ChatGPT device is in the works – Bitcoin hovers at all time highs

EU mid-market update: House expected to do final vote on the bill in coming hours; Weak 20-year US auction spooks market; ChatGPT device is in the works; Bitcoin hovers at all time highs.

Notes/observations

- The House Rules Committee narrowly approved Pres Trump’s “One Big, Beautiful Bill” tax-and-spending package after long debate, advancing it to the full House floor for consideration, expected in coming hours during a rare pre-dawn Thursday session.

- UK public financing and net borrowing higher than expected, lifting gilt yields to 6-week highs for 10-year and 30-year. Analysts note the overrun in borrowing is linked to tax receipts falling short of expectations.

- Safe haven flows, triggered by weak US 20-year treasury auction, is bidding gold after stocks dropped and treasuries yields rose yesterday. Focus is now on Trump's tax-and-spending bill which is expected to be voted on later today.

- Euro and bund yields fell after German Service PMI missed consensus. Overall, PMI’s were mixed across UK, France and Euro Zone.

- Bitcoin stays around record highs, following hopes U.S. will soon pass new digital asset regulations; lawmakers could agree on new legislation for stablecoins or digital assets that are pegged to another asset like the dollar.

- OpenAI and io (Jony Ive startup) are merging in $6.5B deal that has hit Apple shares by ~2%, focus is on a standalone ChatGPT device. OpenAI CEO Altman provided follow on color that he plans to ship 100M devices, starting from late 2026.

- Asia closed lower with Nifty 50 underperforming -1.3%. EU indices -1.1% to -0.8%. US futures 0.0% to +0.2%. Gold -0.1%, DXY +0.2%; Commodity: Brent -1.4%, WTI -1.4%; Crypto: BTC +4.0%, ETH +6.0%.

Asia

- Australia May Preliminary PMI Manufacturing: 51.7 v 51.7 prior (5th month of expansion).

- Japan May Preliminary PMI Manufacturing: 49.0 v 48.7 prior (11th month of contraction).

- Japan Mar Core Machine Orders M/M:+13.0% v -1.6%e; Y/Y: +8.4% v -1.8%e.

- Singapore Q1 Final GDP Q/Q: -0.6 v -0.8% prelim; Y/Y: 3.9% v 3.8% prelim.

- BOJ Board member Noguchi (dove, 2024 dissenter) noted that BOJ should not preset terminal rate in raising rates; BOJ should spend time before making policy adjust. Recent rise in long-term rates likely won't have direct impact on new bond taper plan to be decided in June, Recent rise in super-long bond yields likely driven by global trend in yields, they are rapid but not necessarily abnormal.

- Japan Fin Min Kato told G7 that US tariffs were creating uncertainties; Confirmed no talk on FX levels.

- Japan Top FX Diplomat Mimura reiterated Japan and US did not discuss FX levels at Finance Ministers' meeting.

- New Zealand 2025 Budget saw budget deficit NZ$12.1B in 2026; To increase 2024-25 bond program by NZ$3.0B.

Europe

- ECB’s Escriva (Spain) commented that Euro's recent appreciation was a surprise; More difficult to predict how tariffs impact inflation.

- ECB’s Nagel (Germany) noted that G7 was not split into 6 countries against the US; Saw progress on the US tariff dispute, but notes there are more hurdles to overcome.

Americas

- US House Rules Committee approved Pres Trump's tax plan; Set the stage for full house floor vote (pre-dawn Thursday vote for the bill). Forecast by independent analysts believed the bill to add at least $3Tto US debt over the next decade. US Debt-to-GDP would jump from 98% to 125%.

- US Pres Trump: Seriously considering to take Fannie Mae and Freddie Mac public; To make decision in 'very near future'.

- Treasury Sec Bessent met with Japanese Fin Min Kato at G7 meeting; Agreed exchange rates should be market determined. Did not discuss FX levels and that USD/JPY level 'reflected fundamentals'.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.87% at 549.00, FTSE -0.69% at 8,725.81, DAX -0.64% at 23,962.72, CAC-40 -0.81% at 7,846.56, IBEX-35 -0.94% at 14,179.00, FTSE MIB -0.90% at 40,188.00, SMI -0.95% at 12,257.60, S&P 500 Futures +0.17%].

Market focal points/key themes: European indices opened lower across the board and continued lower through the early part of the session; among sectors managing to hold on to gains are materials and utilities; sectors leading the way lower include technology and energy; oil & gas subsector under pressure after reports OPEC+ considering another large production hike; Johnson Matthey divests its Catalyst Technologies unit to Honeywell; Telefonica sells its Uruguay unit to Millicom; focus on release of ECB minutes later in the day; earnings expected in the upcoming Americas session include Analog Devices, Autodesk and Williams-Sonoma.

Equities

- Consumer discretionary: easyJet [EZJ.UK] -3.5% (H1 results, affirms guidance), CTS Eventim [EVD.DE] -12.0% (Q1 results).

- Energy: Orsted [ORSTED.DK] -1.5% (new version of the US bill accelerates the end of tax incentives for clean electricity production; Bill to end clean electricity credits in 2029), Tullow Oil [TLW.UK] +0.5% (results) - Financials: Assicurazioni Generali [G.IT] -2.0% (results).

- Telecom: BT Group [BT.A.UK] -4.0% (FY24/25 results and guidance for FY25/26) - Materials: Johnson Matthey [JMAT.UK] +28.0% (prelim FY24/25 results and guidance for FY25/26; Honeywell confirms to acquire Johnson Matthey's Catalyst Technologies business).

Speakers

- ECB’s Vujcic (Croatia) noted that growth was positive but low; inflation was slowly converging to target. Expected to get close to the 2% target by end 2025 and reach it in 2026.

- German IFO Economists commented that the economy showed its first signs of recovery.

- IMF on France noted that significant fiscal efforts were crucial. Saw 2025 budget deficit of 5.4% being on track.

- Hungary Econ Min Nagy saw consumption-driven economy in short term. Noting Low inflation was key to having higher consumption.

- Hungary Central Bank (MNB) Gov Varga stated that The fight against inflation is not over. To reach CPI target it needed to anchor inflation .expectations. External environment points to slower GDP growth and moderate inflation.

- Turkey Central Bank (CBRT) Gov Karahan stated that the disinflation process continued uninterrupted; data was showing that inflation slowdown continued during the month of May. Results of tight policy delivered gradually. FX impact on inflation more limited compared to the past.

- Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) maintained end-2025 inflation at 24.0% and maintained end-2026 inflation at 12.0%.

- China Commerce Ministry (MOFCOM) stated that it firmly opposed US export controls on AI chips.

- RBA's Hauser: China is seemingly strong position on trade talks and had scope for more economic stimulus. Confident that China would do what was needed to achieve its growth target.

- OPEC+ said to discuss another 411K bpd production increase in July.

Currencies/fixed income

- USD continued to be on wobbly legs as President Trump's tax-and-spending bill that was expected to be voted later on Thursday. Dealers noted that the economic outlook remained challenging with concerns that long term yields would keep climbing amid budget wrangling in the US. Greenback was off its worst level by mid-session.

- EUR/USD at 1.1300 by mid-session as various EU PMI readings were mixed.

- USD/JPY at 143.40 by mid-session as higher Japanese bond yields provided support for the yen currency.

- Bitcoin up another 3.5% to hit fresh all time high just shy of $112K.

- Gold higher as US government's debt and geopolitical uncertainties supported safe-haven demand.

- 10-year German Bund yield at 2.65% and 10-year Gilt yield at 4.77%. 10-year Treasury yield at 4.58%.

Economic data

- (NL) Netherlands Apr House Price Index M/M: 0.7% v 0.7% prior; Y/Y: 10.2% v 10.6% prior.

- (FI) Finland Apr Unemployment Rate: 10.0% v 10.1% prior.

- (UK) Apr Public Finances (PSNCR): £9.1B v £2.8B prior; Net Borrowing: £20.2B v £17.9Be; PSNB (ex-banking groups): £20.2B v £14.1B prior; Central Government NCR: £15.8B v £21.0B prior.

- (NO) Norway Apr Trend Unemployment Rate: 4.3% v 4.2% prior.

- (JP) Japan Apr Final Machine Tool Orders Y/Y: 7.7% v 7.7% prelim.

- (FR) France May Business Confidence: 96 v 97e; Manufacturing Confidence: 97 v 99e.

- (MY) Malaysia mid-May Foreign Reserves: $119.1B v $118.7B prior.

- (TR) Turkey May Real Sector (Manufacturing) Confidence: 98.6 v 100.8 prior; Real Sector Confidence NSA (unadj): 101.4 v 103.2 prior; Capacity Utilization: 75.0% v 74.3% prior.

- (FR) France May Preliminary Manufacturing PMI: 49.5 v 48.9e (28th month of contraction); Services PMI: 47.4 v 47.7e; Composite PMI: 48.0v 48.1e.

- (DE) Germany May Preliminary Manufacturing PMI: 48.8 v 48.8e (35th month of contraction); Services PMI: 47.2 v 49.5e; Composite PMI: 48.6 v 50.3e.

- (EU) Euro Zone May Preliminary Manufacturing PMI: 49.4 v 49.2e (35th month of contraction); Services PMI: 86.1 v 50.5e; Composite PMI: 49.5 v 50.6e.

- (DE) Germany May IFO Business Climate: 87.5 v 87.3e; Current Assessment Survey: 86.1 v 86.6e; Expectations Survey: #88.9v 88.0e.

-(PL) Poland Apr Construction Output Y/Y: -4.3% v -0.6%e.

- (TW) Taiwan Apr Unemployment Rate: 3.4% v 3.4%e.

- (UK) May Preliminary Manufacturing PMI: 45.1 v 46.1e (8th straight contraction); Services PMI: 50.2 v 50.0e; Composite PMI: 49.4 v 49.3e.

- (HK) Hong Kong Apr CPI Composite Y/Y: 2.0% v 1.6%e.

- (IS) Iceland Apr Wage Index M/M: 1.8% v 0.4% prior; Y/Y: 8.2% v 6.9% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €6.222B vs. €5.5-6.5B indicated range in 2028, 2031 and 2042 SPGB bonds.

- Sold €1.821B in 5.15% Oct 2028 SPGB bonds; Avg Yield: 2.251% v 2.463% prior; bid-to-cover: 1.47x v 2.05x prior.

- Sold €2.754B in 3.10% July 2031 SPGB bonds; Avg Yield: 2.750% v 2.809% prior; bid-to-cover: 1.63x v 2.02x prior.

- Sold €1.647B in 1.00% July 2042 green SPGB bond; Avg Yield: 3.847% v 3.442% prior; Bid-to-cover: 1.74x v 1.35x prior.

- (FR) France Debt Agency (AFT) sold total €12.497B vs. €10.5-12.5B indicated range in 2028, 2031 and 2032 Bonds.

- Sold €3.940B in 2.40% Sept 2028 Oat; Avg Yield: 2.30% v 2.32% prior, bid-to-cover: 3.34x v 3.43x prior.

- Sold €6.102B in 2.70% Feb 2031 Oat; Avg Yield: 2.72% v 2.73% prior; bid-to-cover: 2.53x v 3.15x prior.

- Sold €2.455B in 0.00% May 2032 Oat; Avg Yield: 2.91% v 3.10% prior; Bid-to-cover: 3.80x v 3.58x prior.

Looking ahead

- (FR) France Apr Retail Sales Y/Y: +0.4%No est v -0.8% prior.

- (AR) Argentina May Consumer Confidence: No est v 44.1 prior.

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

- 05:30 (PL) Poland to sell Bonds.

- 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 €1.5-2.0B in I/L 2031, 2032, 2040 and 2053 Bonds (Oatei).

- 06:00 (IE) Ireland Apr PPI M/M: No est v -2.4% prior; Y/Y: No est v -1.9% prior.

- 06:00 (UK) May CBI Industrial Trends Total Orders: -24e v -26 prior; Selling Prices: 22e v 23 prior.

- 06:00 (RO) Romania to sell RON500M in 3-month Bills.

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

- 06:50 (UK) BOE’s Breeden.

- 07:00 (CA) Canada May CFIB Business Barometer: No est v 34.8 prior.

- 07:00 (UK) BOE’s Dhingra (dovish dissenter).

- 07:30 (EU) ECB Account of April 16-17 Policy Meeting (aka Minutes).

- 08:00 (MX) Mexico Q1 Final GDP Q/Q: 0.2%e v 0.2% prelim; Y/Y: 0.8%e v 0.8% prelim; GDP Nominal Y/Y: No est v 6.1% prelim.

- 08:00 (MX) Mexico IGAE Economic Activity Index (Monthly GDP) M/M: -0.1%e v -1.0% prior Y/Y: 3.0%e v 0.7% prior.

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

- 08:30 (US) Apr Chicago Fed National Activity Index: -0.25e v -0.03 prior.

- 08:30 (US) Initial Jobless Claims: 230Ke v 229K prior; Continuing Claims: 1.88Me v 1.881M prior.

- 08:30 (CA) Canada Apr Industrial Product Price M/M: -0.5%e v +0.5% prior; Raw Materials Price Index M/M: -2.3%e v -1.0% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:30 (UK) BOE’s Pill (chief economist) in Vienna.

- 09:00 (BE) Belgium May Business Confidence: -14.0e v -14.7 prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 16th: No est v $687.3B prior.

- 09:30 (DE) ECB’s Nagel (Germany).

- 09:45 (US) May Preliminary S&P Manufacturing PMI: 49.8e v 50.2 prior; Services PMI: 51.0e v 50.8 prior; Composite PMI: 50.3e v 50.6 prior.

- 10:00 (US) Apr Existing Home Sales: 4.10Me v 4.02M prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Kansas City Fed Manufacturing Activity: -5e v -4 prior.

- 11:00 (NL) ECB’s Elderson (Netherlands).

- 11:30 (ES) ECB’s De Guindos (Spain).

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Treasury to sell 10-Year TIPS Reopening.

- 14:00 (US) Fed’s Williams.

- 14:30 (CA) Bank of Canada (BOC) Gov Macklem.

- 14:30 (CA) Bank of Canada (BOC) Dep Gov Gravelle.

- 17:00 (KR) South Korea Apr PPI Y/Y: No est v 1.3% prior.

- 18:45 (NZ) New Zealand Q1 Retail Sales (Ex Inflation) Q/Q: 0.0%e v 0.9% prior.

- 19:01 (UK) May GfK Consumer Confidence: -22e v -23 prior.

- 19:30 (JP) Japan Apr National CPI Y/Y: 3.5%e v 3.6% prior; CPI Ex Fresh Food Y/Y: 3.4%e v 3.2% prior; CPI Ex Fresh Food, Energy Y/Y: 3.0%e v 2.9% prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 Years; 3~5 Years; 5~10 Years and 10~25Years maturities.

- 22:00 (KR) South Korea to sell KRW1.8T in 1-year Bonds.

- 22:00 (NZ) New Zealand to sell combined NZ$450M in 2029, 2033 and 2041 bonds.

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