MNI US OPEN - Poland Downs Russian Drones, Article 4 Invoked

EXECUTIVE SUMMARY

• POLAND INVOKES NATO ARTICLE 4 AFTER DOWNING SEVERAL RUSSIAN DRONES
• JUDGE BLOCKS TRUMP'S ATTEMPT TO FIRE FED GOV COOK
• MODI SAYS INDIA, US TO CONCLUDE TRADE TALKS AT THE EARLIEST
• CHINA'S AUG CPI FALLS MORE THAN EXPECTED

Figure 1: Polish PM says "huge number" of Russian drones shot down over Polish airspace

Source: BBC

NEWS

MNI US CPI PREVIEW: Data to Shape Fed's Tone on Rate Cuts

August inflation data lands this week, with PPI out first on Wednesday September 10 at 0830ET, followed 24 hours later by the CPI report. Consensus (Bloomberg median) is for core CPI to come in at 0.3% M/M rounded in August, same as July, with the MNI unrounded median looking for 0.32% with a slight lean in the risks toward a rounding-up to 0.4%. Recall that the July CPI report saw further acceleration in monthly core inflation but the details defied expectations. The rise was driven by volatile services categories and - in a counter-intuitive finding amid continued tariff concerns - core goods were surprisingly soft (and inflation breadth appeared to moderate).

MNI ECB PREVIEW: Growth Outlook Watched Amidst Data Dependence

The ECB is fully expected to leave its three key rates on hold on Thursday, with its deposit rate at 2.00%. ECB President Lagarde is expected to continue to suggest policy is in a good place. A data-dependent and meeting-by-meeting approach is expected to be reiterated in a continuation of July’s “deliberatively uninformative” communication approach around future rate decisions.

POLAND (MNI): PM Tusk Confirms Poland Invoked NATO Article 4

Speaking in parliament, Prime Minister Donald Tusk says the military detected and tracked 19 violations of the airspace overnight. Three, perhaps four drones were shot down (could have been more, but the number is yet to be confirmed) and the last drone was downed at 05:45BST/06:45CEST. Tusk says that the drones for the first time during the Russo-Ukrainian war crossed the border from the territory of Belarus rather than Ukraine. This suggests a deliberate incursion rather than an error or minimal provocation. • The PM confirms that Poland has formally asked NATO to invoke Article 4 and launch consultations between allies. The decision was preceded by Tusk's talks with President Karol Nawrocki before they reached this joint decision.

POLAND (MNI): Incursion of Polish Airspace Exposes Fragility of NATO's Article 5

A NATO spokesperson confirmed that up to 10 Russian drones violated Polish airspace overnight. A number of the drones were shot down by a multinational NATO air operation, including Italian and Dutch assets, in what appears to be the first direct military confrontation with Russia on NATO territory. Polish PM Donald Tusk confirmed on X that Poland shot down drones that "posed a direct threat", adding in later comments that the "violation of Poland's airspace was likely large-scale provocation." The EU's top diplomat, Kaja Kallas, said that the incident was "the most serious European airspace violation by Russia since the war began, and indications suggest it was intentional, not accidental."

US (MNI): Judge Blocks Trump's Attempt to Fire Fed Gov Cook

A federal judge Tuesday night granted a preliminary injunction blocking President Donald Trump from firing Federal Reserve Governor Lisa Cook while her lawsuit challenging her termination is resolved. The FOMC is set to meet again September 16-17. "At this preliminary stage, the Court finds that Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act’s 'for cause' provision," Judge Jia Cobb wrote.

US/CHINA (MNI): US-China Relations Drag on Members Outlook - Chamber

MNI (Beijing) Trade tensions between the U.S. and China are eroding business confidence and pushing revenue expectations to record lows, the American Chamber of Commerce in Shanghai said Wednesday. According to its newly released 2025 China Business Report, 64% of surveyed companies expect U.S.-China tariffs to weigh on revenue this year, with only 45% of members expecting revenue growth in 2025, which would mark the lowest level on record if realised, the chamber said.

UK (FT): Keir Starmer Tightens Grip on UK Economic Policy With Powerful ‘Budget Board’

Sir Keir Starmer has tightened his grip on economic policy with the creation of a powerful “Budget board” linking top ministers and officials from Number 10 and the Treasury, with a remit to boost growth and avoid another bust-up with business. Starmer’s board, which will meet weekly, has been tasked with coordinating pro-growth policies between now and the Budget on November 26 and ensuring business and City leaders are kept on board, according to officials.

CHINA (MNI EXCLUSIVE): China to Bolster Service Consumption With Greater Supply

MNI discusses China's bid to boost consumption. On MNI Policy MainWire now, for more details please contact sales@marketnews.com

BOJ (MNI EXCLUSIVE): BOJ 2025 Hike Chances Weak on Wages, U.S. Concerns

MNI discusses the diminishing chances for a 2025 BOJ hike. On MNI Policy MainWire now, for more details please contact sales@marketnews.com

DATA

SPAIN DATA (MNI): July IP Dragged by Volatile Capital Goods and Energy Production

Spanish headline IP fell 0.5% in July, below the five-analyst strong consensus of -0.2% and June's 0.8% (revised from 1.0%). Energy (-2.7% M/M) and capital goods (-3.6% M/M) production dragged heavily on the print, both can be volatile and often reverse, meaning that underlying trends might be not as poor as the relatively weak sequential headline reading suggests. 3m/3m IP growth was 0.7%, as in June (revised from 0.8%), the joint highest reading since December 2024. On a Y/Y comparison, IP read 2.5%, the strongest since October 2024.

NORWAY DATA (MNI): SA CPI-ATE Inflation Consistent With 2% Annualised in August

• NORWAY AUG CPI -0.6% M/M, +3.5% Y/Y
• NORWAY AUG UNDERLYING CPI -0.7% M/M, +3.1% Y/Y

On a seasonally adjusted basis using Statistics Norway data, CPI-ATE inflation rose 0.15% M/M, after 0.22% in July and 0.30% in June. When annualised, this is a rate slightly below 2%. As such, we think it is consistent with the view that while August inflation was stronger-than-expected, it isn't enough to stand in the way of a September rate cut in isolation. Tomorrow's Regional Network Survey remains very import.

CHINA DATA (MNI): China's Aug CPI Falls More Than Expected

• CHINA AUG CPI -0.4% Y/Y VS MEDIAN -0.2%; JUL +0.0%: NBS

China’s Consumer Price Index fell 0.4% y/y in August from July's 0.0%, marking the fastest fall since February and missing expectations for a 0.2% drop, mainly due to lower-than-seasonal-level food price increases and the higher comparison base for the same period last year, according to data from the National Bureau of Statistics released Wednesday. On a monthly basis, CPI rose 0.0%, edging down from July's 0.4% growth. Core CPI, which excludes food and energy, rose 0.9% y/y, expanding for the fourth consecutive month from July's 0.8% rise.

FOREX: Risk-Off Phase Short-lived Despite Higher Geopolitical Tensions

• Incursion of Russian drones into Polish airspace have dominated headline flow and market sentiment so far Wednesday. Poland's government have triggered NATO's Article 4 in response - meaning NATO consultations are set to get underway to assess the risks and threats after Poland shot down several drones.
• Given this morning's incursion represents the most serious breach of air defences since the beginning of the Ukraine war, risk sentiment dipped through the European open - albeit only briefly. EUR/USD edged through the overnight lows of 1.1690 as the USD rallied - although haven currencies (JPY, CHF) saw only minimal gains. With Article 4 triggered - the path for de-escalation is relatively clear - allowing markets to correct back to neutral levels.
• That said, oil-tied FX are on the front-foot as WTI and Brent crude futures correct higher on geopolitical risk. This is compounding strength in the NOK on the back of the higher-than-expected underlying Norwegian CPI print (3.1% Y/Y vs. Exp. 2.9%). As a result, EUR/NOK trades heavy and clear of the September lows. The cross has shown through 61.8% retracement for the upleg posted off the June low, opening next support into 11.5416.
• PPI data marks the first inflation salvo this week, with markets expecting PPI to slow on a monthly basis, but hold first on a Y/Y, final demand basis. The PPI release may take on greater importance than usual given it comes ahead of tomorrow's CPI - both of which feed directly in to the Fed's PCE inflation gauge and could prove decisive for the September FOMC meeting and the scale of any potential easing. Both the Fed and ECB remain inside their media blackout periods, meaning we're unlikely to get much policy-relevant commentary following the PPI print. 

EGBS: Bunds Trading More Steadily After Early Volatility; 15-Year Auction Weak

• Bund futures are +15 ticks at 129.18, trading more steadily after a spree of volatile price action around the European cash open. Headline flow has been dominated by reactions to Poland’s downing of Russian drones in its territory overnight. This may be driving some light haven flows into core EGBs.
• The Sep 8 high of 129.33 was pierced in Bunds this morning, exposing the Aug 5 high at 129.50 as the next resistance to watch.
• Note that European equities traded quite resiliently until about 0900BST, but Estoxx 50 futures have fully erased gains in the 90 minutes since.
• German yields are +0.5bps to -0.5bps across the curve, with the 10-year tenor outperforming. The initial downside target for 10-year yields will be the 2.60% handle, which was last tested in early August.
• 10-year EGB spreads to Bunds are biased up to 1.2bps wider, with OATs and GGBs underperforming. Markets are digesting President Macron's appointment of former defence minister Sebastien Lecornu to the PM post. Initial reactions from opposition parties suggest Lecornu will face many of the same challenges as his predecessors in passing a budget.
• In supply, Germany and Portugal have held conventional auctions while Luxembourg is launching a new 10-year LGB via syndication. The 4.75% Jul-40 Bund auction results were weak.
• Spanish industrial production data was a little weaker than expected (-0.5% M/M vs -0.2% cons, 1.0% prior) while Italy was stronger than forecast (0.4% M/M vs 0.1% cons, 0.2% prior).
• Global focus turns today’s US PPI report at 1330BST, before the ECB decision and US CPI cross tomorrow.

GILTS: Curve Bear Flattens After Initial Rally Fades

Gilt futures are little changed after an early bid related to wider demand in core global FI & weakness in equities faded.

• Contract last +5 at 91.41.
• Initial support and resistance 90.65/91.66, corrective bullish phase remains in play.
• Yields flat to 3bp higher as the curve bear flattens.
• UK news flow remains centred on fiscal matters ahead of the late November Budget as PM Starmer reportedly assembles a “Budget Board” focused on pro-growth policies, while Chancellor Reeves has reportedly limited Cabinet colleague access to the Treasury’s emergency funds ahead of the Budget.
• This morning’s GBP4.0bln 4.00% Oct-31 gilt sale saw strong demand, no wider market reaction to note and the front end/belly didn’t see any relief rally.
• GBP STIRs little changed. BoE-dated OIS shows ~10bp of easing through year-end after printing below 8bp in recent sessions.
• Little of note on the UK data calendar until Friday’s monthly economic activity readings.
• That will leave wider macro and geopolitical developments at the fore for much of today, with U.S. PPI data providing the key scheduled risk event and fallout from the Russian drone incursion into Poland eyed.

EQUITIES: Corrective Bear Cycle in Eurostoxx 50 Futures Remains in Play

A corrective bear cycle in Eurostoxx 50 futures remains in play. Recent weakness resulted in a breach of 5369.17, the 50-day EMA. The clear break of this average strengthens a short-term bearish threat and signals scope for a deeper retracement towards 5166.00, the Aug 1 low and a key support. On the upside, the contract has recovered above the 20-day EMA - a bullish development. A stronger reversal would open 5445.00, the Aug 26 high. A bull cycle in S&P E-Minis remains intact and the latest pullback has once again proved to be a shallow correction. The contract traded to a fresh cycle high last week, breaching the Aug 28 high of 6523.00. This confirmed a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Sights are on 6543.75 next, a Fibonacci projection. Initial support to watch is 6456.35, the 20-day EMA.

• Japan's NIKKEI closed higher by 378.38 pts or +0.87% at 43837.67 and the TOPIX ended 18.85 pts higher or +0.6% at 3140.97.
• Elsewhere, in China the SHANGHAI closed higher by 4.929 pts or +0.13% at 3812.221 and the HANG SENG ended 262.13 pts higher or +1.01% at 26200.26.
• Across Europe, Germany's DAX trades higher by 38.44 pts or +0.16% at 23759.92, FTSE 100 higher by 14.85 pts or +0.16% at 9257.45, CAC 40 up 16.64 pts or +0.21% at 7765.54 and Euro Stoxx 50 up 14.72 pts or +0.27% at 5382.97.
• Dow Jones mini down 92 pts or -0.2% at 45665, S&P 500 mini up 10.75 pts or +0.16% at 6532.5, NASDAQ mini up 22.5 pts or +0.09% at 23896.75.

Time: 10:00 BST

COMMODITIES: WTI Futures Extend Recovery Off Last Week's Lows

The trend condition in WTI futures is unchanged - a bear cycle remains intact. The pullback from the Sep 2 high highlights a possible reversal and the end of the corrective phase. Initial resistance to watch is $66.03, the Sep 2 high. Key short-term resistance has been defined at $69.36, the Jul 30 high. A stronger resumption of weakness would pave the way for a move towards $57.71, the May 30 low. Gold remains in a clear bull cycle and last week’s gains plus this week’s bullish start to the week, reinforce current conditions. The yellow metal has traded to  a fresh all-time high. The break also confirms a resumption of the primary uptrend and an extension of the sequence of higher highs and higher lows. The next objective is $3674.8, a Fibonacci projection. Initial firm support lies at $3474.7, the 20-day EMA.

• WTI Crude up $0.63 or +1.01% at $63.27
• Natural Gas down $0.01 or -0.26% at $3.11
• Gold spot up $18.52 or +0.51% at $3646.06
• Copper down $0.05 or -0.01% at $456.75
• Silver up $0.21 or +0.51% at $41.0884
• Platinum up $14.11 or +1.03% at $1388.95

Time: 10:00 BST

Date	GMT/Local	Impact	Country	Event
10/09/2025	1100/0700	**	US	MBA Weekly Applications Index
10/09/2025	1145/1345		CH	SNB's Schlegel on Central Bank Communication in Vezia
10/09/2025	1230/0830	***	US	PPI
10/09/2025	1230/0830	***	US	PPI
10/09/2025	1400/1000	**	US	Wholesale Trade
10/09/2025	1400/1000	**	US	Wholesale Trade
10/09/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
10/09/2025	1430/1030	**	US	US DOE Petroleum Supply
10/09/2025	1700/1300	**	US	US Note 10 Year Treasury Auction Result
11/09/2025	-		EU	European Central Bank Meeting
11/09/2025	0600/0800	***	SE	Final Inflation Report
11/09/2025	0600/0800	***	SE	Final Inflation Report
11/09/2025	1100/0700	***	TR	Turkey Benchmark Rate
11/09/2025	-	***	CN	Money Supply
11/09/2025	-	***	CN	New Loans
11/09/2025	-	***	CN	Social Financing
11/09/2025	1215/1415	***	EU	ECB Deposit Rate
11/09/2025	1215/1415	***	EU	ECB Main Refi Rate
11/09/2025	1215/1415	***	EU	ECB Marginal Lending Rate
11/09/2025	1230/0830	***	US	Jobless Claims
11/09/2025	1230/0830	**	US	WASDE Weekly Import/Export
11/09/2025	1230/0830	*	CA	Household debt-to-income
11/09/2025	1230/0830	***	US	CPI
11/09/2025	1230/0830	***	US	CPI
11/09/2025	1230/0830	***	US	CPI
11/09/2025	1245/1445		EU	ECB Press Conference
11/09/2025	1415/1615		EU	ECB Lagarde Presents Rate Decision on ECB Podcast
11/09/2025	1430/1030	**	US	Natural Gas Stocks
11/09/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
11/09/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
11/09/2025	1700/1300	***	US	US Treasury Auction Result for 30 Year Bond
11/09/2025	1800/1400	**	US	Treasury Budget