Key Highlights

• Outgoing French Prime Minister Lecornu will attempt to reach a political settlement with parties by Wednesday evening.
• Canadian Prime Minister Mark Carney will meet President Trump today and seek further tariff relief.
• Coalition talks are continuing in Japan as the leader of the LDP’s traditional partner Komeito states the two parties have “yet to make an agreement.”

Chart of the Day

ZAR and miners boosted by relentless gold surge

^{Source: BNY}

Gold has continued its ascent this week, and the market appears to view $4,000/oz as only a matter of time. Leaving the individual drivers aside, we note that the move continues to drive some other assets that are seen as having strong “real asset” backing, and holdings acceleration has been quite notable since the summer. For example, ZAR remains one of the strongest “mining” proxies in emerging markets. Although gold production has declined over time, it remains an important export and the “precious” facet could be helping the area where South African prowess is strongest, i.e., in the platinum group metals (PGMs), where the country retains the world’s largest reserves. Healthier fiscal conditions and good progress on inflation, which have supported real rates, have engineered a total shift in the holdings posture of ZAR to comfortable carry status, and we have highlighted how other assets such as equities and SAGBs have also benefited. Meanwhile, global metals and mining stocks (which unsurprisingly make up the biggest sector on the JSE) have also surged by nearly 40% this year, and now represent one of the best-held industries globally. Evidently, valuations are contributing to the improvement in holdings as global demand conditions are far more tenuous, especially outside of the precious space. Nonetheless, we acknowledge that momentum factors are in play and any adjustment will largely depend on exogenous factors.

What's Changed?

The level of noise to signal for markets in 2025 has been extraordinary, and the trend continued overnight: markets were uneven, waiting for the end of the U.S. government shutdown, a budget deal in France and details of China’s Golden Week spending. Waiting for better outcomes means lower volumes and less clarity from the market price; this makes the focus on bond sales important and the success of the Japan 30y sale a relief, potentially helping some of the U.S. supply concerns with the $58bn 3y sale. Today also brings some data to the U.S. markets, albeit from the Fed, with consumer inflation expectations and consumer credit use important facts for building the case for a resilient U.S. economy. Markets remain balanced on hopes of a soft landing rather than inflation or recession. The market noise is revolving around the hope that talking about solutions will produce one. For traders, hope is never a strategy, and that leaves positioning the key risk for the week. There are correlations in play between a stronger USD, higher rates and weaker global demand, ranging from lower German factory orders to narrowing imports in France and the drop in oil prices. The lack of information has pushed down event risk, and with it implied volatility across many markets, particularly FX. Carry trading follows on from this, with emerging market FX winning out, particularly in LatAm. Yesterday’s talks between President Trump and Brazil’s President Lula helped as well. Also in play, USD stability has help move stocks higher abroad, with the Japanese Nikkei linked to USDJPY again. Weaker FX is helping growth hopes, even if trade advantages remain part of the political economic debate. For investors, the talk of the day remains how borrowed money becomes future profits. The key focus will remain on how $1tn of OpenAI computing deals will drive AI development and future returns. 

What You Need to Know

President Trump signaled on Monday that he is open to negotiating with Democrats on extending Affordable Care Act premium tax credits, raising hopes for progress toward ending the U.S. government shutdown. Democrats said no formal talks are yet underway but indicated they would be ready to engage if the White House is serious about a deal. The shutdown entered its seventh day after the Senate once again rejected both Republican and Democratic stopgap funding bills, each falling short of the 60 votes required to advance. With the House remaining in recess until a Senate compromise is reached, the stalemate persists, though another vote on the competing measures is expected later this week. S&P Mini -0.14% to 6779.25, DXY +0.227% to 98.33, 10y UST +1bp to 4.162%.

French President Emmanuel Macron has given Prime Minister Sébastien Lecornu until Wednesday night to hold final negotiations with political parties aimed at securing a stability plan and ending France’s political deadlock. The talks follow Lecornu’s resignation on Monday, in which he blamed deep divisions among rival factions for the failure to form a coalition government. The crisis stems from Macron’s unsuccessful 2024 snap election, which left parliament fractured and successive administrations unable to pass budgets. France now risks missing its October 13 budget deadline, potentially triggering emergency funding measures. With borrowing costs at their highest since January and the deficit widening, Macron must decide whether to appoint a new premier, call fresh elections or step down. Far-right leader Marine Le Pen has reiterated demands for new elections, as political paralysis and credit downgrades weigh on the economy. CAC40 -0.196% to 7956.12, EURUSD -0.274% to 1.1679, 10y OAT +2.7bp to 3.594%.

Canadian Prime Minister Mark Carney will meet President Trump at the White House today, with Canada seeking limited relief from U.S. steel tariffs. Canadian officials, who described expectations as modest, hope progress on steel could establish a framework for easing other U.S. trade barriers. The 50% tariffs on Canadian steel and aluminum remain in place, despite lower rates for other U.S. partners such as the U.K. Sources said Trump extended the meeting invitation after informal talks at the UN in September, viewing it as a chance to rebuild relations after a strained summer marked by disputes over Canada’s digital services tax and missed trade deadlines. While trade talks have resumed, tensions linger amid a variety of issues. TSX 60 Future -0.211% to 1796.8, USDCAD +0.101% to 1.3957, 10y CGB +2.6bp to 3.213%.

Japan’s 30y government bond auction overnight saw strong demand, easing market jitters after pro-stimulus conservative Sanae Takaichi’s surprise win in the ruling party leadership race. The bid-to-cover ratio rose to 3.41 from 3.31 at the previous auction, above the 12-month average of 3.37, while the 30y yield fell 5bp to 3.235%. The result reassured investors concerned that Takaichi’s policies could spur higher fiscal spending and inflation, dampening expectations of an imminent BoJ rate hike. The market notes that while the solid auction suggests recent volatility in long-term Japanese bonds may stabilize, uncertainty remains over fiscal expansion and new debt issuance. Nikkei +0.013% to 47950.88, USDJPY +0.153% to 150.58, 10y JGB -0.8bp to 1.684%.

What We're Watching

U.S. August trade balance delayed due to shutdown, expected to improve to $-61bn from -$78.3bn in July.

U.S. September consumer credit forecast to ease to $14bn vs. $16.01bn in August.

U.S. September New York Fed 1y ahead consumer inflation expectations expected higher at 3.3% from 3.2%.

Central bank speakers: Fed’s Raphael Bostic Speaks at Fisk University in Nashville; Fed Vice Chair for Supervision Michelle Bowman gives welcoming remarks at St. Louis Fed’s 2025 Community Banking Research Conference; Fed Governor Stephen Miran participates in fireside chat at Managed Funds Association (MFA) Policy Outlook 2025; Fed’s Neel Kashkari speaks at Star Tribune Summit.

U.S. Treasury sells $90bn in 6-week bills and $58bn in 3y notes.

What iFlow is Showing Us

Mood: iFlow Mood was in negative territory, with accelerating outflows in both equities and core sovereign bonds. iFlow Mood is at -0.01.

FX: Within the G10, USD, EUR and CAD posted outflows, against notable inflows in DKK, AUD, GBP and NZD. LatAm currencies were sold, led by COP, against better demand for APAC currencies, in particular IDR and KRW. Flows in EMEA were mixed, with CZK inflows vs. HUF and ILS outflows.

FI: U.K. gilts and Eurozone government bonds posted good buying, followed by Singapore government bonds. Elsewhere, Turkish government bonds were most sold.

Equities: Notable buying in South African equities, followed by South Korea and Chile, against broad selling pressure in the rest of the iFlow universe. Canadian and U.K. equities were significantly sold, followed by Australian, European and Mexican equities. 

Quotes of the Day

“Courage is what it takes to stand up and speak; courage is also what it takes to sit down and listen.” – Anonymous

“The trouble with talking too fast is you may say something you haven’t thought of yet.” – Ann Landers

Economic Details

Germany’s July service sector turnover (excluding finance and insurance) declined 0.3% m/m in real terms and 0.4% m/m in nominal terms, according to provisional Destatis data. Compared with July 2024, turnover was down 0.2% in real terms but up 1.3% in nominal terms. The sharpest monthly real decrease was recorded in professional, scientific and technical services (-1.9%), followed by real estate (-1.0%) and transport and storage (-0.5%). In contrast, information and communication services rose 1.3%, and other business services – including equipment rental and employment services – increased 0.3%. The data indicate a modest contraction in overall service activity, driven by professional and property-related sectors, while ICT and support services provided partial offset in July 2025. DAX -0.027% to 24371.65, EURUSD -0.274% to 1.1679, 10y Bund +0.9bp to 2.728%.

Germany’s August manufacturing orders fell 0.8% m/m in real terms after seasonal and calendar adjustment; excluding large-scale orders, they dropped 3.3%. Over the three months to August, orders were down 2.3% versus the prior three-month period. The decline was led by steep falls in the automotive (-6.4%), computer and electronics (-11.5%) and pharmaceutical (-13.5%) industries, partially offset by gains in fabricated metal products (+15.4%), other transport equipment (+17.1%) and electrical equipment (+7.2%). Capital goods orders fell by 1.5% and consumer goods by 10.3%, while intermediate goods rose 3.0%. Foreign demand weakened (-4.1%), while domestic orders rose 4.7%. Manufacturing turnover also shrank by 0.8% m/m and 1.1% y/y in August 2025.

Germany’s public budget recorded revenues of €992.7bn and expenditure of €1.05tn in the first half of 2025, resulting in a financing deficit of €58.5bn, according to Destatis. Public spending exceeded €1tn for the first time. Compared with the first half of 2024, revenues rose 7% and expenditure 6%. The federal government posted a €30bn deficit (H1 2024: €35.5bn), while the states reduced theirs to €2.4bn (from €7.1bn). In contrast, municipalities’ deficit widened to €19.7bn (from €17.5bn). The social security funds showed a €6.4bn shortfall as contribution income rose 7.9% to €453.1bn, offset by 7.3% higher spending. Tax revenues increased 8.2%, mainly benefiting the federal and state levels.

France’s current account returned to a surplus of €1.5bn in August 2025 (seasonally and calendar-adjusted), after a €1.9bn deficit in July. The goods deficit narrowed to €4.2bn from €5.7bn, while the services surplus rose to €6.0bn from €4.1bn. Over 12 months, the current account showed a cumulative deficit of €8.1bn, compared with €2.9bn a year earlier. The financial account recorded net capital inflows of €79.9bn, versus outflows of €13.0bn in August 2024. Direct investments posted net inflows of €35.1bn, portfolio investments saw net outflows of €51.2bn and other investments recorded net inflows of €88.3bn. CAC40 -0.196% to 7956.12, EURUSD -0.274% to 1.1679, 10y OAT +2.7bp to 3.594%.

The U.K.’s average house price fell 0.3% m/m in September to £298,184, following a modest rise in August, reported Halifax. Prices rose 0.4% q/q and 1.3% y/y, the slowest annual increase since April 2024. Since the start of 2025, prices have edged up 0.3%, with market conditions remaining broadly stable. The average first-time buyer home cost £236,811, up 1.7% y/y. Halifax noted that affordability remains tight but is improving thanks to lower mortgage rates and steady wage growth. Despite ongoing economic uncertainty, the lender expects modest house price growth through the remainder of 2025. FTSE 100 +0.059% to 9484.75, GBPUSD -0.319% to 1.3442, 10y gilt +0.8bp to 4.744%.

Norway’s August industrial production rose 1.3% m/m and 1.7% y/y, with extraction and related services up 1.9% while manufacturing grew 0.7%. Within manufacturing, refined petroleum, chemicals and pharmaceuticals surged 5.3% and basic metals rose 3.5%, while food, beverages and tobacco fell 2.8% and electricity, gas and steam declined 2.9%. Turnover across extraction, mining, manufacturing and electricity increased 0.9% m/m but was nearly flat y/y at +0.2%, totaling NOK 229bn. Electricity turnover jumped 27.0% m/m and 52.1% y/y, while basic metals rose 10.2% m/m. In contrast, extraction-related services fell 3.9% and machinery and equipment dropped 4.0%, highlighting ongoing volatility across industrial subsectors in August 2025. OSE -0.369% to 1661.88, EURNOK -0.048% to 11.6171, 10y NGB +1.3bp to 4.105%.

Norway’s August market-oriented service activity rose 2.0% m/m and 6.7% y/y, with turnover up more strongly at 3.7% m/m and 8.0% y/y. Transport and storage saw rises of 1.7% for production and 2.2% for turnover, while accommodation and food services gained 1.6% and 1.7%, respectively. Information and communication output edged up 0.3% and turnover up 2.4%. Professional, scientific and technical activities saw production rise 0.8% but turnover jump 6.5%, whereas administrative and support services recorded a 1.8% fall in production despite turnover advancing 2.0%. The data point to broad-based monthly growth in services, led by strong gains in professional and digital sectors, while overall turnover expanded faster than output in August 2025.

Sweden’s central government debt stood at SEK 1.103tn at the end of September 2025, a contraction of SEK 1.7bn vs. August. Including on-lending and assets under management, total debt stood at SEK 1.091tn. Government bonds accounted for SEK 603bn (55% of total debt), inflation-linked bonds for SEK 212bn (19%) and treasury bills for SEK 150bn (14%). Foreign currency debt totaled SEK 36bn, or 3% of the total, and continues to be phased out ahead of the 2027 target of zero exposure. The average time to refixing was 4.8 years, within the government’s 3.5-6-year guideline range. The decrease in September reflected exchange rate effects and lower short-term borrowing. OMX -0.516% to 2727.142, EURSEK -0.148% to 10.965, 10y Swedish GB +1bp to 2.766%.

Hungary’s industrial production fell 7.3% y/y and 2.3% m/m in August 2025, based on seasonally and working-day-adjusted data. On a working-day-adjusted basis, output declined 4.6% y/y, with production down in nearly all manufacturing subsectors except one. The steepest drop was seen in transport equipment manufacturing, while computer, electronic and optical products also contracted. Over the first eight months of 2025, industrial production was 3.9% lower than in the same period of 2024. Overall industrial output remained below July levels, indicating continued weakness across Hungary’s manufacturing sector. Budapest SI +0.366% to 100286.9, EURHUF +0.26% to 389.7, 10y HGB 0bp to 6.81%.

Czech industrial production fell 1.1% m/m and 1.3% y/y in August 2025, following July’s growth, leaving overall summer output flat compared with a year earlier. The decline was mainly driven by lower production of computers, machinery and motor vehicles, while output of fabricated metal products, electricity and pharmaceuticals rose. New industrial orders dropped 5.5% y/y, with foreign orders down 6.3% and domestic orders 4.1% lower. The automotive sector contributed most to the fall in new orders, reflecting a strong comparison base from 2024. Industrial employment fell 1.9% y/y. For reference, Eurostat reported a 1.8% y/y rise in EU27 industrial output in July 2025, with strong gains in pharmaceuticals. The trade balance was also stronger than expected at CZK 5.6bn. Prague SE -0.685% to 2362.06, EURCZK +0.054% to 24.322, 10y CZGB +0.2bp to 4.481%.

Japan’s August household survey showed average consumption expenditure by households of two or more people up 5.5% y/y in nominal terms and 2.3% in real terms to ¥313,977, marking a fourth consecutive real increase. On a seasonally adjusted basis, spending gained 0.6% m/m. The largest positive contributors were transport and communication (+13.5%, +1.65 percentage points), culture and recreation (+12.2%, +1.34 percentage points), and education (+16.9%, +0.38 percentage points), while declines were recorded in social expenses (-6.6%, -1.07 percentage points) and household durable goods (-6.8%, -0.34 percentage points). For working households, real income increased by 2.8% y/y to ¥608,578, driven by a 6.9% rise in spousal income, while average propensity to consume stood at 68.6%, down 2.5 percentage points from a year earlier. Nikkei +0.013% to 47950.88, USDJPY +0.153% to 150.58, 10y JGB -0.8bp to 1.684%.

Japan’s August coincident index fell 0.7 points to 113.4 (2020=100), in a second straight monthly decline, while the leading index rose 1.3 points to 107.4, its fourth consecutive increase. The Cabinet Office maintained its assessment that the index “shows signs of bottoming out.” The drop in the coincident index was mainly due to negative contributions from the export volume index (-0.37 points), industrial production (-0.25 points) and retail and wholesale sales (-0.22 and -0.11 points, respectively), partly offset by gains in shipments of durable consumer goods (+0.35 points). The lagging index fell 1.6 points to 112.0, the first drop in two months, indicating continued weakness in industrial and trade-related sectors.

Australia’s October Westpac-Melbourne Institute Consumer Sentiment Index fell 3.5% m/m to 92.1 points, marking a six-month low and reversing gains made between May and August. The decline was led by a 9.9% drop in the “family finances next 12 months” sub-index to 97.1 and a 4.8% fall in “family finances vs. a year ago” to 82.1. The “economic outlook next 12 months” component weakened by 2.5% to 89.9, while the “economic outlook next five years” rose 1.4% to 94. The “time to buy a major item” sub-index edged 1.1% lower to 97.2, and the unemployment expectations index declined 2.9% to 127.6. Conversely, house price expectations surged 2.1% to a 15-year high of 171.9, reflecting sustained housing optimism despite softening consumer confidence. ASX +0.02% to 5126.21, AUDUSD -0.408% to 0.659, 10y ACGB +5.5bp to 4.388%.

Australia’s September labor market indicators pointed to further softening as the ANZ-Indeed Job Ads Index fell 3.3% m/m, its lowest since February 2024 and extending a three-month decline. Job advertisements were also 4.3% lower y/y, reflecting a gradual easing in hiring demand after a period of stability. The fall followed August data from the Australian Bureau of Statistics that showed the jobless rate steady at 4.2% amid a 5,000-person drop in employment. Seasonal recruitment in retail and food services has started ahead of the holiday period but remains weaker than last year, with notable declines in education, management and administrative assistance postings.

Philippines’ September headline inflation rose to 1.7% y/y from 1.5% in August, bringing the YTD average to 1.7%. Core inflation eased slightly to 2.6% from 2.7%. The main upward drivers were higher costs for transport (+1.0%) and food and non-alcoholic beverages (+1.0%), while price increases slowed for alcoholic beverages and tobacco (+4.1%), health (+2.8%) and personal care (+2.4%). Housing, water, electricity, gas and other fuels contributed 0.4 percentage points to overall inflation, followed by food and non-alcoholic beverages (0.4 percentage points) and restaurants (0.2 percentage points). Food inflation accelerated to 0.8%, led by vegetables (+19.4%) and oils (+9.3%). Regional inflation reached 2.7% in the NCR and 1.5% in areas outside the NCR, with Central Visayas posting the highest rate at 4.1%. PSEi +1.392% to 6083.83, USDPHP -0.335% to 58.15, 10y PHGB +1bp to 5.99%.