Markets
Markets take a very calm start of the week. Sentiment is slightly risk off, resulting in some modest losses on equity markets. Core bond yields trade little changed between -2 bps and +2 bps, with some minor outperformance by German bunds vs USTs. Italian BTP’s show no particular outperformance following Fitch’s rating upgrade last Friday, meaning the move was already priced in before. That’s obvious from the strong BTP bull run since April of this year. Italian credit risk premia as a result is now considerably closer to and even below some semi-core peers. Italy’s upgrade, along with Spain’s and Portugal’s a few weeks earlier, in a broader perspective highlights the tidal shift going on between the now-former underperforming periphery and the northern part of the euro area. France serves as a prime example, carrying a higher premium than Italy since last week. But Belgium is showing similar French traits with its credit risk premium having topped Portugal’s in September of last year and closing in on Spain’s (the difference is a mere 1.5 bps). Swapspreads of countries such as the Netherlands and Germany have been flatlining in 2025 but saw a material rise from the depths in 2022. UK gilts strengthen a tad after facing some budget deficit-driven selling pressure by the end of last week, especially at the very long end of the curve. In terms of market themes, the looming potential US government shutdown is gaining some attention. The current US fiscal year ends September 30 and Congress must pass annual spending bills to keep the government running in the next. But Capitol Hill is currently deadlocked with the Republican plan which foresaw to keep the government funded through Nov 21 (and which passed the House) failing in the Senate. A Democratic alternative was later rejected as well. The US dollar loses some ground in FX markets, awaiting some potential market moving comments from Fed policymakers including Williams & Marin on monetary policy. EUR/USD bounces off the short-term upward sloping trendline to turn to but remain below the 1.18 big figure. DXY never came to an actual test of the 98 lever and is currently slightly down on the day at around 97.4. USD/JPY is going nowhere within this summer’s narrow sideways trading range of roughly 146-150. UK’s pound steadies against the euro around EUR/GBP 0.872 but ekes out a gain against an overall weaker dollar. Cable (GBP/USD) tops 1.35 again.
News & Views
Confidence indicators published today by the National Bank of Belgium show that consumer confidence in the country continued to rise in September. At -1 (from -2 in August) the overall indicator improved to the best level this year. Still, consumers’ fears about a rise in unemployment increased slightly (2 from 1). On the positive side, household expectations for the for the general economic situation rose solidly from -26 to -23. On a personal level, households have slightly upgraded their expectations regarding their own financial situation (0 from -1). At the same time, they intend to save more (22 from 21).
Statistics Poland reported that retail sales (constant prices) were by 3.1% higher in August than the year before (was +4.8% Y/Y in July). Compared with July 2025, sales were reported 0.4% lower, coming after a monthly gain of 4.4%. In the period of January-August 2025 sales increased y/y by 3.6%. Overall, the data were close to expectations. Details showed that sales were higher Y/Y in most groups of enterprise activity. High increases (Y/Y) were reported for “textiles, clothing, footwear” (by 18.9%), “furniture, radio, TV and household appliances” (by 13.9%). Sales also rose in the groups “motor vehicles, motorcycles, parts” (by 9.4%), “fuels” (by 6,1%), and “pharmaceuticals, cosmetics, orthopedic equipment” (by 3.3%). However, sales in “food, beverages and tobacco products” declined 3.4%. The value of retail sales via internet (current prices) rose 4.9% Y/Y. Today’s data probably won’t change the assessment of the National Bank of Poland on monetary policy. The NBP cut the policy rate by 25 bps 4.75% early this month. At 2.9% Y/Y, inflation in August was again in the NBP target range (2.5% +/- 1%pt), but governors recently remained cautious on (the pace of) further easing due to ongoing high wage growth and a supportive fiscal policy, amongst others. Recent NBP comments suggested that there might still be room for one additional 25 bps rate cut by the end of the year. EUR/PLN (4.255 area) holds a tight sideways consolidation pattern. In this respect, the zloty recently underperformed the forint and the Czech koruna.
