Iran-Israel ceasefire holding up thus far as NATO summit set to commence

EU mid-market update: Iran-Israel ceasefire holding up thus far as NATO summit set to commence; Powell's semi-annual testimony to start as potential dovish dissenters emerge.

Notes/observations

- Israel/Iran ceasefire hold up thus far as Trump declared the end of the 12-days war and both Iran and Israel claimed they have reached their military aims; safe-haven flows unwind; gold oil, USD softer.

- German IFO rises as expectations brightens and German economy is slowly gaining confidence.

- Fed futures now price 23% chance for 25bps cut at July's meeting v ~10% w/w as more Fed members (Waller, Bowman and Goolsbee) express dovish and potentially dissenting views; Trump has again criticized Powell overnight and called interest rates in US to be 'at least two to three points lower' ahead of semi-annual testimony.

- FedEx reports results after the close and may shed some light on current stance of its supply chain.

Asia

- South Korea Jun Consumer Confidence: 108.7 v 101.8 prior.

- Japan Econ Min arranging 7th visit to US for tariff talks as soon as Jun 26th.

- Japan Chief Cab Sec Hayashi: Upper House elections will take place July 20th.

Global conflict/tensions

- Israel and Iran agreed on ceasefire to end 12-day war. Trump thanked the Iranians for the de-escalation after its warned both the Qataris and the Americans that they would target the US base in Qatar. This also permitted the possibility of a ceasefire.

Europe

- ECB's Villeroy (France): ECB might still cut rates despite oil price volatility in the coming six months.

Americas

- US House of Representatives banned WhatsApp on government devices due to privacy concerns; effective Jun 30th.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +1.34% at 542.20, FTSE +0.37% at 8,790.18, DAX +2.04% at 23,749.59, CAC-40 +1.35% at 7,639.09, IBEX-35 +1.24% at 14,021.15, FTSE MIB +1.52% at 39,431.00, SMI +1.50% at 12,036.78, S&P 500 Futures +0.81%].

Market focal points/key themes: European indices opened higher across the board and advanced through the early part of the session; easing tensions in Middle East seen driving risk appetite; financials and technology sectors among those leading to the upside; lagging sectors include energy and utilities; oil & gas subsector under pressure after Brent fell below $70/bbl; Volvo’s construction unit divests assets in China and acquires assets in Northern Europe; reportedly ECB investigation Italian state’s sale of Monte Paschi stake; earnings expected in the upcoming US session include Carnival, TD Synex, FedEx, and Blackberry.

Equities

- Consumer discretionary: TUI [TUI1.DE] +7.0%, Lufthansa [LHA.DE] +6.0% (Middle East countries reopen airspace; falling oil prices due to Iran-Israel ceasefire), Bunzl [BNZL.UK] +1.5% (trading update).

- Energy: Shell [SHEL.UK] -3.5%, BP [BP.UK] -5.5% (falling oil prices due to Iran-Israel ceasefire) - Financials: Sabadell [SAB.ES] +1.0% (reportedly Spain tightens requirements on BBVA's bid for Sabadell - press), MedioBanca [MB.IT] +3.5% (ECB said to have approved Monte Paschi proposed takeover - press).

- Industrials: Hapag-Lloyd [HLAG.DE] -1.0% (Statement: Continue to use the Strait of Hormuz), Volvo AB [VOLCARB.SE] +2.5% (divestment) - Technology: OVHcloud [OVH.FR] -16.0% (earnings).

Speakers

- German Cabinet said to back govt draft 2025 budget and mid-term finance plan.

- Germany Debt Agency (DFA) on Q3 issuance increased issuance by €19B compared to preliminary targets. To sell €81.5B in bonds vs. €66.5B prelim plan and sell €37.0B in Bubills vs. €33.0B prelim plan.

- Sweden Finance Ministry updates its economic outlook which cut the 2025 GDP growth forecast from 1.8% to 0.9% while raising the 2026 GDP growth forecast from 2.3% to 2.6%

- Nato Sec Gen Rutte stated that US was committed to NATO but expected equalized spending.

- Russia Foreign Min Lavrov stated that NATO was moving beyond its traditional area of responsibility.

- Israel PM Netanyahu stated that had told US that it agreed to a ceasefire with Iran; govt had met its war objectives. Would respond forcefully to any breach with Iran.

- Israel military official: Identified missiles launched from Iran towards Israel.

- Iran nuclear chief Eslami stated that currently assessing damage to nuclear sites; planned to avoid interruption to production process.

- India Fin Min Sitharaman noted that trade talks with both US and EU were going on intensely.

- China's top legislature National People's Congress Standing Committee (NPCSC) vowed to make good use of more proactive fiscal policy and speed up policy implementation.

- China PBOC issued statement to use finance to increase consumption; To increase consumption capacity and demand.

Currencies/fixed income

- Trump announcement of an Israeli-Iran ceasefire agreement saw an unwinding of safe haven flows. Gold and oil fell in price while the USD retraced some of its recent strength.

- EUR/USD initially moved above the 1.16 level as the session began but drifted lower as the session progressed. German IFO survey continued with its improvement. The 1.1500 level continued to emerge as key support with 1.20 eyed as next major technical target.

- USD/USD probed the 145 level after testing 147 on Monday.

- 10-year German Bund yield at 2.52% and 10-year Gilt yield at 4.51%. 10-year Treasury yield: 4.32%.

Economic data

- (NL) Netherlands Q1 Final GDP Q/Q: 0.4% v 0.1% prelim; Y/Y: 2.2% v 2.0% prelim.

- (FI) Finland May PPI M/M: -1.3% v -0.7% prior; Y/Y: -2.0% v -1.1% prior.

- (CZ) Czech Jun Consumer Confidence: 100.7 v 100.4e; Business Confidence: 100.0 v 101.0e.

- (ZA) South Africa Apr Leading Indicator: 112.8 v 113.2 prior.

- (TR) Turkey Jun Real Sector (Manufacturing) Confidence: 98.4 v 98.6 prior; Real Sector Confidence NSA (unadj): 100.3 v 101.4 prior.

- (TW) Taiwan May Industrial Production Y/Y: 22.6% v 18.0%e v.

- (DE) Germany Jun IFO Business Climate: 88.4 v 88.0e; Current Assessment: 86.2 v 86.5e; Expectations Survey: 90.7 v 89.9e.

- (PL) Poland May Real Retail Sales M/M: -3.2% v +6.2% prior; Y/Y: 4.4% v 4.3%e; Retail Sales (current prices) Y/Y: 4.3% v 4.7%e.

Fixed income issuance

- (SI) Slovenia opened its book to sell EUR-denominated 10-year bonds via syndicate; guidance seen +70bps to mid-swaps.

- (TR) Turkey to sell USD-denominated 5-year Islamic bonds (Sukuk); yield guidance seen 7.25%.

- (CH) Chile to sell EUR-denominated 10-year bonds; guidance seen +165bps to mid-swaps.

- (UK) DMO sold £1.7B in 1.125% Sept 2035 Inflation-linked Gilts (UKTi); Real Yield: 1.386% v 1.268% prior; bid-to-cover: 3.02x v 3.36x prior.

- (CH) Switzerland sold CHF434.4M in 12-month Bills; Avg Yield: -0.178% v +0.100% prior; bid-to-cover: 5.38x v 1.42x prior.

Looking ahead

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

- 05:30 (ZA) South Africa Q1 Non-Farm Payrolls Q/Q: No est v 0.1% prior; Y/Y: No est v -0.8% prior.

- 05:30 (UK) BOE’s Greene.

- 05:30 (DE) Germany to sell €4.0B in 1.70% Jun 2027 Schatz.

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

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2033, 2044 and 2048 bonds.

- 06:00 (UK) Jun CBI Trends Total Orders: -27e v -30 prior; Selling Prices: 25e v 26 prior.

- 07:00 (BR) Brazil Central Bank (BCB) Jun Minutes.

- 07:00 (BR) Brazil Jun FGV Consumer Confidence: No est v 86.7 prior.

- 08:00 (PL) Poland May M3 Money Supply M/M: 0.7%e v 1.2% prior; Y/Y: 10.2%e v 10.4% prior.

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 6.50%.

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

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:15 (ES) ECB’s De Guindos (Spain).

- 08:30 (US) Jun Philadelphia Fed Non-Manufacturing Activity: No est v -41.9 prior.

- 08:30 (US) Q1 Current Account Balance: -$445.5Be v -$303.9B prior.

- 08:30 (CA) Canada May CPI M/M: +0.5%e v -0.1% prior; Y/Y: 1.7%e v 1.7% prior; CPI Core-Median Y/Y: 3.0%e v 3.2% prior; CPI Core-Trim Y/Y: 3.0%e v 3.1% prior; Consumer Price Index: 164.2e v 163.4 prior.

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

- 09:00 (BE) Belgium Jun Business Confidence: -13.0e v -13.5 prior.

- 09:00 (US) Apr FHFA House Price Index M/M: No est v -0.1% prior.

- 09:00 (US) Apr S&P CoreLogic House Price Index (20-City) M/M: -0.10%e v -0.12% prior; Y/Y: 4.00%e v 4.07% prior; House Price Index (overall) Y/Y: No est v 3.37% prior.

- 09:00 (CL) Chile May PPI M/M: No est v -0.9% prior.

- 09:00 (HU) Hungary Central Bank (MNB) post rate decision statement.

- 09:00 (EU) ECB chief Lagarde.

- 09:15 (US) Fed’s Hammack.

- 09:35 (UK) BOE’s Ramsden.

- 09:55 (IE) ECB’s Lane (Ireland, chief economist).

- 10:00 (US) Jun Richmond Fed Manufacturing Index: -10e v -9 prior.

- 10:00 (US) Jun Consumer Confidence: 99.8e v 98.0 prior.

- 10:00 (US) Fed Chair Powell Semiannual Policy Testimony in House.

- 10:00 (UK) BOE Gov Bailey in House of Lords.

- 10:15 (IE) ECB’s Lane (Ireland, chief economist).

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

- 11:50 (UK) BOE’s Breeden.

- 12:30 (US) Fed’s Williams.

- 13:00 (US) Treasury to sell 2-Year Notes.

- 14:00 (US) Fed’s Collins.

- 16:00 (US) Fed’s Barr.

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

- 18:45 (NZ) New Zealand May Trade Balance (NZD): No est v 1.4B prior; Exports: No est v 7.8B prior; Imports: No est v 6.4B prior.

- 19:50 (JP) Japan May PPI Services Y/Y: 3.1%e v 3.1% prior.

- 21:00 (JP) BOJ’s Tamura.

- 21:30 (AU) Australia May CPI Y/Y: 2.3%e v 2.4% prior; CPI Trimmed Mean Y/Y: No est v 2.8% prior.

- 22:00 (KR) South Korea May Retail Sales Y/Y: No est v 7.0% prior; Department Store Sales Y/Y: No est v -2.9% prior; Discount Store Sales Y/Y: No est v -3.1% prior.