Risk on after Trump pushed back on reports of US strikes on Iran before the midterms - Newsquawk EU Market Open

• US President Trump said he is having productive discussions with Iran and will not attack Iran at any time before the midterms; the US military has nonetheless drafted options for three days of strikes as Trump weighs his next move.
• US CENTCOM said routes for free transit through the Strait of Hormuz are open to vessels not violating the US blockade, while Iranian officials reiterated that they remain in negotiations through mediators.
• APAC stocks traded mixed following the lacklustre handover from Wall St; US equity futures rebounded overnight, while European equity futures indicate a positive cash market open.
• DXY marginally softened as yields pulled back; crude futures continued to retreat from this week's highs after Trump pushed back on reports of US strikes on Iran before the midterms.
• Looking ahead, highlights include Norwegian CPI (Sep), Canadian Jobs Report (Sep) and US University of Michigan Consumer Sentiment Prelim. (Oct). Speakers include ECB's Cipollone & Schnabel and Fed's Collins, with earnings from Delta Air Lines and an S&P credit ratings update on the UK.

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SNAPSHOT

IRAN CONFLICT

• US President Trump said he is having productive discussions with Iran and will not attack Iran at any time before the midterms.
• US military drafted options for three days of strikes as President Trump hesitates, according to NYT.
• US and Israeli officials said Iranian leaders are deeply suspicious of Trump's statements, with Iranian leaders seeking to avoid a third surprise attack, according to Axios.
• US Treasury Secretary Bessent said the Treasury is starving Iran of money used for the war and will continue exposing those facilitating Iran's oil sales. It was separately reported that a Treasury official said Iran has stopped both loading and offloading crude oil vessels due to the US blockade and sanctions, estimating that Iran has 20mln bbls of crude oil remaining on vessels outside the blockade.
• US imposed Iran-related sanctions on vessels and entities.
• US CENTCOM was able to get 20mln barrels of oil through the Strait of Hormuz, exactly the volume that transited the strait before the war, according to the Jerusalem Post citing sources.
• US CENTCOM said US forces have supported the shipment of more than 1.25bln barrels of crude oil from Gulf partners and through the Strait of Hormuz in recent months. It also stated that routes for free transit through the Strait of Hormuz are open to all vessels not violating America's blockade against Iran and that CENTCOM forces have successfully cleared sea mines from primary transit lanes.
• Mediators asked US President Trump for additional time before any potential strike on Iran, while CENTCOM preparations are ongoing and awaiting Trump's decision on Iran, according to Al Arabiya citing sources. Furthermore, it was stated that Trump's change in tone with Iran does not mean there has been a breakthrough in negotiations.
• Iranian President Pezeshkian said they never left the negotiating table despite US attacks, while they are currently compiling proposals, and after the final text is prepared, we will review it through mediators and convey all proposals. It was separately reported that Pezeshkian said they will sit with the mediators to crystallise the final proposal and confirm it, as well as stated that they exchanged proposals with America through intermediaries and introduced some amendments, according to Al Arabiya.
• IRGC Commander-in-Chief said no trans-regional power has the right to threaten, impose a domineering presence or interfere in the Strait of Hormuz and the Persian Gulf, according to Fars. He also stated the IRGC Navy and Army are ready to respond decisively to any attempt at unauthorised passage through the Strait with devastating weapons, while he described Hormuz as a strategic red line for Iran and said drones and missiles will be used to guard the strait.
• IRGC chief said no extra-regional power has the right to threaten or interfere in the Strait of Hormuz and Persian Gulf.
• Iran's Atomic Energy Organisation head said Iran will not abandon uranium enrichment or hand over its uranium.
• Military sources noted several heavy explosions occurred in the southern passage of the Strait of Hormuz, which were caused by oil tankers hitting mines, according to Fars. Furthermore, Arab sources said there were several explosions in the Strait of Hormuz and that a tanker was targeted in the strait.
• Saudi Arabia conducted airstrikes on two factories in Yemen's capital Sanaa, while there were also reports of a Saudi missile attack on Kataf and Al-Baq'a district in Saada and that warplanes targeted Houthi militia positions in the south of Taiz.
• Turkey's Foreign Minister Fidan ruled out sending troops to fight Yemen Houthi forces, despite a defence pact with Saudi Arabia.
• Israel conducted artillery shelling targeting eastern areas of Gaza City.

US TRADE

EQUITIES

• US stocks were somewhat mixed with most major indices in the red, although the declines were predominantly driven by technology, and underlying market breadth remained positive. The Nasdaq underperformed, while the equal-weight S&P 500 gained, potentially reflecting some rotation out of highly valued technology stocks into other areas of the market. Sectors were mixed, with Energy the clear outperformer alongside Consumer Staples, while Technology lagged, followed by Health Care. Energy benefited from higher crude prices, while Consumer Staples was supported by gains in Coca-Cola (KO) and PepsiCo (PEP) following the latter's earnings report. Memory weakness began overnight following disappointing preliminary Samsung earnings, with operating profit and revenue missing expectations and the stock closing 2.4% lower in Asia. The results weighed on memory-related stocks, with the DRAM ETF falling c. 5%, alongside weakness in Samsung, SK Hynix, Micron and Seagate. AI-related names came under further pressure during US trade after the FT reported that OpenAI's annual revenue was USD 20bln below previous estimates, at USD 50bln versus USD 70bln. The report weighed on Nvidia, Microsoft, AMD, Oracle, Broadcom, Amazon, Nebius and CoreWeave. However, CNBC later clarified that the discrepancy reflected differences in accounting methodology, with OpenAI excluding gross revenue from cloud partners, providing a cleaner measure of revenue.
• SPX -0.49% at 7,764, NDX -1.39% at 30,726, DJI +0.10% at 51,232, RUT -0.03% at 2,792.
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NOTABLE HEADLINES

• Fed's Musalem (2028 voter) said inflation is elevated and being driven by persistent demand pressures and supply shock, while he added that bringing inflation back to 2% in a timely manner and limiting second-round effects is key. Furthermore, he stated that more monetary policy firming will be required to bring inflation back to the target and that he goes into all meetings with an open mind, as well as noted that the current level of inflation requires the Fed to consider rate increases, and that rates ought to be going up in the next six to nine months.
• US Treasury Buyback (Liquidity Support, 20-30 year, max USD 6bln): Accepts USD 6bln of USD 14.89bln offers and 10 of 34 eligible securities.
• OpenAI's annualised revenue is about USD 20bln below what had previously been signalled at about USD 50bln instead of the USD 70bln reported by media outlets late last month, according to FT citing sources. CNBC TV later reported that the FT report on OpenAI is accurate, but added that there are some nuances and clarified that the USD 50bln revenue number from OpenAI does not include gross revenue from cloud partners (whereas the USD 70bln previously reported included it and provides a more direct comparison with Anthropic). Furthermore, Bloomberg sources also stated that OpenAI sees run-rate revenue reaching or topping USD 70bln in 2026 and that OpenAI annualised revenue was around USD 50bln at end-September.

APAC TRADE

EQUITIES

• APAC stocks traded mixed following the lacklustre handover from Wall St, where most major indices declined, and the Nasdaq underperformed as tech selling and AI-related concerns were stoked by a report that OpenAI's annual revenue was USD 20bln below previous estimates, at USD 50bln versus USD 70bln, although there have been a couple of reports since that have provided some clarification regarding this.
• ASX 200 was positive with the majority of sectors in the green, although gains were capped amid underperformance in telecoms and with commodity-related industries range-bound.
• Nikkei 225 declined at the open amid tech-related pressure and with the index also not helped by the closures of its tech-heavy counterparts in South Korea and Taiwan, but has since recouped most of the losses.
• Hang Seng and Shanghai Comp diverged amid mixed performances in tech stocks and with the mainland pressured after a paltry liquidity operation by the PBoC, while the subdued spending during the National Day holiday also raises questions regarding domestic demand in the Chinese economy.
• US equity futures rebounded overnight and clawed back most of the prior day's tech-driven losses.
• European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.5% after the cash market closed with losses of 0.9% on Thursday.

FX

• DXY marginally softened after the recent pullback in yields, but with mixed risk appetite and recent AI concerns limiting the downside, while the declines in yields had coincided with a flight to safety, somewhat dovish ECB Minutes, and with President Trump stating no strikes on Iran will occur before the midterms amid 'productive' talks with Iran. Furthermore, there were some comments from Fed officials, but they failed to spur the dollar, with Fed's Musalem (2028 voter) noting that inflation is elevated and being driven by persistent demand pressures and a supply shock, while he added that bringing inflation back to 2% in a timely manner and limiting second-round effects is key.
• EUR/USD eked slight gains following the prior day's intraday recovery and slew of central bank rhetoric, but with gains capped after the ECB Minutes implied that recent yield moves helped its tightening aims, further dampening already declining rate hike expectations.
• GBP/USD continued its rebound against the buck, albeit in a gradual manner, with prior comments from BoE speakers doing little to influence price action despite Governor Bailey stating that monetary policy needs an unwavering commitment to returning inflation to the target.
• USD/JPY was choppy and oscillated through the 158.00 level, with mixed Household Spending data from Japan contributing to the indecision.
• Antipodeans mildly outperformed against G10 counterparts alongside a firmer yuan after the PBoC defended its currency policy, stating that it does not intend to devalue the CNY for trade advantages and will keep the market as the main influence on the yuan exchange rate.
• PBoC set USD/CNY mid-point at 6.7330 vs exp. 6.6973 (prev. 6.7367).

FIXED INCOME

• 10yr UST futures remained afloat after gaining yesterday as AI concerns weighed on stocks and with the latest 30yr auction stateside resulting in an above-average B/C and relatively low dealer allocation.
• Bund futures held on to recent gains after Eurozone yields fell post-ECB Minutes, while Eurogroup President Pierrakakis said he is mindful, but not alarmed, about bond spreads in the Eurozone, and noted the need for fiscal prudence.
• 10yr JGB futures tracked the gains in global counterparts, which were facilitated by haven demand.

COMMODITIES

• Crude futures continued to pull back from this week's best levels, with pressure seen after US President Trump pushed back on prior reports that the US could resume strikes on Iran before the Midterms, in which he announced productive discussions with Iran and that they will not attack Iran any time before the Midterms.
• US NEC Director Hassett said refineries are turning back on and that relief is coming soon.
• French PM Lecornu said a price reduction of 12 to 18 cents per litre of diesel at the pump is expected following the mobilisation of strategic reserves. France will release 10mln barrels of diesel onto the French market, with the operation scheduled to last three months.
• China approved non-state crude oil import quota for 2027 at 257mln metric tons, while it was also reported that China is set to resume October refined fuel exports after a brief halt and approved October fuel exports at around 3.7mln metric tons, according to industry sources.
• Spot gold climbed higher as metal prices rebounded amid lower yields and a softer dollar.
• Copper futures nursed the prior day's losses after sliding alongside the tech-related selling.

CRYPTO

• Bitcoin gradually advanced throughout the session and climbed above the USD 82,000 level.

NOTABLE ASIA-PAC HEADLINES

• Japan's government is to reboot its expenditure review and broaden examination of public spending.
• SoftBank (9984 JT) is seeking USD 100bln from Gulf investors to expand AI bet and CEO Son held talks with senior figures in the UAE in recent weeks, according to FT.

DATA RECAP

• Japanese Household Spending (Aug MM) 0.1% vs. Exp. 0.5% (Prev. 0.5%)
• Japanese Household Spending (Aug YY) -3.1% vs. Exp. -3.6% (Prev. -3.6%)

GEOPOLITICS

RUSSIA-UKRAINE

• US Special Envoys Witkoff and Kushner will reportedly meet with Ukrainian representatives in Miami on Friday and will discuss new ideas and proposals that US negotiators began developing with the Russians and Ukrainians during their recent visit to the region.
• Ukrainian President Zelensky said Ukraine has mirrored Russian attacks on Ukrainian data centres, while he added that Ukraine will raise air defence issues with the US and expects European partners to join Ukraine-US talks in the coming days.
• Ukrainian Energy Minister said Russia damaged an important Kyiv energy facility.
• Russian airstrike killed one and injured two in Ukraine's Zaporizhzhia.
• Russia’s Kremlin spokesman Peskov said Russia agrees with US Secretary of State Rubio that the Ukraine conflict is in a stalemate.

EU/UK

NOTABLE HEADLINES

• UK government is considering plans that would require university students to meet minimum entry standards to receive government loans, according to FT
• UK Labour Party fended off the Green Party to win the Holborn and St. Pancras by-election, while a Green Party spokesperson stated "It is clear now we will come a close second in this by-election. Taking the fight to Labour in one of its safest seats shows just how far the Greens have come".
• ECB President Lagarde told euro finance chiefs that the ECB is attentive to markets and sees no broadening of price pressures, adding that the ECB has tools to counter unwarranted market dynamics. Lagarde also stated that higher long-term yields will weigh on economic growth and dampen the inflationary effects caused by the energy shock, according to Euronews citing sources.
• Eurogroup President Pierrakakis said he is mindful but is not alarmed about bond spreads in the Eurozone, while he added that the key to calm bond markets over France is to adopt a sound 2027 French budget and noted a need for fiscal prudence.