CPI will be the first under Chair Walsh

EU mid-market update: CPI will be the first under Chair Walsh; Strait of Hormuz goes kinetic again; Anthropic releases safe 'Mythos'; Oracle reports tonight.

Notes/observations

- US CPI the session's main event. Consensus sees headline inflation accelerating to 4.2% y/y in May from 3.8%, with analysts warning an upside surprise could cause turmoil given how febrile markets have been. The print lands with the Fed in its quiet period ahead of next week's decision and a board skewing hawkish. Incoming Bank of Canada decision at 09:45 ET, expected to hold at 2.25% with a hike fully priced by December; the ECB is fully priced for a 25bp hike Thursday.

- Tit-for-tat strikes in Middle East. US launched a third round of strikes against Iranian air-defence and radar systems around the Strait of Hormuz in response to the downing of a US Apache helicopter (crew reported safe), with the IRGC retaliating via drone attacks on the US Fifth Fleet in Bahrain - most reportedly intercepted. Crucially, rhetoric on both sides leaned toward containment: CENTCOM framed the strikes as a "proportional" response now complete, and Tehran tied any further action to renewed US attacks.

- VP Vance signaled high confidence that a US-Iran deal is advancing, stating it could arrive within the next week or stretch a few months, but will “absolutely” land before the November midterms. He emphasized the goal is not a short-term pause but a durable agreement that permanently neutralizes Iran’s nuclear threat for the long term, aligning with Trump’s repeated assertions (now over 50 times since March) of actively “working on a deal” and potential lifting of the blockade by Labor Day early Sept.

- The Strait of Hormuz crisis has now decisively crossed Aramco’s red line. Exactly one month ago, the Saudi CEO warned that any closure extending beyond “a few weeks” would push full market normalization out to 2027; with that window now closed and Hapag-Lloyd’s CEO stating it remains unclear when the strait reopens - and even then will require at least three months for meaningful recovery - Aramco’s 2027 scenario has become the operative base case. Global inventories, which masked the true severity, are depleting fast, shifting the shock from headline prices to structural chemical-feedstock shortages and downstream pain. The market is therefore not merely awaiting a reopening, but a prolonged, multi-quarter rebalancing of shipping networks, risk premia, and supply chains.

- Anthropic launched Claude Fable 5 - its most powerful publicly available model and a safeguarded gateway to the Mythos-class system — priced at twice the rate of Claude Opus 4.8 ($10 per million input tokens, $50 per million output). While Fable 5 delivers superior memory and complex-task performance for general users, it redirects dangerous queries on bioweapons or cyber exploits back to the safer Opus 4.8, balancing frontier intelligence with robust guardrails in long-running asynchronous execution: it sustains ambitious, days-long agentic workflows and knowledge work with minimal intervention, a capability previously locked behind Mythos.

- TTN SpaceX IPO Preview: SpaceX’s IPO presents a control premium disguised as growth equity: public investors enter a tightly engineered liquidity machine where Musk retains super-voting dominance, staggered insider lock-up releases create repeated supply waves over a year, and old strategic holders (Google, Valor, DFJ) gain orderly exits while public capital absorbs bridge-loan penalties and related-party lease economics. The financial architecture hides critical mismatches - long-duration GPU/power infrastructure obligations versus short-notice cancellable contracts with Anthropic and Google, insider-adjacent Valor leases financing the AI stack, and orbital data-center economics burdened by unrepairable hardware and rapid depreciation. Local political and regulatory frictions (Mississippi turbine suits, Texas water/power bargains) can throttle the AI ramp faster than model competition, while Musk’s new incentive plan quietly reorients the company toward 100 TW orbital compute as a vesting trigger. SpaceX going public risks turning Tesla from the clean public Musk proxy into a key supplier and collateral asset inside a larger compute empire, delivering real Energy/Megapack tailwinds but eroding Tesla’s standalone AI narrative premium and valuation multiple.

- Gilts are trading with a clear political-risk premium, with the Makerfield by-election - where Andy Burnham is running - and Reeves hinting at tax rises to fund defense keeping UK fiscal/leadership uncertainty alive.

- Asia closed lower with KOSPI underperforming 4.5%. EU indices +0.1% to -0.5%. US futures -0.6% to -1.2%. Gold -2.1%, DXY -0.1%; Commodity: Brent -0.6%, WTI -0.8%; Crypto: BTC -2.5%, ETH -3.1%.

Asia

- China May CPI Y/Y: 1.2% V 1.3%E [the data remains below the ~2.0% CPI target]; CPI Core Y/Y: 1.1% v 1.3%e; PPI Y/Y: 3.9% v 3.8%e [highest y/y figure since Jul 2022].

- Japan's Defense Ministry expected to designate China as "Japan's most serious concern" - Ministry's Annual White Paper (Nikkei).

- South Korea Finance Ministry: Volatility in financial sector is expanding.

- Korea Exchange activates sidecar to halt Kospi program selling, following Kospi index "extending losses" by -4.9% - US financial press.

- Magnitude 6.0 earthquake strikes Auckland Islands, New Zealand region.

- China banks said to be attracting gold investors via 'favors' - China Securities Times.

- China MIIT: Seeks "breakthrough" integrating AI and communication networks.

- Japan Weather Bureau: El Nino phenomenon appears to be occurring since Spring, 2026; 100% chance of El Nino phenomenon to continue through Autumn.

- Thailand said to restart consideration of Trans-Pacific CPTPP Trading Bloc membership - Nikkei.

Europe

- Germany DIW Institute: German economy likely to shrink in Q2 and Q3.

- UK private utility name Thames Water to pay £749M under creditor takeover deal - FT.

- European Union signs economic deal with Comoros, Madagascar, Mauritius, Seychelles.

- Ukraine Pres Zelenskiy: Hit Russian Kuibyshev refinery overnight.

Americas

- Cuba poised to receive it's biggest US fuel shipment dating back to the "Cold War embargo" - US financial press.

- Arizona has proposed pausing tax breaks related to data centers for 3 years - US financial press.

- Reportedly the White House has requested the Center of AI Standards and Innovation to stop publishing public reports - WSJ.

- Reportedly US Intelligence workforce were told to expect cuts - press.

- US Deputy Secretary of State Landau: US working to release energy reserves and boost sales of LPG, LNG to ASEAN nations.

- Brazil Aviaion Regulator ANAC Head: Brazil seeks US, Canada, and Europe cooperation to harmonize eVTOL rules.

Global conflict/tensions

- US VP Vance: I think the Iran deal could happen in the next week, but it could also happen months from now; Deal with Iran could "absolutely" come before November's midterm elections - extracts from "CBS Sunday Morning" interview to be aired on June 14th.

- Iran Foreign Ministry spokesman Baghaei: With continued ceasefire violations, US harms the diplomatic process; Iran needs to re-assess following overnight clashes.

- US CENTCOM says has begun "self defense" strikes against Iran, in response to the downing of a US Apache helicopter; Mission will be a proportional response to Iranian aggression - X Post.

- US Pres Trump: It's important to respond to Iran downing of helicopter; Our response will be strong and is happening now.

- Iran state media: Military sources say no offensive air military ops conducted in the last 24 hours in the Strait of Hormuz; Any renewed hostility by the enemy under the pretext of the US Apache helicopter crash will trigger a decisive response.

- Iran's State Media: Qeshm was attacked; Situation now reported to be calm after US attacks on areas in Southern Iran.

- US Official: [Confirms] Third round of strikes in Iran - Axios.

- Iran IRGC: launched drone strike on US Fifth fleet in Bahrain; Clashes are continuing, warns 'more severe responses' if US hostility continues; hit 21 aerial US Naval targets in the region, used long-range missiles in certain strikes - Iran media.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.31% at 616.74, FTSE -0.34% at 10,192.99, DAX -0.52% at 24,290.28, CAC-40 -0.17% at 8,189.87, IBEX-35 -0.25% at 18,141.21, FTSE MIB +0.09% at 50,310.50, SMI +0.32% at 13,399.00, S&P 500 Futures -0.79%].

Market focal points/key themes: European indices open modestly higher and remained in the green through the early part of the session; risk appetite supported after tit-for-tat strikes between US and Iran end without escalation; among sectors leading the way higher are consumer discretionary and financials; lagging sectors include telecom and technology; EnQuest acquires four offshore assets in Malaysia; reportedly KKR revises offer for DCC; focus on release of US CPI later in the day; earnings expected in the upcoming US session includes Oracle.

Equities

- Consumer discretionary: Adidas [ADS.DE] +1.0% (analyst upgrade), WH Smith [SMWH.UK] -18.5% (trading update; files to sell shares).

- Consumer staples: Fuller Smith & Turner [FSTA.UK] +11.5% (earnings).

- Healthcare: Sanofi [SAN.FR] -1.0% (stops one trial; affirms outlook).

- Industrials: Hapag-Lloyd [HPAG.DE] +1.0% (CEO comments), Volvo [VOLVA.SE] -0.5% (CMD).

Speakers

- Taiwan Central Bank (CBC) Gov Yang: I personally believe the recent pullback of the stock market is healthy - comments to Legislature.

- Indonesia Central Bank (BI) Gov Warjiyo: BI sees Indonesia economic growth at 5.1-5.9% in 2027; Rupiah (IDR) currency is inline with the government's estimate of 16,800-17,500 - comments in parliament.

- Indonesia Fin Min: Impact on inflation from fuel price hike should be limited.

Economic data

- (GR) Greece Apr Industrial Production Y/Y: 2.1% v 8.2% prior.

- (GR) Greece May CPI Y/Y: 5.2% v 5.4% prior; CPI EU Harmonized Y/Y: 4.9% v 4.6% prior.

- (IS) Iceland May International Reserves (ISK): 1.01T v 939B prior.

- (IT) Italy Apr Industrial Production M/M: 0.5% v 0.0%e; Y/Y: 1.3% v 0.5%e; Industrial Production NSA (unadj) Y/Y: 5.0% v 4.1% prior.

- (AT) Austria Apr Industrial Production M/M: -0.1% v 0.3% prior; Y/Y: 0.6% v 0.2% prior.

- (CZ) Czech Apr Import Price Index Y/Y: +1.8% v -2.0% prior; Export Price Index Y/Y: -0.4% v -1.8% prior.

- (CZ) Czech May Final CPI M/M: 0.1% v 0.1%e; Y/Y: 2.1% v 2.1%e.

- (SE) Sweden Apr Household Consumption M/M: 0.8% v 1.4% prior; Y/Y: 1.8% v 4.1% prior.

- (DK) Denmark May CPI M/M: 0.6% v 0.2% prior; Y/Y: 1.9% v 1.4% prior; CPI EU Harmonized M/M: 1.8% v 0.2% prior; Y/Y: 1.8% v 1.4% prior.

- (SE) Sweden Apr GDP Indicator M/M: 0.5% v -0.1%e, Y/Y: 2.4% v +2.8% prior.

- (SE) Sweden Apr Private Sector Production M/M: 1.7% v 0.8% prior; Y/Y: 4.1% v 4.7% prior; Industrial Orders M/M: +5.1% v -1.9% prior; Y/Y: +6.3% v -7.2% prior; Industry Production Value Y/Y: 7.1% v 3.4% prior; Service Production Value Y/Y: 3.9% v 5.5% prior.

- (NO) Norway May CPI M/M: 0.2% v 0.1%e; CPI Y/Y: 3.1% v 3.1%e; CPI Underlying M/M: 0.4% v 0.2%e; Y/Y: 3.4% v 3.2%e.

- (FI) Finland Apr Industrial Production M/M: -2.6% v 2.8% prior; Y/Y: 1.9% v 7.3% prior.

- (NL) Netherlands Apr Manufacturing Production M/M: 1.3% v 2.8% prior; Y/Y: 4.7% v 1.7% prior; Industrial Sales Y/Y: 7.3% v 11.4% prior.

- (NL) Netherlands May Producer Confidence: -2.0 v -0.7 prior.

Fixed income issuance

- Norway sells total NOK3.0B vs. NOK3.0B in 2028 and 2036 Bonds.

- Italy Debt Agency (Tesoro) sells €8.5B vs. €8.5B in 12-month bills; Avg Yield: 2.695% v 2.699% prior; Bid-to-cover: 1.43x v 1.44x prior (May 12th 2026).

- India sells total INR240B vs. INR240B indicated in 3-month, 6-month and 12-month bills.

- JAPAN SELLS ¥600B VS. ¥600B INDICATED IN 30-YEAR JGB BONDS; AVG YIELD: 3.8600% V 3.8420% PRIOR; BID-TO-COVER: 2.94X V 3.49X PRIOR.

- Thailand sells THB40B vs THB40B indicated in 10-year and 51-year bonds.

Looking ahead

- 05:30 (DE) Germany to sell €5.0B in 2.90% Feb 2036 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2035 and 2045 OT bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays.

- 06:00 (IL) Israel May Consumer Confidence: No est v 72 prior.

- 07:00 (US) MBA Mortgage Applications w/e Jun 5th: No est v -2.5% prior.

- 07:00 (RU) Russia to sell OFZ Bonds.

- 08:00 (HU) Hungary Central Bank (MNB) May Minutes.

- 08:30 (US) May CPI M/M: 0.5%e v 0.6% prior; Y/Y: 4.2%e v 3.8% prior.

- 08:30 (US) May Core CPI M/M: 0.3%e v 0.4% prior; Y/Y: 2.9%e v 2.8% prior.

- 08:30 (US) May CPI Index NSA: 335.143e v 333.02 prior; Core CPI Index: 336.335e v 335.423 prior.

- 08:30 (US) May Real Avg Hourly Earning Y/Y: No est v -0.3% prior; Avg Weekly Earnings Y/Y: No est v -0.2% prior.

- 08:30 (CL) Chile Central Bank Economist Survey.

- 09:45 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 2.25%.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (RU) Russia May CPI M/M: 0.2%e v 0.1% prior; Y/Y: 5.4%e v 5.6% prior.

- 12:00 (RU) Russia May CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 4.96% prior.

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

- 14:00 (US) May Federal Budget Balance: -$275.0Be v $215.0B prior.

- 19:00 (KR) South Korea May Unemployment Rate: 2.8%e v 2.8% prior.

- 19:01 (UK) May RICS House Price Balance: -32%e v -34% prior.

- 19:50 (JP) Japan Q2 BSI Large All Industry Q/Q: No est v 4.4 prior; BSI Large Manufacturing Q/Q: No est v 3.8 prior.

- 20:00 (KR) South Korea Jun Exports 1-10 Days Y/Y: No est v 43.7% prior; Imports Y/Y: No est v 14.9% prior.

- 21:00 (AU) Australia Jun Consumer Inflation Expectation Survey: No est v 5.6% prior.

- 22:00 (JP) Japan May Tokyo Avg Office Vacancies: No est v 2.2% prior.

- 23:00 (KR) South Korea May Total Bank Lending to Household (KRW): No est v 1174.9T prior.

- 23:00 (TH) Thailand May Consumer Confidence: No est v 50.6 prior; Economic Confidence: No est v 44.1 prior.