Daiwa Comments on Thursday's Germany Bunds, U.K. Gilts

12:31 PM EDT, 10/02/2025 (MT Newswires) -- While the eurozone jobless rate edged up from the series low on Thursday, longer-dated German Bunds made modest gains, said Capital Markets.

September's final services and composite PMIs, due on Friday, are expected to reaffirm the modest uptick in eurozone economic activity at the end of Q3 signalled by the preliminary estimates, noted the bank. Indeed, the flash eurozone composite output index rose 0.2pt to 51.2, a 17-month high.

The improvement was led by firmer activity in Germany (52.4), itself matching the most pronounced expansion in the last two years. That contrasted somewhat with the less upbeat signals from Germany's Ifo survey. But Daiwa pointed out that the improvement in Wednesday's updated manufacturing output PMI (to a 3.5-year high) raises the likelihood of an upwards revision to the German composite index.

In a similar vein, the stability of the French national surveys raises the potential for an upward revision to those flash PMIs.

Separately, French industrial production data for August, also due on Friday, is expected to suggest stabilization after a drop in the previous month. Despite September's slightly hotter flash eurozone inflation figure, PPI inflation should fall back into negative territory for the first month in nine, consistent with the ongoing absence of core goods price pressures.

Economic data aside, European Central Bank President Christine Lagarde will be among the many speakers in Amsterdam on Friday for a symposium celebrating the outgoing Governing Council member Klaas Knot.

Gilts closed slightly lower on Thursday while the Bank of England's DMP survey reported an uptick in business inflation expectations but maintained expectations for weaker jobs and wage growth, according to Daiwa.

The most notable economic data from the United Kingdom on Friday will be the final services PMIs, added the bank. While the final manufacturing indices confirmed a larger contraction in output that month, likely amplified by disruption at JLR, the flash PMIs primarily attributed the loss of growth momentum last month to weaker services activity.

The respective flash estimate was nevertheless still consistent with an expansion in the tertiary sector (51.9), as the drop of 2.3pts failed to reverse the increase in August, which also marked a 16-month high.

Elsewhere, BoE Governor Bailey is due to deliver the keynote speech at the symposium in Amsterdam. While Bailey is among the couple of MPC members to haven't publicly commented on monetary policy over the past two weeks -- and, indeed, probably has the least predictable vote at November's meeting -- Daiwa expects his comments to focus on financial stability, reflecting his position as FSB chair for which he succeeded Knot.

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