Trump hopes for deal with Iran but hostilities with Israel show no sign of slowing down

EU mid-market update: Trump hopes for deal with Iran but hostilities with Israel show no sign of slowing down; G7 summit starts in Canada with more talks on trade expected.

Notes/observations

- Israel/Iran and geopolitics still at the forefront of attention after chaotic session on Fri, oil is down ~1%. UK and Eurozone bond yields are higher, reflecting the higher crude pricing expected impact on inflation. Sentiment shift triggered by Trump saying he ‘hopes deal between Iran and Israel, it is time for a deal, we will see what happens’.

- Over the weekend, Israel PM Netanyahu declined to comment on press report that Trump vetoed Israel's plan to assassinate Iran's Supreme Leader Ayatollah Ali Khamenei.

- US and Japanese trade officials reportedly could meet as soon as tomorrow on sidelines of G7 Summit in Canada.

- US dollar and S&P vix fall, highlighting the improved risk sentiment overnight about upcoming central bank rate decisions from BOJ, Fed and BOE this week.

- Japan BOJ said to to consider reducing JBG purchases by ¥200B per quarter from the Spring of 2026 (largely inline) at tomorrow’s meeting.

- UK press reports that another Air India Boeing 787-8 Dreamliner had to return to Hong Kong mid-flight after a suspected technical issue; It's not yet known what the suspected technical issue flagged by the pilot.

- Homebuilders in UK decline after Rightmove property prices declined MoM for first time since 2024.

- Asia closed higher with KOSPI outperforming +1.8%. EU indices +0.4-0.8%. US futures +0.5-0.7%. Gold -0.4%, DXY -0.2%; Commodity: Brent -0.9%, WTI -0.8%; Crypto: BTC +2.1%, ETH +4.7%.

Asia

- New Zealand May Performance Services Index: 44.0 v 48.1 prior.

- China May New Home Prices M/M: -0.22% v -0.12% prior.

- China May Retail Sales Y/Y: 6.4% v 4.9%e.

- China May Industrial Production Y/Y: 5.8% v 6.0%e.

- China May YTD Fixed Urban Assets Y/Y: 3.7% v 4.0%e.

- China May Surveyed Jobless Rate: 5.0% v 5.1%e.

- Japan BOJ said to consider reducing JBG purchases by ¥200B per quarter from the spring of 2026.

Mid-East

- Oil higher on mid-East conflict.

Global conflict/tensions

Israel hit more targets in Tehran and Iranian missiles fired at Israel.

- Iran said to have told Qatari and Omani Official that they were not open to a ceasefire negotiations while being bombed by Israel. Iranian For Min noted that would prepare the ground for a return to diplomacy and negotiations if Israeli aggression stopped.

- Iran Pres Pezeskian stated that it had no intention of developing nuclear weapon and had the right to nuclear energy and research, Would not let anyone take that away.

- President Trump said to have told Israel PM Netanyahu that targeting Supreme Leader Ayatollah Khamenei was not a good idea and thereby vetoed the plan. US could potentially join the conflict if Iran targets US assets in the region. Hoped Iran and Israel can find an agreement but sometimes you have to fight it out.

- Israel PM Netanyahu stated that regime change in Iran could be a result of Israeli military attacks.

Europe:

- UK Jun Rightmove House Prices M/M: -0.3% v +0.6% prior; Y/Y: 0.8% v 1.2% prior.

- Germany policy paper said to want the EU to keep a lid on spending and sees limited financial leeway on the Bloc’ s next 7-year budget.

- S&P affirmed Germany sovereign rating at AAA; Outlook Stable.

- S&P affirmed Sweden sovereign rating at AAA, outlook Stable.

Americas:

- G-7 leaders gather in Canada for summit.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.34% at 546.78, FTSE +0.35% at 8,881.68, DAX +0.46% at 23,608.30, CAC-40 +0.88% at 7,752.42, IBEX-35 +1.13% at 14,060.99, FTSE MIB +0.76% at 39,738.00, SMI -0.16% at 12,111.23, S&P 500 Futures +0.58%].

Market focal points/key themes: European indices opened generally higher and remained upbeat through the early part of the session; with the Middle East conflict still contained, markets seemed to gain some optimism on better-than-expected China data; among sectors trending higher are financials and energy; lagging sectors include health care and communication services; reportedly Metro Bank receives takeover offer from PE firm; earnings expected in the upcoming US session include Lennar.

Equities

- Consumer discretionary: Kering [KER.FR] +8.0% (Renault CEO Luca De Meo to step down July 15th to lead Kering), Entain [ENT.UK] +8.5% (BetMGM raises outlook after positive momentum).

- Energy: TotalEnergies [TTE.FR] +0.5% (oil prices amid Israel-Iran conflict; acquires 25% working interest in a portfolio of exploration leases Offshore U.S. from Chevron (operator); No terms disclosed) - Financials: Metro Bank [MTRO.UK] +13.5% (reportedly contacted by the private equity firm in recent weeks regarding a possible acquisition).

- Industrials: Renault [RNO.FR] -7.5% (Renault CEO Luca De Meo to step down July 15th to lead Kering), Airbus [AIR.FR] -2.0% (CEO comments ahead of Paris Airshow this week; Supply chain is improving and early signs defense spending is increasing).

Speakers

- ECB de Guindos (Spain) commented that the risk of undershooting the inflation target was very limited. Going to pay more attention to impact on financial stability. Appreciation of EUR currency was not an obstacle; pace had not been rapid or volatile. Fully convinced that Fed swap lines would be maintained over time. Bringing gold back from NY not even discussed.

- ECB's Nagel (Germany) stated that was not sensible to signal either pause or rate cut given exceptional uncertainty; must retain full optionality on interest rates. Cautious monetary policy and communications is advisable. Reiterated that should continue making decisions on a meeting-by-meeting approach.

- BOE policy makers said to be concerned that a big rise in regulated prices could fuel wage demands. Caution likely to be reinforced by rise in oil prices following Iran/Israel conflict. BOE prepared to keep policy steady at the Jun meeting but signal more cuts to come.

- Poland Central Bank (NBP) Kotecki commented that domestic CPI likely to fall <3% in July.

- Swiss SECO Summer Economic Forecasts cut its 2025 GDP growth forecast from 1.4% to 1.3% and cut the 2026 GDP growth forecast from 1.6% to 1.2%. Forecasts cut 2025 CPI from 0.3% to 0.1% and cut 2026 CPI from 0.6% to 0.5.

- Swiss KOF Institute Summer Economic Forecast maintained 2025 GDP growth (sports adj) at 1.4% while cutting 2026 GDP growth from 1.9% to 1.5%. Forecasts cut 2025 CPI from 0.5% to 0.2% (below target, SNB has a 2% inflation target) and cut 2026 CPI from 0.6% to 0.5%.

- Israel National Security Advisor Hanegbi noted that toppling Iran regime was not part of Israeli goals; Israel could tackle Fordow nuclear site alone.

Currencies/fixed income

- USD was steady during a quiet EU morning. Focus remained on the Mid-East as Israel/Iran conflict entered its 4th day.

- EUR/USD staying below the 1.16 level. One analysts noted euro's moves in the coming days would likely be heavily dependent on oil market volatility and the USD’s performance.

- GBP/USD holding below the 1.36 level with focus on Thurs BOE rate decision. BOE seen keeping policy steady but likely to maintain a "gradual and careful" approach to rate cuts.

- USD/JPY at 144.20 by mid-session. BOJ widely expected to keep interest rates unchanged on Tues. Recent inflation data presenting greater possibility that the central bank would hike rates next in July. Markets watching for more signals on tapering plan of the central bank bond purchases.

- 10-year German Bund yield at 2.56% and 10-year Gilt yield at 4.57%. 10-year Treasury yield at 4.44%.

Economic data

- (DK) Denmark May PPI M/M: -1.4% v -1.8% prior; Y/Y: 9.2% v 10.3% prior.

- (NO) Norway May Trade Balance (NOK): 46.1B v 54.5B prior.

- (IN) India May Wholesale Prices (WPI) Y/Y: 0.4% v 0.7%e.

- (CH) Swiss May Producer & Import Prices M/M: -0.5% v +0.1% prior; Y/Y: -0.7% v -0.5% prior.

- (CZ) Czech May PPI Industrial M/M: -0.6% v -0.4%e; Y/Y: -0.8% v -0.6%e.

- (TR) Turkey Apr Current Account Balance: -$7.9B v -$7.5Be.

- (TR) Turkey Central Bank (TCMB) Apr Inflation Expectation Survey: Expected Inflation Next 12 Months: 24.6% v 25.1% prior.

- (TR) Turkey Apr Retail Sales Y/Y: 11.5% v 9.6% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 434.8B v 438.1B prior; Domestic Sight Deposits: 426.7B v 426.3B prior.

- (IT) Italy May Final CPI M/M: -0.1% v 0.0% prelim; Y/Y: 1.6% v 1.7% prelim.

- (IT) Italy May Final CPI EU Harmonized M/M: 0.0% v 0.1% prelim; Y/Y: 1.8% v 1.9% prelim; CPI Index (ex-tobacco): 121.2 v 121.3 prior.

- (TR) Turkey May Central Gov't Budget Balance (TRY): +235.2 v -174.7B prior.

- (IT) Italy Apr General Government Debt: €3.063T v €3.033T prior (record high).

- (EU) Euro Zone Q1 Labour Costs Y/Y: 3.4% v 3.8% prior.

Fixed income issuance

- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €3.0B in 12-month BuBills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 3-month and 6-month Bills.

- 06:00 (IL) Israel Q1 Preliminary GDP Annualized (2nd of 3 readings): No est v 3.4% advance.

- 06:00 (IL) Israel Q1 Current Account Balance: No est v $3.0B prior.

- 06:00 (IL) Israel May Unemployment Rate: No est v 3.0% prior.

- 06:00 (RO) Romania to sell RON400M in 7.5% 2033 Bonds.

- 06:00 (IL) Israel to sell combined ILS2.25B in2031, 2033, 2034, 2042 and 2052 bonds.

- 06:30 (IT) ECB’s Cipollone (Italy).

- 07:00 (BR) Brazil Jun FGV Inflation IGP-10 M/M: -0.9%e v 0.0% prior; Y/Y: No est v 7.5% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (PL) Poland May CPI Core M/M: -0.1%e v +0.6% prior; Y/Y: 3.3%e v 3.4% prior.

- 08:00 (BR) Brazil Apr Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.8% prior; Y/Y: 2.4%e v 3.5% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:15 (CA) Canada May Annualized Housing Starts: 247.5Ke v 278.6K prior.

- 08:30 (US) Jun Empire Manufacturing: -6.3e v -9.2 prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.1-7.7B in 3-month, 6-month and 12-month bills.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 6th: No est v $678.7B prior.

- 09:00 (CA) Canada May Existing Home Sales M/M: No est v -0.1% prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:00 (DE) ECB's Nagel (Germany).

- 13:00 Treasury to sell 20-Year Bond Reopening.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea May Export Price Index M/M: No est v -1.2% prior; Y/Y: No est v 0.7% prior.

- 17:00 (KR) South Korea May Import Price Index M/M: No est v -1.9% prior; Y/Y: No est v -2.3% prior.

- 18:45 (NZ) New Zealand May Food Prices M/M: No est v 0.8% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 86.7 prior.

- 20:30 (SG) Singapore May Non-Oil Domestic Exports Y/Y: No est v 12.4% prior; Electronic Exports Y/Y: No est v 23.5% prior.

- (TH) Thailand to sell combined THB105B in 3-month and 12-month bills.

- Bank of Japan (BOJ) Interest Rate Decision: Expected to leave Target Rate unchanged at 0.50%.