European markets choppy; sterling slumps against the dollar

UK bond yields set for record monthly rise

British government bond yields are on course for the biggest monthly rise recorded within Refinitiv and Bank of England data going back to 1957, a Reuters analysis found.

The yield on 10-year gilts has risen 131 basis points so far in September, with a sell-off intensifying Friday after the government announced extensive tax cuts. Yields move inversely to prices.

“The speed [of gilt yield rises] has been quite eye-watering. We’ve not seen moves like this since the Financial Crisis,” Craig Inches, head of rates and cash at Royal London Asset Management, told CNBC’s “Squawk Box Europe.”

“The problem you’ve got now is markets are very thin, liquidity is very low, and you’ve got a lot of market participants caught in long positions. There’s been many people who’ve been trying to call the top in the interest rate profile and they’ve been stopped out of markets,” he said.

Analyst says there's a push and pull between the chancellor and the Bank of England

UK economy: “Something’s got to break”, says bank CIO

As sterling slumps against the dollar, hitting a record low in the early hours of Monday, the U.K. is in a position where “something’s got to break”, according to Fahad Kamal, CIO at Kleinwort Hambros.

“Sterling is the thing that seems to be taking a lot of the pressure right now,” Kamal told CNBC’s “Squawk Box Europe.”

Pound plunge: 'Something's got to break,' strategist says

Falling energy prices would also not cause inflation to dip anytime soon, according to the CIO.

“The oil price falling will help, but ultimately inflation has gone beyond just the oil price and commodity prices, it’s much deeper and more entrenched and linked to things like rent and wages,” Kamal said.

— Hannah Ward-Glenton

German business sentiment plummets in September

German economic sentiment deteriorated rapidly in September, according to the latest survey from the ifo Institute.

The ifo Business Climate Index dropped to 84.3 points this month, its lowest value since May 2020 and down from 88.6 points in August.

“The decline is affecting all four sectors of the economy. Companies assessed their current business as clearly worse,” said Clemens Fuest, president of the ifo Institute.

“Pessimism regarding the coming months has grown decidedly; in retail, expectations have fallen to a record low. The German economy is slipping into recession.”

– Elliot Smith

Brent crude slides below $85 a barrel as dollar surges

Brent crude fell below $85 a barrel Monday, as recession fears mount and the U.S. dollar surged.

Brent futures for November settlement were trading down over 1% around $84.92 at 8 a.m. London time. West Texas Intermediate futures also fell to trade around $77.93.

Central banks around the world — including the U.S. and the U.K. — continue to hike interest rates in an effort to tackle inflation.

You can read the full story on CNBC here.

— Hannah Ward-Glenton

Stocks on the move: Belimo up 7%, K+S down 8%

Shares of Swiss heating and ventilation manufacturer Belimo Holding climbed more than 7% in early trade after Berenberg upgraded the stock to “buy” and increased its price target, citing rising demand for home renovation.

At the bottom of the Stoxx 600, German chemical company K+S fell 8%.

– Elliot Smith

Giorgia Meloni and her far-right Brothers of Italy party top vote in Italian elections, exit poll shows

Giorgia Meloni seen speaking during the campaign. Giorgia Meloni, leader of the right nationalist and conservative party Brothers of Italy (Fratelli dItalia, FDI) held the conclusive electoral rally at Arenile, in the left-oriented district of Bagnoli, Naples.

Sopa Images | Lightrocket | Getty Images

Italians are on course to elect the country’s first female prime minister and the first government led by the far-right since the end of World War II.

Giorgia Meloni’s Fratelli d’Italia (Brothers of Italy) party are set to gain 26.4% of the vote, according to an exit poll early Monday morning. The party is in a broad right-wing coalition with Lega, under Matteo Salvini, Silvio Berlusconi’s Forza Italia and a more minor coalition partner, Noi Moderati.

This alliance is set to win 44.43% of the vote, according to exit polls, enough to gain a parliamentary majority with the center-left bloc on 26.57%. Early projections from the actual election results are due Monday morning.

Read more on the story here

Sterling hits record low against the dollar, as Asia-Pacific currencies also weaken

CNBC Pro: Morningstar reveals its top high-dividend global stocks — and gives three 30% upside

Morningstar has revealed its pick of global stocks with the highest dividend yields, saying they stand out in an environment where many companies may not be able to maintain their dividends due to “economic strain.”

Pro subscribers can read more here.

— Ganesh Rao

CNBC Pro: Dan Niles predicts when the S&P 500 might bottom, and reveals how he’s profited this year

Stocks prepare to test their lows in the final week of trading for September

Heading into the final week of trading for September, the Dow and S&P 500 are each down about 6% for the month, while the Nasdaq has lost 8%.

Both the Dow and S&P are now sitting 1.2% and 1.6%, respectively, above their lows from mid-June. The Nasdaq is 2.9% above its low.

European markets: Here are the opening calls

European stocks are expected to open in negative territory on Wednesday as investors react to the latest U.S. inflation data.

The U.K.’s FTSE index is expected to open 47 points lower at 7,341, Germany’s DAX 86 points lower at 13,106, France’s CAC 40 down 28 points and Italy’s FTSE MIB 132 points lower at 22,010, according to data from IG.

Global markets have pulled back following a higher-than-expected U.S. consumer price index report for August which showed prices rose by 0.1% for the month and 8.3% annually in August, the Bureau of Labor Statistics reported Tuesday, defying economist expectations that headline inflation would fall 0.1% month-on-month.

Core CPI, which excludes volatile food and energy costs, climbed 0.6% from July and 6.3% from August 2021.

U.K. inflation figures for August are due and euro zone industrial production for July will be published.

— Holly Ellyatt

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