Iran/Hormuz de-escalation hopes turn into a fading macro tailwind from news exhaustion

EU Mid-Market Update: Risk-on rotation into tech from Computex narrative as Iran/Hormuz de-escalation hopes turn into a fading macro tailwind from news exhaustion.

Notes/observations

- Overnight, Pres Trump again expressed optimism that a deal with Iran could be reached within the next week, stating it would extend the ceasefire and open the Strait, adding that “Peace deal could be better than military victory.” He noted that negotiators “still have to get a ‘few more points’” on the Memorandum of Understanding with Iran. Trump described Iran’s anger over Israel’s attacks in Lebanon as a temporary “glitch,” while Iranian media reported that Tehran is still discussing its final text and has not yet sent a response to the U.S.

- Axios reports that, in a heated phone call on Monday, President Trump sharply rebuked Israeli Prime Minister Benjamin Netanyahu over Israel’s escalation in Lebanon, telling him, “You’re f*cking crazy” and yelling, “What the f*ck are you doing?” According to sources, Trump reminded Netanyahu of past support during his corruption trial, stating: “You’d be in prison if it weren’t for me. I’m saving your ass. Everybody hates you now. Everybody hates Israel because of this.” Trump pressed Netanyahu to halt plans to strike Beirut, arguing the actions were disproportionately damaging Israel’s international position and threatening to derail U.S. negotiations with Iran.

- At the COMPUTEX Taipei Financial Analyst Q&A, NVIDIA again outlined aggressive shareholder returns, committing to return 50%+ of free cash flow this year, next year, and beyond. Supply remains tightly constrained despite robust ecosystem support, with Vera Rubin now in full production and ramping at massive scale - management expects AI factories to grow from ~200K–250K Blackwell GPUs to at least half a million GPUs, supported by a supply chain twice as large. Jensen Huang emphasized maximizing GPU economics (“you’re only making money on tokens”), positioned the CPU business as complementary but secondary, highlighted strong software recurring revenue potential ($1,000–$1,500 per GPU/year for AI Enterprise), and framed AI infrastructure spend as recession-resistant amid exploding productivity.

- FT reports that the US is actively discussing with NATO allies the possibility of expanding nuclear weapons deployments in Europe, with U.S. officials signaling openness to stationing them in additional countries beyond the current six - Belgium, Germany, Italy, the Netherlands, Turkey, and the United Kingdom - that already host U.S. dual-capable aircraft (DCA). The talks focus on enabling more European nations to host nuclear-capable fighters such as the F-35A and F-15E, which can deliver U.S. B61 gravity bombs stored under American control. Eastern flank countries including Poland and the Baltic states have expressed interest, with discussions taking place in NATO channels; however, no agreement is imminent.

- UK economic releases were mixed but housing held up: April mortgage approvals beat at 65.9K (vs 62.0K expected), while net consumer credit came in slightly above forecast at £1.9B and net lending undershot at £4.4B (vs £5.4B expected); M4 money supply growth ticked up to 4.5% y/y. Gilts rallied alongside the broader bond move, with the 10-year yield down 5.8bps to 4.841% on the Hormuz/Iran optimism. Politically, the latest Mandelson files sharpened scrutiny of an apparent government rift over tax and welfare. On the growth side, the BCC warned that nearly one in five young people could be unemployed next year due to higher payroll taxes and AI adoption, and a small-business lobby group called for a rethink of business rates to support growth.

- Russian Finance Ministry and central bank officials have reportedly warned the Kremlin that current levels of projected defense spending risk dangerously widening the government’s budget deficit. The officials have proposed new cuts to military expenditure, arguing that it will be difficult to repair Russia’s stretched public finances without finding further efficiencies. However, senior Defense Ministry officials and some in the Kremlin are pushing back, insisting on protecting defense spending to pursue Putin’s war aims and warning that reductions would severely damage the economy due to the heavy reliance of many businesses on military contracts.

- Bitcoin extended losses, falling to touch the $70K level during the Asia session and trading lower into the European open. Move came after Strategy (formerly MicroStrategy) sold first batch of BTC since 2022; Sentiment also worsening against a notably skeptical backdrop on digital assets: Fed's Kashkari jabbed that bitcoin has had "17 years" and he's still asking, "where's the beef," citing lots of blockchain hype but little real-world utility.

- Kyiv came under what witnesses described as a "massive" overnight air attack, with Ukrainian air defenses working to repel incoming strikes. Roughly ten people were reported killed in the overnight assault.

- Asia closed mixed with Hang Seng outperforming +2.5%. EU indices +0.3-1.2%. US futures -0.3% to -0.2%. Gold +1.0%, DXY -0.1%; Commodity: Brent -1.9%, WTI -1.9%; Crypto: BTC -4.5%, ETH -0.7%.

Asia

- Japan aims to triple storage battery sales by FY25 - Yomiuri.

- China housing market could have further to fall - FT.

- ACCC [Australia competition regulator]: Issues takedown requests to Amazon, Ebay for toys with magnets.

- Bank of Korea (BOK): Expects June CPI to be 'similar' to levels in May; CPI to remain at 3% level for 'some time'.

- BOJ's Summary of Meeting with Investors: Overall tone is mixed with some favoring continued gradual tapering with flexibility, while others believe current purchase levels are appropriate and further tapering is unnecessary.

- Taiwan President Lai: Keeping the status quo is Taiwan's "most responsible promise" to global supply chains.

- South Korea Government to streamline regulations for imports of "key" semiconductor manufacturing equipment - Yonhap.

Europe

- EU reportedly considers granting countries fiscal leeway to meet energy costs.

- US in discussion to expand nuclear weapons deployments in Europe - FT.

- Follow-up: EU lawmakers vote to remove some import duties; Puts final approval on track to meet Pres Trump's imposed July 4th deadline for EU-US trade deal - press - 6.6 mag earthquake strikes Southern Italy - GFZ.

- German VDMA Engineering Association: Apr Order Intake flat y/y; Feb-Apr Orders +5% y/y.

- German Chancellor Merz: With the computing capacity we have planned, we can operate independently of that of the US and China.

Americas

- US Pres Trump: Believes the Iran deal extending ceasefire and opening the Strait could happen over the next week; Peace deal could be better than military victory - ABC News.

- US Pres Trump: Reiterates that Israel Pres Netanyahu and Hezbollah agreed to ceasefire; "Let's see how long it lasts".

- White House: Adjusting tariff regimes for imports of Aluminum, Steel & Copper into the US until December 2027 [follows announcement from Apr 2nd]; cuts tariffs on agricultural equipment to 15% from 25% - Proclamation.

Global conflict/tensions

- Ukraine air defense systems are repelling air attacks over Kyiv; The capital is under a "massive" air attack - press citing witness; Follow up, approx. 10 people died from overnight attacks.

- Iran's final text reportedly still being discussed in Tehran, no response sent yet to US - Iranian press.

- Iran claims to attack container ship in the Gulf of Oman - Iranian press.

- China investigates AI chips for ties to the US military, according to procurement records.

Energy

- Japan's Trade/Industry Min Akazawa: Expect to secure stable oil supply until next Spring [2027].

- Australian LNG Union begins industrial action today.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.63% at 625.14, FTSE +0.33% at 10,372.63, DAX +1.05% at 25,256.50, CAC-40 +0.80% at 8,211.57, IBEX-35 +0.90% at 18,305.76, FTSE MIB +1.11% at 50,328.50, SMI +0.36% at 13,353.80, S&P 500 Futures -0.10%].

Market focal points/key themes: European indices opened higher across the board and remained upbeat through the early part of the session; markets focus on positive tech developments amid Middle East news exhaustion; among sectors leading the way higher are technology and materials; lagging sectors include energy and health care; tech sector supported by various announcements at Computex, with ASML pulling sector higher; LAES acquires Miraex; reportedly Unicredit’s stake in Commerzbank rises to 30%; focus on US JOLTS coming out later in the day; earnings expected in the upcoming US session include Dollar General and Palo Alto Networks.

Equities

- Consumer staples: British American Tobacco [BATS.UK] -4.5% (trading update; outlook).

- Healthcare: Abivax [ABVX.FR] -27.5% (Phase 3 ABTECT data; uncertainty around reported rare adverse events deemed unrelated to the treatment)

- Industrials: Chemring Group [CHG.UK] -6.5% (earnings).

- Technology: STMicroelectronics [STM.FR] +8.5% (raises Data Center Rev target), Prosus [PRX.NL] +10.0% (Tencent mulls launching AI agent).

Speakers

- ECB's Simkus (Lithuania): Consumer short-term inflation expectations are similar to 2022.

- Thailand Central Bank Gov Vitai: No need to raise rates to address inflation; Sees GDP growing at 2.0% in 2026 (previously saw 2.1%); Trade balance seen returning to surplus in 4Q.

- Fed’s Kashkari (voter): Bitcoin has had "17 years" and still asked "where’s the beef," arguing he has seen "so much hype" around blockchain but little real utility..

- Japan Fin Min Katayama: Again refrains from commenting further on FX.

Economic data

-(EU) EURO ZONE MAY ADVANCE CPI ESTIMATE Y/Y: 3.2% V 3.2%; CPI CORE Y/Y: 2.5% V 2.4%E (1-year high); CPI M/M: 0.1% v 0.1%e; Y/Y: 3.2% v 3.2%e.

-(CY) Cyprus Q1 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 3.0% v 3.0% prelim.

-(HK) Hong Kong Apr Retail Sales Value Y/Y: 8.6% v 13.8%e; Retail Sales Volume Y/Y: 6.4% v 11.6%e.

-(UK) Apr M4 Money Supply M/M: 0.2% v 0.8% prior; Y/Y: 4.5% v 4.3% prior.

-(UK) Apr NET consumer credit: £1.9B V £1.7BE; net lending: £4.4B V £5.4BE.

-(UK) Apr mortgage approvals: 65.9K V 62.0KE.

-(ZA) South Africa Q2 BER Business Confidence: 39 v 47 prior.

-(ES) Spain May Net Unemployment Change: -36.3K v -62.7K prior; Net Employment Change M/M: +63.7K v +41.8K prior.

-(AT) Austria May Preliminary CPI M/M: 0.1% v 0.4% prior; Y/Y: 3.7% v 3.4% prior.

-(FR) France Apr YTD Budget Balance: - €69.6B v - €42.9B prior.

-(HU) Hungary Q1 Final GDP Q/Q: 0.8% v 0.8% prelim.

-(CH) Swiss Apr Trade Balance (CHF): 3.1B v 3.2B prior.

-(NL) Netherlands May Preliminary CPI EU-Harmonized M/M: 0.0% v 1.7% prior; Y/Y: 3.4% v 2.5% prior; CPI Y/Y: 3.5% v 2.8% prior.

-(ID) Indonesia Mar Trade Balance: $90.0M v $1.3Be.

-(NL) Netherlands Apr Retail Sales Y/Y: 3.0% v 2.9% prior.

-(ID) Indonesia May CPI Y/Y: 3.1% v 2.4% prior; CPI Core Y/Y: % v 2.4% prior; CPI NSA M/M: 0.3% v 0.1% prior.

- CPI Core Y/Y: 2.6% v 2.4% prior.

-(IE) Ireland May PMI Manufacturing: 55.9 v 54.9 prior.

Fixed income issuance

-(UK) DMO SELLS £3.25B IN 4.625% MAR 2037 GREEN GILTS; AVG YIELD: 4.975%; BID-TO-COVER: 3.63X; TAIL: 0.2BPS (SYNDICATED ON MAR 10TH 2026).

-Spain Debt Agency (Tesoro) sells total €6.482B vs. €6.5B indicated range in 6-month and 12-month bills.

-Philippines sells PHP30B in 5-year bonds; Avg Yield: 7.400% v 7.249% prior; bid-to-cover: 1.94x v 1.28x prior.

- Japan sells ¥2.6T VS. ¥2.6T indicated in 10-year JGB bonds; AVG yield: 2.649% V 2.540% prior; bid-to-cover: 3.53X V 3.90X prior.

-South Korea Finance Ministry sells KRW3.0T vs. KRW3.0T indicated in 30-year government bonds (3.5%) at Avg Yield: 4.155% v 3.830% prior.

-Thailand sells THB25B vs. THB25B indicated in 5-year bonds.

Looking ahead

- 05:30 (DE) Germany to sell €5.0B in Jun 2028 Schatz.

- 05:30 (CH) Switzerland to sell 3-month Bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €3.5B in 3-month, 6-month and 12-month bills.

- 05:30 (ZA) South Africa to sell combined ZAR2.55B in 2033, 2038 and 2042 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €14.936 with 66 bids recd).

- 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR).

- 06:00 (FI) Finland to sell combined €2.0B in 9-month and 12-month Bills.

- 06:30 (EU) ESM to sell €1.6B in 3-month Bills.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

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

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (SG) Singapore May Purchasing Managers Index (PMI): No est v 50.7 prior; Electronics Sector Index: No est v 51.7 prior.

- 10:00 (US) Apr JOLTS Job Openings: 6.890Me v 6.866M prior.

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.

- 11:00 (DK) Denmark May Foreign Reserves (DKK): No est v 687.0B prior.

- 11:30 (US) Treasury to sell 6-Week Bills.

- 16:30 (US) Weekly API Crude Oil Inventories.

- 18:45 (NZ) New Zealand Q1 Terms of Trade Index Q/Q: -1.0%e v +3.7% prior.

- 18:45 (NZ) New Zealand Apr Building Permits M/M: No est v -1.3% prior.

- 19:00 (AU) Australia May Final PMI Services: No est v 47.7 prelim; PMI Composite: No est v 47.8 prelim.

- 20:30 (JP) Japan May Final PMI Services: No est v 50.0 prelim; PMI Composite: No est v 51.1 prelim - 20:30 (HK) Hong Kong May PMI (whole economy): No est v 48.6 prior.

- 21:30 (AU) Australia Q1 GDP Q/Q: 0.5%e v 0.8% prior; Y/Y: 2.6%e v 2.6% prior.

- 21:45 (CN) China May RatingDog PMI Services: 52.2e v 52.6 prior; PMI Composite: No est v 53.1 prior.

- 22:05 (VN) Vietnam May CPI Y/Y: 5.5%e v 5.5% prior.

- 22:05 (VN) Vietnam May Industrial Production Y/Y: No est v 9.9% prior.

- 22:05 (VN) Vietnam May Retail Sales Y/Y: No est v 12.1% prior.

- 22:05 (VN) Vietnam May Trade Balance: -$4.0Be v -$3.3B prior; Exports Y/Y: 18.2%e v 21.0% prior; Imports Y/Y: 30.9%e v 32.5% prior