EU markets rally after Trump's quick delay of new EU tariff effective date

EU mid-market update: EU markets rally after Trump's quick delay of new EU tariff effective date; Trump also flips on Putin? UK/US closed due to holidays; Flexport hints on upcoming port congestion globally.

Notes/observations

- US Pres Trump agreed to delay his 50 % tariffs on EU goods until July 9th—“It was my privilege to do so”—after a “good” call with von der Leyen, who says the bloc needs that long to strike a “good deal.”; G7 Summit next month also emerges as key catalyst for US-Japan trade talks.

- Trump has also warned that Vladimir Putin “has gone absolutely CRAZY! … missiles and drones are being shot into Cities in Ukraine, for no reason whatsoever,” while Ukraine Pres Zelenskiy insists that “Only new sanctions will force Russia to agree to a ceasefire.”

- Moody’s has reaffirmed China’s A1 sovereign rating but kept the outlook negative; On Friday. Moody's affirmed Italy sovereign rating at Baa3 (one notch above junk); Italy's outlook was revised to Positive from Stable.

- FT reports that China has increased its ability to launch a sudden attack on Taiwan with faster-paced air and operations, new artillery systems and more alert amphibious and air assault units, according to Taiwanese and US officials and experts.

- Also China, undeterred by U.S. calls to rebalance, reportedly quietly drafting a fresh “Made in China” master plan to supercharge domestic high-end tech output; In other news, China has also reportedly relaxed export restrictions on rare earth elements crucial for drone manufacturing after the controls threatened to derail the industry's growth.

- Flexport saw its two largest-ever weekly ocean freight bookings in the two weeks after China tariffs were paused—80 % above the pre-tariff trend line—with China-to-U.S. volumes up 275 % week-on-week and Vietnam also hitting record highs. The Flexport CEO has earlier warned that vessel capacity will be insufficient, triggering surge pricing and peak-season surcharges that could push container rates to $6–7K by the end of June.

- Ahead of earnings this week, Nvidia said to soon launch a Blackwell-architecture AI GPU for China priced at about $6,500–8,000—down from $10,000–12,000—by foregoing TSMC’s CoWoS packaging in favour of conventional memory.

- AI model Claude 4’s debut exposed frontier AI’s hidden perils: beyond its touted leaps in reasoning and memory, security tests showed it can divulge step-by-step chemical-weapon protocols and even resort to coercive “blackmail” tactics when threatened with shutdown.

Trade

- US Pres Trump: "I received a call today from Ursula von der Leyen, President of the European Commission, requesting an extension on the June 1st deadline on the 50% Tariff with respect to Trade and the European Union. I agreed to the extension — July 9, 2025 — It was my privilege to do so. The Commission President said that talks will begin rapidly." [**Note: July 9th is original date of expiration of 90-days reciprocal tariff pause].

- EU Commission Pres Von der Leyen: Had "good" call with US Pres Trump to discuss trade: EU needs until July 9th to reach a "good deal".

- EU Trade Commissioner Sefcovic: Spoke with USTR Greer and Commerce Sec Lutnick; EU ready to work in good faith with US.

- Japan Economic Revitalization Min Akazawa: Met with US Commerce Sec Lutnick in Washington, discussed trade measures; Both sides seeking mutually beneficial deal as soon as possible.

- China-ASEAN Free Trade Agreement 3.0 negotiations concluded; To boost investment and trade; Inaugural GCC-ASEAN-China Summit to also be held in Malaysia this week - ASEAN Sec Gen Dr Kao Kim Hourn.

- Reportedly China has quietly relaxed export restrictions on rare earth elements crucial for drone manufacturing after the controls threatened to derail the industry's growth - DigiTimes.

- Malaysia PM Anwar: Wrote to US Pres Trump requesting a US-ASEAN Summit.

Tensions

- US Pres Trump: I’ve always had a very good relationship with Vladimir Putin of Russia, but something has happened to him. He has gone absolutely CRAZY! He is needlessly killing a lot of people, and I’m not just talking about soldiers. Missiles and drones are being shot into Cities in Ukraine, for no reason whatsoever.

- FT reports that China has increased its ability to launch a sudden attack on Taiwan with faster-paced air and operations, new artillery systems and more alert amphibious and air assault units, according to Taiwanese and US officials and experts.

- US Pres Trump: We had some 'very good talks' with Iran, (made) serious progress (in regards to nuclear).

- Iran Foreign Ministry Spokesman Baghaei: Iran will not accept temporarily suspending uranium enrichment to secure a nuclear deal with US.

- Ukraine's Pres Zelenskiy: Only new sanctions will force Russia to agree to a ceasefire.

- South Korea DP [opposition party] leader Lee: (If elected) would restore hotline between North and South Korea.

Europe

- Reportedly UK PM Starmer has told cabinet ministers that he wants to scrap the two-child benefit cap and has asked the Treasury to identify ways to fund the plan - UK press.

- Poland presidential candidate Nawrocki [opposition candidate] leads Trzaskowski [Warsaw Mayor] 48-45.5% in new poll - press.

Asia

- Moody's affirms china's A1/A+ ratings; keeps outlook negative.

- China is reportedly planning a new iteration of Pres Xi’s flagship “Made in China” initiative to ramp up high-end tech production—even as the U.S. urges Beijing to rebalance its economic strategy.

- Former China official: China should consider (reducing down to) a 4.0% GDP target, focus on jobs and debt over the next 5 years - SCMP

- China Vice Fin Min Liao: China will support Macau's development.

Mid-East

- US Treasury Dept issues immediate sanctions relief for Syria.

Americas

- Pres Trump: Think the Senate will make significant changes to the tax bill.

- District Court Judge Allison Burroughs temporarily halts Trump administration ban on Harvard’s ability to enroll international students; Remote conference in the case is set for Tuesday May 27.

Energy

- Energy Intel's Bakr: On the May 28th Opec+ will be holding their virtual meeting, and this is not the call where policy related to the unwinding will be decided; that call between the 8 states involved in the voluntary cuts will take place on the 1st of June.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.98% at 550.46, FTSE closed, DAX +1.64% at 23,998.43, CAC-40 +1.09% at 7,818.37, IBEX-35 +1.31% at 14,267.05, FTSE MIB +1.31% at 39,992.00, SMI +0.88% at 12,299.50, S&P 500 Futures +1.17%].

Market focal points/Key themes: European indices opened higher across the board and remained upbeat through the early part of the session; weekend trade announcements seen supporting risk appetite; UK closed for holiday; all sectors trading in the green; among sectors leading to the upside are industrials and technology; lagging sectors include utilities and real estate; industrial sector supported after Airbus receives order for jets; Capgemini, Mistral and SAP to partner on generative AI solutions; no major events expected in the upcoming Americas session with US markets closed for holiday.

Equities

- Consumer discretionary: Matas [MATAS.DK] -1.0% (hearing analyst downgrade).

- Industrials: Stellantis [STLA.NL] +2.5% (Trump moved deadline for new EU 50% tariff from June 1st to July 9th), Maersk [MAERSKB.DK] +1.0% (Flexport CEO: Flexport had the two biggest ocean freight booking weeks in company history in the two weeks since the tariffs on China were paused. 80% growth over the pre-tariff trend line. Not just China surging, Vietnam also setting records), Rheinmetall [RHM.DE] +3.0% (Trump's hawkish comments on Putin).

- Technology: Infineon [IFX.DE] +2.5%, ASML [ASML.NL] +2.5% (Trump moved deadline for new EU 50% tariff from June 1st to July 9th), Capgemini [CAP.FR] +2.0% (Capgemini, Mistral AI and SAP combine forces to offer secure, scalable gen AI-powered solutions for regulated industries).

Speakers

- ECB's Simkus (Lithuania): There is a space for further rate cut in June; Risks that inflation will undershoot 2% target are higher.

- Fed's Kashkari (non-voter): Uncertainty is top of mind for Fed and US businesses; When asked if Fed will move by Sept, "Anything is possible"; We are really in wait-and-see mode; The shock of tariffs is stagflationary.

- Bank of Canada (BOC) Gov Macklem: The extent of pass-through of tariffs to consumer prices, the speed of it — there is some uncertainty around that - NYT interview.

- Japan PM Ishiba: Hope new rice sales will relive consumer concerns.

- South Korea DP [opposition party] leader Lee: Extra budget necessary to boost domestic economy in the short term; If elected will form task force run by himself to tackle the slowing economy - financial press.

- Indonesia Pres Prabowo: Indonesia sees China as "Very Important Partner" in developing industry and tech - financial press, following meeting with China Premier Li Qiang in Jakarta.

Economic data

- Japan Mar Final Leading Index CI: 108.1 v 107.7 prelim; Coincident Index: 115.9 v 116.0 prelim.

- Singapore Apr Industrial Production M/M: 5.3% v 6.1%e; Y/Y: 5.9% v 2.5%e.

- Finland Apr PPI M/M: -0.7% v -0.2% prior; Y/Y: -1.1% v +0.5% prior.

- Sweden Apr PPI M/M: -1.6% v -3.0% prior; Y/Y: -2.4% v -0.3% prior.

- Norway Apr Credit Indicator Growth Y/Y: 4.1% v 3.8% prior.

- Spain Apr PPI M/M: -2.9% v -4.1% prior; Y/Y: 1.9% v 4.6% prior.

- Czech May Consumer Confidence:100.7 v 97.7 prior.

- Swiss weekly Total Sight Deposits (CHF): 443.4B v 443.2B prior.

- Poland Apr Real Retail Sales M/M: 6.2% v 14.3% prior; Y/Y: +7.6% v -0.3% prior.

- Poland Q1 Unemployment Rate: 3.4% v 2.8% prior.

- Poland Apr Unemployment Rate: 5.2% v 5.3% prior.

- Hong Kong Apr Trade Balance (HKD): -16.0B v -29.2Be.

Fixed income issuance

- Philippines sells total PHP28.6B indicated in 3-month, 6-month and 12-month bills.

- Bank of Korea (BOK) sells KRW500B in 3-month Monetary Stabilization Bonds (MSBs): Yield 2.380%.

Looking ahead:

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

- 07:00 (BR) Brazil May FGV Consumer Confidence: No est v 84.8 prior.

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

- 07:30 (BR) Brazil Apr Current Account: No est v -$2.2B prior; Foreign Direct Investment: No est v $6.0B prior.

- 08:00 (MX) Mexico Mar Gold Production: No est v 6.37K prior; Silver Production: No est v 355.2K prior; Copper Production: No est v 15.8K prior.

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

- 09:00 (IL) Israel Central Bank (BOI) interest rate decision: Expected to leave base rate unchanged at 4.50%.

- 17:00 (KR) South Korea May Consumer Confidence: No est v 93.8 prior.

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 88.8 prior.

- 19:01 (UK) May BRC Shop Price Index Y/Y: No est v -0.1% prior.

- 19:50 (JP) Japan Apr PPI Services Y/Y: No est v 3.1% prior.

- 21:30 (CN) China Apr Industrial Profits Y/Y: No est v 2.6% prior; YTD Y/Y: No est v 0.8% prior.