Market drivers and catalysts
Equities: US flat with Nasdaq at a record on rate-cut bets; Europe fractionally lower on pharma drag and France risk; Asia firmer with Hong Kong at a 4-year high and Japan at a record
Volatility: VIX flat, Fed week, skew calm, SPX ±73pts
Digital Assets: BTC stable, ETH outflows, ETF gains, alt season index 67%
Currencies: USD mixed, JPY firms overnight ahead of FOMC, BoJ later this week
Commodities: Broad gains seen ahead of FOMC decision
Fixed Income: European yields rose Friday even before Fitch downgrade of French debt
Macro events: ECB speeches
Macro headlines
The FT reports a “desperate supply squeeze” is developing for the rare earth metal germanium, which is critical for a number of military applications like thermal imaging for infrared imaging. China dominates the global supply chain for the metal and
The US preliminary University of Michigan Sentiment survey released Friday showed sentiment falling to 55.4 in September 2025 from 58.2 in August, below the expected 58. This second monthly drop is the lowest since May, impacting mainly lower- and middle-income households. Although durable goods buying improved, concerns over business conditions, jobs, and inflation grew. Personal finance views dropped 8%, with 60% citing tariffs as a major issue.
US and Chinese officials began trade talks in Madrid, discussing strained relations, TikTok's divestiture deadline, and potential tariffs on Chinese goods over Beijing's Russian oil purchases. US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer met with Chinese Vice Premier He Lifeng and negotiator Li Chenggang.
Fitch Ratings downgraded France's credit rating to A+ from AA-, citing political turmoil and rising debt. This follows Prime Minister François Bayrou's resignation after losing a confidence vote on an austerity budget. Sébastien Lecornu was appointed to form a new government.
The UK economy stalled in July 2025 after June's 0.4% growth, as predicted. Services edged up 0.1%, while construction rose 0.2%, but production fell 0.9% with manufacturing down 1.3%. Over three months to July, GDP rose 0.2%, weighed by a production decline. Annual GDP growth was stable at 1.4%, slightly below the 1.5% forecast.
China's economic activity slowed more than expected in August, with industrial output and consumption having their worst month yet this year. Retail sales grew 3.4% on year in August, down from 3.7% in the previous month, and expansion in fixed-asset investment decelerated sharply to 0.5%. A notable slowdown in third-quarter GDP growth may jeopardise the government's 5% growth target, raising hopes for more policy stimulus.
Macro calendar highlights (times in GMT)
ECB speakers: Schnabel (1130) & Lagarde (1810)
Earnings this week
Tuesday: Ferguson
Wednesday: Exor NV, General Mills
Thursday: FedEx, Lennar, Darden Restaurants, Next PLC
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
USA: S&P 500 was flat, the Dow fell 0.6% (−274 pts), and the Nasdaq 100 rose 0.4% to a record as soft jobs and cooler inflation kept a Sept 17 Fed cut in play. Health care and materials lagged, while Tesla jumped 7.4% and Microsoft rose 1.8% after the EU accepted Teams remedies, avoiding a fine. Warner Bros Discovery rallied 16.7% on fresh Paramount bid chatter, and Gemini Space Station closed its Nasdaq debut at $32, up 14.3% from its $28 IPO price. Focus now turns to the Fed decision and dot-plot.
Europe: The STOXX 50 finished flat and the STOXX 600 slipped 0.1% Friday, with the FTSE 100 down 0.2%, as pharma weighed after Goldman downgraded Novartis. Novartis fell 2.9%, while AstraZeneca and GSK declined 1.4% and 0.7%, respectively. Caution ahead of Fitch’s France review lingered; after the close Fitch cut France to A+, keeping sovereign risk in focus into this week. ECB held rates and signaled the economy is “in a good place,” reinforcing the view the easing cycle is largely done.
Asia: Regional tone improved into policy and China data. Nikkei 225 rose 0.9% to a record on Friday, while Hang Seng gained 1.2% to 26,388, its sixth straight advance; CSI 300 added 2.4%. Alibaba climbed 5.4% and Baidu 8.1% in Hong Kong as AI optimism supported tech. Japan is shut today for Respect for the Aged Day, while investors parse China’s August activity figures released this morning.
Volatility
The VIX sits near 14.8, showing little movement, while short-tenor hedges tick higher into Fed week. Traders expect quiet tape until Wednesday’s rate decision, with spikes quickly sold. Skew is flat, realized vol remains calm, and dispersion is limited to EVs, IPOs, and China-linked autos. Cross-asset measures like MOVE also softened, underscoring muted risk. Base case: a quick pop around headlines, fading unless Powell surprises on cut size or guidance. SPX options price a ±73-point move (±1.1%) to Friday, giving a range of ~6511–6658.
Digital Assets
Bitcoin trades steady near $116.7k, with ETH at $4.67k and ETH/BTC stuck below 0.05. ETF flows remain the main driver: IBIT +2.1%, ETHA +5.6%. On-chain, ETH shows exchange outflows while Solana sees transfers tied to Galaxy Digital. The Ethereum Foundation’s privacy team rebrands as PSE, mapping an on-chain roadmap. Altcoin season chatter rises as the Altcoin Season Index hits 67%, edging closer to the 75% trigger. Market tone stays range-bound until the Fed decision sets macro direction.
Fixed Income
Long US treasury yields rebounded Friday after falling for much of the week, with the benchmark 10-treasury yield backing up a few basis points to 4.06%. At the shorter end of the curve, US yields were largely steady, with the benchmark 2-year treasury yield ending the week around 3.55% as the market eyes 25 basis point cuts at all three of the remaining Fed meeting this year.
- Japanese government bond yields rose a bit further, with short yields pinned back just below the cycle highs near 88 basis points for the 2-year benchmark JGB, while the benchmark 10-year JGB rose slightly and still trades some five to six basis points south of its multi-year highs posted earlier this month at 1.65%
European yields rose Friday even before the Fitch downgrade of French debt, with the benchmark 10-year German Bund yield rising some five basis points to 2.72%, while the action at the front end of the curve was notable, with the benchmark 2-year German Schatz rising three basis points to new highs for the year to close at 2.02% on the day after the ECB meeting Thursday made clear that the central bank has shifted into a neutral stance on its policy rate.
Commodities
The Bloomberg Commodity Index (BCOM) rose 1.4% last week, supported by gains across all sectors. Soft commodities led the advance as coffee surged 6.3%, followed by industrial metals where aluminum and copper posted solid gains. Precious metal gains were driven by silver, while the energy sector lagged on weakness in natural gas.
Silver holds near a cycle high above USD 42, while gold has paused near record highs following four straight weekly gains. Traders are weighing whether this week’s Fed rate cut could spark a short-term “sell the fact” reaction, or if lower funding costs, together with steady ETF and central bank demand, will provide continued support.
Brent crude remains range-bound between USD 65 and 70, underpinned by Russian disruption risks from Ukrainian attacks and renewed calls from Trump for tougher secondary sanctions on Russian crude buyers. Hedge funds, meanwhile, have reduced bullish WTI bets to a record low amid a focus on OPEC+ production growth.
Arabica coffee futures surged to nearly USD 4 per pound on Friday, the highest level since May and up 40% in the past six weeks. The rally has been fueled by drought in Brazil’s main growing regions, a stronger real, and U.S. trade tariffs that have forced roasters and buyers to scramble for alternative supplies, tightening the US and international market balance.
Currencies
The US dollar traded mixed on Friday, launching a mild rally that was reversed later in the session and with little action overnight. USDJPY was slightly lower, at 147.50 amidst a broad firming in the JPY overnight, while EURUSD traded in a tight range near 1.1730. AUDUSD remained firm near 0.6660 after posting new highs for the year last week above the prior high of 0.6625.
The Norwegian krone topped the leader board among G10 currencies last week, as EURNOK ended the week near 11.56 ahead of this Thursday’s Norges Bank meeting, with divided market expectations on whether the central bank will cut rates 25 basis points to 4.00%.
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