EU Mid-Market Update: U.S Nonfarm Payrolls to give session its direction ahead of long U.S weekend; ECB decision next week; VW’s historic restructuring and start of AGI era with OpenAI’s GPT-6-Astra.
Notes/observations
– Payrolls arrives today with less authority than usual. Waller has effectively said August CPI gets the deciding vote on September, after telling Reuters he could hold if disinflation continues; hike odds fell from above 60% to roughly 50%. That makes today’s expected +55K payrolls (+20-85K analysts’ range) / 4.1% unemployment report asymmetric: a very weak number can probably kill September, but an ordinary beat does not secure a hike because ISM services already gave the Fed plenty of nominal heat – new orders 60.9, prices paid 72.6, employment still below 50. Even the payroll headline has some administrative noise: the expiry of Haitian temporary work status may subtract roughly 15K jobs. September is becoming an inflation meeting with a labour-market veto, rather than a payroll meeting with an inflation footnote.
– As of now, September’s FOMC arithmetic is stranger than the roughly 50/50 hike probability in futures suggests. The best public reconstruction is currently 5 leaning hike, 6 leaning hold, Powell unknown: Hammack, Kashkari and Logan actually dissented for +25bp in July, with Warsh and Cook now joining the hawkish side; Williams, Barr, Jefferson, Bowman, Paulson and Waller sit provisionally on hold. That means Powell cannot produce a hike by himself—his vote for +25 only creates 6–6; Warsh still needs to take somebody such as Barr from the hold camp. Powell voting hold, by contrast, immediately makes it 7–5, so the committee’s human arithmetic is already skewed toward inaction even when the market’s economic probabilities are even. The truly peculiar branch is a 6–6 tie: the chairman has no casting vote, and the closest procedural precedent is April 1979, when Chairman G. William Miller was told a 5–5 vote would mean “no new directive” and the existing one would simply remain in force. September could therefore produce the first modern Fed decision in which the effective seventh vote belongs to nobody at all, 3.50–3.75% survives not because hold wins, but because hike fails to acquire authority to replace it. That also makes the published vote politically important in its own right: 7–5 tells Trump that changing the chairman does not change the committee; 10–2 or 11–1 after five members arrived publicly inclined the other way would teach almost the opposite lesson about where political pressure is cheapest to apply.
– For European data, German factory orders beat sharply on large orders and construction contracted far less severely than in July, but the sector tape was defensive under the surface and the ECB is widely expected to close a short hike cycle this month rather than extend it, the hawkish tail lives in gas and crude, not in domestic demand.
– Oil premium is now set by how few ships move, not by how much crude exists. Kpler counted four commodity vessels through Hormuz on Thursday, down from nine the day before and far under the ten-day average, even as Vance put the previous day’s flow at 15M barrels and ruled out talks until Iran stops firing on commercial shipping. Oman has quietly refused Tehran’s pitch for transit fees, undercutting the IRGC’s claim of a revenue-sharing deal, right in principle for toll-free passage, immaterial while the waterway is barely functioning. Seoul is preparing its first naval logistics deployment in twenty-two years to escort the traffic that remains. Trade file hardened in parallel: Greer called UK-EU regulatory alignment a problem for any US-UK deal, said there have been no Canadian negotiations since the breakdown, and trailed agriculture announcements around the Xi meeting, while the US auto lobby pushed Congress for a statutory ban on Chinese vehicles before year-end.
– GPT-6 Astra did something awkward to the AGI scoreboard: it reaches the finish line and makes the finish line look obsolete. ARC-AGI-3 goes from 7.8% on GPT-5.6 Sol to 99.9%, FrontierMath Tier 4 to 98%, ExploitBench to 100%, AutomationBench from 18.1% to 41.4%, while OpenAI’s fresh June–August exploit set jumps to 39% arbitrary-code execution from 11.5% and Astra independently found two previously unknown V8 flaws during testing. Brockman can therefore say “we’re there” on AGI with some empirical ammunition, but the timing is almost comic: the moment an AGI-labelled benchmark saturates, AGI itself retreats from a contractual threshold into a looser mission concept. More consequentially, Astra is not simply “bigger reasoning.” It appears able to spend computation between visible tokens, which means capability can rise without a proportional rise in language output; OpenAI has effectively produced a model that is simultaneously easier to call AGI by old benchmarks and harder to audit by the old habit of reading its thoughts.
– That also changes who OpenAI is really racing. Anthropic is not suddenly irrelevant—Claude Fable 5.1 scores 31.4% on AutomationBench against Astra’s 41.4% and actually leads Astra on Artificial Analysis’s aggregate index, 65.7 versus 61.2—but if 5.1 is Anthropic’s near-term answer rather than the prelude to something larger, the frontier may temporarily look less like OpenAI-versus-Anthropic and more like OpenAI versus the Chinese swarm. Zhipu is already serving tens of trillions of tokens on roughly 100,000 domestic accelerators while cutting inference cost/token ~80%, and Chinese labs have unusually strong reason to pursue recurrent or latent reasoning because it can substitute more local arithmetic for less KV-state growth. That is why Astra is unusually ambiguous for Micron, Samsung and SK Hynix: its 1M-token context is ferociously memory-hungry, but recurrent depth can reduce HBM consumed by each unit of hidden thought; NVDA/AMD get paid for the extra compute either way, while memory demand now depends on whether exploding agent volume outruns falling memory intensity per reasoning step.
– Tail risks: Canadian retaliatory tariffs on roughly C$28B of US goods land Monday; Norway’s oil fund is weighing an $80B cut to Treasury holdings just as Chinese commercial banks are reported buying them; Milei will sanction firms exploring off the Falklands; Reform UK’s conference opens under a donor sting.
– Asia closed mixed with KOSPI outperforming +1.6%. EU indices -0.3% to 0.0%. US futures -0.1% to +0.4%. Gold +0.1%, DXY +0.1%; Commodity: Brent -0.4%, WTI -0.6%; Crypto: BTC +4.6%, ETH +5.7%.
Asia.
– New Zealand Q2 Volume of All Buildings Q/Q: 4.8% v 1.0%e.
– South Korea July Current Account Balance: $42.1B v $49.7B prior.
– Japan July Household Spending Y/Y: -3.6% v -1.6%e [8th straight decline and largest drop in 2.5 years]. government noted spending cutbacks on inflation-sensitive items [food and transportation].
– Japan Fin Min Katayama noted that US Tsy Sec Bessent had long held his view that yen had been undervalued, due largely to interest rate differentials. Reiterated stance of closely watching bond markets with high sense of urgency
Global Conflict/tensions
– Treasury Sec Bessent stated that EU had joined ‘operation Economic Outcast’; Appreciated EU’s ‘strong and early stance’ on Iran
Europe
– BOE’s Pill (chief economist, hawkish dissenter) believed that the bank rate needed to be raised to 4.00%; raising it did not be the beginning of a prolonged and aggressive series of increases.
Americas
– Fed’s Waller (voter) noted that recent data suggested finally seeing some disinflation; Open to keeping policy rate in the 3.50-3.75% range this month if data supported it; If inflation came in hot, would consider a rate hike; Expected ‘reasonable’ CPI and PPI in next month. Would support holding rates at current levels if recent disinflation continued over the next two weeks.
– US VP Vance noted that the administration believed if it “proper and responsible” for the Fed to lower interest rates.
Trade
– USTR Greer stated that the UK-EU alignment was ‘problem’ for US trade deal.
Energy
– AAA says motorists set to pay the highest ever prices for the upcoming US Labor Day long weekend.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [FTSE +0.03% at 10,834.49, DAX +0.06% at 26,023.21, CAC-40 +0.01% at 8,287.04, IBEX-35 -0.25% at 19,949.86, FTSE MIB -0.28% at 52,101.50, SMI +0.03% at 14,399.30, S&P 500 Futures +0.09%].
Market Focal Points/Key Themes: European equities remained largely steady on Friday, clinging to multi-week troughs after a punishing weekly sell-off driven by a historic fixed-income rout that pushed Germany’s 10-year Bund yield to a 2011 high of 3.37%, soaring energy costs after U.S.-Iran clashes effectively closed the Strait of Hormuz and sent Brent toward a 7% weekly gain, and persistent central-bank rate anxiety that compressed equity risk premia. The STOXX 600 hovered near its lowest levels in over a month and stayed on course for its steepest weekly percentage decline since early July, even as dovish remarks from Fed Governor Christopher Waller and New York Fed President John Williams—signaling willingness to hold rates steady if disinflation continues—slashed September hike odds from nearly 65% to a coin-toss 50% and triggered a modest overnight relief bounce across Asia and Europe ahead of the high-stakes U.S. jobs report. Volkswagen surged as much as 7% before settling near +5% after its supervisory board approved the most sweeping restructuring in the group’s 89-year history, targeting another roughly 50,000 jobs to bring planned reductions to around 100,000 while four German plants remain under review. AI-infrastructure and semiconductor names outperformed on Astra-related optimism, with Computacenter rising 3.5% as one of London’s strongest large/mid-cap movers on enterprise and computer-use infrastructure read-through, Legrand advancing 3% as it extended yesterday’s Deutsche Bank upgrade that specifically flagged data centres, energy transition and digital lifestyles, and ASML gaining about 1% in broader semiconductor sympathy that lifted the AEX chip complex. On the downside, Dassault Systèmes dropped 3% from a flat open to a session low of €21.79 (versus a prior close of €22.48) on negative software-disruption fears as GPT-6 Astra sharply raises the bar for autonomous engineering and computer-use tasks, while Experian also fell 3% after U.S. housing regulator Bill Pulte attacked pricing by the major credit bureaus and floated potentially tougher mortgage-score reforms, including a possible bi-merge system.
Equities
– Industrials: Volkswagen [VOW3.DE] +5.0% (supervisory board approved the biggest restructuring in VW’s 89-year history; another ~50,000 jobs targeted, taking planned reductions to ~100,000; four German plants remain under review; stock had traded as high as ~+7% early), Experian [EXPN.UK] –3.0% (U.S. housing regulator Bill Pulte attacked pricing by Experian/Equifax/TransUnion and signalled potentially stronger mortgage-credit-score reform, including a possible bi-merge system; this offsets the nominal positive of wider VantageScore approval by creating fresh pricing/regulatory risk).
– Technology: Dassault Systèmes [DSY.FR] –3.0% (open ~0.0% → now –3.0%; [L●━━━━━H]; likely negative Astra/software-disruption read-through as GPT-6 Astra sharply raises the bar in autonomous software engineering and computer-use tasks; €21.82 versus €22.48 prior close, €21.79 session low), ASML [ASML.NL] +1.0% (AI/semiconductor sympathy following Astra and the overnight technology rally; AEX semiconductors are outperforming, although this is not a clean Astra-only attribution), Computacenter [CCC.UK] +3.5% (likely AI-infrastructure/Astra read-through rather than a fresh company-specific catalyst; one of London’s strongest large/mid-cap moves as Astra’s enterprise/computer-use launch renews attention on the infrastructure required for agentic workloads), Legrand [LR.FR] +3.0% (likely AI/data-centre infrastructure read-through after Astra, extending yesterday’s Deutsche Bank Hold → Buy, PT €150 → €160; DB specifically highlighted data centres, energy transition and digital lifestyles as Legrand’s fastest-growing exposures).
Speakers
– Norway’s Sovereign Wealth fund said to consider cutting US Treasury holdings by ~ $80B in an overhaul of bond positions.
– Chinese commercial banks have been reportedly buying US Treasuries over the past few months after lifting dollar deposit rates.
Currencies
– Focus on US payrolls while oil prices remain form on growing geopolitical risks in the Middle East. Jobs data to help gauge the outlook for Fed rate path. However, dealers noted that payrolls might be overshadowed by next week’s CPI release following Fed Waller’s comments.
– USD consolidating near 4-month lows.
– Yen holding onto gains. Dealers noted that the tightening of BOJ rate-hike expectations drove JPY to a one-month high near ¥155 against USD.
– EUR/USD at 1.1625. Dealers noting of weekend’s state election in Saxony-Anhalt region where a far-right party could take power for the first time since World War II. G0-year bund yield rose to the highest since 2011 earlier this week.
– The 10-year German Bund yield last at 3.35%, France 10-year Oat at 4.20% and 10-year Gilt yield at 5.14%; 10-year Treasury yield: 4.75%; 10-year JGB: 2.90%.
Economic data
– (DE) Germany July Factory Orders M/M: 2.5% v 0.3%e; Y/Y: 13.1% v 10.5%e.
– (SE) Sweden Q2 Current Account Balance (SEK): 126.2B v 97.5B prior.
– (HU) Hungary July Retail Sales Y/Y: 4.9% v 4.0%e.
– (CZ) Czech Aug Preliminary CPI M/M: 0.3% v 0.3%e; Y/Y: 1.9% v 1.9%e.
– (CZ) Czech July Retail Sales (ex-auto) Y/Y: 4.8% v 4.3%e.
– (DE) Germany Aug Construction PMI: 48.7 v 42.1 prior (8th month of contraction).
– (CN) Weekly Shanghai Deliverable Copper Inventories (SHFE): 63.0K v 72.4K tons prior.
– (TH) Thailand May Foreign Reserves w/e Aug 28th: $283.2B v $284.7B prior.
– (UK) Aug New Car Registrations Y/Y: 13.7% v 11.7% prior.
– (IT) Italy July Retail Sales M/M: -0.4% v -0.2% prior; Y/Y: 0.8% v 3.1% prior.
– (RU) Russia Narrow Money Supply w/e Aug 28th (RUB): 22.39T v 22.41T prior.
– (WO) Aug FAO World Food Price Index: 133.3 v 130.8 prior.
– (TW) Taiwan Aug Foreign Reserves: $601.9B v $594.3B prior.
– (UK) Aug Construction PMI: 44.3 v 46.0e (20th month of contraction).
– (UK) Bank of England (BOE) Aug Decision Maker Panel (DMP) Survey: 3M Output Price Expectations: 3.1% v 3.9% prior; 1 Year CPI Expectations: 3.1% v 3.1%e.
– (EU) Euro Zone July Retail Sales M/M: -0.6% v +0.2%e; Y/Y: 0.6% v 1.1%e.
– (GR) Greece Q2 Unemployment Rate: 7.9% v 10.6% prior.
Fixed income issuance
– (IN) India sold total INR320B vs. INR320B indicated in 2031 and 2066 bonds.
Looking ahead
– (MX) Mexico CitiBanamex Survey of Economists.
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2038, 2046 and 2058 Bonds.
– 06:00 (IE) Ireland Q2 Final GDP Q/Q: No est v 3.9% prelim; Y/Y: No est v -1.6% prelim.
– 06:00 (IE) Ireland Q2 Current Account Balance: No est v €17.9B prior.
– 06:00 (IE) Ireland Aug Live Register Monthly Change: No est v 1.2K prior; Level: No est v 174.5K prior.
– 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.0B respectively).
– 06:00 (BE) Belgium Debt Agency (BDA) to sell Bonds via Ori Auction.
– 06:30 (IS) Iceland to sell 2029 and 2042 RIKB Bonds.
– 07:30 (IN) India Forex Reserve w/e Aug 28th: No est v $729.3B prior.
– 07:30 (TR) Turkey Aug Real Effective Exchange Rate (REER): No est v 105.96 prior.
– 08:00 (MX) Mexico Jun Gross Fixed Investment M/M: +0.3%e v -0.4% prior; Y/Y: 5.7%e v 1.1% prior; Private Consumption Y/Y: 3.1%e v 1.5% prior.
– 08:00 (MX) Mexico July Leading Indicators M/M: No est v 0.04 prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:30 (US) Aug Change in Nonfarm Payrolls: +55Ke v -23K prior; Change in Private Payrolls: +50Ke v 30K prior; Change in Manufacturing Payrolls: +5Ke v +5K prior.
– 08:30 (US) Aug Unemployment Rate: 4.1%e v 4.1% prior; Underemployment Rate: No est v 7.9% prior; Labor Force Participation Rate: 61.4%e v 61.4% prior.
– 08:30 (US) Aug Average Hourly Earnings M/M: 0.3%e v 0.1% prior; Y/Y: 3.1%e v 3.2% prior; Weekly Hours All Employees: 34.3e v 34.3 prior.
– 08:30 (CA) Canada Aug Net Change in Employment: +15.0Ke v +75.1K prior; Unemployment Rate: 6.4%e v 6.4% prior; Full Time Employment Change: No est v +38.6K prior; Part Time Employment Change: No est v +36.6K prior; Participation Rate: 65.1%e v 65.1% prior; Hourly Wage Rate Y/Y: 2.9%e v 3.0% prior.
– 09:00 (IN) India announces upcoming bill issuance (held on Wed).
– 10:00 (CA) Canada Aug Ivey Purchasing Managers Index: No est v 55.1 prior; PMI (unadj): No est v 54.1 prior.
– 13:00 (US) Weekly Baker Hughes Rig Count data.
– 13:00 (EU) Potential sovereign ratings after European close (S&P on Iceland; Fitch on Portugal; DBRS on Greece).
– 14:00 (BR) Brazil Aug Trade Balance: $7.1Be v $7.1B prior; Total Exports: $33.8Be v $34.1B prior; Total Imports: $26.6Be v $27.1B prior.
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