EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Track Weekly Losses
{EU}{2QEUAs/UKAs Dec25 are rangebound amid weaker trading interest on the day, tracking weekly losses. Meanwhile, losses in EU gas and equities are limiting carbon upticks, with STOXX trending lower as investors hold back ahead of US inflation data scheduled for release at 13:30 BST.
- EUA DEC 25 down 0.09% at 78.37 EUR/t CO2e
- UKA DEC 25 down 0.2% at 55.05 GBP/t CO2e
- TTF Gas NOV 25 down 1.3% at 32.02 EUR/MWh
- NBP Gas NOV 25 down 1.7% at 80.37 GBp/therm
- Estoxx 50 down 0.2% at 5659.04
- FTSE 100 DEC 25 down 0.1% at 9606
- The latest Germany ETS CAP3 auction cleared at €78.47/ton CO2e, up 0.62% compared with the previous Germany auction at €77.99/ton CO2e according to EEX.
- TTF front month has pulled back from a high of nearly €32.9/MWh yesterday but still on track for a small net gain on the week after the EU adopted another package of sanctions on Russia including a ban on LNG imports from 2027.
- EU leaders agreed on Thursday for the bloc to move ahead with setting a 2040 climate target of cutting net emissions by 90% versus 1990 level, while requesting to add revision clause, according to the European Council.
- MEPs called on the EU maintain ambitious NDCs, phase out fossil fuel subsidies, and accelerate the energy transition, ahead of COP30 next month, according to Committee on the Environment Climate and Food Safety press release on 23 Oct.
- Germany’s Federal Environment Ministry and UBA welcomed EU CBAM simplifications but emphasised that free allocation of EUAs for should continue until the mechanism fully protects domestic industries, according to the joint letter.
- Wood Mackenzie said that the EU is unlikely to meet its 2030 carbon storage injection target of 50 million tonnes per annum (mtpa), due to project delays, licensing lags, and economic hurdles.
- France and Spain have urged EU leaders to maintain the ban on new diesel and petrol cars by 2035, stressing that zero-emission vehicles are “indispensable” for achieving carbon neutrality by 2050, according to a letter seen by Euronews.
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OAT: Light Widening In OAT/Bund As Unions Announce New Day Of Protests
"FRENCH TRADE UNIONS ANNOUNCE PLANNED NEW DAY OF PROTESTS ON OCT 2 AFTER MEETING WITH PM LECORNU, SAYS THE CFDT UNION" Reuters
That headline was worth ~0.5bps of widening in the 10-year OAT/Bund spread, now at 82bps. It underscores the difficult situation facing new PM Lecornu, much like his predecessors Bayrou and Barnier. More to follow from our political risk team.
JAPAN: Koizumi & Takaichi Play It Safe On Foreign Policy In LDP Debate
Earlier, the five contenders for the presidency of the governing Liberal Democratic Party (LDP) participated in a debate hosted by the Japan National Press Club. Asahi Shimbun detailed the main points of the debate, with key foreign policy comments from the main contenders, Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi and former Minister of State for Economic Security Sanae Takaichi, below.
- Koizumi:
- On US-Japan relations: "Building trust between leaders is extremely important." He indicated a desire to meet Trump at the earliest possible time if elected PM. He said that "Japan-US relations remain the cornerstone of Japan's diplomacy."
- To former Minister of State for Economic Security Takayuki Kobayashi, Koizumi says that 2% of GDP on defence is "not nearly enough."
- Takaichi:
- On foreign relations: "I believe it is extremely important to cooperate and respond [with South Korea] amid the growing closeness between China, Russia, and North Korea. While there is economic competition to some degree, there is significant cultural exchange." Calls for deeper Japan-US-RoK links, as well as Japan-US-Philippines.
- On relations with China: "While there are concerns regarding economic security and national defence, diplomatic strength is crucial. We will approach this with a stance of engaging in candid and repeated dialogue."
- Takaichi demurred on the topic of visiting the controversial Yasukuni shrine. Advocating for the PM visiting during the 2024 LDP election, this time she said the issue should not be politicised in effort to maintain ties w/RoK if she becomes PM.
OUTLOOK: Price Signal Summary - Support In Bunds Remains Exposed
- In the FI space, Bund futures are unchanged and the contract is trading closer to its recent lows. Key support and the bear trigger lies at 127.61, the Sep 3 low. A break of this level would cancel a recent bullish theme and confirm a continuation of the medium-term bear cycle. For bulls, a reversal higher would refocus attention on key resistance at 129.44, the Sep 10 high. First resistance is at 128.60, the 20-day EMA.
- Despite the latest pullback from its recent highs, Gilt futures remain in a bull cycle and a recent rally highlights a stronger corrective phase. Note that the move higher has allowed an oversold trend condition to unwind. Price has breached initial firm resistance at 90.84, the Aug 28 and 29 high. A resumption of gains would open 92.06, the Aug 14 high. Initial support to monitor lies at 90.65 (pierced), the Sep 5 low.
