Musk says he regrets some Trump-related posts

EU mid-market update: Musk says he regrets some Trump-related posts; Readout from US-China talks fails to stimulate market as both sides struggle to resolve key issues and continue to kick the can down the road.

Notes/observations

- Europe modestly higher with exception of Spain’s IBEX 35, which is down nearly 1.0% after Inditex Q1 earnings missed expectations (one of world’s largest fashion retailers). Accordingly, retail sector underperforms across Europe; basic besources and tech outperforms.

-The general optimism flowed from Asia session, after US-China concluded trade talks in London and agreed in principle to implement the Geneva consensus. Key issues, like US export controls, remain unresolved. Needs approval from Trump and Xi. Treasury Sec Bessent said he will have to go back to Washington to testify before Congress tomorrow, while USTR Greer and Commerce Sec Lutnick to continue talks.

- Economic data across Europe was few and far between. Market waits for US CPI at 08:30 ET and US Federal Budget Balance at 14:00 ET.

- Asia closed higher with KOSPI outperforming +1.2%. EU indices +0.3% to -0.9%. US futures -0.1%. Gold +0.4%, DXY -0.1%; Commodity: Brent -0.4%, WTI -0.3%; Crypto: BTC -0.1%, ETH +2.7%.

Asia

- South Korea May Unemployment Rate: 2.7% v 2.7%e.

- Japan May PPI (domestic CGPI) M/M: -0.2% v +0.2%e; Y/Y: 3.2% v 3.5%e.

- South Korea Jun 1-10th Exports Y/Y: +5.4% v -23.8% prior; Imports Y/Y: +11.5% v -15.9% prior.

Europe

- ECB's Stournaras (Greece) noted that a stable EU policy was drawing investors to Euro.

Americas

- Treasury Sec Bessent said to be contender for next Fed Chair (**Note: Bessent has supported President Trumps calls for the Fed to cut rates while also reportedly pushing back on Trump advisers suggesting the President attempt to remove Powell).

- World Bank warned global economy will grow at its slowest pace since the 1960s during this decade.

Trade

- China Vice Commerce Min Li Chenggang stated that the two sides reached consensus on 'Geneva Agreement'; Both sides had 'in-depth' exchanges and to report on framework to leaders. Expect” that issues around shipments of rare earth minerals and magnets will be resolved with the framework implementation.

- US and Mexico said to be near deal to cut steel tariffs and set a cap on imports; US Pres Trump would need to sign off on the agreement.

- US federal appeals court allowed President Trump to continue enforcing his global tariffs.

Energy

- Weekly API Crude Oil Inventories: -0.4M v -3.3M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.03% at 553.28, FTSE +0.11% at 8,862.60, DAX +0.03% at 24,041.99, CAC-40 +0.26% at 7,824.51, IBEX-35 -0.82% at 14,143.00, FTSE MIB -0.01% at 40,203.00, SMI +0.10% at 12,364.46, S&P 500 Futures -0.12%].

Market focal points/key themes: European indices opened mixed with a positive bias that became more pronounced through the early part of the session; lack of details on preliminary trade deal between US and China kept risk appetite from flourishing; among sectors leading the way higher are materials and technology; lagging sectors include utilities and consumer discretionary; Ricardo to be acquired by WSP; KKR raises offer for Assura; Demant acquires Kind; Bain says will not make an offer for Craneware, but will still acquire more shares; focus on US CPI data coming out later in the day; earnings expected in the upcoming Americas session include Oracle.

Equities

- Consumer discretionary: Inditex [ITX.ES] -4.5% (Q1 results misses expectation; May-June trends), Fnac Darty [FNAC.FR] +8.0% (2030 plan).

- Financials: Deutsche Boerse [DB1.DE] -1.5% (analyst downgrade).

- Healthcare: Bayer [BAYN.DE] +2.5% (analyst upgrade).

- Industrials: Demant [DEMANT.DK] +2.5% (to acquire hearing aid manufacturer Kind for €700M; Affirms FY25 guidance; suspends buyback).

- Technology: Ricardo [RCDO.UK] +28.0% (to be acquired by WSP at 430p/shr in £281M deal), Frontier Developments [FDEV.UK] +15.0% (trading update).

- Materials: Ibstock [IBST.UK] -15.5% (Q2 trading update).

Speakers

- ECB Chief Lagarde Role of the Euro Report noted that further shifts might be underway in global currencies.

- ECB and PBoC renew MOU on cooperation.

- EU said to aim for US trade talks to extend past Pres Trump's July 9th deadline.

- Elon Musk posted on social media that he regretted some of his posts about President Trump last week. They went too far.

- Japan Trade Negotiator Akazawa noted of higher risk of economic downturn due to US policies.

- Japan PM Ishiba stated that the Govt took issues of rising prices seriously.

- USTR Greer reiterated that was up to Pres Trump whether deadline were extended; Did not have another meeting scheduled (with China).

- China issued a statement on recent US-China trade talks in London. Not afraid to fight trade war but did not want to fight"; Reiterates stance that there were no winners in trade war and urged US to resolve issues via dialog; Vowed to enhance cooperation with the US and reduce misunderstandings.

- Iran Foreign Min Araghchi noted that a nuclear deal was 'within reach', could be achieved 'rapidly'.

Currencies/fixed income

- Quiet session during the EU morning but did see the USD drift lower. Focused remained on trade negotiations.

- EUR/USD at 1.1435 by mid-session with 1.15 being the key resistance.

- GBP/USD staying below the 1.35 handle following Tues soft labor and wage data.

- USD/JPY holding above the 145 level ahead of next week’s BOJ decision.

Economic data

- (HU) Hungary May CPI M/M: 0.2% v 0.0%e; Y/Y: 4.4% v 4.3%e.

- (EU) ECB 2025 Expected Euro-Area Negotiated Wages: 3.1% v 3.1% prior.

- (RU) Russia Narrow Money Supply w/e Jun 6th (RUB): 18.15T v 18.03T 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 DKK0M (nil) in 3-month and 6-month Bills; rejected all bids.

- (UK) DMO sold £4.25B in 4.5% Mar 2035 Gilts; Avg Yield: 4.588% v 4.673% prior; bid-to-cover: x v 3.13x prior; Tail: 0.3bps v 0.3bps prior.

- (SE) Sweden sold SEK6.0B vs. SEK6.0B indicated in 2.5% Oct 2036 Bonds; Avg Yield: 2.428% v 2.4113% prior; bid-to-cover: 1.84x v 1.82x prior.

- (NO) Norway sold total NOK3.0B in 2035 and 2039 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €8.5B vs. €8.5B indicated in 12-month bills; Avg Yield: 1.983% v 1.959% prior; Bid-to-cover: 1.41x v 1.42x prior.

Looking ahead

- (CO) Colombia May Consumer Confidence: -8.2e v -8.6 prior.

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

- 05:30 (ZA) South Africa May Sacci Business Confidence: # v 123.5 prior.

- 05:30 (IE) ECB’s Lane, (Ireland, chief economist).

- 05:30 (CH) Switzerland to sell 2039 and 2055 Bonds.

- 05:30 (DE) Germany to sell €3.0B in 2.5% Feb 2035 bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2035 and 2054 OT bonds.

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

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

- 06:00 (IL) Israel Apr Chain Store Sales Y/Y: No est v -1.1% prior.

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

- 06:00 (CZ) Czech Republic to sell Floaters.

- 07:00 (US) MBA Mortgage Applications w/e June 6th: No est v -3.9% prior.

- 07:30 (UK) Chancellor Reeves Spending Review.

- 08:00 (HU) Hungary Central Bank (MNB) May Minutes.

- 08:00 (MX) Mexico Apr Industrial Production M/M: +0.1%e v -0.9% prior; Y/Y: -3.5%e v +1.9% prior; Manufacturing Production Y/Y: -2.4%e v +3.1% prior.

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

- 08:00 (IT) ECB’s Cipollone (Italy).

- 08:30 (US) May CPI M/M: 0.2%e v 0.2% prior; Y/Y: 2.5%e v 2.3% prior.

- 08:30 (US) May CPI (ex-food/energy) M/M: 0.3%e v 0.2% prior; Y/Y: 2.9%e v 2.8% prior.

- 08:30 (US) May CPI Index NSA: 321.732e v 320.795 prior; Core Index: 327.319e v 326.43 prior.

- 08:30 (US) May Real Avg Hourly Earning Y/Y: No est v 1.5% prior (revised from 1.4%); Avg Weekly Earnings Y/Y: No est v 1.8% prior (revised from 1.7%).

- 08:30 (CA) Canada Apr Building Permits M/M: +2.0%e v -4.1% prior.

- 09:00 (RU) Russia Apr Trade Balance: No est v $11.8B prior; Exports: No est v $34.6B prior; Imports: No est v $22.8B prior.

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

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

- 12:00 (RU) Russia May CPI M/M: 0.4%e v 0.4% prior; Y/Y: 9.8%e v 10.2% prior.

- 12:00 (RU) Russia May CPI Core M/M: No est v 0.3% prior Y/Y: No est v 9.2% prior.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes reopening.

- 14:00 (US) May Federal Budget Balance: -$314.5Be v $258.4B prior.

- 18:45 (NZ) New Zealand May Total Card Spending M/M: No est v -0.2% prior; Retail Card Spending M/M: No est v 0.0% prior.

- 19:01 (UK) May RICS House Price Balance: -3%e v -3% prior.

- 19:50 (JP) Japan Q2 BSI Large All Industry Q/Q: No est v 2 prior; Large Manufacturing Q/Q: No est v -2.4 prior.

- 21:00 (AU) Australia Jun Consumer Inflation Expectation Survey: No est v 4.1% prior.

- 22:00 (JP) Japan May Tokyo Avg Office Vacancies: No est v 3.7% prior.

- 23:00 (ID) Indonesia May Consumer Confidence: No est v 121.7 prior.

- 23:30 (TH) Thailand May Consumer Confidence: No est v 55.4 prior; Economic Confidence: No est v 49.3 prior.