US Futures Rise, Near All-Time High, As Oil, Yields Drop On US-China Diplomacy Optimism

US futures are higher driven by Trump / Xi optimism around AI, Middle East, and trade with Middle East kinetic headlines over the weekend reflecting a pause to escalation. Sentiment was lifted by signs of progress on geopolitical issues: it’s a big week for talks, with Trump set for a summit with China’s Xi Jinping on Thursday and a possibility of talks with Iran’s president at the UN General Assembly. As of 8:00am ET, S&P futures are up 0.7%, rising to 7,770 and less than 1% from all time highs, as Nasdaq futures gain 1.1%, with tech strength on full display in APAC trade and also leading in premarket US trading with broad-based strength across Semis, Memory, and Mag7. Cyclicals ex-Energy are leading Defensives with the AI theme boosting Tech / Industrials within Cyclicals. Within Defensives, both healthcare and staples have pockets of strength as today looks like a broad-based rally in both the SPX and within Tech. WTI is below $100, dropping for a fourth day, fuel prices are lower, while bond traders reckon the Fed will succeed in its fight against inflation helping drive bond yields lower as the yield curve bull flattens, as the USD drops to session lows. This is bidding up risk assets with Equities leading. The Fed’s Goolsbee speaks 6.30am with previous speakers Fri / Sun offering a hawkish view which reiterates Warsh’s key points. According to JPM, given the macro and earnings strength, the market may be underpricing the number of hikes through YE27. There is little on today's calendar: we get the Aug Chicago Fed Nat Activity Index (est. -0.04) at 8:30am ET.

In premarket trading, Mag 7 stocks are all higher: Meta climbs about 2% after shares in the social media giant sold off on Friday. Tesla +1.5%, Alphabet +0.3%, Nvidia +0.8%, Amazon +0.7%, Microsoft +0.4%, Apple unchanged.

Cryptocurrency-linked stocks are rallying as Bitcoin trades above $84,000, near an eight-month high.
Accenture (ACN) gains 4% after Anthropic partnered with the technology consulting company to test the safety of its advanced artificial intelligence models.
Alkermes (ALKS) climbs 8% after announcing positive Phase 1b results for ALKS 7290 in adults With attention-deficit hyperactivity disorder.
Arhaus (ARHS) rises 2% after Jefferies upgraded the furniture company to buy, writing that it has “newfound optimism on the retailer’s strategy to elevate brand awareness” and improve market share.
Candel Therapeutics (CADL) gains 6% after BofA upgraded the biotech company to buy, citing optimism about a prostate cancer treatment.
Ciena (CIEN) rises 5% after Evercore ISI raised the recommendation to outperform, citing the way data centers are boosting demand for optical networking equipment.
Critical Metals (CRML) soars 24% after President Donald Trump said the he reached an agreement with Denmark over Greenland that would give the US “permanent control over security” of the Arctic island. In April, Critical Metals agreed to acquire European Lithium Ltd., giving it full ownership of a rare earth project in Greenland.
Securitize (SECZ) rises 8% after Cantor Fitzgerald initiated coverage with a recommendation of overweight as it sees the tokenization company benefiting from recent Securities and Exchange Commission guidance.
Warner Bros. (WBD) is up 7% and Paramount Skydance (PSKY) is up 6% as the latter is in settlement talks with California officials over its planned acquisition of the former.

In other corporate news, settlement talks between Paramount Skydance and California officials over the planned acquisition of Warner Bros. Discovery are said to include a financial penalty if the company fails to make good on a promise to distribute 30 films per year in theaters. Nscale, a developer of AI data centers that counts Nvidia and Microsoft among its partners, filed for an IPO. Novo Nordisk shares fell after the maker of Ozempic and Wegovy outlined its 2030 strategic ambitions, targeting revenue CAGR in line with industry peers. SoftBank is seeking the equivalent of more than $11 billion in what would be one of the biggest junk bond deals ever to fund OpenAI investments in OpenAI

Global markets are firmer across the board, helped by lower energy prices despite heightened geopolitical tensions over the weekend. Brent is down about 2% as diplomatic efforts to resolve the conflict are parsed, while oil and LNG flows through Hormuz hit a six-month high. The Houthis said they attacked sensitive sites in Riyadh and an Aramco facility in Yanbu over the weekend, while US President Trump reportedly said that he is thinking of "blowing up" all of Iran. One source of potential optimism is the commentary following US-China trade talks, with US Treasury Secretary Bessent describing talks as "successful" on trade and AI, while they agreed to hold another meeting on AI dialogue. For the Trump-Xi meeting - which is Xi’s first trip to the US in three years - trade, AI, critical minerals, industrial capacity, Taiwan, Ukraine and the Middle East are all on the bingo card.

The “feedback from the talks between China and the US is feeding a positive narrative as the week begins,” said Alexandre Baradez, chief market analyst at IG in Paris. “That said, for me oil prices remain the key driver.”

“The market doesn’t really need any grand bargain,” says Panmure Liberum’s Mark Taylor, who thinks signs of “amicable agreement to manage tensions” will be enough to support risk appetite. “However, if fresh tariff threats, tech restrictions or hostile commentary resurface, it could quickly revive the trade-war risk aversion,” he adds.

For today, oil is also a major risk-on driver. In a sign that US naval protection and mine-clearing efforts in the Strait of Hormuz were paying off, a regional US commander said oil and liquefied natural gas shipments through the waterway reached their highest level in six months, which almost helped push Brent below $100. Trump told Fox News he would “probably” be open to meeting his Iranian counterpart on the sidelines of the UN assembly this week.

Meanwhile, as BBG notes, the AI debate continues to rumble on, with the narrative to positive over the weekend, despite some news reports of a looming drop in memory prices. South Korea’s chip exports surged nearly 260% year-on-year in the first 20 days of September, to a record $34.1 billion. Accenture shares surged after it was chosen by Anthropic to test the safety of AI models, and SocGen said AI could help it make substantial cost savings.

But there’s still a lot of caution. Citi’s CEO said companies are racing to build up their defenses as AI models become more powerful and risk spurring cyber attacks. Today’s Big Take looks at how AI risk is making CIOs nervous. Elsewhere, opposition to data centers continues to mount: Data Center Watch said some 45 projects worth $68 billion were blocked or delayed by local pushback during the second quarter.

“AI is clearly becoming the next major area of strategic competition, but the fact that both sides are at least discussing a mechanism for dialogue is constructive,” said Mohit Mirpuri, senior partner at SGMC Capital Pte. “Markets don’t necessarily need Trump and Xi to resolve all their differences on Thursday, they mainly need reassurance that those differences remain manageable and don’t spill back into another trade or technology shock.”

And then there is inflation: price pressures continue to show up, with US retail diesel prices topping $6.50 a gallon for the first time, copper holding gains and food shock risks making headlines. Fed’s Kashkari said inflation remains too high and that pressures have broadened beyond the oil-price shock of the Iran war.

European shares gain as cooling oil and gas prices ease inflation concerns, while optimism ahead of this week’s China-US summit also lifts sentiment. The Stoxx 600 rises 0.9% with tech outperforming while healthcare falls after Novo Nordisk disappointed investors who were hoping to see more robust sales targets at the company’s capital markets day. Here are some of the biggest movers on Monday:

Kuehne+Nagel shares rise as much as 6% following the freight transportation firm’s collaboration with US tech behemoth Amazon, which will include providing assistance on logistics services and infrastructure for Amazon Web Services.
Lundbeck gains as much as 4.6% after UBS raised its recommendation to buy from neutral, saying the company is potentially on track to turn around its R&D activities, and notes several upcoming key trial readouts.
Lotus Bakeries gains as much as 6.2% after UBS raised its recommendation to buy from neutral, saying the company is potentially on track to turn around its R&D activities, and notes several upcoming key trial readouts
Huber+Suhner shares rise as much as 5.6%, recouping the losses booked on Friday after the maker of telecommunication products held its capital markets day.
Industrie De Nora shares rise as much as 5.9%, extending a rally after Italy agreed to cover full costs for its Gigafactory project, according to a statement.
Novo shares fall as much as 7.7% after the Danish firm outlined its 2030 strategic ambitions at its Capital Markets Day in London.
Ayvens shares drop as much as 6.2% after the fleet management company outlined its new 2029 strategic plan. Jefferies said the new targets are “more realistic than ambitious.”
VW shares fall as much as 2.6% after Kepler Cheuvreux downgraded the German carmaker to hold from buy citing a profit warning that offset positives from a restructuring program.
Craneware shares fall as much as 25% after the healthcare software company cut its revenue guidance for FY27 amid disruption caused by a cyber security incident.
Ipsen drops as much as 7.8% after Amneal Pharmaceuticals received FDA approval for its generic version of somatuline.

Asian stocks advanced as an extended rally in semiconductor shares and a decline in oil prices supported investor sentiment. The MSCI Asia Pacific Index rose more than 1%, heading for a fourth straight session of gains. Samsung Electronics, TSMC and MediaTek were the top contributors to the gauge’s increase. South Korea’s Kospi was the best performer in the region. Markets in Japan were shut for a holiday. “Friday’s Wall Street session has aided sentiment in the AI names early, with the US semiconductor index rising close to 3%, led by the memory names as contract prices keep rising,” said Josh Gilbert, lead APAC analyst at Etoro. “Korea and Taiwan carry the most exposure to that, which is why we’ve seen buyers return to Asia, with flows coming back into the region after a run of selling.” The MSCI Asia Pacific Index is up about 23% so far this year. However, the gauge has risen just 0.3% so far in September as the Federal Reserve’s hawkish rate hike, persistent inflation concerns, elevated bond yields and growing unease over the

In FX, the Bloomberg Dollar Spot Index is near unchanged. USD/JPY is back on a 157 handle after Friday’s reported rate check.

In rates, treasuries trade near session highs in early US session, supported by steeper gains across European bond markets as oil prices slide, leaving Brent crude on track for the longest run of declines since June. Energy prices are easing amid diplomatic efforts to end the US-Iran war and signs cargoes are still moving through the Strait of Hormuz. Treasury coupon auctions of 2-, 5- and 7-year notes commence Tuesday. US yields are 3bp to 4bp richer across the curve with front-end lagging slightly, flattening 2s10s and 2s5s spreads by ~1.5bp. 10-year is around 4.955% with bunds and gilts in the sector outperforming by 1.5bp and 3.5bp. In Europe, French bonds outperform, moving the French-German 10-year yield spread back below 100bp; 105bps spread reached Friday was the widest since 2012. IG dollar issuance slate includes a few deals already. Dealers expect around $40 billion of new issuance this week, possibly including Sysco Corp., which is preparing a roughly $17 billion bond sale. This week’s Treasury note auctions include $69 billion 2-year Tuesday, $70 billion 5-year Wednesday and $44 billion 7-year Thursday.

are on the decline with the US 10-year borrowing cost down 4bps at 4.96% - note, cash trade was closed overnight due to the Japanese market holiday. Yields in the UK and Germany are also lower, with the pullback in energy outweighing mounting political risks for the latter. French 10-year bonds are outperforming after being trounced on Friday and the OAT-bund yield spread is back below 100 basis points.

In commodities, WTI crude futures are down almost 3%, Brent is down more than 2% as diplomatic efforts to resolve the conflict are parsed, while oil and LNG flows through Hormuz hit a six-month high. Spot gold is down 0.8%. The crypto rally is extending with Bitcoin up 4.7% and at levels not seen since January.

US economic data slate includes August Chicago Fed national activity index at 8:30 a.m. Fed speaker slate is blank for Monday.

Market Snapshot

Top Overnight News

Oil prices slid to their lowest in 11 days on Monday as investors ‌hoped for diplomatic progress on the Iran war due to this week's UN meeting, and eyed a partial recovery in shipments from Saudi Arabia. Brent crude futures and US West Texas Intermediate crude touched their lowest since September 10 earlier on Monday. The Brent contract for November was at $101.75 a barrel at 0859 GMT, down $2.12, or 2%. RTRS
The Iran war has created a new shortage on the oil market. This time the scarce commodity isn’t just crude—it is the ships that carry it. Drone attacks that shut Saudi Arabia’s bypass pipeline earlier this month have forced more crude back through the Strait of Hormuz and onto a tanker fleet already stretched thin. WSJ
The US and China have agreed to set up an AI dialogue ahead of a high-stakes summit on Thursday in Washington between Donald Trump and Xi Jinping. US Treasury secretary Scott Bessent said the two sides had negotiated the creation of an AI dialogue mechanism, which was floated when Trump met Xi in Beijing in May, in talks with Chinese vice-premier He Lifeng in New York on Sunday. FT
China is more than halfway toward its pledge to buy 25 million tons of US soybeans this year, but a commitment to purchase at least another $17 billion of American farm products has largely stalled. BBG
OpenAI projects it will burn through almost $280bn by the end of 2030, highlighting its huge long-term funding needs as the AI company pushes for a valuation of more than $1.2tn in fresh investment talks. The company expects negative free cash flow of $278bn over five years from 2026 to 2030 as it invests aggressively to expand its access to computing power. FT
Friedrich Merz vowed to stay on as German chancellor after his CDU suffered heavy losses in state elections. The party won just 4.9% in Mecklenburg-Western Pomerania, shutting it out of a regional assembly for the first time in the country’s postwar history. BBG
SoftBank’s seeking the equivalent of over $11 billion for AI investments in what would be one of the biggest junk bond deals ever, people familiar said. BBG
Wall Street banks are expecting the US to borrow up to $1tn over the next year by selling short-term Treasury bills as part of a growing dependence on quick-maturing debt that leaves Washington vulnerable to rising interest rates. FT
The Fed’s Austan Goolsbee warned the central bank cannot ignore repeated and persistent supply shocks, and must respond in a way that may cause economic hardship. BBG
Investors are betting on a Fed win the inflation fight, turning bullish on front-end Treasuries. Two-year yields remain well above the central bank’s range, offering scope for the securities to rally if inflation eases or rate hikes are less than priced. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed, but with cautious gains seen for most of the region ahead of this week's key meetings in the US, including the UN General Assembly and the Trump-Xi summit, while there are also thinned conditions with the closure of Japanese markets through to Wednesday. ASX 200 was uneventful amid mixed M&A related headlines and further RBA rate hike calls, with CBA bringing forward its rate hike call to September from November, while ANZ expects hikes in both September and November. KOSPI outperformed as tech stocks took impetus from the advances in the Nasdaq last Friday. Hang Seng and Shanghai Comp were mildly higher ahead of the Trump-Xi summit this week and after US and Chinese officials held talks in New York ahead of the leaders' meeting, with China's top trade negotiator describing the discussions as 'not bad', while state media noted the sides had frank, in-depth and constructive exchanges on important economic and trade issues of mutual concern, as well as holding dialogue on AI-related issues.

Top Asian News

Japan's government will work with major machinery manufacturers to collect machine-learning data for physical AI applications such as autonomous robots and assigning unique IDs to factory equipment to enable cross-vendor data aggregation, according to Nikkei.
Japan is poised to ease restrictions on regional bank loans for AI and energy projects, Nikkei reported.
China's CPC Politburo met to discuss draft documents to be submitted to the Fifth Plenary Session (26th-29th October), with Chinese President Xi presiding.

European bourses (STOXX 600 +1.0%) are firmer across the board, helped by lower energy prices despite heightened geopolitical tensions over the weekend. The Houthis said they attacked sensitive sites in Riyadh and an Aramco facility in Yanbu over the weekend, while US President Trump reportedly said that he is thinking of "blowing up" all of Iran. One source of potential optimism is the commentary following US-China trade talks, with US Treasury Secretary Bessent describing talks as "successful" on trade and AI, while they agreed to hold another meeting on AI dialogue. Sectors highlight the positive bias. Tech tops the sector pile, with Industrials and Basic Resources following closely behind. To the downside is Health Care, with Optimised Personal Care and Energy rounding out the sector laggards. Explaining the underperformance in Health Care is the downbeat reaction in Novo shares (-5%) after they announced their 2030 ambitions. The drugmaker plans to launch over 5 blockbusters by the end of 2030 and targets pipeline sales of over DKK 150bln in 2035.

Top European News

German Chancellor Merz vowed to stay on despite a ‘disaster’ in regional elections with partial results showing his CDU at just under the 5% threshold for parliamentary representation in Mecklenburg-Vorpommern, while the centre-left SPD is projected as 35.5% of votes and the far-right AfD is expected to get 37.0% of votes, according to exit polls. Merz's conservatives are projected at 20% of votes in the Berlin state election, while the Left Party is seen at 24.5%, SPD is seen at 12%, and AfD is seen at 16% in Berlin.
Scope downgraded France’s long-term ratings to 'A+' from 'AA-' and revised the outlook to stable; DBRS affirmed France at 'AA', lowered the French outlook to negative.

Snapshot: G10s are mixed against a flat USD this morning. The Antipodeans are mildly firmer, benefiting from the risk tone, whilst the Loonie and JPY are the marginal laggards.
DXY currently holds within 100.20 to 100.37 range, and towards the highs made post-FOMC last week. Newsflow for the Dollar has been lacking this morning; oil prices are slipping off highs, despite ongoing supply disruptions, as attention turns to the UN General Assembly Council this week, alongside the summit between President Trump and Xi. The current mood between the two is positive; Trump recently suggested that he and Xi get on “very well”, whilst Treasury Sec Bessent suggested they had a very successful engagement with the Chinese on trade and AI.
JPY is a touch lower this morning, giving back some of the strength made last Friday. The Nikkei reported that the BoJ conducted a “rate check” on that Friday, which helped curtail some of JPY pressure seen following the Bank’s dovishly perceived rate decision. This makes evident that the Japanese officials remain ready and active in the market to keep USD/JPY from approaching the 160.00 mark once again. If market expectations of a Fed-BoJ divergence continue to grow, then it may prove to be difficult for Japan to significantly prevent another bout of upside in the pair. Do note that Japan is away on holiday and returns on Thursday; as such, the lower-volume environment could provide a decent opportunity for the MoF to enact some intervention.
EUR is essentially flat vs USD, despite political uncertainty from within the region. Firstly, two regional elections were held in Germany over the weekend; the ruling CDU party performed terribly, falling short of the 5% threshold to enter state parliament in one state. There is now mounting pressure on current Chancellor Merz to resign, though he announced that he will stay in office and “fight on”. The state election results point out the issues the German population is currently facing, but for now, it will remain a regional problem. It will likely have little impact on the federal government itself; as such, the EUR is little changed.

Fixed Income

USTs (+8 ticks) are stronger this morning, benefiting from 1) falling energy prices and 2) markets awaiting the US-China meeting at the White House on Thursday. On the first point, supply disruptions remain, and Trump recently said he is thinking of “blowing up” all of Iran. It seems as if markets are shifting their attention to the UNGA this week, with Trump reportedly set to meet Gulf leaders and then President Xi. There may be growing hopes that a framework agreement/deal can be ironed out; recent reports have noted that Pakistan’s Interior Minister has travelled to Iran.
Yields are lower across the curve, with very slight underperformance at the belly. The US 10-year (4.96%) has now slipped below the key 5.00% mark, given the aforementioned energy dynamics. A constructive UNGA mood and/or geopolitical progress could help the 10-year continue to slip to near-term lows, with 4.92% a likely area of support (low from 18 Sep).
Gilts (+72 ticks) outperform vs peers, and currently hold towards the upper end of an 85.28 to 85.76 range. UK-specific news flow has been focused on pre-budget speculation around housing and CGT, but with action in UK paper today ultimately driven by energy dynamics. On trade relations, UK PM Burnham is set to meet US President Trump this week. Reports suggest that the talks between the pair will focus on the Middle East, energy costs and the ongoing Russia-Ukraine conflict.
EGBs dominate the fixed income space this morning. Bunds after the latest state parliamentary elections, and OATs after sovereign updates and the latest fiscal disclosure. However, despite these points, EGBs are firmer with the marked energy pullback providing relief and some caveats/points to look to with reference to Bunds and OATs specifically.
For Germany, the Grand Coalition’s CDU had a disaster in the two elections, while their SPD partner fared somewhat better. Within Mecklenburg-Western Pomerania, the CDU are set to come in below the 5% threshold to enter state parliament, while AfD won with 38.2% but PSD a near second on 35.5%; a point that provides some relief, as there is no appetite to work with AfD, and thus SPD will likely lead a SPD-Green-Die Linke combination of some description in the region. For now, we await the final results of Mecklenburg-Western Pomerania to confirm if CDU has missed the threshold. Thereafter, we look for signs of more pressure on Chancellor Merz and whether the Grand Coalition may look for an alternative to him, a ‘Kanzlertausch’, given the September regional election outcomes and his personal low approval rating.
Turning to OATs, firstly digesting the trend cut to negative from stable at DBRS, due to “the risk of the government failing to address fiscal imbalances is increasing, leading to a continued rise in the government debt ratio over the medium term”. Additionally, Scope cut France to A+ (prev. AA-), primarily due to the deteriorating fiscal outlook.

Commodities

WTI Nov and Brent Dec futures are softer after initially advancing at the open on weekend escalation, including a Houthi attack on a Saudi Aramco facility in Yanbu and Trump reportedly saying he was considering “blowing up” Iran. Prices subsequently reversed as the immediate escalation failed to develop further and Trump also signalled openness to meeting Iran’s President. Further, there may be some hopes that the Trump-Xi meeting this week may help simmer down some geopolitical tensions in the Middle East. This morning’s picture remains mixed in terms of newsflow: the IRGC said it shot down a US MQ-1 drone over Hormuz and warned the war “is not over”, while Pakistan’s Interior Minister is heading to Tehran, with conflicting reports over whether the trip involves US-Iran mediation. WTI Nov trades close to the bottom of a USD 93.46-97.22/bbl range, while Brent Dec nearer to the lower end of a USD 96.97-100.22/bbl range. Dutch TTF is sharply softer (-3.8%) alongside the broader pullback in the energy complex within a EUR 76.85-80.55/MWh range.
Precious metals are softer as the Dollar remains firm in the face of lower oil prices. Spot gold trades around USD 4,350/oz within a USD 4,342-4,383/oz range, and with the 100 DMA at USD 4,319/oz today. Spot silver similarly trades flat on either side of its 100 DMA (USD 66.40/oz) in a narrow USD 65.73-67.05/oz parameter.
Base metals are firmer despite the cautious broader backdrop, extending some of last week’s gains. COMEX copper trades near the upper end of a USD 6.60-6.66/lb range, and 3M LME copper trades towards the top end of a USD 14,540.50-14,688.00/t parameter, with the complex supported by the generally positive tone across Chinese markets ahead of the Trump-Xi summit and after constructive US-China trade discussions in New York.
Kazakhstan oil shipments to Ust-Luga were recorded at 200k metric tons in August, according to Interfax.
French Finance Minister Lescure said France’s strategic oil stocks are full.
Naftogaz said ORLEN (PKN PW) will supply up to USD 500mln of petroleum products to Ukraine to stabilise the market and deliver three LNG cargoes in Q1 2027.
South Africa's Pretoria is reportedly looking to leverage its role as a platinum supplier to help integrate into the US and China, Semafor reported.

Trade/Tariffs

US Treasury Secretary Bessent said they had a very successful engagement with the Chinese on trade and AI, while they agreed to hold another meeting on AI dialogue and the US suggested a notification system between the two countries. Bessent separately commented that he is likely to meet the Chinese delegation in two months and they discussed extending the trade truce, although no pact was reached, according to FT citing an interview following Bessent's meeting with Vice Premier He Lifeng.
USTR Greer said they implemented a board of trade, with the US and Chinese teams to continue working on a board of trade agreement, while the board of trade from the Chinese side is likely to include consumer goods and low-tech items.
China's top trade negotiator Li said trade talks are ‘not bad’ and that talks will continue on Monday among the working group, while he confirmed that both sides discussed AI along with trade and investment.
Chinese state media noted that China and the US conducted frank, in-depth and constructive exchanges on important economic and trade issues of mutual concern, while they held dialogue on issues related to AI.
US and China were reported on Friday to be discussing cutting tariffs on US LNG ahead of Xi's visit, with potential USD 30bln reciprocal tariff cuts, while the visit could bring broader energy and agricultural deals.
China reportedly purchases more US soy cargoes ahead of the President Trump-Xi meeting.
Indian Trade Minister said a trade agreement with New Zealand will provide duty-free access to New Zealand for 100% of India's exports.

Central Banks

Fed's Kashkari (2026 voter) said inflation remains too high and that price pressures have expanded beyond the oil-price shock from the Iran war and are affecting the broader economy.

Geopolitics: Iran

US President Donald Trump reportedly said on Sunday that he is thinking of "blowing up" all of Iran as he left the Camp David retreat a day early to return to the White House, while Fox News reporter Yungst said Trump told him during a phone call that "very big things are going to be happening" soon. Furthermore, Trump said his options are ‘wiping out’ the regime, letting it ‘rot economically’ under naval blockade, or striking a deal, according to Fox News and The Telegraph.
US President Trump said on Friday that the Iran War will end soon, adding that once the war ends, US gasoline prices will revert to prior levels and could even fall further. US President Trump confirmed on Friday the US is talking to the Houthis, saying they want a deal, while adding "we'll see" on whether to annihilate Iran.
US CENTCOM commander Cooper said oil and LNG shipments through the Strait of Hormuz in the past two weeks reached the highest levels in six months. More US troops had reportedly died amid the Iran war than the Pentagon disclosed publicly, according to a report on Friday in the Washington Post.
Pakistani Interior Minister travelled to Iran today, IRNA reported. Tasnim later reported that the trip is unrelated to Iran-US matters and will focus on bilateral relations and cooperation, with the report adding that Pakistan is not carrying a message between Iran and the US.
Iranian officials conveyed their conditions to mediators for re-engaging in negotiations for ending the war with the US, while the conditions include ending the war on all fronts and the naval blockade, as well as unfreezing Iranian funds and they also want an end to the war between Saudi Arabia and Yemeni Houthis.
IRGC spokesman said all of the US' superior technologies pale in comparison to Iran's offensive and defensive capabilities, adding that Tehran are defining the new regime in the region, not America, and the war is not over and continues. The spokesman added that the IRGC has prepared itself for a long-term war and that they have new targets and weapons ready if the US launches a new attack.
IRGC said it shot down a US MQ-1 drone over the Strait of Hormuz.
UKMTO received a report of an incident involving a vessel transiting the Strait of Hormuz, reported at 07:30 UTC. A tanker conducting an inbound transit was struck by an unknown projectile.
Qatar's PM Al-Thani said Gulf states need to cooperate to restore regional stability and help reach a settlement between the US and Iran. It was separately reported that Qatar's Energy Minister said US Treasury Secretary Bessent is "wrong" in saying that the strategic Strait of Hormuz will be worthless in two years.

Geopolitics: Ukraine

Russia's Press Secretary Peskov said there have been no progress in negotiations on Ukraine yet but remains open to further talks, IFX reported.
UK Burnham hopes to build bridges with US President Trump at their first meeting and wants to press the case for the US to help Ukraine with air-defence systems.
Moscow Oil Refinery was hit during a drone attack that was part of Ukraine's largest barrage this year.

Geopolitics: Other

US, Denmark and Greenland reached a security agreement that expands the US’s role on the Arctic island to end the row that threatened NATO.
North Korea launched two missiles off its eastern coast on Sunday. It was also reported that North Korea rejected an IAEA resolution on its nuclear program and vowed to keep its status as a nuclear-armed state.
Japanese Defence Minister Koizumi and US Defence Secretary Hegseth agreed in a phone call to further strengthen security ties.

US Event Calendar

8:30 am: Aug Chicago Fed Nat Activity Index, est. -0.04, prior -0.08

DB's Jim Reid concludes the overnight wrap

For 2026 standards, its been a relatively quiet weekend news wise but yesterday saw more, albeit expected, heavy defeats for the ruling CDU in two German state elections with a surge in support for the far right AfD in one and the far left Die Linke in the other. Chancellor Merz called the early results "a disaster" but vowed to press on with reforms. In Mecklenburg-Western Pomerania, the AfD won 38.3% of the vote, roughly double its support from the previous election in 2021 and enough to make it the largest party in the state even if a coalition to keep them out of power is likely. The shock was that the CDU didn't even make the 5% threshold to enter parliament for the first time in the country’s post-World War II history. So this will create huge amounts of political pressure on the Chancellor and raise questions about the reform agenda.

Meanwhile, in Berlin, the Left Party (Die Linke) emerged as the biggest force with 25.3%, ahead of the CDU and Greens. The mainstream parties seem to be caught in a continued pincer movement. On the far-right the AfD continues to gain support on anti-immigration and anti-establishment themes, particularly in eastern Germany, while the Left appears to have capitalised on concerns over housing affordability, living costs and social inequality. For markets, the immediate implication is not a change in national policy, but a further weakening of Germany’s political centre and another reminder that the forces driving political polarisation across Europe remain alive and well.

Also over the weekend, President Trump announced that the US, Denmark and Greenland had reached an agreement that would allow a significant expansion of the US military presence on the island, with Trump describing the deal as giving the US “permanent control over security” in Greenland. The agreement falls well short of Trump’s earlier ambitions to acquire Greenland, while Danish and Greenlandic leaders stressed that it explicitly recognises Greenland’s right to self-determination and Danish sovereignty. Taken at face value, if this agreement holds it actually reduces event risk, as the Greenland issue could easily have come back to be a high tension hotspot in the months ahead.

Overnight in Asia, equity markets are advancing led by technology shares supported by optimism from US-China trade talks ahead of the much anticipated summit between President Trump and President Xi Jinping later this week. Across the region, the KOSPI (+1.79%) is outperforming with Japanese markets closed for the three-day Silver Week holiday. Elsewhere, the Hang Seng (+0.57%), the Shanghai Composite (+0.55%) and the CSI 300 (+0.42%) are all trading moderately higher. S&P 500 (+0.41%), NASDAQ 100 (+0.54%) and Stoxx (+0.55%) futures are all higher. Brent is -2.21% lower at $101.65/bbl which is helping. It's been above $100/bbl again since September 9th, and although US cash Treasury trading hasn't commenced due to the Japanese holiday, US and European bond futures are all notably higher this morning.

Moving on, the week ahead brings a mix of economic data, central bank decisions, lots of Fed speak, and geopolitical events. The first read of the September PMIs across the major economies on Wednesday should provide the most timely update on global growth momentum, while investors will also be watching policy decisions from the Norges Bank, Riksbank and SNB on Thursday with their hike probabilities according to futures at 62%, 21% and 5% respectively. Elsewhere, attention will turn to the meeting between Presidents Trump and Xi on Thursday which will likely garner a lot of headlines. Indeed they already have overnight as discussed above. See our Geopolitics team's preview of the summit here. We also have opening week of the UN General Assembly debate in New York.
In the US, the focus will increasingly shift towards next Friday’s payrolls report, which will be the most important data release before the

October FOMC meeting. Ahead of that, markets will be very keen to hear from a heavy schedule of Fed speakers throughout the week. These comments will frame last week’s FOMC meeting, where policymakers delivered a widely expected rate increase but signalled a more hawkish policy outlook. The updated projections showed a strong majority of officials anticipating further tightening, while Chair Warsh emphasised that the Committee still sees limited evidence that policy is meaningfully restrictive.

Fed communication begins today with Chicago Fed President Goolsbee alongside the Chicago Fed National Activity Index. Tomorrow, investors receive the Philadelphia Fed non-manufacturing survey and the Richmond Fed manufacturing index. On the policy front, Fed Vice Chairs Williams and Jefferson are due to speak. Our economists view Williams as one of the four officials who are still expected to see the Fed easing by the end of next year, so any hints on that outlook will be closely scrutinised.

Wednesday’s main event will be the September flash PMIs. Our economists expect the US manufacturing PMI to edge up to 54.0 from 53.9, while the services gauge is forecast to ease slightly to 56.1 from 56.5. Given the recent focus on AI-related investment and broader capex trends, these surveys will be watched closely for signs that business activity remains resilient. Fed Governor Barr is also due to speak. Investors will also be watching Wednesday's Treasury buyback announcement ahead of Thursday's 20-30yr operation, particularly after last month's decision to at least double the size of long-end buybacks.

Thursday sees August new home sales and initial jobless claims. Last week continuing claims hit their lowest since January 2024. Fed speakers include Williams, Barkin, Hammack and Paulson, offering further opportunities for markets to assess where officials stand after last week’s hawkish meeting. Friday’s US durable goods report will be particularly important from a growth perspective. Our economists expect headline orders to rise by 0.6% month-on-month, with orders excluding transportation and core capital goods both expected to increase by 1.1%. The data should provide one of the clearest indications yet of whether the recent strength in business investment is being sustained. Williams and Hammack are also due to speak on Friday.

Recapping last week now and it was a story of two halves that left most assets little changed from where they started the week. The first half saw a fresh rise in energy prices that led to renewed fears of stagflation, and we even saw the 10yr Treasury yield close above 5% for the first time since 2007. But on Wednesday, the Fed delivered their first rate hike since 2023, which seems to help ease inflation fears with a delay but the reality was that energy price falls were the more important theme reversing the yield spikes.

Brent crude oil prices were down -0.71% on the week (-0.91% Friday), closing at $103.87/bbl after approaching $110/bbl in the first half of the week. That marked a reversal after a +17.1% jump over the previous two weeks. While oil prices stabilised, sovereign bond yields still extended their rise overall. For instance, the 10yr Treasury yield reached an intraday peak of 5.04% last Tuesday, before ending the week at 5.00%, up +2.9bps on the week (+6.5bps Friday). Meanwhile in Germany, the 10yr bund yield also hit an intraday peak of 3.57% on the Wednesday, before ending the week -1.4bps overall at 3.52%. French bonds underperformed, with the 10yr spread over bunds closing above 100bps on Friday for the first time since 2012. In absolute terms, the 10yr French yield also hit a post-2008 high on Friday of 4.56%.

This backdrop meant equities saw modest losses last week, with the S&P 500 down just -0.08% (+0.17% Friday). The index was boosted by some of the big tech stocks, with the Magnificent 7 up +1.05% last week, marking its 4th consecutive weekly gain. However, small cap stocks struggled by comparison, with the Russell 2000 down -1.50% last week. After the AI doomerism of the previous weekend, the Philly Semiconductor index (SOX) closed up +0.73% after being down nearly -6% on Monday. Meanwhile in Europe, there were slightly larger declines, with the STOXX 600 down -0.57% (-1.11% Friday).

Elsewhere, there were some sizeable moves in FX last week, with the dollar index up +1.11% after the Fed’s hike, marking its biggest weekly gain since June. Conversely, the Japanese Yen weakened -2.08% against the US Dollar last week, which marked its biggest weekly decline since October 2025. That followed the BoJ’s 25bp rate hike, but the move was already priced in and two members voted against the hike, so markets interpreted the decision in a dovish light.

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