Is inflation anxiety unsettling Europe?

S&P 500 unchanged at 7,718.60

Germany’s 10-year Bund yield +4.6 basis points to 3.400%

Spot gold -0.52% to $4,404.67 an ounce

Key data to move markets today

EU: German Imports, Exports and Trade Balance and a speech by ECB Executive Board member Frank Elderson

UK: BoE Monetary Policy Report Hearings 

CHINA: CPI

Global Macro Updates

Germany’s AfD secures major state-election victory. Germany’s far-right Alternative for Germany (AfD) party secured a major election victory in Saxony-Anhalt, winning approximately 44% of the vote following a sharp decline in support for the Christian Democratic Union (CDU). The result marked the party’s strongest performance in a state election and left it only three seats short of an outright majority in the state legislature. Attention will now turn to whether the AfD can reach an agreement with the populist-left Bündnis Sahra Wagenknecht (BSW) to govern, or alternatively persuade lawmakers to defect, according to Politico.

Analysts said the key issue will be how the CDU/CSU (Christian Social Union) and Social Democratic Party (SPD) respond to the setback. One important driver of the weak electoral performance was fading support for the governing coalition, although regional factors also played a role. Politico noted that Saxony-Anhalt has Germany’s lowest average net income, alongside rising concerns over industrial decline and higher energy costs. However, it remains uncertain whether the AfD can translate regional support into broader national momentum.

The AfD has benefitted from the government’s difficulty in implementing reforms, ending prolonged economic stagnation and addressing the rising cost of living. The principal risk is that the result intensifies internal disputes within the CDU and further destabilises the coalition.

US Stock Indices

US markets were closed in observance of Labor Day

European Stock Indices

CAC 40 +0.33%
DAX -0.15%
FTSE 100 -0.08%

In European trading on Monday, energy, technology and utilities led gains, while real estate, insurance, financial services and healthcare were the main underperformers.

Energy outperformed, supported by another rise in crude prices amid renewed US - Iran strikes and growing concerns over potential disruptions to oil flows through the Strait of Hormuz. TotalEnergies traded higher after completing the EPC tendering process for the Papua LNG project and selling a 9.1% interest to project partners. Utilities benefitted from broader strength in energy markets, while also drawing support from their defensive characteristics.

Technology was supported by renewed strength across the global AI value chain, coupled with weekend press reports that highlighted Anthropic’s potential IPO. In company news, IQE rose after H1 revenue exceeded guidance and adjusted EBITDA turned positive, with the company pointing to strong H2 momentum from data-centre and AI infrastructure demand.

Real estate was among the weakest sectors amid renewed upward pressure on European interest-rate expectations. Company news provided a relative bright spot, with Grainger trading higher after an 11-month update showed occupancy above 96%, like-for-like build-to-rent rental growth of 3% and continued strong leasing performance.

Healthcare also underperformed, driven primarily by a sharp decline in Novartis after its Phase III HORIZON trial for pelacarsen failed to meet its primary endpoint of reducing major cardiovascular events. A more constructive space was centred on M&A, with Spire Healthcare advancing after agreeing to a £1.03 bn equity-value cash takeover by a Toscafund-led consortium. CEO Justin Ash is expected to retire upon completion.

Insurance was weaker despite a solid update from Standard Life, which reported H1 operating cash generation of £745 mn versus £705 mn a year earlier, while assets under administration increased to £333 bn from £317 bn. The company maintained its FY targets. Financial services also underperformed, with Ashmore Group falling after FY EPS of 5.0 pence came in below the 9.1 pence FactSet consensus, while adjusted EBITDA and EBIT also missed expectations. Performance fees were softer and FX revenue declined y/o/y.

Commodities

Gold spot -0.52% to $4,404.67 an ounce
Silver spot -0.08% to $66.14 an ounce
West Texas Intermediate +1.62% to $92.70 a barrel
Brent crude +1.52% to $97.31 a barrel
Gold softened on Monday, extending Friday’s -1.01% decline, after the US nonfarm payrolls report reinforced expectations that the Fed will raise rates later this month.
Spot gold was down -0.52% at $4,404.67 an ounce.

Spot silver declined -0.08% to $66.14 an ounce.

Oil prices climbed to a six-week high on Monday as Iran vowed to target energy infrastructure across the Middle East in response to any further US attacks on its assets, marking the latest escalation in a conflict that has significantly curtailed regional oil supply.

Brent crude futures rose $1.46, or +1.52%, to settle at $97.31 per barrel, after touching $98.06, the highest level since 24 July. The contract settled one hour earlier than usual because of the Labor Day holiday in the US.

US WTI, which did not settle on Monday because of the holiday, was up +1.62%, or $1.48, at $92.70 per barrel by 4:00 pm EDT. Earlier in the session, WTI reached $93.29, also its highest level since 24 July.

The US and Iran exchanged strikes on oil tankers and warships over the weekend, representing a major escalation in the conflict.

Commercial tankers are increasingly being used as instruments of reciprocal economic pressure, materially blurring the distinction between military confrontation and commercial shipping.

Regional tensions were further heightened by Israeli strikes on a town in southern Lebanon that killed at least 12 people on Monday, according to the Lebanese health ministry.

Elsewhere in the Middle East, Saudi Aramco’s Jazan oil refinery was attacked on Monday, with the extent of damage still being assessed, the Financial Times reported, citing two people familiar with the matter.

One week earlier, a Saudi-owned tanker was attacked by Iran, with Saudi Arabia reporting that two seafarers had died. Oman said on Monday that it had evacuated 16 crew members from the vessel.

An average of 10 commodity vessels transited the Strait of Hormuz per day over the past 10 days, the lowest level since May, according to data from analytics firm Kpler released on Monday.

Iran will announce a restricted zone outside the Strait of Hormuz in the coming days, according to Mohsen Rezaei, secretary of Iran’s Supreme National Security Council.

The UAE is developing alternative routes for its energy exports and trade to ensure they are not ‘held hostage’ by the US - Iran war, UAE presidential adviser Anwar Gargash said on Monday.

OPEC+ kept its oil output policy unchanged for October at a meeting on Sunday, the producer group said in a statement, as members need to agree on new quotas before determining the next steps for supply.

Note: As of 4 pm EDT 7 September 2026

Currencies

EUR +0.16% to $1.1621
GBP +0.18% to $1.3537
Bitcoin -0.55% to $79,231.87
Ethereum -1.54% to $2,491.39

The yen advanced to a seven-month high on Monday, supported by expectations of faster BoJ policy tightening and growing speculation that Japanese investors could repatriate capital.

The ECB meets on Thursday and is widely expected to raise eurozone interest rates.

The dollar fell as low as ¥154.05, its weakest level since February, and was down -1.22% on the day to ¥154.34. It has now moved below the lows reached in August, when Washington and Tokyo jointly intervened to support the Japanese currency as it traded near 40-year lows.

Although much of the yen’s post-intervention strength quickly faded, renewed support from capital repatriation, carry-trade unwinds and US political uncertainty is prompting investors to reconsider long-held bearish positions.

The dollar’s decline against the yen also weighed more broadly on the US currency. The euro rose +0.16% to $1.1621, while sterling gained +0.18% to $1.3537.

Fixed Income

US 10-year Treasury unchanged at 4.789%
German 10-year Bund +4.6 basis points to 3.400%
UK 10-year Gilt +4.6 basis points to 5.106%

Bund yields rose on Monday, reversing part of the previous two-session decline from their highest levels in more than 15 years. Investors remained cautious after Alternative for Germany’s victory in Saxony-Anhalt and ahead of this week’s ECB policy meeting.

Although the AfD fell short of an outright majority, it secured 44% of the vote, delivering a significant setback to Chancellor Friedrich Merz’s conservatives.

The ECB is widely expected to raise interest rates on Thursday, likely erring on the side of caution as the US - Iran war persists, keeping oil prices elevated relative to pre-conflict levels and lifting inflation expectations.

Germany’s 10-year bond yield rose +4.6 bps to 3.400%. Last week, it reached 3.395%, its highest level since April 2011.

German 2-year bond yield increased +6.0 bps to 3.011%, broadly in line with moves across other eurozone bonds of similar maturity. At the long end of the curve, the German 30-year Bund yield rose +4.1 bps to 3.853%.

Investors remained focussed on natural gas prices, a key source of inflationary pressure in the euro area. These rose after attacks on oil tankers further reduced expectations for a recovery in Qatari liquefied natural gas flows from the region.

The benchmark Dutch front-month TTF contract rose +1.2% to €72.85 per megawatt hour. Last week, it reached €75.325, its highest level since January 2023.

Traders priced the ECB deposit rate at 2.78% by December, implying more than an 80% probability of a second hike after this week’s expected increase, from the current 2.25%. Market pricing also continued to move toward a 3.00% terminal rate, with the policy rate last seen reaching that level by September 2027.

Italy’s 10-year BTP yield rose +5.2 bps to 4.203%, while the spread versus Bunds stood at 80.3 bps.

Note: As of 4 pm EDT 7 September 2026

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