Markets bet 25bps hike from ECB next week and BoJ week after

EU mid-market update: AI sentiment cools as Broadcom guidance disappoints; Markets bet 25bps hike from ECB next week and BOJ week after.

Notes/observations

- Tech complex is the session's clear under-performer after Broadcom's sales let down, dragging sentiment across semis and the broader AI trade. The wobble dovetails with a cautionary note from Capital Economics, who argue South Korea's headline chip-export strength masks underlying fragility - the boom is narrowly concentrated in AI-linked electronics and isn't broadening into consumer or investment activity. Supply-side strains add to the unease: nine industry groups have written to Bessent and Lutnick pressing the administration on the memory chip shortage, while TSMC's CEO sought to temper pricing fears, saying it won't pursue memory-style hikes or raise prices significantly all at once, framing the message around sustainable long-term growth. Risk appetite more broadly stayed soft, with Bitcoin printing a four-month low overnight on the combination of geopolitical uncertainty and firmer Fed hike expectations.

- President Trump has reportedly told mediators he will not agree to release frozen Iranian funds before a deal is signed, leaving the assets issue as one of the final obstacles in the talks, but the arrangement to release Iranian funds said to be in its final stages, with the remaining dispute centers on how part of the money would be used or controlled after release. The JCPOA parallel is the sequencing problem: Obama’s deal gave relief only around detailed nuclear limits and IAEA verification, so any Trump deal that releases funds before restoring that verification logic would look economically generous but structurally thinner.

- Israel-Lebanon ceasefire, contingent on Hezbollah halting attacks, has taken some heat out of crude, though both Brent and WTI remain higher week-to-date after the recent US-Iran escalation. Trump struck a constructive but non-committal tone: a deal is close "in theory," he'd rather not wipe out Iran, and Hormuz reopens once an MOU is signed, while suggesting talks could run another two to three weeks. Reporting (WSJ) indicates he's reluctant to reignite the conflict and would only end the ceasefire if US troops are killed - though the House passed a war powers resolution in a rebuke of the President. The net is a market caught between de-escalation hopes and unresolved supply risk: US crude stocks fell 8M barrels (plus another 8M from the SPR), and ING warns that without normalized regional flows the market stays exposed to sharp upward price swings.

- In the last 24 hours, General Mills, Clorox, P&G, Boston Beer and Colgate all signaled that the US consumer remains present but has become markedly more fragile, with household purchase decisions in everyday staples suddenly shortening from weeks to paycheck-to-paycheck liquidity management in recent weeks. After tax refunds masked underlying pressure in April, May exposed the shift: consumers are no longer optimizing lifestyle but survival, buying only when cash lands, promos hit, or pack prices feel survivable—turning boring, essential categories choppy week-to-week. The result is not outright collapse but a migration to “expensive demand”: volumes may hold, but with worse mix, elevated spending to move units, and structurally lower profitability, creating a post-refund consumer who is still shopping yet increasingly painful to serve at yesterday’s margins.

- The Bank of Japan is reportedly leaning to a rate hike at its June 16 meeting (likely +25bp to 1.0%), which is already priced in at ~83% probability in OIS markets and consistent with the hawkish tone from April’s 6-3 vote. Earlier this week, BOJ Governor Ueda highlighted faster oil price pass-through and the need to continue raising rates at an appropriate pace in response to improving inflation and wage dynamics, while signaling less urgency to accelerate the reduction in bond purchases in FY2027.

- TSMC CEO C.C. pushed back against comparisons with memory-chip suppliers, saying, “We don’t want to suddenly raise prices like memory companies do. That’s not sustainable. TSMC is focused on long-term, sustainable operations. We’re not that kind of company.” The comments come as memory-chip inflation has become a broader market concern, while reports suggest TSMC may still seek more measured advanced-node price increases, including potential 3nm hikes later in 2026 and 2027.

- Partners Group is capping withdrawals because too many investors are asking for cash back from its semi-liquid private-market funds at the same time: reportedly one U.S. vehicle had redemption requests of about 6% of NAV versus a 5% limit, while its Global Value SICAV saw requests near 9.8% and will also use its 5% quarterly cap. The issue is not that Partners Group cannot raise money - it still expects FY26 gross new client demand of $26-32B - but that the “evergreen” model is being tested: funds sold with periodic liquidity are invested in assets that cannot be sold quickly without price damage. That matters because private credit and private equity worries have already made investors more sensitive to valuation marks, weak exits, bankruptcies and liquidity mismatch; when redemptions rise across several funds at once, the market keeps asking whether this is just one manager’s flow problem or a wider stress signal for semi-liquid private markets.

- India’s southwest monsoon reportedly reached Kerala today, marking the start of the June-September rainy season and its northward advance across the country. The season is unusually important this year because more than half of India’s farmland is rain-fed, while war-related disruption has kept global grain, fertilizer and freight markets more vulnerable. A weak or uneven monsoon, especially if stronger El Nino weighs on late-season rainfall, could pressure crop output, food prices and policy decisions on exports, subsidies and buffer stocks.

- Asia closed lower with KOSPI underperforming -1.8%. EU indices -0.4% to +0.7%. US futures -1.0% to +0.2%. Gold +0.8%, DXY -0.1%; Commodity: Brent -1.6%, WTI -1.5%; Crypto: BTC -5.5%, ETH -6.0%.

Asia

- TSMC CEO: Not seeking memory-style price hikes; Will not raise prices 'significantly' all of a sudden; Focused on sustainable growth over long-term.

- BOJ reportedly said to mull June hike with another possible in FY2026; BOJ sees less need to cut bond purchases at the same pace as FY2027 – US financial press [citing people familiar with the matter].

- South Korea's Joint Chiefs of Staff: North Korea's nuclear facility is uranium-enriching facility.

- South Korea Fin Min Koo: To "take action" if one-sided movement seen in currency markets; To closely monitor the bond market in case of "excessive volatility"; To strengthen risk checks on stock trading via borrowing.

- India govt said to have instructed public sector banks to build added buffers - US financial press [citing three people familiar with the matter].

- Australia PM Albanese: Comments on Trump's new proposed tariffs noting Australia has a robust, comprehensive, and world-leading legislation addressing labor and modern slavery.

- China MOFCOM: U.S and China negotiating teams remain in close communication; Will agree on specifics ASAP.

- China May PPI likely sustained recovery on factors including low base effect and imported inflation; PPI rise is estimated to accelerate to 3.6% y/y – China Securities Daily.

- Japan PM Takaichi: Believe market is watching bond issuance amount.

Europe

- Partners Group said to limit withdrawals from a $16B U.S. fund - press.

- Ukraine seeks dozens of extra patriot missiles from Germany - US financial press.

- Latvian General: Russia could invade Nato states by end-2028 - FT.

- FTSE 100 index changes: Aberdeen Group, Computacenter and Investec to join the FTSE 100 Index, with Berkeley Group Holdings, Mondi and Rightmove to leave the -Index; effective from June 22nd.

- Russia Fin Min Siluanov: Budget situation is getting better compared to Q1; Current prices permit reserve accumulation.

- Israel Finance Ministry updates economic outlook: Cuts 2026 GDP growth from 4.7% to 4.0%; Raises 2027 GDP growth from 4.0% to 4.8%.

- France Fin Min Lescure: Reiterates U.S investigation into forced labor is not justified.

Americas

- Reportedly US Pres Trump informed the mediators of his refusal to release funds to Iran before signing the agreement; Agreement on the release of frozen Iranian funds in its final stages, but main obstacle relates to the mechanism for disposing of part of the frozen Iranian funds - Al Arabiya.

- House of Reps passes war powers resolution on Iran, in a rebuke of Pres Trump.

- Pres Trump: Iran is close to an agreement 'in theory;' We could go another two, three weeks; Would rather not wipe out Iran; Hormuz will open when the MOU is signed; We'll take over the Southern route once its opened.

- Pres Trump said to have told aides that 'he would consider ending Iran ceasefire only if US troops are killed"; US officials say Pres is "reluctant" to reignite Iran war - WSJ.

- SpaceX releases amended S-1 file; Confirms setting IPO at 555.6M shares at $75B, in-line with expectations; Targets $1.77T market value; CEO Elon Musk's net worth to surpass $1T following SpaceX IPO - US financial press.

- Nine industry groups send letter to Treasury Sec Bessent and Commerce Sec Lutnick pressing Trump Admin on memory chip shortage issue.

Energy

- Trump to approve almost $700M of funding for the coal industry, seeks to help build coal plants and export sites.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.09% at 620.66, FTSE -0.44% at 10,286.66, DAX +0.26% at 24,875.43, CAC-40 +0.71% at 8,208.54, IBEX-35 % at #, FTSE MIB -0.38% at 49,850.50, SMI +0.76% at 13,319.70, S&P 500 Futures -0.41%].

Market focal points/key themes: European indices open mixed but took on an upward bias through the early part of the session; Croatia and Poland closed for holiday; markets cautiously about easing Middle East tensions but no progress on a ceasefire; among outperforming sectors are consumer discretionary and health care; underperforming sectors include telecom and energy; tech sector under pressure after Broadcom sales disappoint; Pershing Square sells its stake back to Universal Music; reportedly Castelake considering including MSC in bid for EasyJet; reportedly ING considering bid for Singular Bank; earnings expected in the upcoming US session include Ciena, Lululemon and Brown-Forman.

Equities

- Consumer discretionary: Universal Music Group [UMG.NL] -5.5% (Pershing Square to sell about 80.6M shares of UMG).

- Financials: Partners Group [PGHN.CH] +4.0% (affirming outlook; said to limit withdrawals from a $16B U.S. fund).

- Healthcare: Pharming Group [PAHRM.NL] +1.5% (FDA accepts sNDA).

- Telecom: Nokia [NOKIA.FI] -7.5% (sell-off in some US tech names).

Speakers

-RBA Gov Bullock: Flow of data and developments since May has not been materially different to our expectations; seen some signs policy tightening starting to work - testimony at Senate Economics Legislation Committee.

-South Korea Fin Min Koo: To "take action" if one-sided movement seen in currency markets; To closely monitor the bond market in case of "excessive volatility"; To strengthen risk checks on stock trading via borrowing.

-Japan PM Takaichi: Believe market is watching bond issuance amount.

-Indonesia Deputy Governor: Indonesia Central Bank has continued with increased intensity to intervene in FX markets.

Economic data

-(CY) Cyprus May CPI M/M: -0.1% v 1.7% prior; CPI Y/Y: 2.6% v 2.8% prior.

-(EU) EURO ZONE Apr Retail Sales M/M: -0.4% V -0.3%E; Y/Y: 1.0% V 0.3%E.

-(UK) May construction PMI: 38.2 V 40.5E (lowest since May 2020).

-(UK) May New Car Registrations Y/Y: 7.1% v 24.0% prior.

-(DE) Germany May construction PMI: 42.4 V 42.1 PRIOR.

-(TR) Turkey Apr Unemployment Rate: 8.2% v 8.1% prior.

-(CZ) Czech Q1 Average Real Monthly Wage Y/Y: 6.4% v 5.2%e; Average Nominal Monthly Wage Y/Y: 8.1% v 6.7% prior.

-(CH) Swiss May Unemployment Rate: 3.0% v 3.0%e; Unemployment Rate (seasonally adj): 3.1% v 3.0%e.

-(ES) Spain Apr Industrial Production M/M: -0.4% v -0.1%e; Y/Y: 2.0% v 1.9%e; Industrial Output NSA (unadj) Y/Y: 4.2% v 2.2% prior.

-(CZ) Czech May Preliminary CPI M/M: 0.1% v 0.3%e; Y/Y: 2.1% v 2.3%e.

-(HU) Hungary Apr Retail Sales Y/Y: 3.6% v 4.0%e.

-(CH) SWISS MAY CPI M/M: 0.2% V 0.3%E; Y/Y: 0.6% V 0.7%E; CPI EU Harmonized M/M: 0.1% v 0.6% prior; Y/Y: 0.9% v 0.5% prior; CPI Core Y/Y: 0.3% v 0.3%e.

-(RO) Romania Apr Retail Sales M/M: -2.6% v +2.0% prior; Y/Y: -6.3% v -3.8% prior.

-(SE) Sweden May Preliminary CPI M/M: 1.0% v 0.7%e; Y/Y: 0.8% v 0.5%e; CPIF M/M: 0.9% v 0.6%e; Y/Y: 1.5% v 1.3%e; CPIF (ex-energy) M/M: 0.7% v 0.4%e; Y/Y: 0.5% v 1.3%e.

-(NL) Netherlands Mar Trade Balance: €10.7B v €9.9B prior.

-(IE) Ireland May PMI Services: 50.8 v 49.7 prior (moves back into expansion after one month contraction); PMI Composite: 52.5 v 51.4 prior.

Fixed income issuance

-(FR) France debt agency (AFT) sells total €13.998B VS. €12.0-14.0B indicated range in 2036, 2038, 2042 and 2057 bonds.

-(ES) Spain debt agency (TESORO) sells total €4.973B VS. €4.5-5.5B indicated range in 2029, 2031 and 2041 bonds.

-(ES) Spain Debt Agency (Tesoro) sells €593M vs. €250-750M indicated in 2.05% Nov 2039 inflation-linked bonds (SPGBei); Real Yield: 1.570% v 1.492% prior; bid-to-cover: 1.81x v 2.00x prior.

Looking ahead

- 05:30 (US) May Total Challenger Job Cuts: No est v +83.4K prior; Y/Y: No est v -20.9% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 07:00 (ZA) South Africa Apr Electricity Production Y/Y: No est v -7.1% prior; Electricity Consumption Y/Y: No est v -3.5% prior.

- 07:30 (TR) Turkey May Real Effective Exchange Rate (REER): No est v 106.3 prior.

- 08:00 (MX) Mexico Mar Gross Fixed Investment M/M: No est v -0.8% prior; Y/Y: No est v -4.2% prior; Private Consumption Y/Y: No est v 0.9% prior- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Q1 Final Nonfarm Productivity: No est v 0.8% prelim; Unit Labor Costs: No est v 2.3% prelim.

- 08:30 (US) Initial Jobless Claims: No est v 215K prior; Continuing Claims: No est v 1.786M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 29th: No est v $753.8B prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

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

- 19:00 (KR) South Korea Apr Current Account: No est v $37.3B prior; BoP Goods Balance: No est v $35.1B prior.

- 19:30 (JP) Japan Apr Real Cash Earnings Y/Y: No est v 1.0% prior; Labor Cash Earnings Y/Y: No est v 2.7% prior; Cash Earnings - Same Sample Base Y/Y: No est v 2.5% prior; Scheduled Full-Time Pay - Same Base Y/Y: No est v 2.6% prior.

- 19:30 (JP) Japan Apr Household Spending Y/Y: No est v -2.9% prior.

- 21:00 (PH) Philippines May CPI M/M: No est v 2.6% prior; Y/Y: No est v 7.2% prior.

- 22:35 (CN) China to sell 1-year and 20-year Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.

- 23:30 (TH) Thailand May CPI M/M: No est v 2.8% prior; Y/Y: No est v 2.9% prior; CPI Core Y/Y: No est v 0.8% prior.