CONSUMER STAPLES: Essity | Court Updates

• With European equities gapping lower at the open, it's no surprise to see JPY getting further support through Asia-Pac trade and maintaining that poise into early Europe. There is little sign that the risk-off trade has bottomed, evident in the new pullback low for AUDJPY at Y86.15 overnight, the lowest print since Mar'23's Y86.06, and 2022 before that.
• NOK/CHF trades similarly, defining both ends of the G10 FX table today, making for a convincing break through the 8.00 handle at the open as the cross becomes another strong indicator of risk.
• The breakout in implied vols strongly suggests markets see little respite for spot forward. G10 3m vol is comfortably clearing to multi-year highs across many markets (see chart below) -
• While spot may have settled somewhat over the past hour or so, pre-market trade in single stocks is set to begin imminently - and another significant phase of weakness is expected for mega-cap names - which could keep risk on the backfoot.

0RK5 98.00/98.125 cs, sold at 9 in 52k.

The 10-year BTP/Bund spread is just off intraday widest levels as European equities find a short-term base, but remains almost 11bps wider today at ~130bps. Heavy risk-off price action following the US administration’s tough weekend tariff rhetoric has favoured the safe-haven of Bunds, with heightened uncertainty around the near-term outlook also disincentivising carry vehicles such as BTPs.

• A close at current levels for BTP/Bund would be the highest since the US election result in early November, with the spread on track for the largest 1-day increase since March 2023 (around the time of the SVB collapse).
• GGBs also widen ~11bps on the session to ~95bps, narrowing the gap to the psychological 100bp handle.
• Over the weekend, Politico reported that the Spanish and Italian economy ministers are pushing for a negotiation-centred EU response to US tariffs, but France and Germany continue to favour for a more forceful retaliation.
• A reminder that Spain announced a E14bln fiscal package to mitigate the impact of US tariffs last week. The 10-year SPGB/Bund spread is 7bps wider at 76bps at typing.