Market News

●         Asian Stock Markets : Nikkei up 1.38%, Shanghai Composite down 0.36% Hang Seng down 0.92% ASX up 0.05%

●        Commodities : Gold at $4,376.10 (-0.00%) Silver at $67.028 (0.76%), Brent Oil at 98.50 (-0.74%), WTI Oil at 89.44 (-1.20%)

●        Rates : US 10-year yield at 4.955, UK 10-year yield at 5.2440, Germany 10-year yield at 3.4538

●        (EUR)    Consumer Confidence  17 to 16   expected

U.S. equity futures were little changed late Tuesday as oil prices and Treasury yields eased amid hopes for a potential de-escalation in the war between the U.S. and Iran.

S&P 500 futures rose 0.02%, while Nasdaq-100 futures gained 0.1%. Dow Jones Industrial Average…

• Prior 52.5
• Manufacturing PMI xx vs 51.5 expected
• Prior 51.7
• Composite PMI xx vs 52.0 expected
• Prior 52.5

Key Findings:

Comment:

• Eurozone September flash services PMI 53.0 vs 51.5 expected
• Prior 51.6
• Eurozone September flash manufacturing PMI 52.7 vs 52.6 expected
• Prior 52.7
• Eurozone September flash composite PMI 53.1 vs 51.7 expected
• Prior 52.0

Following the stronger showings in both France and Germany earlier, the more robust business activity in the overall euro area here was very much expected.

The latest reading signalled a third consecutive monthly expansion in business activity in the region, with it being the fastest in almost three-and-a-half years.

Solid growth was registered across both the manufacturing and services categories, with the latter in particular being a key driver of the improvement in September.

The latest rise in output was also broad based across…

• France September flash services PMI 51.4 vs 48.3 expected
• Prior 48.0
• France September flash manufacturing PMI 50.3 vs 50.9 expected
• Prior 51.1
• France September flash composite PMI 51.2 vs 48.7 expected
• Prior 48.5

That is a strong read as French business activity moved back into expansion territory (>50.0) in September, bolstered by a stronger performance in the services sector. Of note, the headline estimate for the services print is the highest in 10 months. That drove the overall expansion to being the quickest in just over two years.

Of note, demand conditions improved and that reflected rising sales activity in the service sector, although employment continued to decline and business optimism weakened further.

New orders rose marginally,…

• Prior 54.3
• Services PMI 52.9 vs 50.0 expected
• Prior 49.7
• Composite PMI 53.8 vs 51.8 expected
• Prior 51.8

Comment:

Phil Smith, Economics Associate Director at S&P Global Market Intelligence said 

"German businesses reported further signs of resilience in September, with output growth picking up speed, expectations towards the outlook holding steady and employment rising for a second month running, all despite renewed pressure on the inflation front.

"The flash data pointed to the strongest rise in business activity for almost a year, with the service sector finally rejoining manufacturing in growth territory after a quieter period that followed the outbreak of the Middle East war.

"Rising inflows of new work were starting to put pressure on…

FUNDAMENTAL OVERVIEW

USD:

The US dollar rallied across the board on Wednesday following the FOMC decision as the market interpreted it as more hawkish than expected. The Fed hiked interest rates by 25 bps as widely expected in an unanimous decision. Moreover, the part saying that inflation remained elevated in part reflecting supply shocks was removed. The SEP showed an upward revision for growth and inflation, and downward revision for unemployment.

The most important thing was the dot plot where the Fed projected just one more rate hike in 2026, with rates staying higher throughout 2027 before rate cuts coming in 2028. That was more dovish compared to…

European equities are opening higher across the board:

• Eurostoxx +0.5%
• Germany DAX +0.3%
• France CAC 40 +0.5%
• UK FTSE +0.4%
• Spain IBEX +0.3%
• Italy FTSE MIB +0.5%

The main backdrop helping with the overall mood remains the continued retreat in oil prices. Brent crude has fallen back to just below $99 today, extending its decline to a sixth consecutive session as improving Saudi supply flows and US-Iran diplomacy hopes reduce some of the geopolitical premium.

That is easing concerns over inflation and taking some pressure off bond markets as well. 10-year Treasury yields continue to sit just under 5% at around 4.95% today. Meanwhile, 10-year bond yields in Germany are also settling down at around 3.44% since peaking last week at 3.57%.

In the midst of all the geopolitical focus, the ECB quietly took another meaningful step into tokenised finance this week.

The central bank launched a new service called Pontes, allowing wholesale transactions in tokenised assets to settle using central bank money. And we're getting the likes of Deutsche Bank, Santander, and Societe Generale among the institutions already onboarded, with more expected to follow.

Now, all of this might sound like just another blockchain experiment. However, the difference this time is that we are perhaps increasingly moving beyond the experimenting stage.

At its core, Pontes connects distributed-ledger markets with the ECB's existing settlement infrastructure. That gives institutions a way to trade tokenised…

We will be getting the preliminary PMI data for September for France, Germany, and the overall Eurozone later today. In terms of key estimates, markets are looking for:

• Manufacturing PMI: France 50.9 (prior 51.1), Germany 54.0 (prior 54.3), Eurozone 52.6 (prior 52.7)
• Services PMI: France 48.3 (prior 48.0), Germany 50.0 (prior 49.7), Eurozone 51.5 (prior 51.6)
• Composite PMI: France 48.7 (prior 48.5), Germany 51.8 (prior 51.8), Eurozone 51.7 (prior 52.0)

The headline numbers will tell us whether euro area growth is holding up, but I think the bigger market question is what the report might say about the ECB's next move.

Markets are currently pricing roughly a 45% chance of another 25 bps rate hike in October, with a further rate hike fully…

There are a couple of key expiry levels to take note of on the day, as highlighted in bold below.

The first ones are for EUR/USD at the 1.1400 and 1.1450 levels, sandwiching the current spot price - sitting less than 30 pips in between both.

The expiries, especially the ones at 1.1400, could offer some pull factor ahead of the cut if price momentum in EUR/USD continues to stick to the downside. The dollar has been trading firmer in the past few sessions, with bond yields continuing to keep elevated despite a pullback in oil prices. So, that remains a key driver of dollar sentiment and overall price action for dollar pairs.

Meanwhile, the expiries closer to 1.1450 might just offer some pull on any upside price extensions - helping to keep a…

Last week, the BOJ raised interest rates to their highest level in 31 years. And yet now, we're seeing USD/JPY still trading just above the 157 level from around 156 before the decision.

I reckon that alone should tell us quite a lot about where the pressure in this currency pair is coming from.

While the BOJ did lift its policy rate to 1.25%, the move failed to generate sustained yen demand. Markets were already well expecting the central bank to deliver a rate hike, so the onus was on the statement language and governor Ueda to follow up on a more hawkish path. Instead, neither delivered as markets were unable to gather any sense of urgency that the BOJ would be stepping up the pace of their policy tightening.

Meanwhile, the Fed has moved…

Bitcoin breakout draws nearly $1 billion into ETFs: More than a short squeeze?

Bitcoin's breakout has evidence of demand beyond forced short covering. Nearly $1 billion entered U.S. spot Bitcoin ETFs on September 21, while Strategy disclosed renewed corporate buying. That strengthens the case for broader investor participation, although ETF flows alone cannot prove that institutions are making lasting, unhedged bets.

I'm was monitoring the crypto space yesterday as multiple catalysts converge, particularly noting how Canada's largest banks are moving to test a tokenized deposit system, a clear signal of institutional infrastructure being built out despite the lack of a set timeline.

Meanwhile, Eamonn Sheridan highlighted a shift in ETF…