All eyes on US consumer confidence

In focus today

From the US, Conference Board's May consumer confidence survey is due for release in the afternoon. Another preliminary survey from the University of Michigan released earlier pointed towards further weakening in consumer sentiment in early May. That said, Conference Board's surveys' cut-off date is typically around a week later, so we will follow if the US-China trade deal managed to improve consumers' mood.

In the euro area, focus turns to the French inflation data for May. As French inflation has been very low since February due to a publicly related lowering of electricity prices, focus will mainly be on the m/m increases as predictors of the euro area data.

In Sweden, the NIER survey released at 09:00 CET may shed further light on both household sentiment (which we expect to recover) and companies' price plans. While price plans have mainly been elevated due to retail trade and especially by non-durables, it still poses as an upside risk to inflation and should be a concern for the Riksbank. A clear easing in the price plans would be needed to make the case a bit stronger for the Riksbank to ease policy. Additionally, Riksbank board member Per Jansson gives a speech at 08:30-09:30 CET, potentially commenting on the fresh data.

In Hungary, the central bank will announce its policy rate. The market consensus is a for an unchanged decision, with the policy rate kept at 6.50%.

Overnight, the Reserve Bank of New Zealand will have a monetary policy meeting. In line with markets, we expect a 25bp cut to the Official Cash Rate (to 3.25%).

Economic and market news

What happened overnight

In China, industrial profit for the January-April period ticked up 1.4% y/y (January-March: 0.8% y/y), reflecting economic resilience in the face of pressure from trade tensions with the US and lingering deflationary pressures domestically. In isolation, April alone was up 3.0% y/y compared to 2.6% y/y in March. The increase in profits was driven by a government trade-in program that boosted demand for manufactured products.

In Japan, while the BoJ projects that the effects of food inflation will wane, BoJ Governor Ueda emphasized that the central bank should be "careful about how food price inflation will impact underlying inflation" with underlying inflation nearing 2%. Ueda also added that the BoJ continues to expect underlying inflation to gradually move toward 2% over the second half of its forecast horizon, and that the BoJ will "adjust the degree of monetary easing as needed." Currently, the BoJ is expected to stay on hold at its meeting on 17 June.  We believe the next BoJ hike is most likely to occur in October this year, followed by a potential additional hike in Q1 2026.

What happened yesterday

In Sweden, PPI for April stood at -1.6% m/m (-2.4% y/y), compared to -3.0% m/m and -0.3% y/y in March, marking the largest decline yearly in 16 months. Electricity prices served as the main driver behind the decrease.

Equities: The tariff induced round trips in equities are truly remarkable. Equities recouped most of the tariff threat losses already Friday and amid the tariff pause on Sunday, equities rallied yesterday. This means that European equities have fully recovered to where they were before the 50% tariff threat. For the stock market, nothing has really happened. After multiple threats by the US administration that have ultimately not been carried out, markets are no longer taking them at face value.

European markets were in risk-on yesterday while the US market was closed for holiday, with Stoxx 600 up 1% (German DAX up 1.7%). Unlike past sessions, this was not a large cap cyclical rally. Instead, investors looked outside the usual bets for new sources of risk: Growth stocks and small-cap stocks. It is a long time since we saw such preference in equity markets. While interesting to observe after years of underperformance, we do not style mix it to be particularly long lasting, given the upward pressure on long-end yields.

FI & FX: EUR/USD continue to experience upwards pressure and traded close to 1.14 yesterday. SEK and NOK held on to recent gains vis-à-vis the EUR on an otherwise quiet day in FX markets. Long-end EUR yields dropped slightly yesterday despite some relief on the tariff front as the market digested the decision by US to postpone the 50% tariff on the EU announced on Friday. Oil market did not react on OPEC+'s call to move its coming meeting, where it will decide on another output hike, forward one day to 31 May.