Central bank focus turns to Bank of England – US is off

EU mid-market update: World on tenterhooks about nuclear conflict if US 'goes in' on Iran but market looking through Trump talk; Central bank focus turns to Bank of England; US is off.

Notes/observations

- Rate decisions in focus as geopolitical tensions continue to percolate but market impact is holding off until next move by US, in which an attack on Iran nuclear sites is speculated in ‘coming days’. In the meantime, string of rate decisions from Philippines (cut 25bps), Swiss SNB (cut 25bps), Norway (unexpectedly cut 25bps), Taiwan (unchanged). Both Turkey and BOE at 07:00 ET with BOE expected to hold.

- Since yesterday’s press conference, Trump has remained silent on potential Iran attack, but press outlets note that next 24-48 hours will be key for any final decisions.

- Despite US initial jobless claims holding near 245 000, subtler gauges—continuing claims up 16 of the past 19 weeks, 26 states with higher jobless rates, and a broad spike in Google searches for “file for unemployment”—signal that hiring demand is stalling across the country. Recruitment giant Hays today reported a steep, sequential drop in permanent placements in Q4, underscoring that firms are freezing head-count rather than launching mass layoffs, a pattern that typically lengthens unemployment duration and foreshadows a broader labor-market downturn.

- MIT study of under-graduates found that relying on GPT-4 to draft essays eroded both short-term recall (83 % couldn’t quote their own text) and EEG-measured neural connectivity, effects that lingered even after students went “no-tool.” The authors liken this “cognitive debt” to high-interest credit: use AI as a coach asking questions and the brain gains equity, but treat it as a ghost-writer and tomorrow’s memory and reasoning pay the hidden cost.

- US market holiday for ‘Juneteenth’.

- Asia closed lower with Hang Seng underperforming -2.0%. EU indices -0.4% to -0.8%. US futures -0.4% to -0.5%. Gold -0.1%, DXY +0.1%; Commodity: Brent +0.3%, WTI +0.5%; Crypto: BTC +0.1%, ETH 0.0%.

Asia

- New Zealand Q1 GDP Q/Q: 0.8% v 0.7%e; Y/Y: -0.7% v -0.8%e.

- Australia May Employment Change: -2.5K v +21.2Ke; Unemployment Rate: 4.1% v 4.1%e.

Global conflict/tensions

- US Officials said to be preparing for possible strike on Iran in 'coming days'. Trump said to be edging closer to a military strike on Iran but remained undecided. Trump said to have doubts on the ability of bunker-buster bombs to destroy the Iran's Fordow nuclear facility (**Note: Iran's Fordow uranium enrichment facility is located deep beneath a mountain south of Tehran. US officials say could be destroyed using 30,000-pound bunker-busting bombs delivered by B-2 stealth bombers).

Europe

- Swiss National Bank (SNB) Financial Stability Report: Economic and financial outlook highly uncertain, in particular due to trade policy and geopolitical tensions.

Americas

- FOMC Interest Rate Decision: Expected to leave Target Range unchanged at 4.25-4.50% (as expected). Committee was attentive to the risks to both sides of its dual mandate.

- FOMC Staff Projections signals no rush; dials down our FFR cuts outlook for 2025 (officials who think the Fed won’t cut at all this year rose to seven from four in March)., Forecasts 50 bps of cuts in 2025, and another 25 bps in 2026.

- Fed Chair Powell post rate decision press conference noted economy was in a solid position; Near term inflation expectations had moved up recently, based on surveys; Inflation had come down a great deal, but running somewhat above our 2% objective. Effects of tariffs would depend on level, increases this year would likely weigh on economic activity, and push inflation up.

- US Apr Total Net TIC Flows: -$14.2B v $253.1B prior; Net Long-term TIC Flows: -$7.8B v $162.4B prior.

- Brazil Central Bank (BCB) raised Selic Target Rate by 25bps to 15.00% (not expected). Statement noted that the risks to the inflation scenarios, both to the upside and to the downside, continue to be higher than usual.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.48% at 537.74, FTSE -0.38% at 8,810.22, DAX -0.63% at 23,195.27, CAC-40 -0.80% at 7,595.06, IBEX-35 -0.44% at 13,873.43, FTSE MIB -0.40% at 39,262.00, SMI -0.98% at 11,836.14, S&P 500 Futures %].

Market focal points/key themes: European indices opened lower across the board and remained under pressure through the early part of the session; Croatia and Poland closed for holiday; lack of risk appetite blamed on Middle East conflict; among better performing sectors are energy and telecom; sectors leading to the downside include financials and technology; travel & leisure subsector dragged down by airlines; oil & gas subsector supported with Brent near $78/bbl; Frasers confirms it will make an offer for Revolution Beauty; focus on BOE rate decision later in the day; US closed for holiday.

Equities

- Consumer discretionary: Hays [HAS.UK] -12.0% (FY25 trading update), Emmi [EMMN.CH] -4.5% (MIBA Genossenschaft places 110,000 shares in Emmi AG).

- Energy: Neste Oil [NESTE.FI] +5.0% (analyst upgrade) - Financials: UBS Group [UBSG.CH] -2.0% (SNB cuts rates to zero).

- Industrials: Saab [SAABB.SE] +3.5% (Swedish lawmakers back proposal for 5% defense spending target), Aker Solutions [AKSO.NO] -4.0% (analyst downgrade).

Speakers

- ECB chief Lagarde stated that greater regional trade could offset global losses.

- ECB’s Rehn (Finland) stressed that the region risked stagflation shock if Middle East crisis deepened.

- ECB's Villeroy (France) noted that if there was a key rate change in next 6 months it would likely be a cut.

- Swiss National Bank Policy Statement reiterated stance that was prepared to intervene in FX market as needed. Scenario for the global economy remained subject to high uncertainty with developments abroad still being the main risk to the Swiss economy.

- SNB President Schlegel post rate decision press conference noted uncertainty about future inflation remained elevated. Recent easing to counter lower inflation pressure. On the verge of negative rate territory and aware of possible negative side effects.

- Norway Central Bank Policy Statement noted that key rate would be reduced further during course of 2025. Stressed that a restrictive policy was still needed Inflation had declined since the monetary policy meeting in March, and the inflation outlook for the coming year indicated lower inflation than previously expected. Economic outlook was uncertain.

- Norway Central Bank (Norges) Gov Bache post rate decision press conference noted that the task of bringing inflation to target was not done. Rate path suggested one or two more cuts in 2025.

- Russia envoy Dmitriev noted that joint action by Russia, US and Saudi Arabia to stabilize oil market was possible, based on precedent of similar action in 2020.

- Japan PM Ishiba stated that to continue to strongly seek review of US tariffs.

- Philippines Central Bank Policy Statement saw the need for an accommodative monetary policy. Would continue to assess impact of previous easing. Noted deceleration of global economic activity and sees slower growth domestically. Would safeguard price stability.

- Taiwan Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. To cautiously respond to changes brought by US policies. Reiterated ready to step in when needed to maintain FX market order.

Currencies/fixed income

- USD held onto its post FOMC gains during a quiet EU session. Focus remained on the Mid-East tensions.

- GBP/USD at 1.3420 area ahead of the BOE rate decision. Market pricing over 95% change that BOE would keep its policy steady today. Focus to be on the gradual language of the expected paxce of rate cuts..

- NOK currency was softer following the surprise Norges rate cut and dovish guidance.

- 10-year German Bund yield at 2.54% and 10-year Gilt yield at 4.55%. 10-year No cash Treasury yield during session (US holiday); Wed close at 4.39%.

Economic data

- (NL) Netherlands May Unemployment Rate: 3.8% v 3.8% prior.

- (CH) Swiss May Trade Balance (CHF): 3.8B v 6.3B prior; Real Exports M/M: -10.2% v -3.7% prior; Real Imports M/M: +0.5% v -10.4% prior; Watch Exports Y/Y: -9,5% v 18.5% prior.

- (ES) Spain Apr Home sales Y/Y: 2.3% v 40.6% prior.

- (PH) Philippines Central Bank (BSP) cut Overnight Borrowing Rate by 25bps to 5.25% (as expected).

- (CH) Swiss National Bank (SNB) cut Policy Rate by 25bps to 0.00% (as expected).

- (NO) Norway Central Bank (Norges) cut the Deposit Rate by 25bps to 4.25% to move into easing.

- (TW) Taiwan Central Bank (CBC) left Benchmark Interest Rate unchanged at 2.00% (as expected).

- (EU) Euro Zone Apr Construction Output M/M: +1.7% v -0.2% prior; Y/Y: +3.0% v -1.3% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.546B vs. €5.0-6.0B indicated range in 2030, 2033 and 2035 SPGB bonds.

- Sold €1.868B in 1.95% July 2030 SPGB bonds; Avg Yield: 2.506% v 2.950% prior; Bid-to-cover: 2.13x v 2.04x prior.

- Sold €1.428B in 3.15% Apr 2033 SPGB bonds; Avg Yield: 2.904% v 3.554% prior; bid-to-cover: 1.99x v 1.47x prior.

- Sold €2.250B in 3.20% Oct 2035 SPGB bonds; Avg Yield: 3.208%; bid-to-cover: 1.73x.

- (FR) France Debt Agency (AFT) sold total €12.0B vs. €10.0-12.0B indicated range in 2028, 2030 and 2031 Bonds.

- Sold €3.739B in 2.40% Sept 2028 Oat; Avg Yield: 2.28% v 2.30% prior, bid-to-cover: 2.88x v 3.34x prior (May 22nd 2025).

- Sold €3.541B in 2.75% Feb 2030 Oat; Avg Yield: 2.53% v 2.80% prior; Bid-to-cover: 3.81x v 3.37x prior (Mar 20th 2025).

- Sold €4.720B in 2.70% Feb 2031 Oat; Avg Yield: 2.69% v 2.72% prior; bid-to-cover: 3.42x v 2.53x prior.

Looking ahead

- (IL) Israel May 12-month CPI Forecast: No est v 2.4% prior.

- (AR) Argentina Jun Consumer Confidence: No est v 45.5 prior.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.25-1.75B in 2028, 2034 and 2038 inflation-linked bonds (Oatei).

- 06:00 (IE) Ireland Apr Property Prices M/M: No est v 0.0% prior; Y/Y: No est v 7.5% prior.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 9-month Bills.

- 06:00 (RO) Romania to sell combined RON800M in 2027 and 2031 bonds.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:30 (EU) ECB chief Lagarde.

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 4.25%.

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 46.00%.

- 07:00 (CA) Canada Jun CFIB Business Barometer: No est v 40.0 prior.

- 08:00 (MX) Mexico Apr Gold Production: No est v 6.2K prior; Silver Production: No est v 351.7K prior; Copper Production: No est v 43.4K prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 13th: No est v $687.3B prior.

- 10:00 (ZA) South Africa Central Bank (SARB) Financial Stability Report.

- 12:00 (EU) ECB chief Lagarde.

- 15:00 (AR) Argentina Q1 Unemployment Rate: No est v 6.4% prior.

- 15:00 (AR) Argentina May Trade Balance: $1.1Be v $0.2B prior.

- 17:00 (KR) South Korea May PPI Y/Y: No est v 0.9% prior.

- 19:01 (UK) Jun GfK Consumer Confidence: -20e v -20 prior.

- 19:30 (JP) Japan May National CPI Y/Y: 3.5%e v 3.6% prior; CPI (Ex Fresh Food) Y/Y: 3.6%e v 3.5% prior; (CPI Ex Fresh Food, Energy) Y/Y: 3.2%e v 3.0% prior.

- 21:00 (CN) China PBOC Monthly Loan Prime Rate (LPR) Setting: Expected to leave both 1-year and 5-year unchanged at 3.00% and 3.50% respectively.

- 22:00 (KR) South Korea to sell KRW1.7T in 1-year Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.