Newsquawk European Market Wrap - 1st September 2025

• Stocks in Europe tilt higher whilst Final PMIs were largely mixed


• US Appeals Court upheld a ruling that most Trump tariffs were illegal but kept them in place as the case proceeds


• US markets closed today on account of Labor Day

EQUITIES

• European bourses opened modestly firmer across the board and traded sideways throughout the European morning. Much of the focus has been on the trade situation, after the US Appeals Court upheld a ruling that the majority of Trump's tariffs were illegal.


• Sectors held a positive bias, Healthcare initially led the gains after numerous updates in the sector from AstraZeneca, Sanofi, Novartis, Roche and most pertinently Novo Nordisk. Industrials also bid, benefiting from a report in the FT that the UK secured a GBP 10bln warship deal from Norway, an article that bid BAE Systems.


• Stateside, no cash trade given Labor Day. Futures were flat at the time of writing, with volumes capped given the holiday conditions.

FX

• 
  USD - DXY is softer with US participants away today due to the Labor Day holiday and with the overall mood cautious amid trade uncertainty after a US Appeals Court ruled late on Friday that most Trump tariffs are illegal but kept them in place as the ruling paves the way for a further battle in the Supreme Court. Fed-related uncertainty also lingers after a US judge did not rule on the dismissal of Fed Governor Cook on Friday and asked both parties to submit subsequent court documents on Tuesday, while there were recent comments from Fed's Daly that policy will be recalibrated soon to better match the economy and that they can't wait for perfect certainty without risking harm to the labour market.


• 
  EUR - EUR/USD edges higher after reclaiming the 1.1700 handle overnight following last Friday's upward momentum and despite comments from ECB's Rehn, who sees the risk of inflation cooling and noted there’s great uncertainty over inflation, which calls for flexibility in reacting to shifts in the economy. This morning also saw commentary from ECB President Lagarde, who suggested the French banking system is not a source of risk (against the backdrop of the French vote of confidence on September 8th). She added that the ECB will continue to take necessary measures to keep inflation under control; US court challenge to President Trump's tariffs adds another level of uncertainty.


• 
  GBP - GBP/USD ekes out mild gains and remains afloat after recently reclaiming the 1.3500 status, but with the upside capped in the absence of any UK-specific drivers. Cable moves in tandem with the USD after finding support near its 50 DMA (1.3498) and at the 1.3500 level to trade in a 1.3500-1.3540 range at the time of writing.


• 
  JPY - USD/JPY trades indecisively amid the lack of tier-1 releases from Japan and despite the underperformance in Japanese stocks alongside the backdrop of trade uncertainty, as it was recently revealed that Japan's top trade negotiator had postponed his trip to the US last week due to issues regarding rice purchases, with Tokyo said to protest against the US President telling Japanese government agencies what to do.


• 
  Antipodeans -Antipodeans are also kept afloat by the softer dollar, although price action is contained amid the predominantly cautious risk appetite and mixed Chinese PMI data. NZD outperforms the AUD as the AUD/NZD cross failed to breach 1.1100 and found resistance at 1.1099 before pulling back.


• India has reportedly proposed a 10pp cut to its general sales tax for around 175 products, via Reuters, citing sources.

FIXED

• A bearish start to the week, no cash trade stateside owing to the Labor Day holiday. Conditions generally thin, focus on the morning’s PMIs, though no direct move to primarily upward revisions to the figures.


• JGBs were heavy overnight into supply on Tuesday. A theme that continues into Europe with supply from Germany due thereafter.


• OATs were unreactive to remarks from ECB’s Lagarde around French spreads; as it stands, the OAT-Bund spread is just under 78bps. Shy of the 82.19bps peak from last week and the YTD peak at 88bps, and then last year’s 90bps peak.


• Gilts in-fitting with peers, perhaps also feeling the pressure of reports that Chancellor Reeves could increase the VAT threshold to boost growth; a move that is a short-term hit to fiscal revenue, though has reportedly historically been judged as a longer-term positive, via The Telegraph sources. Elsewhere, domestic markets are attentive to some Labour MPs being moved around, though the moves have stopped well short of a full reshuffle. Amidst this, yields continue to climb and the UK 30yr yield has hit a 5.64% high, matching the existing YTD best and taking us back to pre-2000 levels.

COMMODITIES

• 
  Crude - Crude futures are marginally higher amid the mixed risk appetite in Asia but a positive tilting tone in Europe, and with some geopolitical headlines hitting the wires this morning. Modest upside was seen on reports that Yemeni Houthis launched a missile towards the "Scarlet Ray" ship in the Red Sea. And then further upside on Israeli PM Netanyahu saying that Trump told him to "Forget the partial hostage deals with Hamas. Go in with full force. Finish it.", according to journalist Stein. Add to that, penalty risk premium remains, as Russian President Putin said, following a meeting with Indian PM Modi, that Russia and India are closely coordinating efforts at an international level. Elsewhere, Germany's gas storage sites reached the key 70% threshold as of Friday, while the government had aimed to reach the aforementioned level by November 1st, which eases fears about winter heating shortages, according to Bloomberg


• 
  Precious Metals – Spot gold was initially rangebound with US and Canadian markets on an extended weekend, but then found inspiration alongside a rally in silver, which breached above the USD 40/oz level to print its highest since 2011. Some desks also flag demand from the festive and wedding seasons in Asia.


• 
  Base Metals - Spot gold resides in a USD 3,437-3,489.84/oz range at the time of writing, once again taking aim at USD 3,500/oz to the upside.


• HSBC on Brent: maintains its USD 65/bbl forecast for Q4-2025. Noting of downside risks of stocks building within the OECD or if OPEC+ continues to increase supply.


• Iraq's SOMO and Saudi's Aramco halt crude oil sales to Indian refinery Nayara, according to Reuters, citing sources

EUROPEAN HEADLINES

• Guardian's Crerar reports that there is not expected to be a wider reshuffle of the UK junior ministerial ranks at this point, despite some reports; the Cabinet is also to remain.


• EU Council President Costa says it would have been an imprudent risk to escalate trade tensions with the US while Europe's eastern border is under threat; that is why they chose diplomacy over escalation.


• French presidency says France to host meeting of Ukraine's "coalition of the willing" on Thursday. Meeting in hybrid format to focus on Ukraine's security guarantees and Russia's refusal to make peace. French President Macron and UK PM Starmer will co-chair in Paris on Thursday morning, with Ukrainian President Zelensky present.

EUROPEAN DATA

• EU Unemployment Rate (Jul) 6.2% vs. Exp. 6.2% (Prev. 6.2%)


• EU HCOB Manufacturing PMI Final (Aug) 50.7 vs. Exp. 50.5 (Prev. 50.5)


• German HCOB Manufacturing PMI Final (Aug) 49.8 vs. Exp. 49.9 (Prev. 49.9)


• French HCOB Manufacturing PMI Final (Aug) 50.4 vs. Exp. 49.9 (Prev. 49.9)


• Italian HCOB Manufacturing PMI (Aug) 50.4 (Prev. 49.8)


• Italian Unemployment Rate (Jul) 6.0% vs. Exp. 6.3% (Prev. 6.3%)


• Spanish HCOB Manufacturing PMI (Aug) 54.3 vs. Exp. 52.0 (Prev. 51.9)


• UK Nationwide house price mm (Aug) -0.1% vs. Exp. 0.2% (Prev. 0.6%, Rev. 0.5%)


• UK Nationwide house price yy (Aug) 2.1% vs. Exp. 2.8% (Prev. 2.4%)


• UK Mortgage Lending (Jul) 4.522B GB vs. Exp. 3.35B GB (Prev. 5.34B GB, Rev. 5.389B GB)#


• UK BOE Consumer Credit (Jul) 1.622B GB vs. Exp. 1.35B GB (Prev. 1.417B GB, Rev. 1.471B GB)


• UK S&P Global Manufacturing PMI Final (Aug) 47.0 (Prev. 47.3)


• UK Mortgage Approvals (Jul) 65.352k vs. Exp. 64.4k (Prev. 64.167k, Rev. 64.571k)


• UK M4 Money Supply (Jul) 0.1% (Prev. 0.3%)


• Swiss Manufacturing PMI (Aug) 49.0 vs. Exp. 46.9 (Prev. 48.8)


• Swiss Retail Sales YY (Jul) 0.7% (Prev. 3.8%, Rev. 3.9%)

CENTRAL BANKS

• 
  ECB President Lagarde says the French banking system is not a source of risk, as of itself; says the French banking system is in a better place than the 2008 crisis; she is looking very attentively at the French bond spread situation. Adds that any risk of a government falling in the EZ is worrying. France is not currently in a situation which would need IMF intervention. On the French situation, it says fiscal discipline is imperative.


• 
  ECB President Lagarde says will continue to take necessary measures to keep inflation under control; US court challenge to President Trump's tariffs adds another level of uncertainty. She adds that the equilibrium of the US economy could be impacted if Trump removes the Fed chair, citing serious implications for the global economy.


• 
  ECB President Lagarde says EU reforms are advancing too slowly.


• ECB's Dolenc says rates can be left at current levels.

GEOPOLITICS

• 
  Houthis reportedly say, "the actions that are being prepared will be of high quality and painful, and the Israeli government offices will not be far from the fire of our armed forces...may expand and the prime minister's residence", via Kais on X.


• Yemen's Houthis say they launched a missile towards the "Scarlet Ray" ship in the Red Sea.


• Ship manager says Chemical tanker "Scarlet Ray" is undamaged and operating under the command of the captain.


• 
  "Israeli PM Netanyahu at the security Cabinet meeting: President Trump told me, "Forget the partial hostage deals with Hamas. Go in with full force. Finish it."", according to journalist Stein.


• 
  Russian President Putin tells Indian PM Modi that Russia and India are closely coordinating efforts at an international level.


• 
  European Commission President's plane was reportedly impacted by suspected Russian GPS interference, according to FT; the incident occurred on Sunday, and the plane was deprived of electronic navigational aids when landing. Subsequently confirmed.


• Extraordinary meeting of the NATO-Ukraine council will be held on Monday, according to Ukraine's Foreign Minister; the meeting will focus on steps to respond to Russia's rejection of peace efforts


• A joint letter from Iran, China, and Russia says the EU's attempt to invoke "snapback" on Iran is legally baseless and politically destructive.


• Turkish President Erdogan tells Iranian President Pezeshkian he believes Iran continuing nuclear talks is useful, and Turkey will continue its support for Iran on this

NOTABLE NORTH AMERICAN NEWS

• US President Trump says India has now offered to cut their tariffs to nothing, but it’s getting late; They should have done so years ago


• US President Trump says it's very important that the drug companies justify the success of their various Covid drugs (PFE, BNTX, JNJ, MRNA), via Truth Social.

01 Sep 2025 - 15:00- MetalsResearch Sheet- Source: Newsquawk