EU mid-market update: Manufacturing carries Europe, services drag; Bessent to detail ‘economic operation’ against Iran on Monday.
Notes/observations
– Equities opened firmer, core yields barely moved on the misses, and volatility stayed muted in classic thin late-August trade. ECB backdrop is benign: consumer inflation expectations eased at both horizons and Kazaks reiterated data dependence into September.
– EU August flash PMIs split hard along the goods/services line. Euro zone composite beat clearly, carried by manufacturing. Germany drove it, factory activity beat sharply and hit its strongest since spring 2022 on defense spending and post-Q2 catch-up, but German services contracted for the first time in five months, pulling the composite marginally below consensus. France mirrored it: manufacturing expanded for the first time in eight months, services contracted for a seventh, with firms blaming extreme heat outright.
– UK was the day’s clear miss, transmitting through fiscal and FX rather than growth. Retail sales fell more than expected and the annual rate missed sharply; public finances came in worse than the balanced outturn forecast, as spending outpaced record income tax receipts. Yet GfK confidence hit a two-year high and the composite PMI beat clearly on weather and tech investment, a wide gap between sentiment and spend.
– Gilts underperformed Bunds and Treasuries; sterling sat near a three-week low versus the euro. Elsewhere the Treasury buyback bid faded from Weds session, with long-end yields retracing most of their decline.
– Watch Italian bank consolidation after MPS’s dual bid.
– Energy and mid-east update: Trump’s “crushing” economic operation, with details due at Monday’s press conference, comes alongside an explicit signal that large-scale combat is unlikely to resume, and Tehran’s parliamentary lead negotiator answered by preparing to absorb pressure rather than concede. That combination keeps the supply premium in place without a resolution path: Hormuz crossings remain in single digits, the IEA put 8.3M bpd of Gulf production shut in during July, and Brent held above the levels that have been feeding European input costs. Ukraine’s strike on a Urals refinery deepens Russian downstream outages already running well below plan, and Iraq’s ambition to lift output substantially is a six-year story, not an offset.
– Asia closed mixed with Hang Seng outperforming +1.2%. EU indices -0.3% to +0.9%. US futures +0.4-0.5%. Gold +1.5%, DXY -0.3%; Commodity: Brent -1.1%, WTI -1.1%; Crypto: BTC +8.5%, ETH +5.6%.
Asia
– July National CPI Y/Y: 1.9% v 1.9%e; CPI (ex-fresh food) Y/Y: 1.8% v 1.8%e CPI (ex-fresh food/energy) Y/Y: 1.9% v 1.9%e; accelerated from Jun levels and kept the BOJ’s September meeting live.
– Japan Aug Preliminary Manufacturing PMI: 55.1 v 54.5 prior (5th month of expansion).
– Australia Aug Preliminary Manufacturing PMI: 52.0 v 52.0 prior (5th month of expansion).
– South Korea Aug Imports 20 Days Y/Y: 19.0% v 20.0% prior; Exports 20 Days Y/Y: 56.0% v 52.3% prior.
– South Korea July PPI Y/Y: 7.7% v 8.5% prior.
– New Zealand July Trade Balance (NZD): -2.0B v -0.2B prior; Exports: 7.4B v 7.8B prior; Imports: 9.3B v 8.1B prior.
– Delegation of Japan’s parliamentary members to visit Beijing from August 24 to 27th.
Global conflict/tensions
– Treasury Sec Bessent stated that would hold a press conference on Monday (Aug 24th) to discuss actions on Iran; Unlikely to restart large scale combat operation against Iran.
– Trump administration said to be pressing China to support a sweeping campaign of economic isolation against Iran.
– Russia Dep Foreign Min Ryabkov stated that govt was open to listening to new ideas on Ukraine’s peaceful settlement. Important, how Washington is able to influence the decisions of Kyiv and Europe.
Europe
– UK Aug GfK Consumer Confidence: -14 v -17 prior (strongest level since August, 2024).
Americas
– Treasury Sec Bessent noted that the US bond buyback program expansion could be more than $4B; Added that this was a thinly traded area of the market.
– Fed’s Musalem (non-voter, hawk): stated that wanted to see inflation down to 2% target within 18 months; Did recommend raising rates at July meeting. Fed monetary policy is neutral or accommodative now.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [FTSE +0.22% at 10,772.16, DAX +0.25% at 26,076.20, CAC-40 +0.23% at 8,472.18, IBEX-35 +0.90% at 19,996.63, FTSE MIB +0.57% at 52,967.00, SMI -0.23% at 14,334.40, S&P 500 Futures +0.24%].
Market focal points/key themes: European equities locked in their worst weekly performance in nearly two months, with the Stoxx Europe 600 down 1.14% as Trump’s threat of historic secondary sanctions on Iran snuffed out any rebound and propelled Brent crude to a one-month high of $93.12, pricing in prolonged Hormuz disruption. The sell-off reversed the continental markets’ post-Q2 euphoria, yet selective strength emerged where fundamentals defied the gloom: NIBE Industrier surged 8.5% on a 13% operating-profit beat driven by stronger margins, while Antofagasta, Fresnillo and Endeavour Mining advanced 3.5–5.5% on dollar-softened precious- and industrial-metals support, and Infineon with STMicroelectronics both climbed 2% in a semiconductor rebound. Earlier bond-market violence had already compressed risk premia by driving Bund yields to 2011 highs and the U.S. 30-year past 5.33%, only for hawkish Fed minutes and ECB warnings on near-3% inflation to force September rate-hike odds higher, amplifying pressure on names such as Hunting, which plunged 13.5% after cutting FY26 EBITDA guidance on delayed Kuwait tenders, and Fielmann, which fell 7.5% on reduced sales and margin forecasts amid weak German demand. With the earnings tailwind now exhausted, oil entrenched above $93 and mixed results at CTS Eventim exposing margin shortfalls even as Monte dei Paschi’s ambitious dual-bank offer briefly lifted its own shares, continental desks confront a classic stagflationary trap that leaves further geopolitical and rate headwinds firmly in play into autumn.
Equities
– Consumer discretionary: Adidas [ADS.DE] +1.5% (JPMorgan reiterated Overweight/€230 PT, arguing wholesale orders should recover and the innovation pipeline remains supportive despite a difficult Q2), JD Sports Fashion [JD.UK] +5.0% (rebound after Thursday’s guidance-cut selloff; no new company-specific catalyst identified in the morning UK/U.S.-retail checks), Fielmann Group [FIE.DE] –7.5% (FY26 sales guide cut to €2.50–2.55bn from €2.55–2.60bn and adjusted EBITDA cut to €560–580m from €590–610m amid continued weak German consumer demand).
– Energy: Hunting [HTG.UK] –13.5% (open –10.0% → now –13.5%; FY26 EBITDA guidance cut to $138–141m from $145–155m as the delayed Kuwait Oil Company OCTG tender pushes expected profit out).
– Financials: Monte dei Paschi di Siena [BMPS.IT] +1.0% (launched simultaneous all-share offers for Banco BPM and Banca Generali and proposed a €4bn extraordinary shareholder distribution).
– Technology: Infineon Technologies [IFX.DE] +2.0%; STMicroelectronics [STMPA.FR] +2.0% (semiconductor-sector rebound after recent weakness; no verified direct overnight customer-specific read-through).
– Materials: Antofagasta [ANTO.UK] +5.5%; Anglo American [AAL.UK] +2.5%; ArcelorMittal [MT.NL] +2.5% (broader metals/basic-resources strength as the softer dollar supports commodities).
Speakers
– ECB’s Kazaks (Latvia) noted that ECB was well placed to act if needed to get inflation to 2%. To decide in September based on data (reiteration of data dependence). Saw wage growth gradually slowing.
– Euro Zone Jun Consumer Expectation Survey: 1-year ahead CPI expectations: 2.9% v 3.0% prior with the 3-year ahead CPI expectations: 2.7% v 2.8%e.
– France govt said to be considering renewing tax on large corporate profits (**Note: In 2025 the tax generated about €7.5B and the govt 2026 estimate was roughly €7.3B).
– Japan PM Takaichi noted that long-term interest rates were rising gradually including in Japan. An economy that was growing would experience certain level of inflation.
– Iran Parliament Speaker Qalibaf (lead negotiator) stated that must plan to overcome these unjust sanctions (following Trump threat).
Currencies
– Mixed EU PMI data did little to install any volatility in FX prices. Quiet market had dealers note that US recently chosen a buyback of long-term debt instead of changing its fiscal trajectory and slowing debt growth would only reinforce the de-dollarization trade over time.
– EUR/USD hovering around the 1.17 level with the 1.20 area opened for testing on technical in the coming weeks.
– USD/JPY back below the 159 level as recent Japanese inflation data kept the BOJ Sept meeting as ‘live’ for a potential hike.
– The 10-year German Bund yield last at 3.25%, France 10-year Oat at 4.10% and 10-year Gilt yield at 5.06%; 10-year Treasury yield: 4.69%; 10-year JGB: 2.86%.
Economic data
– (NL) Netherlands July House Price Index M/M: 0.5% v 0.6% prior; Y/Y: 3.9% v 4.1% prior.
– (NL) Netherlands Aug Consumer Confidence: -34 v -35 prior.
– (UK) July Retail Sales (ex-auto/fuel) M/M: -0.9% v -0.5%e; Y/Y: 23% v 3.3%e.
– (UK) July Retail Sales M/M: -0.5% v -0.5%e; Y/Y: 1.6% v 2.2%e.
– (UK) July Public Finances (PSNCR): +£29.0B v -£15.6B prior; Public Sector Net Borrowing: £1.8B v £0.0Be.
– (SE) Sweden July Unemployment Rate: 7.8% v 9.9% prior; Unemployment Rate (seasonally adj): 8.7% v 8.8%e.
– (DK) Denmark Aug Consumer Confidence: -13.1 v -14.7 prior.
– (FR) France Aug Business Confidence: 98 v 98e; Manufacturing Confidence: 103 v 101e; Own-Company Production Outlook: 9 v 2e; Production Outlook Indicator: -11 v -11 prior.
– (FR) France Jun Retail Sales (ex-auto) M/M: +0.4% v -0.2% prior.
– (MY) Malaysia Foreign Reserves mid-Aug: $132.7B v $132.1B prior.
– (CH) Swiss July M3 Money Supply Y/Y: 3.3% v 3.6% prior.
– (TR) Turkey Aug Consumer Confidence: 90.8 v 89.8 prior; Real Sector (Manufacturing) Confidence: 102.4 v 101.2 prior; Real Sector Confidence (unadj): 102.8 v 102.2 prior.
– (TR) Turkey Aug Capacity Utilization: 73.5% v 73.9% prior.
– (FR) France Aug Preliminary Manufacturing PMI: 51.5 v 50.0e (1st expansion in 8 months); Services PMI: 48.4 v 49.4e (7th month of contraction); Composite PMI: 48.8 v 49.5e.
– (DE) Germany Aug Preliminary Manufacturing PMI: 54.1 v 52.1e (7th month of expansion) Services PMI: 48.5 v 50.1e (1st contraction in 5 months); Composite PMI: 51.0 v 51.3e
– (TH) Thailand May Foreign Reserves w/e Aug 14th: $280.9B v $280.6B prior.
– (CN) Weekly Shanghai Deliverable Copper Inventories (SHFE): 89.5K v 69.7K tons prior.
– (EU) Euro Zone Aug Preliminary Manufacturing PMI: 52.8 v 51.8e (7th month of expansion); Services PMI: 51.7 v 51.5e (2nd month of expansion); Composite PMI: 52.1 v 51.7e.
– (RU) Russia Narrow Money Supply w/e Aug 14th (RUB):22.36 T v 22.19T prior.
– (TR) Turkey July Foreign Tourist Arrivals Y/Y: -0.3% v -4.0% prior.
– (UK) Aug Preliminary Manufacturing PMI: 51.5 v 51.5e (10th month of expansion); Services PMI: 52.8 v 51.8e; Composite PMI: 52.5 v 51.6e.
– (EU) Euro Zone Q2 Negotiated Wages: 2.4% v 2.4%e.
– (BE) Belgium Aug Consumer Confidence: -7 v -5 prior.
– (IS) Iceland July Wage Index M/M: -0.3% v +0.2% prior; Y/Y: 5.7% v 5.8% prior.
Fixed income issuance
– (IN) India sold total INR280B vs. INR280B indicated in 2041 and 2076 bonds.
Looking ahead
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2038, 2043 and 2058 Bonds- 06:00 (IE) Ireland July PPI M/M: No est v -0.2% prior; Y/Y: No est v 3.5% prior.
– 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.5B respectively).
– To sell combined £B in 1-month, 3-month and 6-month Bills on Fri Aug 28th (£B, £B and £B respectively).
– 07:30 (IN) India Forex Reserve w/e Aug 14th: No est v $707.0B prior.
– 08:00 (MX) Mexico Jun Retail Sales M/M: +0.1%e v -0.6% prior; Y/Y: 3.1%e v 1.6% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:30 (CA) Canada Jun Retail Sales M/M: 0.4%e v 1.0% prior; Retail Sales (ex-auto) M/M: 0.3%e v 1.2% prior.
– 09:00 (IN) India announces upcoming bill issuance (held on Wed).
– 09:45 (US) Aug Preliminary S&P Manufacturing PMI: 53.9e v 53.9 prior; Services PMI: 54.0e v 54.6 prior; Composite PMI: 53.9e v 54.5 prior.
– 10:00 (EU) Euro Zone Aug Advance Consumer Confidence: -16.0e v -15.9 prior.
– 13:00 (US) Weekly Baker Hughes Rig Count data.
– 13:00 (EU) Potential sovereign ratings after European close (Moody’s on Ireland and Netherlands).
