European Midday Briefing : Stocks Rebound But Bond Selloff Deepens

MARKET WRAPS

September didn't start on a positive note for global markets, but indexes in Europe rose early Wednesday, despite concern that pressure on long-dated government bonds could spill into equities.

The 30-year Treasury yield rose to its highest level since July.

Several factors were contributing to these moves, including inflation and fiscal concerns, worries about the Fed's independence, and debt issuance picking up after the summer break, according to Julius Baer.

"Ultimately, it is likely just more evidence for a broader decrease of investor appetite of very long-dated bonds, in our view."

Fresnillo shares rose, leading the FTSE 100 index risers, on safe-haven demand and higher precious-metal prices after gold futures set another record.

Stocks to Watch

Adidas seems to have an increasing diversity of growth drivers despite a tough backdrop marked by U.S. tariffs, Jefferies said as upgraded the stock to buy from a hold.

The company was successfully expanding the brand momentum initially created by its Terrace shoes into the broader offering, and Jefferies said a guidance upgrade in October was likely.

"Ongoing market share gains appear well anchored for the quarters ahead."

H&M could return to EBIT growth in its fiscal third quarter, with further strengthening in the fourth quarter, Deutsche Bank said as it raised its target price on the stock and retained its hold rating.

U.S. Markets:

Indexes were mixed early Wednesday, with investors on edge about rising borrowing costs as long-dated bonds extended their recent selloff.

Alphabet shares climbed 6% premarket after Google avoided harsh antitrust penalties for its conduct in the U.S. search market.

Apple also benefited from the ruling, rising 2.6%

Forex:

The dollar turned lower after Tuesday's sharp gains as investors await U.S. labor market data.

The U.S. job openings and turnover survey at 1400 GMT will be closely monitored ahead of the highly-anticipated nonfarm payrolls report on Friday.

Worse-than-expected jobs data that point to a substantial weakening in the economy could prompt markets to anticipate more aggressive rate cuts.

Fed governor Christopher Waller has said he could back a larger cut in September if jobs data signal "substantial weakening."

Sterling fell to a four-week low against the dollar as yields in long-dated gilts rose sharply.

ING said the move was influenced by high inflation and the scaling back of BOE rate-cut expectations, adding that the currency shouldn't fall much further on gilt moves alone.

Bonds:

Natixis expected the Treasury curve to steepen furthe r, forecasting the spread between two- and 10-year Treasury yields to widen to 85 bps in 4Q before rising to 105 bps in 1Q 2026.

It continues to harbor serious concerns about long duration government bonds globally.

Long duration JGB yields continued to be pressured to new highs, thirty-year gilt yields were higher than the peak seen in the Liz Truss/pension stress period in 2022.

"Political stresses in France may continue to pressure long duration OATs, as France struggles with containing deficits amidst a divided government."

Even in Germany, increased fiscal spending remains a theme heading into the end of 2025 and into 2026, it added.

"Pressures overseas can easily spill over onto U.S. shores."

Commerzbank said the bearish curve steepening across global bond markets will be put to the test after long-end yields marked new highs in Bunds, other eurozone government bonds, gilts as well as JGBs.

"An increasing number of investors tell us that they consider real yields attractive at these levels, and last but not least, risk-sentiment is rather under pressure with equities down."

AXA IM continued to hold its small position on German two-year bonds , with the yield below 2% and was encouraged by a softening of tone from ECB President Christine Lagarde.

Gilt yields rose , extending Tuesday's sharp gains and taking the 30-year gilt yield to its highest since 1998. Although gilts are tracking moves in long-dated bonds globally they are considered particularly vulnerable amid concerns about the sustainability of U.K. public finances as well as elevated inflation.

Japanese 30-year government-bond yields rose to a record, mirroring a trend of rising long-dated bond yields globally, putting focus on Thursday's auction.

Energy:

Oil prices eased but remained near recent highs after the U.S. sanctioned a network of companies and vessels for smuggling Iranian oil disguised as Iraqi oil.

Prices were supported by risks of disruption to Russian supplies due to Ukrainian attacks on key energy infrastructure and the spectrum of tougher U.S. sanctions if the Kremlin stalls peace negotiations.

Still, "while the geopolitical backdrop is providing support, weaker refinery runs in Russia could still increase crude availability for export, leaving the market finely balanced," MUFG said.

Traders now await Sunday's OPEC+ meeting, with the group widely expected to keep October output unchanged following months of supply increases.

Metals:

Gold futures rose, having set another record earlier.

Gold could hit the $3,600 to $3,900 an ounce range in the coming months if spot prices sustain the breach above the $3,500 zone, Philip Nova said, adding that a target of $3,800/oz is likely to be the first clear psychological milestone beyond current highs.

Copper Demand

ANZ pointed to reports that indicate new policies in China could boost demand for refined copper.

Scrap metal is likely to attract lower subsidies and has already prompted some recyclers to reduce their output.

"This will ultimately lead to an increase in demand for copper cathodes and put upward pressure on domestic prices."

EMEA HEADLINES

Ashtead Posts Lower Profit on Higher Costs

Ashtead Group posted a decline in profit for the fiscal first quarter after one-time costs related to its move to a U.S. listing weighed on earnings but raised its free cash flow target for the year.

The London-listed equipment rental company-which makes the bulk of its business in the U.S.- on Tuesday posted a 6% decrease in pretax profit for the three months ended July 31 at $512 million.

The Woman Trump Calls Europe's Most Powerful Leader

BRUSSELS-With geopolitical tensions flaring in June, European Commission President Ursula von der Leyen wanted to get President Trump alone at a Group of Seven summit in Canada. She surprised his security team, taking Trump by the arm and leading him to a sofa for a chat. There, the two discussed Ukraine, China and trade.

It was one of the moments, her aides say, that has helped her bridge a divide with Trump and thaw frosty trans-Atlantic relations.

Primary Health's $2.40 Billion Assura Takeover Gets U.K. Regulatory Probe

The U.K. competition regulator launched an investigation into Primary Health Properties' 1.79 billion-pound ($2.40 billion) acquisition of Assura.

The Competition and Markets Authority said Wednesday that it will investigate whether the merger will lead to a substantial lessening of competition within any market or markets in the U.K. for goods or services.

GLOBAL NEWS

China Services PMI Expands at Fastest Pace in Over a Year

A private gauge of China's services sector showed activity grew at the fastest pace in more than a year in August, supported by improved demand at home and abroad.

The RatingDog general services purchasing managers index compiled by S&P Global rose to 53.0 last month from July's 52.6. That marked the strongest reading since May 2024 and was firmly above the 50 mark separating expansion from contraction.

U.S. Military Strikes Drug Vessel From Venezuela, Killing 11

The U.S. military carried out a strike against a drug-carrying boat from Venezuela, President Trump said Tuesday, escalating tensions with that country's authoritarian government just days after the Pentagon deployed warships to the Caribbean to stop the flow of cocaine.

"There's more where that came from," Trump said in a news conference at the White House, promising further actions.

China Flaunts Military Might With Lavish Parade-and Sends Warning to Washington

BEIJING-China flexed its growing military power and its deepening ties to Washington's adversaries with an extravagant parade that cast leader Xi Jinping as the standard-bearer of a new global order.

Flanked by leaders from 26 countries, including Russia, North Korea and Iran, Xi oversaw a procession of advanced Chinese weaponry and thousands of troops marching in unison past Tiananmen Square on Wednesday, in a display marking China's victory in World War II.

Republicans Make Public Tranche of Epstein Documents

WASHINGTON-A House committee released more than 30,000 pages of documents related to Jeffrey Epstein on Tuesday as Republican lawmakers returned to Capitol Hill facing pressure to make public more details on the convicted sex offender.

The records made public had been turned over to the GOP-led House Oversight and Government Reform Committee by the Justice Department last month in response to a subpoena and had been previously reviewed by panel members. Republicans emphasized that Tuesday's release was the first in what were expected to be several tranches of documents, including from future Justice Department handovers. Democrats said the documents released Tuesday were mostly materials about the disgraced financier, who died in 2019, that already had been made public.

Write to [e-mail]

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

09-03-25 0522ET