Israel-Iran continue lobbing missiles/drones

EU mid-market update: Middle East chess board unchanged from yesterday; Israel-Iran continue lobbing missiles/drones; US thinks next move.

Notes/observations

- No major update or change to situation in Middle East overnight. Analysts continue to monitor involvement of US and the positioning of aircraft ahead of any moves to help disrupt nuclear enrichment facilities in Iran with bunker busting tech. Media reports suggest Trump is keen for US airstrikes but these are not confirmed and a National Security meeting overnight yielded no publicly made decision.

- Overall, market is muted as Fed rate decision and dot plot projections to drop in afternoon session. CME futures pricing in 99.9% of a hold in policy. Odds have been increased slightly since Middle-East conflict and any run-through of oil pricing onto inflation.

- Note on liquidity, triple witching futures expiry on Fri, Jun 20th.

- For macro, Sweden Central Bank (Riksbank) cut rates by 25bps as expected in what was seen as a dovish cut, weaking SEK currency. Meanwhile, GBP/USD (cable) little changed after UK CPI was mostly in line and ahead of BOE rate decision tomorrow where no change is expected.

- Asia closed mixed with Hang Seng under-performing -1.1%. EU indices -0.2% to +0.3%. US futures +0.1-0.3%. Gold -0.1%, DXY -0.2%; Commodity: Brent -1.2%, WTI -1.2%; Crypto: BTC -1.0%, ETH -1.3%.

Asia

- New Zealand Q1 Current Account Balance (NZD): -2.3B v -2.2Be.

- Japan May Trade Balance: -¥637.6B v -¥897.8Be; Exports Y/Y: -1.7% v -3.8%e; Imports Y/Y: - 7.7% v -5.8%e.

- Japan Apr Core Machine Orders M/M: -9.1% v -9.5%e; Y/Y: 6.6% v 4.2%e.

- Australia May Westpac Leading Index M/M: -0.06 v -0.0% prior.

- China SAFE [FX regulator] Chief Zhu Hexin: China had conditions to maintain stable FX market.

Global conflict/tensions

- Over 4 dozen Israeli fighter jets struck military targets in the Tehran area overnight, including a centrifuge production site used to advance Iran’s nuclear weapons program; additional strikes hit facilities producing missiles and air defense components.

- Israel PM Netanyahu stressed that govt would do whatever was needed to destroy Iran’s nuclear facilitie; after victory, there would be a different Middle East.

- Iran said to be preparing missiles for possible retaliatory strikes on US Bases.

- Iran could begin to mine the Strait of Hormuz if the US join Israel in attacking Iran in order to pin US warships in the Persian Gulf.

Europe

- UK Chancellor (Fin Min) Reeves said to be reconsidering non-domicile tax changes to halt exodus of wealthy individuals.

Americas

- US regulators said to propose lowering SLR by up to 1.5ppts for largest banks after concerns that it constrained their trading in the $29T Treasuries market.

- Senate passed GENIUS stablecoin bill.

Energy

- Weekly API Crude Oil Inventories: -10.1M v -0.4M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.01% at 542.30, FTSE +0.22% at 8,853.31, DAX +0.06% at 23,470.33, CAC-40 +0.24% at 7,701.98, IBEX-35 +0.29% at 13,948.50, FTSE MIB +0.33% at 39,518.00, SMI -0.22% at 11,990.36, S&P 500 Futures +0.36%].

Market Focal Points/Key Themes: European indices opened mixed with an upward bias, but failed to gain direction through the early part of the session; tensions in the Middle East seen keeping risk appetite at bay; better performing sectors include utilities and financials; among underperforming sectors are health care and financials; reportedly Sabadell to sell TBS Banking to NatWest; focus on FOMC rate decision later in the day; no major earnings expected in the upcoming US session.

Equities

- Energy: Tullow Oil [TLW.UK] -12.0% (Sky News report that continuing debt-refinancing plans were likely an obstacle to any merger with Meren Energy) - Financials: Pierre et Vacances [VAC.FR] +11.0% (reviews strategic options), UBS [UBSG.CH] -2.0% (analyst downgrade; cyberattack; tomorrow's SNB decision), Deutsche Pfandbriefbank [PBB.DE] -9.5% (to completely discontinue US business and to sell, securitise or respectively run-down the US portfolio; Affirms its medium-term targets for 2027), Storebrand [STB.NO] +2.0% (analyst upgrade).

- Industrials: Airbus Group [AIR.FR] +3.5% (business update; To adopt new div payout ratio 30-50% (prior 30-40%); Affirms FY25 guidance), Continental [CON.DE] -0.5% (Mutares to acquire Continental's Drum Brake location in Italy; No terms disclosed) - Technology: Nordic Semiconductor [NOD.NO] -4.0% (two analyst downgrades).

Speakers

- ECB Panetta (Italy) noted that the outlook faced substantial hard-to-quantify risks that include US tariffs and Mid-East Tensions. ECB to continue to make decisions on meeting-by-meeting basis.

- Sweden Central Bank (Riksbank) Policy Statement noted of some probability of another cut this year as economic recovery that began last year had lost momentum, SEK currency (krona) was 'somewhat undervalued'.

- Sweden Central Bank (Riksbank) Gov Thedeen post rate decision press conference noted Inflation was in line with projections.

- Czech Central Bank (CNB) Member Kubicek stated that had no more room for rate cuts as its margin had been exhausted.

- Indonesia Central Bank (BI) Gov Warjiyo pre-rate decision press conference noted that Q2 GDP aided by front loading of exports due to US tariffs. Domestic growth seen improving in H2. IDR currency (Rupiah) had strengthened.

- Indonesia Central Bank Post Rate Decision Statement noted policy would be optimized to support growth and provide flexibility in liquidity management. To observe room to further support the economy while keeping inflation within target range and stable FX rate.

- China Foreign Ministry stated that it had lodged formal complaint about G7 statement on Taiwan and South China Sea.

- China PBOC's Wang noted that multipolar currency was better than US dollar reliance.

- Iran's Bahreini (Ambassador to UN) stated that if concluded that US was directly involved in Iran attacks, then would start responding to U.

Currencies/fixed income

- FX price action remain locked on mid-east tensions.

- GBP/USD was trading in the mid-1.34 area after UK inflation eased in May. Dealers noting that BOE's guidance for gradual rate cuts had not been endorsed by recent data with soft jobs, growth and now inflation figures. BOE was expected to keep policy steady on Thurs. but could raise the risk of a slightly more "dovish" tone.

- EUR/USD holding above the key support level of 1.15.

- SEK currency was softer after the Riksbank cut the Repo Rate and signaled further cuts.

- 10-year German Bund yield at 2.54% and 10-year Gilt yield at 4.54%. 10-year Treasury yield at 4.39%.

Economic data

- (UK) May CPI M/M:0.2% v 0.2%e; Y/Y: 3.4% v 3.3%e; CPI Core Y/Y: 3.5% v 3.5%e; CPI Services Y/Y: 4.7% v 4.8%e; CPIH Y/Y: 4.0% v 3.9%e.

- (UK) May RPI M/M: 0.2% v 0.2%e; Y/Y: 4.3% v 4.2%e; RPI-X (ex-mortgage interest payments) Y/Y: 4.1% v 4.2% prior; Retail Price Index: 402.9 v 402.2 prior.

- (AT) Austria May Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 3.0% v 3.0% prelim.

- (ID) Indonesia Central Bank (BI) left the Bi-Rate unchanged at 5.50% (as expected).

- (SE) Sweden Central Bank (Riksbank) cut Repo Rate by 25bps to 2.00% (as expected).

- (EU) Euro Zone Apr ECB Current Account Balance: €19.8B v €50.9B prior.

- (PL) Poland Jun Consumer Confidence: -9.3 v -14.5 prior.

- (ZA) South Africa May CPI M/M: 0.2% v 0.1%e; Y/Y: 2.8% v 2.8%e.

- (ZA) South Africa May CPI Core M/M: 0.0% v 0.1%e; Y/Y: 3.0% v 3.1%e.

- (UK) Apr ONS House Price Index Y/Y: 3.5% v 7.0% prior.

- (IT) Italy Apr Current Account Balance: €0.4B v €1.6B prior.

- (PT) Portugal Apr Current Account Balance: +0.2B v -€0.2B prior.

- (GR) Greece Apr Current Account Balance: -€2.1B v -€3.0B prior.

- (EU) Euro Zone May Final CPI Y/Y: 1.9% v 1.9% prelim; CPI Core Y/Y: 2.3% v 2.3% prelim; CPI.

- (CY) Cyprus May CPI Harmonized M/M: 0.2% v 0.7% prior; Y/Y: 0.4% v 1.4% prior.

- (IS) Iceland May International Reserves (ISK): 960B v 880B prior.

Fixed income issuance

- (IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK3.0B in 2027 and 2035 DGB bonds.

- (SE) Sweden sold total SEK17.5B vs. SEK17.5B indicated in 3-month and 12-month bills.

Looking ahead

- (AR) Argentina May Budget Balance (ARS): No est v 845.9B prior.

- (AR) Argentina May UTDT Leading Indicator: No est v 0.5% prior.

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

- 05:30 (FR) ECB’s Villeroy (France).

- 05:30 (DE) Germany to sell combined €2.5B in 2046 and 2054 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCB) to sell 12-month bills.

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

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

- 06:00 (RU) Russia to sell OFZ Bonds.

- 06:00 (EU) European Union to sell combined €3.0B in 3-month, 6-month and 12-month bills.

- 06:00 (CZ) Czech Republic to sell combined CZK10.0B in 2033, 2036 and 2044 Bonds.

- 06:15 (NL) ECB’s Knot (Netherlands).

- 07:00 (US) MBA Mortgage Applications w/e Jun 13th: No est v +12.5% prior.

- 07:00 (ZA) South Africa Apr Retail Sales M/M: No est v -0.2% prior; Y/Y: 3.1%e v 1.5% prior.

- 08:00 (MX) Mexico Q1 Aggregate Supply and Demand: No est v 1.9% prior.

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

- 08:30 (US) May Housing Starts: 1.350Me v 1.361M prior; Building Permits: 1.425Me v 1.412M prior.

- 08:30 (US) May Housing Starts M/M: -0.8%e v +1.6% prior; Building Permits M/M: +0.2%e v -4.7% prior.

- 08:30 (US) Initial Jobless Claims: 245Ke v 248K prior; Continuing Claims:1.94Me v 1.956M prior.

- 09:00 (IT) ECB’s Penetta (Italy).

- 10:00 (CL) Chile Central Bank (BCCh) Quarterly Monetary Policy Report.

- 10:30 (US) Weekly DOE Oil Inventories.

- 10:30 (DE) ECB’s Nagel (Germany) with members Villeroy; Panetta, Knot, Escriva and Centeno at YFI conference.

- 11:00 (IE) ECB’s Lane (Ireland, chief economist) at conference.

- 11:30 (CA) Bank of Canada (BOC) Gov Macklem.

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

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

- 12:00(US) Weekly EIA Natural Gas Inventories.

- 12:00 (RU) Russia Q1 Preliminary GDP (2nd of 3 readings) Y/Y: 1.4%e v 1.4% advance.

- 12:00 (RU) Russia Q2 Consumer Confidence: No est v -11 prior.

- 12:00 (CO) Colombia Apr Economic Activity Index (Monthly GDP) Y/Y: 0.8%e v 4.5% prior.

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Target Range unchanged at 4.25-4.50%.

- 14:00 (US) FOMC Staff Projections.

- 14:00 (ES) ECB’s De Guindos (Spain).

- 14:30 (US) Fed Chair Powell post rate decision press conference.

- 16:00 (US) Apr Total Net TIC Flows: No est v $254.3B prior; Net Long-term TIC Flows: No est v $161.8B prior.

- 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to leave Selic Target Rate unchanged at 14.75%.

- 18:45 (NZ) New Zealand Q1 GDP Q/Q: 0.7%e v 0.7% prior; Y/Y: -0.8%e v -1.1% prior.

- 21:00 (CN) China May Swift Global Payments (CNY): No est v 3.5% prior.

- 21:30 (AU) Australia May Employment Change: +21.2Ke v +89.0K prior; Unemployment Rate: 4.1%e v 4.1% prior; Full Time Employment Change: No est v +59.5K prior; Part Time Employment Change: No est v +29.5K prior; Participation Rate: 67.1%e v 67.1% prior.

-23:30 (JP) Japan to sell 12-month Bills.

- 23:35 (JP) Japan to sell 5-year JGB Bonds.