Key Highlights

• Indian rupee hits an all-time low against the dollar amid softer data and tensions with the U.S.
• Presidents Milei and Trump to hold talks on U.S. financial support for Argentina.
• Riksbank cuts rates 25bp to three-year low of 1.75%, pushing for stronger growth even as it rules out further easing next year.

Chart of the Day

Clear pick-up in Argentine fixed income interest ahead of Milei-Trump summit

^{Source: BNY}

Argentina has been one of the best-performing sovereign debt markets in the frontier space since the beginning of Javier Milei’s presidency. From adjusting government finances to bringing down inflation, the market has been a draw for investors due to the perception of a decrease in FX risk and improvement in repayment ability. Crucially, as the current environment is one of higher real rates, bringing down inflation has become imperative to any emerging/frontier market, though we believe that adequate hedging of currency risk is still relatively light. Regardless, the recent local election results in Argentina have clearly had an impact on sovereign and corporate flows. This is to be expected after a sustained run of positioning, but for less liquid markets it is always a balancing act to ensure that a simple correction does not morph into something more pernicious which could jeopardize financial stability and detract from reforms. Irrespective of the non-financial drivers in place, financial support for Argentina from the U.S. is conducive to ensuring that the reform program remains on track, and this appears to be what investors have now been re-pricing in recent sessions. The turnaround in sovereign bond momentum for Argentina is clear, while other forms of debt, mostly hard-currency corporate issues, have performed even better. To be clear, we haven’t witnessed large-scale liquidation yet in Argentina so headlines may not match up with reality, but the near-term boost in sentiment is clearly welcome.

What's Changed?

UN week and its side-meetings between leaders have produced a cacophony of headlines. Markets are not expecting much from the meeting between President Trump and Ukraine’s Volodymyr Zelenskyy, but they are hoping for more from the U.S./Argentina conversations. The markets are sanguine in this “everything rally,” awaiting more evidence that further Fed easing will steer the economy away from any hard landings. Today, Fed Chair Jerome Powell gives his view, while the U.S. flash PMI reports will show the survey mood among business. Overnight, the PMI reports were mixed, as the EU accelerated but the U.K. slowed, along with Australia. The focus remains on rates, with the Riksbank’s surprise easing making it clear that there are limits to further cuts; that boundary makes the comparison with potential Fed easing more important, with investors fretting about growth and inflation as they look into a murky 2026 forecast. The OECD today warned that the full effect of tariffs has yet to be felt and that the U.S. and U.K. are leading growth in 2025 but likely won’t in 2026. Global growth is seen slowing by 0.1 percentage points to 3.2% this year and shrinking further to 2.9% in 2026, while inflation is expected to soften from 3.4% to 2.9%. This puts the focus on demand and margins; however, shares were higher overnight, while energy prices fell and gold continued to rally. For bonds, the noise around economic and political headlines leaves some room for confusion over these forecasts and whether their accuracy matters as much as the policy pivots ahead. For the U.S. markets, the dollar remains the simplest way to absorb surprises, and the way it has held within tight ranges over the last 24 hours makes it clear investors are waiting for less noise and more signal to increase the volumes behind the risk-on trends in stocks. As for bonds, the test of the 2y auction and Fedspeakers’ remarks will collide, as the terminal rate for easing sets the limits for buying. Demand will meet supply, but at what price?

What You Need to Know

Sweden’s Riksbank cut its policy rate by 0.25 percentage points to 1.75%, citing the need to support recovery and stabilize inflation at target in the medium term. The market was on balance looking for an on-hold decision but the policy board opted to ease, likely on a precautionary basis as CPIF forecasts for 2026-2027 have been revised sharply lower. However, inflation remained high in August, though measures excluding energy moved closer to forecasts, with company pricing plans easing and the krona strengthening, reinforcing the view that elevated inflation is transitory. The Riksbank also noted that government tax cuts will dampen inflation temporarily in 2026 but are not expected to materially reduce pressures. However, growth has been weak and the labor market recovery slower than anticipated, though conditions for improvement remain in place. Deputy Governor Anna Seim dissented, favoring no immediate cut and warning that fiscal expansion could fuel renewed inflation. The Riksbank statement also highlighted that the krona is still “somewhat undervalued.” OMX +0.978% to 2673.528, EURSEK -0.273% to 11.0046, 10y Swedish GB +2bp to 2.748%.

Indian External Affairs Minister Subrahmanyam Jaishankar met U.S. Secretary of State Marco Rubio in New York on the sidelines of the UN General Assembly, where both men reaffirmed the critical importance of bilateral ties despite escalating tensions. Rubio highlighted cooperation in trade, defense, energy, pharmaceuticals and critical minerals, while both sides pledged to advance a free and open Indo-Pacific region through the Quad framework. The meeting followed recent strains after President Trump imposed 50% tariffs on Indian exports and announced a $100,000 fee on new H-1B applications, heavily impacting Indian workers. With India continuing to import Russian despite U.S. objections, Washington has pressed for further tariff penalties, clouding trade negotiations and straining the $280bn Indian tech sector. Despite the meeting, the rupee has weakened to a record low against the dollar. SENSEX +0.072% to 82219.07, USDINR +0.493% to 88.7513, 10y INGB -0.5bp to 6.484%.

U.S. Treasury Secretary Scott Bessent voiced strong support for Argentina’s President Javier Milei on Monday, pledging to do “whatever it takes” to assist the country. Bessent described Argentina as a systemic ally in Latin America and said stabilization options could include currency swaps, direct foreign exchange purchases and interventions by the Treasury’s Exchange Stabilization Fund. He reaffirmed U.S. backing for Milei’s fiscal discipline and pro-growth reforms, noting confidence in Argentina’s IMF negotiations. Milei postponed his arrival in New York for the UN General Assembly until Tuesday, when he will meet President Trump and Scott Bessent, alongside Economy Minister Luis Caputo and Foreign Minister Gerardo Werthein. Talks are expected to explore financing tools potentially worth $3-10bn. IBG +7.538% to 76151860, USDARS -4.404% to 1409.8022, 10Y AGB -251.2bp to 12.531%.

Eurozone’s September HCOB Flash Composite PMI Output Index rose slightly to 51.2 from 51.0 in August, the highest in 16 months, signaling continued expansion. Services activity strengthened to 51.4, its best in nine months, while manufacturing output slowed to 50.7 from 52.5, with the manufacturing PMI falling below 50 at 49.5. New orders were flat after August’s rise, as export demand fell at the sharpest rate in six months. Employment growth stalled, with services hiring offset by further factory job cuts. Input cost inflation eased, while selling price growth slowed to the weakest level since May. Business confidence dipped to a four-month low, led by deteriorating sentiment in manufacturing. Euro Stoxx 50 +0.712% to 5480.8, EURUSD +0.017% to 1.1805, BBG AGG Euro Government High Grade EUR 0bp to 2.891%.

What We're Watching

National Bank of Hungary decision: The MNB is expected to keep rates unchanged at 6.50% with cuts unlikely until inflation shows a clear and sustained return to the tolerance band, supported by credible forecasts.

U.S. September Philadelphia Fed non-manufacturing index expected to improve to -10 from -17.5.

U.S. Q2 current account balance forecast to narrow to $-268bn from $-450bn in Q1.

U.S. September preliminary PMI expected to soften to 51.9 from 53.0.

U.S. September Richmond Fed manufacturing index expected to fall to -9 from -7.

Central bank speakers: Governor Michelle Bowman speaks in Kentucky on the outlook; Chicago Fed’s Austan Goolsbee speaks on CNBC; Atlanta Fed’s Raphael Bostic speaks on the economic outlook. Fed Chair Jerome Powell speaks on the economic outlook in Rhode Island. Bank of Canada Governor Macklem speaks on the economy in Saskatoon with Q&A.

U.S. Treasury sells $85bn in 6-week bills and $69bn in 2y notes.

What iFlow is Showing Us

Mood: iFlow Mood is in risk-positive zone with light equity inflows against a flattening in core sovereign bond buying.

FX: SEK, ILS, PHP and AUD posted the most outflows. BLP, HUF, IDR, KRW and MYR were significantly bought, followed by good inflows into JPY, COP and INR. JPY’s scored holdings rose further to new recent highs of +2.6.

FI: Strong demand for sovereign bonds globally except in the APAC region. Eurozone, Colombian, Mexican and Hungarian government bonds and U.K. gilts were significantly bought. Cross-border U.S. Treasurys eased.

Equities: There was a shift in asset allocation away from developed markets, especially DM AMER, into emerging markets, especially EM EMEA. Japanese equities saw the only inflows within the G10, while Brazil and South African equities posted strong buying. 

Quotes of the Day

“Life is a symphony to the wise. And a cacophony to the foolish.” – Mokokoma Mokhonoana

“If the mind is a cacophony, the subconscious is silent theater.” – Samantha Harvey

Economic Details

Germany’s September HCOB Flash Composite PMI Output Index rose to 52.4 from 50.5 in August, the highest in 16 months, driven by stronger services activity, which climbed to 52.5. Manufacturing output remained in expansion at 52.2 but slowed from August’s peak, while the manufacturing PMI slipped to 48.5. Despite rising output, inflows of new work fell across both sectors, with manufacturing seeing the sharpest drop in orders since January, including weaker exports. Employment declined for a sixteenth straight month, led by manufacturing, while business expectations softened further below average. Input and output prices accelerated, with services driving inflation to its fastest pace in several months. DAX +0.781% to 23710.88, EURUSD +0.017% to 1.1805, 10y Bund 0bp to 2.748%.

France’s September HCOB Flash Composite PMI Output Index fell to 48.4 from 49.8 in August, marking the steepest contraction since April and the thirteenth consecutive month below 50. Services activity weakened to 48.9 from 49.8, while manufacturing output dropped to 45.9 from 49.8, its lowest in seven months. The headline manufacturing PMI slipped to 48.1 from 50.4. New orders fell for the sixteenth month in a row, with sharper declines in factory sales, partly linked to political uncertainty. Export demand contracted at a slower pace, while employment rose marginally. Input cost inflation eased to a five-month low, but firms cut selling prices for the first time since May amid competition, underscoring subdued demand conditions. CAC40 +0.993% to 7907.89, EURUSD +0.017% to 1.1805, 10y OAT +0.2bp to 3.562%.

The U.K.’s September S&P Global Flash Composite PMI Output Index fell to 51.0 from August’s 53.5, marking a four-month low and signaling the slowest expansion since May. Services activity softened to 51.9 from 54.2, while manufacturing output declined to 45.4 from 49.3, its weakest in six months, with the manufacturing PMI slipping to 46.2. New work rose only marginally, as export orders recorded their steepest drop since April. Employment fell again, extending the decline that began in October 2024, with firms citing hiring freezes and reduced workloads. Input cost inflation remained high, though factory gate price growth eased substantially. Business confidence weakened to a three-month low, reflecting subdued client demand and political uncertainty. FTSE 100 +0.349% to 9258.9, GBPUSD -0.067% to 1.3505, 10y gilt -1.8bp to 4.694%.

Netherlands’ Q2 GDP grew 0.2% q/q, up from the initial estimate of 0.1%, with the revision mainly reflecting stronger household consumption, an improved trade balance and higher investments, while public consumption was revised down. On a y/y basis, GDP rose 1.7%, compared with 1.5% in the first estimate, again driven by stronger household consumption plus positive contributions from investments and public spending. Employment increased by 28,000 q/q and 87,000 y/y, compared with earlier estimates of 24,000 and 80,000, respectively. The CBS noted that revisions followed additional data on sectors including construction, business services, accommodation, food services, health and finance. AEX 0.374% to 934.1, EURUSD +0.017% to 1.1805, 10y NGB -0.3bp to 2.913%.

South Africa’s composite leading business cycle indicator rose 0.9% in July 2025. Seven out of ten components made positive contributions, led by higher U.S. dollar-denominated export commodity prices and stronger passenger vehicle sales, while real M1 money supply and a narrower interest rate spread detracted. The coincident indicator increased 0.3% in June 2025, supported by gains in wholesale, retail and motor trade sales and industrial production. In contrast, the lagging indicator fell 0.5% in June 2025. On a 12-month basis, the leading indicator was up 1.2%, while the coincident and lagging indicators showed a smaller gain of 0.5% and a decline of 0.9%, respectively. JSE TOP40 +0.225% to 98926.45, USDZAR -0.198% to 17.2918, 10y SAGB -2.6bp to 9.105%.

Australia September flash PMIs weaken, with manufacturing coming in at 51.6 (August: 53) and services at 52.0 (August: 55.8). The weaker expansion in output was driven by a slower rise in incoming new orders, attributed partly to a renewed fall in export orders. Business optimism also fell to the lowest level in a year. That said, firms continued to hire at a solid pace to cope with ongoing workloads and to clear existing orders. On prices, average input costs continued to increase at an above-average pace, while selling price inflation eased slightly in September. ASX +0.404% to 5011.76, AUDUSD +0.076% to 0.6604, 10y ACGB -0.5bp to 4.264%.

India’s September HSBC Flash Composite PMI Output Index registered 61.9, down from August’s 63.2, indicating slower but still sharp expansion in private sector activity. The manufacturing PMI eased to 58.5 from 59.3, while the manufacturing output index fell to 62.7 from 63.7. Services also moderated, with the business activity index slipping to 61.6 from 62.9. New business continued to rise strongly but at a gentler pace, with international sales posting the softest growth in six months. Employment growth slowed, input costs rose less sharply overall and factory gate charges increased at the fastest pace in over 12 years. Business confidence improved, reaching a seven-month high. SENSEX +0.072% to 82219.07, USDINR +0.493% to 88.7513, 10y INGB -0.5bp to 6.484%.

South Korean August PPI fell by -0.1% m/m but rose 0.6% y/y. The changes in the major sub-indices were as follows: agricultural, forestry and marine products +3.4% m/m, +3.9% y/y; manufacturing products +0.0% m/m, -0.2% y/y; electric power, gas, water and waste 0.0% m/m, +2.6% y/y; and services -0.4% m/m, +1.1% y/y. KOSPI +0.506% to 3486.19, USDKRW +0.212% to 1394.2, 10y KTB +1.8bp to 2.83%.

Malaysia August headline CPI ticked up to 1.3% y/y from 1.2% y/y and core inflation rose to 2% y/y, matching the YTD high. This was driven by a faster increase in the insurance and financial services category (+5.6% y/y) with rises elsewhere for personal care, social protection and miscellaneous goods and services (+4.0% y/y); restaurant and accommodation services (+3.5% y/y); education (+2.4% y/y); food and beverages (+2.0% y/y); recreation, sport and culture (+0.9% y/y) and furnishings, household equipment and routine household maintenance groups (+0.2% y/y). KLCI +0.013% to 1603.55, USDMYR -0.155% to 4.1975, 10y MGB +1.8bp to 3.421%.

Singapore’s August CPI rose 0.5% m/m and 0.5% y/y, with cumulative inflation for January-August at 0.8%. MAS core inflation stood at 0.3% y/y and 0.1% m/m, bringing the YTD average to 0.6%. By division, food prices increased 1.1% y/y, supported by higher costs for oils and fats (+5.6%), fruits and nuts (+2.7%) and sugar and desserts (+4.8%). Housing and utilities gained 0.3% y/y, while transport rose 2.3% y/y, led by land transport services (+5.5%). Health climbed 2.3% y/y, largely driven by a 13.7% rise in health insurance. Offsetting these were falls in information and communication (-2.1% y/y) and recreation, sport and culture (-3.0% y/y). STI +0.259% to 4308.5, USDSGD +0.047% to 1.2827, 10y SGB +0.3bp to 1.799%.

Taiwan’s export orders increased by 34% y/y in August to $58.5bn. This marks the highest figure YTD, although the growth rate was below the 56.7% y/y recorded in June. Major export destinations included the U.S. (33.6%) and ASEAN members (18.2%), while exports to mainland China represented a share of 15.8%. As the market has come to expect from the Taiwanese economy, semi-conductors and related industries continue to dominate: the “electronic integrated circuits” customs code accounted for 32.9% (or $19.24bn) of major exports, while “automatic data processing machines and units thereof” accounted for 29.1%. TAIEX 1.417% to 26247.37, USDTWD +0.149% to 30.284, 10y TGB +0.1bp to 1.363%.