Thursday, October 1. Here's what's on the agenda. Global bonds glad to see the back of September, which left 30-year yields at a 24-year high. The French prime minister gets ready to set out his budget, with spreads at double early-summer levels. Micron gets a bullish forecast, which doesn't do much for its market stock, but Nasdaq futures are higher.
The strength in terms of the numbers and the outlook for Micron underpinning the positive picture in Nasdaq futures right now. As things stand, set for a strong session. European open futures pointing lower. Started strong yesterday and then ended up down half a percent on European stocks. The 10-year stateside, after core inflation came in softer than expected, you are seeing steepening across the curve. Brent is back below $100 a barrel, $97 per barrel. The countdown to the opening trade starts right now.
First of October. Last quarter is in the rearview mirror. Are we getting 6% in this quarter? That is the key question. Yesterday's data pushing yields higher once again. GDP print was really strong. There's import factors in terms of the mix, but the data is strong at the moment coming out of the United States. PCE story came in lower, but that was the revision factor. Are we finally done with that debate? Look at the component parts. They don't paint a disinflationary picture. And you've got core services accelerating. All of this points to an inflation problem the Fed still hasn't dealt with. If you can see that in breakevens, are we going to 6%? Is that going to be the narrative of the new quarter? The bond market is on alert.
Difficult to pivot away from the things we've been dealing with in September. When our colleagues write down 10 reasons why we are entering upon a selloff, you know that even if you fix part of that and end the conflict in the Middle East, there would be other things to worry about. There would be growth to think about. There would be trade wars potentially, changing Treasury ownership these days. Even if we were to see these issues go away for the bond market, it doesn't seem easy to wipe them all away just because we got into October.
Wasn't the picture yesterday decent data? Yet you are not seeing a wage-price spiral. That's not happening. We are not getting second-round effects. Strong economy. Inflation is a major problem.
Another day, oil prices below $100 per barrel.
Also, this is accelerating. 50% of the basket is north of 3%. Fine. Look at consumer confidence.
I agree, it is incredibly low right now. We will get employment data later on this week. The pressure is coming in terms of what will happen. We will get to Micron in a moment. What's a big standout feature in terms of the numbers they deliver? Great outlook. The picture looks positive for now. But wages are the factors that are starting to weigh. You are starting to see wages starting to come through in terms of the narrative.
Whether we pivot here is --
Whether we pivot here is a question. The level of yields to the weakest in the mix is one worth contemplating. The lowest level of junk, and we are more than 1,000 basis points above Treasuries. That has moved really quickly. As we hear from our guests, it's the pace of change that matters and the reason, not the levels. 860 basis points at the start of September. That story is moving pretty quickly. Not helpful for France either. The higher bond yield environment. At a time when the global bonds are all about how your yields, it seems that the spread is widening for France. 120 basis points. We have a new budget set out today. The thing we are watching for, as well as the survival of the prime minister, is what they are able to do on the deficit. 5.4% for 2026. Are they able to bring it down to 5%? Does the government survive as it tries to do that?
The French office indicated that it will assume record numbers of bonds next year. So yeah, you can get the deficit down, but you are still issuing lots of debt. 126 or something in terms of the spread.
At what point do the institutions of Europe start to have a problem with this? 130, 140, 150? When do we start to get institutional pushback? That's what traders will be thinking about in terms of their positioning. How much further out can this go until you start to get Europe rallying around?
Interest costs France 91 billion euros. More than education, more than defense. GDP of 120%. You potentially get a deficit of 6% depending on how the budget unfolds. So that's a major topic. We will see how they react.
Before we get to special measures, there is some other sort of number we need to be aware of. 59.3. The article in the French constitution that might be relied on for the government to get this through, even if they can't pass it by the legislators. If they can say we pass this, otherwise you have to do a no-confidence vote. If they are not prepared to do that, it passes.
If she thinks she can win the election next year, she would want to back this.
That's the change this time around versus other French dramas.
Marine Le Pen doesn't want to find herself in a situation where Europe is having to protect France. That will come with conditionality, and that will tie her hands.
Trying to get more leeway on the deficit in Italy because of energy costs. Let's talk about other cost measures. This is something you zeroed in on, Micron and the earnings that came through. One of the key lines was that gross margins are going to be a little bit slimmer. Still north of 80%, around 83% gross margins. They will be narrower because they are raising compensation for their employees as they see this significant demand. It was a clean beat for Micron. For the current quarter, it was a beat in terms of profits, revenues. Expected revenues north of $61.5 billion. A reminder that the demand cycle around AI in the U.S. remains strong. But they will be putting up wages.
It's interesting. He wrote a piece this morning that talked about the profit bubble. This is what you are seeing in terms of the inflation record. Spectacular. There's a clear concentration in the chips at the moment. That's the point in the cycle we are at. At some point ultimately, do we reverse? You are getting a relatively muted response off the back of the Micron numbers because people are going, how long can this last for? This is amazing and great, but can I track this four quarters out, eight quarters out?
We are mindful of the fact that it is the first of October and people are starting with a clean slate. Making new decisions, new calls. What do I want to be exposed to in October? Especially after the drops in the stocks.
We've also rolled on Brent. Just a mechanical factor as to why oil is lower. You go from November to December. UBS Wealth Management, France CIO on deck. What we need to know. Legora CEO, the legal AI platform, is going to be joining us. Looking forward to that conversation.
Let's look ahead to what else we are watching throughout the day. 9:00 U.K. time, Andrew Bailey speaking at the Future of Money Conference. Listening out for anything interesting he has to say. U.S. jobless claims, building on the data and the color around the labor force. 2:30, Christine Lagarde speaking at the European Systemic Risk Board annual conference in Frankfurt. Later, other central bankers in focus. Fed speak from Chris Waller, Lisa Cook, Tom Barkin, Lorie Logan. Nike earnings as well after market. That will be interesting as we look at the macro data on the consumer pointing to strength.
Passengers and crew of a flight are hailed as heroes after subduing a pilot who tried to crash the plane traveling from Dubai to Tel Aviv. More on that later in the program. Plus, the stocks we are watching this morning at the European open. European tech space. How much will it participate in enthusiasm around Micron? The futures don't look pretty for me, so maybe not. We will be joined by the head of U.S. economics research at Bank of America. We will try to get to the bottom of the strength in the U.S. economy. If you want to get in touch with the people who put together the program, this is Bloomberg.
Welcome back. Happy Thursday. 45 minutes from the opening trade. European futures pointing down. Very different picture across Nasdaq futures. Micron playing a role there. U.K. FTSE 100, cooler by 74 points. In France, pointing down by four-tenths of 1%.
Let's talk about that Micron story. Asian tech stocks getting a boost this morning from Micron, which gave an upbeat forecast for the current quarter. The company forecasting first-quarter revenue well above estimates after a record 2026. The higher worker compensation will squeeze margins. Let's bring in our Bloomberg markets reporter. Talk us through the latest on this chipmaker. I know we are talking about the squeeze on margins as a result of wages, and that is an important narrative. I'm still marveling at that figure versus the rest of the tech sector and other sectors.
It's a fantastic result right there. They beat this quarter's estimate. They beat on the guidance range. The margins are in the high 80s. It's important to mention that on a gross level, this puts Micron's earnings in the NVIDIA category, like nine months ago. We are really in the realm of some really mega-cap kind of earnings now. It was interesting to see Micron get really slow off the block during the aftermarket session. That speaks to this worry around peak earnings in the AI space, the earnings bubble. How much of this repeatability is there? Management did try to address that concern by talking about long-term commitments for AI spending. Asia took time to warm up to that theme, and it's only now, as the earnings come in, that you see a huge bid across the board in tech and Nasdaq futures. Clearly there is debate around how much of that is repeatable. It has taken a sharp drop in oil to keep the tech train up higher. It really looks to be a combination of factors that are required to continue to move the trade higher. The result is great, but we need yields to moderate. We need the tech trade to have a lower bar from a macro perspective to keep going.
Are yields going to moderate? That's the question. The rate of change was extraordinary. Does it continue?
We continue to kick on in Australia, in Japan, and increasingly in Europe. The same themes apply coming into the new quarter as they did last quarter. That is setting up an unfavorable comparison with equities, which is the first problem that bonds need to scale. What is the investment case if equities are doing well? You have the supply problem as well. JGB 10-year selling off into a packed calendar of issuance next week. We have Micron guidance. They talked about the data center build going into 2027. So that's powered by a lot of AI lending and borrowing in the capital markets, which again will weigh. The U.S. data and the European fiscal concerns are coming together in an interesting manner. U.S. economic story is very strong. You do have a reluctance to hike, which puts pressure on the belly of the curve. Meanwhile, European budgets pushing in the same direction. It looks like France's budget will be fascinating. French bonds have been leaving bonds weaker. It will be interesting to see whether there's any fiscal discipline that comes out of this bond market move on the long end. Unless we see that, it doesn't look like value buying at high yields is going to trace this.
Yeah. Great update. Thank you very much indeed. Head of U.S. economic research at Bank of America. Good morning.
Good morning. Thank you for having me on.
Is the U.S. economy overheating?
It is at risk of overheating. The two factors that stop us from calling for overheating is that wage inflation is soft and gas prices are probably a bit too high right now. Gasoline moved down to four dollars or so per gallon. That opens up room for additional demand. If you had that with a pickup in wages, you are off to the races.
Should the Fed be hiking more aggressively?
We think the Fed will go again in October and December. At that point, you can take a pause. See how the base effects work out on inflation for the next three months and decide if you need to come back to do more in the second half of next year.
Good morning. Talk to us about the U.S. consumer. Are there just two different consumers? On the one hand, consumption has been benefiting from higher asset prices. On the other, others see a higher cost of living. They must struggle.
It's an interesting question. This would be spending on credit and debit cards. You see there is clearly a K-shaped consumer from early last year to the middle of this year. Over the summer, year-over-year growth rates, they basically converge. There's less of a K-shaped story now. Higher-income folks have done well in the equity market. The pickup in job growth has been beneficial for lower-income folks. Their spending is probably more sensitive to labor income because they have less.
Consumer spending is at a one-year high. Economy seeming to surge ahead. Consumer confidence, really weak. What does that tell us about the path ahead?
There's been a dichotomy between spending and confidence. Confidence used to be a useful indicator of spending. It's not anymore. Weakness in confidence is a function of cumulative inflation, a function of political polarization. The bottom line is that it hasn't affected spending for several years now, and I don't think it will going forward.
You expect another two hikes from the Federal Reserve. Is your assumption that core inflation is lower than estimates? Is that as good as it gets on inflation?
We knew there would be revisions. The Fed has been factoring this in. Maybe on the margin there were larger than expected. But we've been saying for the last two years that underlying inflation is stuck around 2.5%. Now you have lower inflation, but you also have one less factor. If you take out the effects of Iran and the effects of tariffs, all that rolls off, and we know probably the path gets worse before it gets better. You still land at 2.5%. That's the size of the Fed problem in our view. That's why we are hopeful that 75 basis points will be enough to address that problem. They need to go decisively, which is why we've been saying since June, September, October, December.
What does that do to yields?
Potentially could help yields at the long end. If the Fed shows again decisiveness, commitment, that's one less thing for the bond to worry about. I don't think Chair Warsh can save the bond. He can certainly help and not make things worse.
Are you seeing evidence of crowding out?
It's interesting. Credit spreads are not showing evidence of that.
Are you beginning to get a little bit of that?
A little bit. The concern seems to be in the other direction.
What about the rest of the economy? Is it okay? Is it being crowded out? You put the government and AI together, what's left?
The two big engines of U.S. growth have been AI capex and consumer spending. Consumer spending isn't super sensitive to interest rates. One of the big pass-through challenges is mortgages. Everyone is locked in to very low fixed-rate mortgages. That's taken care of. Then the AI issuance that has been relatively rate-insensitive. That allows the cycle to continue. I think one thing higher yields are reflecting is also fundamental. The U.S. government spends about $7 trillion a year, takes in about five, and that needs to be fixed.
As we look ahead to jobs data tomorrow, how do you characterize the labor market? The ADP number was strong yesterday. You have a below-consensus expectation for tomorrow. What is the story for jobs?
The story for September jobs is largely seasonal. We think underlying job growth is quite strong, consistent with what you saw in the ADP number. You had a favorable seasonal adjustment. That gets paid back in September. The broader take on the labor market is that it is stable. So far, the indications are mixed. It's not weak. But the thing to watch for is wage inflation. The unemployment rate continues to fall. A few months down the line, it's below 4%. Then I'm worried about wages starting to accelerate, and then you think, this could be a full-blown hiking cycle from the Fed rather than a mid-cycle adjustment.
How should investors be thinking about the midterms in the U.S.?
I don't think there will be a ton of effect. We don't forecast election outcomes. It looks like we will end up with divided government. I wouldn't expect anything to get done from a legislative perspective. If you look at the two extreme scenarios, if it was a big wave election that Democrats won a lot of seats, there is some concern among investors that perhaps there will be more AI-related regulation. On the other hand, if Republicans sweep, I would expect another fiscal bill that could involve a pickup in defense spending, for example, which could be problematic for the deficit.
It could get worse if the Republicans do better than expected?
It depends. They are going to try to increase Fed spending. It's a question of how you pay for it.
Head of U.S. economic research at Bank of America.
What else do you need to know this Thursday morning? Benjamin Netanyahu has praised passengers and crew who helped overpower a pilot after he stabbed his co-pilot while flying to Tel Aviv. The pilot was attempting to crash the jet, which was carrying more than 170 passengers on a flight that took off from Dubai. Later made an emergency landing. The attacker's identity has not been disclosed. He's being questioned by local authorities. Christine Lagarde said she might cut short her term as European Central Bank president before it's official in October 2027. She said that she cannot rule out the possibility of leaving a few months before the end of her term. Google grappling with internal skepticism over performance of its new flagship AI model. It was released yesterday. They said it posted leading scores, including security skills. But some insiders say metrics don't tell the whole story, saying it struggles to handle certain coding tasks. A lot of questions whether this is the wrong product now. You have Meta doing interesting things in terms of agents. That's what the consumer is going to latch onto. You don't need cutting-edge models. You need something that's useful.
There's a spectrum of opinions inside Google about Google's own product. We are supposed to get the answers, and this would seem to be demonstrably provable in some form. There is still a range of opinions as to how good it is.
They sidelined one model they were planning to release. There was that internal pressure to be at the frontier.
Is that the right thing to do?
It may not be. Our reporting suggests there's an overfocus on benchmarking rather than actually creating product that's useful for the consumer and for the enterprise.
There's another reason to pace the frontier then. Not just the future of humanity, but whether it's going to be where the money is.
Coming up, budget day in France. We discussed what to expect in the outlook for the nation's economy as we see that spread over German debt at 127. That conversation is coming up. This is Bloomberg.
First of October, good morning. "The Opening Trade." Let's talk about the futures picture, which looks grim on our side of the Atlantic. We are down reasonably hard this morning. We basically saw U.S. markets yesterday cratering toward the back end of the session, which now needs to be pressed into Europe. So in some ways, this is yesterday's news that you're looking at on the screen this morning. If you want to look at today's news, take a look at what is happening with the function on your Bloomberg. Nasdaq futures up by 1.4% right now. It's interesting. The S&P is basically back to where it was in terms of the futures picture right now, but the Nasdaq is definitely outperforming. So it looks like there is a tech trade to be had in the U.S. this morning, and as they say, Nasdaq futures up by 1.4%.
Things looking a little bit calmer than they have of late in European bond markets, just as they do in Treasuries. That 24-year high on 30-year Treasury yields. This is the picture on European debt. We are seeing some selling, but very small moves at the 10-year horizon. Not a huge amount of movement. I can note that the French spreads, 126.9.
Let's stay on France because the French government is set to unveil the details of its 2027 budget today, with the focus on sharply narrowing the national deficit, rising debt-servicing costs, and pressure from Brussels to put public finances on a more sustainable path. What can we expect? This is the last budget under President Macron. What are we expecting the prime minister to put forward?
French Budget Correspondent
26:03 ↗
We had the prime minister posting on X last night saying reality is catching up with us. As you can see with this spread between the French and the German 10-year, clearly, today what we are expecting, we've already got some numbers in the French press. He is saying 54 billion euros of effort, that is what he's targeting for this last budget under President Macron. It's going to be a mix of new taxes and savings, especially this exceptional tax. Well, not so exceptional after all. It was extended last year, probably going to be extended again this year, although it might be smaller to just 5 billion euros compared to nearly 8 billion last year. The government is also going to ask more effort from pensioners with this very controversial measure, possibly to stop indexing the highest pensions on inflation and to remove a tax allowance for pensioners. Obviously, these measures are very controversial, something they've been very much against in the past. Finally, the social security budget. The government is planning to cut the deficit of social security by almost half next year. Obviously that has also brought a lot of debate in this fragmented parliament that we still have in France. And last but not least, today there is a regular bond auction actually, which is scheduled at 10:00 a.m. U.K. time, about the time we will have the details of this next budget. The goal is to issue about 12 billion euros of long maturities, 10-year and 20-year, and that is clearly seen as one of the key tests in the current bond market situation in France.
Thank you very much indeed. That preview of an important day with the budget and focus in France. More on what to expect from that budget. We bring in our chief investment officer, CIO for France. How challenging a moment is this for France and for the debt market?
UBS Wealth Management France CIO
28:31 ↗
I think we have a seasonality. We will see the spread widening in 2024 and 2025 and 2026 still the same. We have a few comments this morning presenting the budget in the government, so there is already a pre-announcement of about 44 billion of cuts. So the effort is pretty big. The market is repricing quite a lot. There is also a big contingent coming from the other movement. It is not only French-specific because the spreads are also widening on Italian bonds. Of course, there is a bit more volatility on the French one because we know to pass the budget this year. But overall, I think that the market has already priced quite a lot of negative elements we may probably see in the coming weeks.
With a spread of about 127, close to 1.3%, is that a market that is pricing in a budget that fails and a deficit that gets closer to 6% next year?
UBS Wealth Management France CIO
29:48 ↗
I think at this point it is already priced, but it is not sustainable. When you compare the spread between the Italian bond and the French to the German one, then you realize that this spread, France is already trading above Italy by 20 points. This credit downgrade, the market is pricing that 54 billion will not pass. Probably we end up with something about 35 billion. But the market is also repricing the risk with the coming election. Next year we have presidential elections, but we also have a general election, which is putting the country in a situation that we need social reform, we need pension reform, we need work reform. Clearly, these are reforms which are needed to bring the debt trajectory down, which is not possible.
It sounds like even if we get this passed, it may not weigh down spreads all that much. We are looking at underperformance in the French market, but some of that is luxury names and some of that is the Chinese consumer, nothing to do with the French economy. How do you attach the French political story to what you are seeing in French stocks?
UBS Wealth Management France CIO
31:31 ↗
I think as an equity market we've been less impacted depending on the outcome of the election. But mostly the equity in France has been impacted by the position, which is mostly consumer names, which have been impacted by the rise in energy price, but also by the weakness in consumer demand coming from Asia. And then you have big tech names. Clearly this is also impacting the performance. We have, I think, a different composition relative to the Euro Stoxx. That does not mean that the equity market in France will not be impacted because there will be an increase in taxes on companies with big market cap. But this is already considered by the market because it is not new. There is nothing new additional on the company side so far.
Does it strike you as interesting that we have spreads at these levels that we haven't seen for many years, despite the fact that Marine Le Pen is sounding as if she is listening to where the messages are coming through from the bond market and adjusting her policies accordingly? That doesn't seem to be offering much comfort. What do you put that down to?
UBS Wealth Management France CIO
33:08 ↗
I think because uncertainty is just right and we don't really know yet the different fiscal problems. We only have the extreme left, which probably could put additional pressure on the spread. But on the other side, clearly people are still expecting to see which of the programs in the coming month all the parties will announce. But the big discussion today is around reform. We are still discussing retirement age, which is the lowest in Europe. Italy just increased retirement age by six months. Clearly, I think the discussions are not enough to put the spread on the downward trend so far. Again, I think there is a very short bond in France with spreads that are pretty large. Probably less volatility after the announcement. I still believe that this budget will pass. There are different ways to pass the budget for France. France needs to pass and then open the discussion for the presidential election next year. That is another story. For the time being, the lower volatility is for the budget discussion.
We are going to look forward to that election coming up. When does it become a crisis? 130 over Germany, 140 over Germany, 150 over Germany? At some point does Europe step in to fix this? And what would that look like?
UBS Wealth Management France CIO
35:01 ↗
I was thinking a few months ago that 120 was already a high level of spread. I wasn't expecting 127. So I think there is no limit depending on what is going on in the coming 10 months. It's really, really important where the candidates are proposing, focusing on the debt trajectory. We are expecting it to increase again by 2030, and what the market is pricing is this scenario.
So if you are buying France at this point -- actually, let me put it the other way. If you are selling France at this point, how big a risk is there that something takes you the other way, that you do get a budget passing, that you do get a more benign outcome in the election, or you do get, dare I say it, maybe some conditionality being imposed from Brussels, from the rest of Europe? What is to stop me having a short position on right now in French debt?
UBS Wealth Management France CIO
36:07 ↗
I think taking the risk of shorting French debt at 127 basis points is high. This is because for me, the budget will pass. There are some risks, and probably where there is more tension on the spread, so between the 18th of April and the 2nd of May. But by the end of the year I see the spread to be lower. Also because I think there is a bit of contention coming from bonds. Then I have to say, opportunities are there. France is not defaulting, so if you're carrying your bonds to maturity, I think the bond is quite attractive.
On that note, perfect point to leave it. Coming up, Netflix's chief wants to get bigger quicker.
Overall, we are not growing as fast as I want us to. We are also doing things that create a lot of headwind. And we do live programming on Netflix, which is a relatively new thing. We spend about 5% of our content budget on live events. They generate about 1% of our watching.
Live TV is good. That was the Netflix co-CEO speaking exclusively at the Bloomberg Screen Time Conference taking place in Los Angeles. Up next, stocks to watch, tech firmly in focus this morning. The opening is coming. 16 minutes to go. This is Bloomberg.
Thursday morning. European equities are not going to open on the front foot. Seven, eight, nine-tenths of 1%. Feels like a yesterday story reacting to the selloff we saw at the back end of yesterday's session. They are off the earlier highs, but still up by 1.1%.
With Markets Live executive editor Mark Cudmore. Good morning to you. Don't look at European futures, look at U.S. futures. A much more positive story, and I know you want to see a much more positive stock story. It's October, what changes?
One of the things I think will change the dynamic of the last month or two has been a very stark negative correlation between stocks and bonds. And generally I am always in that camp that if yields are going up higher, which is then the driver in the U.S., that it should be a major buffer for stocks. I have been bullish stocks. I've said that stocks be resilient to higher yields. And now think that the moves are going so extreme in yields that if yields continue to climb much further, that will no longer be the case that stocks stay resilient. I think we are moving into a paradigm of where we've seen recently a very strong negative correlation between stocks and bonds, sovereign bonds. Now, I don't have high conviction on which way that could go. Could be that bonds are selling off while stocks continue to do well. I will tell you why I'm changing my view a little bit now. Or it could be that I'm moving a little bit more into that nervous camp that they both weaken. Two things. One, the pace of the move is really quite drastic, and I think the dynamic in the U.S. is exacerbating the hedging, the mortgage-backed security system. And then we've got the whole French situation. Maybe that's why this is the extreme. And whether both stocks and bonds rally or selloff, I lean into the fact that we got a bit more pain for both assets ahead rather than stocks staying resilient.
Let's explore France a little bit more. Your French is pretty good. What is a crisis in the French bond market looking like? Is this it, or does it get worse?
We are not at a crisis. The fact is we are talking about Treasuries. Once we're at levels that we only really saw in the eurozone crisis, and yet there hasn't been that panic yet. I kind of think it is a news-flow story. The problem with this trade is the timing. The presidential elections are next year. It's very, very hard to hold on such a negative carry when these bonds are offering such yields. I'm really open to the idea that the budget has a breaking point, but I don't know with high conviction. I'm going to be open-minded as that story plays out. It is a very exciting moment because it is a tipping point either way.
Are we thinking about systemic risks, potentially, from this?
I think if French bonds selloff further from here, yes. That's why there is a correlation from stocks and bonds. If French bonds keep on falling off from here, it is going to feed into stock markets, and we are going to see the euro-dollar drop hard as well.
Mark Cudmore, thank you. You can get up-to-date analysis and insight from Mark and the rest of the team by going to MLIV GO on your terminal. Alex, what are you looking at?
Our first stocks to watch of the quarter, starting with tech stocks. The story here is coming off the back of Micron's upbeat forecast. You're already seeing it play out in Asia, the idea of a rising tide lifting all ships. Talking about demand tightening, if anything, going forward. For European chip stocks, that of course is signaling multiyear demand, sustained demand, and perhaps looking to downplay those fears in a cycle that could be a potential part of the AI buildout frenzy. So keep your eyes, we are already seeing stocks like ASML up in premarket trade. Keep an eye on the European chip and tech stocks this morning. Let's turn it over to Sanofi. We had some news they are expanding their partnership with Regeneron, the U.S. pharmaceutical company having worked on Sanofi's blockbuster drug. The emphasis here is looking to new antibody drugs, looking at the immune system in the years ahead. You can see them really quite a bit below, but this is looking to the future. Looking in that partnership and expanding it at the signal they have that intention to do so. Let's finish with Pandora, getting a read on consumer sentiment, particularly in the United States. Talking about U.S. markets and what we are seeing from lower- to middle-income consumers. Saying they are confronted with rising prices, rising gas prices, and the uncertainty linked to the conflict around the world. But for Pandora, there is actually an interesting split, if you like, between markets like the United States and Asia. In Japan alone, they've had huge growth. So you are seeing Pandora signaling demand in the U.S., this inflationary pressure squeezing consumers, and Japan, they are really seeing that uplift. Also beginning to read from Nike later, it sends off consumer sentiment there as well. Some of the stocks kicking us off in the new quarter.
Alex, thanks very much. Another to the list, Filtronic has got a contract from SpaceX, so that is one we can watch at the open. Broadly speaking, as you can see, it is a weird day for Europe. We have to price in the negativity that came just in the last hour of the U.S. trading day before we can perhaps get on the bandwagon with a higher U.S. futures picture.
Tech is going to be really interesting this morning. We've also got a mechanical shift lower, a factor maybe for some of the other names that have done well recently. FTSE looks like it is going to underperform.
That mechanical function around oil, does it give a lift to travel and leisure? Maybe less, maybe a little more muted? We are back below $100, so possibly there is a read across for travel and leisure as well.
The bond market story is not making things massively worse for stocks, but we are up by two basis points on the French story. Just sort of watching and waiting.
127 this morning. Five minutes to go until the opening trade. We will be back with that in just a moment. That is what futures look like. This is Bloomberg.
First of October, good morning. Let's talk about what the S&P did yesterday because it's relevant to what we are about to see here this morning. In the last hour, as you can see, we turned tail and headed sharply lower and closed out of those lows. That is the reason. There are a few others, that is the main reason.
Look at that picture on the FTSE 100 futures pointing sharply lower by nine-tenths of 1%. This index is up about 7%. Energy is lower. European futures across the benchmark, down by six-tenths of 1%. Over in Germany, the DAX looking to drop 200 points, down a tenth of 1%.
Let's keep an eye on what goes on with technology. Nasdaq futures, as we've been saying, hitting higher as a result, perhaps influenced by that. The whole European space is supposed to drift lower. Sanofi is an interesting one, shares rising premarket ahead of regulatory in Paris. The company expanding its partnership with the U.S.-listed Regeneron. So what will that do to the antibody drugs for diseases related to --
The immune system? And Pandora's seeing U.S. demand stabilizing. So how will the market deal with that kind of messaging? The consumer in the United States grappling with inflation and higher gas prices. That has been weighing on demand.
Guy: To positive stock story from tech, everything else pretty negative. What are we going to see? Let's find out. Europe is expected to open sharply to the downside. Let's see how quickly it drops. Stoxx 600 may be down by half of 1%.
A more positive picture emerging, potentially. That gap is what stocks like ASML are effectively doing. If you are not fully pricing in the futures picture, here you go. I'm interested to see the open this morning.
The AEX is outperforming, only down by three tenths of 1%. This is the FTSE, which is down by 1.1%. A big spread between the FTSE and the AEX this morning. Going to be interesting to see how divergent this market is, how dispersed this market is. Tech on one hand, maybe energy stocks on the other. CAC's down by six tenths of 1%.
IBEX down by seven tenths of 1%. AEX only down by three tenths of 1%.
Tom: One sector in positive territory right now is the tech sector. There is the Micron story filtering through. Every other sector so far in negative territory. Biggest losses coming through for personal care. Food and beverage down about 1.2%. Everything else right now, apart from tech, seeing losses. Industrial goods is a little bit more muted.
We've been expecting that maybe there would be a positive picture for travel and leisure on the back of weaker oil prices, but in fact that takes us down seven tenths of 1%.
Anna: But have a look at some of the movers and where we are on some individual names. We've been watching the tech sector and some of the individual names are heading higher within that sector, of course. ASML is at 1.7%. So now Sanofi up 3.3%. Infineon also a decent points contributor. So there is that tech theme going on.
On the downside, some of the banks, some of the pharmaceuticals companies heading lower. HSBC and AstraZeneca provide the biggest downside push, and they play heavily into the FTSE 100's underperformance today.
