Korea July Current Account Balance: $1.0B v $14.3B prior.

- Australia July Trade Balance (A$): 7.3B v 4.9Be; Exports M/M: 3.3 v 6.3% prior; Imports M/M: -1.3% v -1.5% prior.

- Australia July Household Spending M/M: 0.5% v 0.5%e; Y/Y: 5.1% v 5.0%e.

- China said to consider curbs on stock speculation to foster 'steady gains' [including the removal of certain short selling curbs.

Global conflict/tensions

- Russia Pres Putin: We are not discussing security for territory swap in Ukraine, we are fighting for people's rights. ready to hold talks with Zelenskiy if the Ukrainian president came to Moscow, but that any such meeting had to be well prepared and lead to tangible results.

- President Trump to call Putin over the next few days.

Americas

- Fed Beige Book saw most districts reported little to no change in optimism or economic activity with 4 districts reporting modest growth; Most districts saw price increases to continue.

- Fed's Waller (voter, dovish dissenter): Repeats should cut rates at next FOMC meeting; Could see multiple rate cuts over the next 3-6 months.

Energy

- Weekly API Crude Oil Inventories: +0.6M v -1.0M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.36% at 548.74, FTSE +0.05% at 9,182.15, DAX +0.30% at 23,672.14, CAC-40 -0.20% at 7,704.10, IBEX-35 +0.08% at 14,798.91, FTSE MIB +0.14% at 41,843.00, SMI +1.56% at 12,386.85, S&P 500 Futures +0.23%].

Market focal points/key themes: European indices opened mixed but took on a positive bias in the early part of the session; among outperforming are communication services and financials; underperforming sectors include health care and energy; aviation stocks under pressure following Jet2 trading update; Anchor to complete Acquistion of REC Silicon; focus on US trade balance published later in the day; earnings expected in the upcoming Americas session include SAIC, Cienna, lululemon and Broadcom.

Equities

- Consumer discretionary: Jet2 [JET2.UK] -13.5%, TUI [TUI.UK] -2.0% (AGM statement), Currys [CURY.UK] +16.5% (trading update), Grafton Group [GFTU.UK] +2.0% (earnings; buyback).

- Healthcare: Sanofi [SAN.FR] -10.0% (trial results).

- Industrials: Volkswagen [VOW3.DE[ -0.5% (BYD cuts sales target by 16%; Japan and US are in the final stages of talks to implement lower tariffs (15% from current 27.5%) on Japanese automobile imports).

- Technology: SAP [SAP.DE] +1.0% (Salesforce results), ASML [ASML.NL] +1.0% (China to promote technological breakthroughs in chips, modules and conduct adaptability test for AI chips and large models), TeamViewer [TMV.DE] -5.0% (holder sells stake).

Speakers

- Bank of England (BOE) Decision Maker Panel (DMP) Aug Survey raised the 1-year ahead CPI from 3.2% to 3.3% and raised 3-year ahead CPI from 2.8% to 2.9%.

- Sweden Central Bank (Riksbank) Dep Gov Jansson noted that underlying inflation pressures did not look too dramatic; Signs high summer inflation looked to be temporary. Domestic economy is weak, recovery sluggish. Did not need to exactly hit the 2% inflation target to cut rates; only need to confirm that pickup in CPI was temporary and on the way down.

- German IFO Institute updated its economic forecasts which cut 2025 GDP growth forecast from 0.3% to 0.2% and cut 2026 GDP growth from 1.5% to 1.3%. IFO raised the 2025 Inflation from 2.1% to 2.2% and raised 2026 Inflation from 2.0% to 2.1%.

- German RWI think tank on German economic outlook cut the 2025 GDP growth from 0.3% to 0.2% and cut 2026 GDP growth forecast from 1.5% to 1.1%.

- German IFW economic institute updated its outlook saw 2025 GDP growth at 0.1% (prior view was GDP to stagnate) and saw 2026 GDP growth at 1.3.

- Russia Dep PM Novak noted that OPEC+ was not discussing an oil production increase. Yet to have an agenda for Sunday’s meeting.

- Hungary Central Bank (MNB) Gov Varga stated that needed to anchor and lower inflation expectations which were seen at 8% currently.

- Poland Defense Min Kosiniak: Ready to accommodate more US troops.

- Russia Econ Min: Reshetnikov noted that the domestic economy was cooling down faster than expected.

- Malaysia Central Bank Policy Statement noted that its stance to be appropriate and supportive of economy and price stability.Headline inflation for both 2025 and 2026 expected to remain moderate and close to long-term average. 2026 GDP growth to be supported by resilient domestic demand.

Currencies/fixed income

- FX price action was quite muted with focus on upcoming US job data over the next two sessions (ADP, initial claims on Thurs; Nonfarm payrolls on Friday).

- EUR/USD steady at 1.1650 in a quiet session.

- GBP/USD at 1.3450 by mid-session.

- USD/JPY at 148.25.

- 10-year German Bund yield at 2.72% and 10-year Gilt yield at 4.73% 10-year Treasury yield: 4.21%.

Economic data

- (SE) Sweden Aug Preliminary CPI M/M: -0.4% v -0.4%e; Y/Y: 1.1% v 1.1%e.

- (SE) Sweden Aug Preliminary CPIF M/M: -0.2% v -0.3%e; Y/Y: 3.3% v 3.2%e.

- (SE) Sweden Aug Preliminary CPIF (ex-energy) M/M: -0.5% v -0.5%e; Y/Y: 2.9% v 3.1%e.

- (SE) Sweden Q2 Current Account Balance (SEK): 84.5B v 124.5B prior.

- (NO) Norway Q2 Current Account Balance (NOK): 217.8B v 285.3B prior.

- (CH) Swiss Aug CPI M/M: -0.1% v 0.0%e; Y/Y: 0.2% v 0.2%e.

- (CH) Swiss Aug CPI EU Harmonized M/M: -0.1% v +0.3% prior; Y/Y: 0.0% v 0.1% prior; CPI Core Y/Y: 0.7% v 0.8%e.

- (HU) Hungary July Retail Sales Y/Y: % v 3.1%e.

- (TH) Thailand Aug CPI M/M: 0.0% v 0.2%e; Y/Y: -0.8% v -0.7%e; CPI Core Y/Y: 0.8% v 0.8%e.

- (CZ) Czech Aug Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 2.5% v 2.5%e.

- (CH) Swiss Aug Unemployment Rate: 2.8% v 2.8%e; Unemployment Rate (seasonally adj): 2.9% v 2.9%e.

- (MY) Malaysia Central Bank (BNM) left Overnight Rate unchanged at 2.75% (as expected).

- (DE) Germany Aug Construction PMI: 46.0 v 46.3 prior.

- (UK) Aug New Car Registrations Y/Y: -2.0% v -5.0% prior.

- (UK) Aug Construction PMI: 45.5 v 45.0e.

- (EU) Euro Zone July Retail Sales M/M: -0.5% v -0.3%e; Y/Y: 2.2% v 2.3%e.

- (IS) Iceland Q2 Current Account Balance (ISK): -82.3B v -56.4B prior.

Fixed income issuance

- (IN) India sold total INR250B vs. INR250B indicated in 2032 and 2074 bonds.

- (ES) Spain Debt Agency (Tesoro) sold total €5.394B vs. €4.5-5.5B indicated range in 2028, 2031 and 2037 SPGB bonds.

- Sold €1.555B in 1.4% July 2028 bonds; Avg yield: 2.204% v 3.137%prior, Bid-to-cover: 2.10x v 1.59x prior (July 20th 2023).

- Sold €1.919B in 3.10% July 2031 SPGB bonds; Avg Yield: 2.734% v 2.750% prior; bid-to-cover: 2.08x v 1.63x prior (May 22nd 2025).

- Sold €1.920B in 4.20% Jan 2037 SPGB; Avg Yield: 3.425% v 3.187% prior; Bid-to-cover: 1.92x v 2.04x prior.

- (ES) Spain Debt Agency (Tesoro) sold €536M vs. €250-750M indicated range in 1.00% Nov 2030 inflation-linked bonds (SPGBei); Real Yield: 0.885% v 0.810% prior; Bid-to-cover: 2.83x v 2.83x prior.

- (FR) France Debt Agency (AFT) sold total €11.0B vs. €9.5-11.0B indicated range in 2035, 2042 and 2056 Bonds.

- Sold €7.261B in new 3.5% Nov 2035 Oat; Avg Yield: 3.57%; Bid-to-cover: 2.18x (no prior history).

- Sold €1.930B in 3.6% May 2042 Oat; Avg Yield: 4.04% v 3.72% prior; Bid-to-cover: 2.73x v 2.77x prior.

- Sold €1.809B in 3.75% May 2056 Oat; Avg Yield: 4.43% v 4.05% prior; Bid-to-cover: 2.66x v 2.91x prior.

- (UK) DMO sold £800M in 0.625% Mar 2045 Inflation.

Looking ahead

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

- 05:30 (IT) ECB’s Cipollone (Italy).

- 05:30 (HU) Hungary Debt Agency (AKK) to sell combined HUF40B in 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:40 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (IE) Ireland Q2 Final GDP Q/Q: No est v -1.0% prelim; Y/Y: No est v 12.5% prelim.

- 06:00 (IE) Ireland Q2 Preliminary Current Account: No est v €5.8B prior.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 9-month bills.

- 06:00 (RO) Romania to sell RON500M in 12-month bills.

- 06:00 (RO) Romania to sell RON400M in 7.1% July 2034 bonds.

- 07:00 (ZA) South Africa July Electricity Production Y/Y: No est v -1.3% prior; Electricity Consumption Y/Y: No est v -3.8% prior.

- 07:30 (US) Aug Challenger Job Cuts Y/Y: No est v 139.8% prior.

- 07:30 (TR) Turkey Aug Real Effective Exchange Rate (REER): No est v 69.36 prior.

- 08:00 (BR) Brazil CONAB Coffee Production.

- 08:00 (MX) Mexico Jun Gross Fixed Investment M/M: 0.1%e v 0.9% prior; Y/Y: -4.7%e v -7.1% prior; Private Consumption Y/Y: +0.8%e v -1.6% prior.

- 08:00 (MX) Mexico Aug Vehicle Domestic Sales: No est v 124.5K prior.

- 08:00 (MX) Mexico July Leading Indicators M/M: No est v 0.16 prior.

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

- 08:15 (US) Aug ADP Employment Change: +68Ke v +104K prior.

- 08:30 (US) Q2 Final Nonfarm Productivity: 2.7%e v 2.4% prelim; Unit Labor Costs: 1.2%e v 1.6% prelim.

- 08:30 (US) Initial Jobless Claims: 230Ke v 229K prior; Continuing Claims: 1.96Me v 1.954M prior.

- 08:30 (US) July Trade Balance: -$77.9Be v -$60.2B prior; Exports M/M: No est v -0.5% prior; Imports M/M: No est v -3.7% prior.

- 08:30 (CA) Canada July Int'l Merchandise Trade (CAD): -5.3Be v -5.9B prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 29th: No est v $682.8B prior.

- 09:00 (PL) Poland Central Bank (NBP) post rate decision press conference.

- 09:30 (CA) Canada Aug Final Services PMI: No est v 49.3 prior; Composite PMI: No est v 48.7 prior.

- 09:45 (US) Aug Final S&P Services PMI: 55.4e v 55.4 prelim; Composite PMI: No est v 55.4 prelim.

- 10:00 (US) Aug ISM Services Index: 50.9e v 50.1 prior.

- 10:00 (US) Senate banking committee hearing on Fed nominee Miran.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Fed’s Williams.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) Weekly DOE Oil Inventories.

- 14:00 (BR) Brazil Aug Monthly Trade Balance: $6.1Be v $7.1B prior; Exports: $30.1Be v $32.3B prior; Imports: $23.7Be v $25.2B prior.

- 19:00 (US) Fed’s Goolsbee.

- 19:30 (JP) Japan July Labor Cash Earnings Y/Y: 3.0%e v 3.1% prior (revised from 2.5%); Real Cash Earnings Y/Y: -0.6%e v -0.8% prior (revised from -1.3%).

- 19:30 (JP) Japan July Household Spending Y/Y: 2,3%e v 1.3% prior.

- 21:00 (PH) Philippines Aug CPI M/M: 0.5%e v 0.3% prior; Y/Y: 1.2%e v 0.9% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.