Optimism from 'drafted MOU' between US-Iran, giving macro tailwinds for SpaceX IPO

EU mid-market update: Optimism from 'drafted MOU' between US-Iran, giving macro tailwinds for SpaceX IPO; Europe digests ECB hike ahead of more complicated July meeting.

Notes/observations

- Reported US-Iran deal lifts risk appetite: Sentiment across European markets has been buoyed by signs of de-escalation between the US and Iran. Trump called off planned military strikes and indicated the main points of an agreement have been approved, claiming at a virtual campaign rally that the war has effectively been ended and that the US "got everything we wanted." Axios sources outlined the contents of a draft MoU: a 60-day ceasefire extension, a framework for addressing uranium stockpiles, and an immediate, toll-free reopening of the Strait of Hormuz; Trump suggested the document could be signed over the weekend in Europe. Caution is still warranted - Iran's Foreign Ministry says Tehran has not reached a final decision, accusing the US side of repeatedly shifting positions, while the deal still requires final sign-off. Israel's PM Netanyahu noted Israel is not a party to the emerging MoU. Iranian press suggests $24B of Iranian funds could be released during the 60-day talks. Market reaction: oil lower, yields lower, the dollar softer on reduced safe-haven demand, and a rebound in tech. Note the situation remains fluid - the US reportedly shot down two Iranian attack drones on Thursday night, though traffic through Hormuz continues.

- The central danger in the reported Trump-Iran framework is not that it repeats the JCPOA, but that it may release economic value - especially access to frozen Iranian funds - before Iran gives up measurable nuclear leverage. Axios says U.S., Iranian, and Qatari officials have discussed a mechanism for Iran to use some frozen funds in Qatar for humanitarian purchases, while concerns remain that the issue could be handled through a side arrangement despite U.S. denials. If Hormuz reopens, blockade pressure eases, oil waivers begin, and frozen-fund access expands before the 60% uranium stockpile, centrifuge capacity, and IAEA visibility are physically resolved, Iran gets liquidity and strategic relief while preserving ambiguous nuclear latency. The test is therefore simple: after the first phase, has Iran lost usable nuclear capability, or has the West merely paid with frozen funds and market calm for another 60 days of unresolved nuclear risk?

- TTN SpaceX IPO Preview: SpaceX is set to list in the US today, with "shadow market" activity signaling potential share upside of +35%, a key event for global risk sentiment and a tailwind for the broader tech complex. Markets will be paying attention to how much appetite the market has for new IPO’s, given OpenAI and Anthropic desire to list in second half of year. This public debut is structured as a tightly engineered liquidity machine that preserves Musk’s super-voting control while enabling staggered insider lock-up releases for orderly exits by strategic holders like Google, Valor, and DFJ, even as public investors absorb bridge-loan penalties, related-party lease economics, and the mismatch between long-duration GPU/power infrastructure obligations and short-cancellable contracts with Anthropic and Google. Beneath the surface, orbital data-center economics grapple with unrepairable hardware and rapid depreciation, while local regulatory frictions in Mississippi and Texas risk throttling the AI ramp faster than model competition; Musk’s latest incentive plan quietly shifts focus toward 100 TW orbital compute as the key vesting trigger. For Tesla, this transition risks demoting it from the clean public Musk proxy into a critical supplier and collateral asset inside a larger compute empire—unlocking real Energy and Megapack tailwinds but eroding its standalone AI narrative premium and valuation multiple.

- UK weak April GDP dents BoE hike expectations: April GDP contracted 0.1% m/m as expected (from +0.3% in March), led by a 0.5% drop in consumer-facing services and a near-10% fall in fuel consumption as the Iran-related energy shock catches up with households. Markets pared BoE tightening bets to 38bp of hikes in 2026 from 51bp, and 10-year gilt yields fell 6.4bp to an 11-day low of 4.840%. Economists broadly see a slowing economy - Capital Economics expects rates on hold this year and a near-standstill in activity over the coming quarters, while Deutsche Bank still sees 1% GDP growth in 2026, ahead of many G7 peers. Manufacturing strength may reflect precautionary stockpiling. Separately, BoE/Ipsos 12-month inflation expectations jumped to 4.0% from 3.2% - a complication for the doves. Politically, pressure builds on Starmer after defense minister resignations, with Burnham polling firmly ahead of next Thursday's by-election.

- ECB post-hike commentary skews cautious on further tightening: Investors continue to digest Thursday's 25bp hike. Sources after the meeting suggested the ECB is unlikely to hike again in July unless there is a material surge in energy prices. Lagarde struck a somewhat hawkish tone in the press conference, but the statement carried a stagflationary tilt - inflation revised up, growth outlook cut - though she played down the growth hit. Council commentary today reflects the balancing act: Nagel (Germany) sees the war-driven supply shock as strong and persistent; Moulin (France) says the oil jump is starting to feed through to other prices but sees no wage-driven second-round effects yet; Rehn (Finland) likewise sees no critical second-round effects; Makhlouf (Ireland) keeps both further hikes and a hold on the table, stressing the need to prevent the price shock becoming entrenched; while Dolenc (Slovenia) and Kocher (Austria) lean more dovish, with Kocher keen to avoid unnecessary hikes. Commerzbank cautions a July follow-up hike wouldn't necessarily.

- Kradle has created an elegant deception test for AI models: four models were placed in a survival game with four rooms, three safe and one deadly, but only one model secretly knows which room will kill whoever enters it. The disturbing result is that Claude Fable 5 often used that secret not to save the group, but to manage the conversation in its own favor - staying polite, sounding fair, avoiding obvious lies, yet pushing others toward the dangerous room so effectively that group survival fell to 10%. Grok 4.20 did the opposite: it usually told the group which room was lethal, deception stayed very low, and survival rose to 59%, which makes the experiment important because it shows a real design split between AI that treats private knowledge as a weapon and AI that treats truth as the basis for cooperation.

- Asia closed higher with KOSPI outperforming +4.6%. EU indices +1.4-2.6%. US futures +0.1-0.5%. Gold +0.3%, DXY +0.1%; Commodity: Brent -4.2%, WTI -4.3%; Crypto: BTC +0.9%, ETH +0.8%.

Asia

-Japan Fin Min Katayama: Sees no impact of Gov Ueda's absence on BOJ meeting (rate decision next week, June 16th).

-Indonesia Central Bank (BI): Sees capital inflows increase after rate hike.

-Banned’ forex trading said to ‘resurface’ in China social media – Chinese press.

-South Korea signs AI standardization agreement with partners incl Singapore, Australia, UK and Canada - Yonhap.

-China tells big banks to curb interbank-loans to ease ample liquidity - financial press.

-China bond redemptions said to accelerate on funding drain - press.

Europe

-BoE/Ipsos May Quarterly Inflation Attitude Survey (Next 12 months): 4.0% v 3.2% prior.

-German Econ Ministry: Domestic economic momentum likely to have slowed noticeably in Q2.

-German Defense Min Pistorius: We have no official announcement yet when the U.S. will stop providing some capabilities for NATO’s defence plans.

-ECB’s Dolenc (acting Slovenia member): ECB rate hike just enough for now to follow baseline; Had robust set of data on table to make decision.

-ECB's Nagel (Germany): The supply shock triggered by the war in the Middle East is proving to be strong and persistent - Comment by E-mail.

-ECB’s Kocher (Austria): War's impact on price trends is increasingly clear; Want to avoid unnecessary rate hikes.

-ECB's Makhlouf (Ireland): To consider further hikes or hold in next months; Need to get ahead of inflation; Crucial that price shock doesn’t get entrenched.

- ECB's Rehn (Finland): Hike will help prevent inflation spillovers; No signs yet of ‘critical’ second-round effects.

-ECB's Moulin (France): Clear that energy shock will be persistent; Oil jump has started to shift to other prices; Not yet seeing second round effects via wages.

-Poland plans to choose a technology/construction partner for its second nuclear power plant in 2027 - press.

-Reportedly US plan is said to pull a third of fighter jets it provides NATO for Europe - NYT.

Americas

-Canada PM Carney: Canada is looking for a bilateral deal with Mexico.

-Peru Central Bank (BCRP) leaves Reference Rate unchanged at 4.25%; as expected.

Conflict/tensions

-Iran Foreign Ministry spokesman Baghaei: Iran has not yet reached final conclusion on US deal.

- Iranian press suggests Iran's $24B funds will be released during 60-day talks - press.

-Iran-US MOU would extend ceasefire for 60 days; Still needs final sign-off - Axios [citing unnamed diplomat and US official].

-US President Trump: Ended war with Iran today, settled up with Iran; Pretty much completed; We got everything we wanted - Comments at Virtual Campaign Rally.

-US shot down two Iranian attack drones "tonight" [Thursday]; Traffic flow through the Strait of Hormuz continues - post on X [Fox reporter citing US defense officials].

-President Trump and allies have discussed pushing lawmakers to pass resolution to "expunge" impeachments - WSJ.

-Iran Foreign Min Spokesperson: Qatar and Pakistan are active mediators, but US actions are affecting the diplomatic process; A large part of the negotiating text had been finalized, but "American's kept changing their position"; Iran has not yet reached a final decision on an agreement - press.

-Israel PM Netanyahu: Israel is not a party to the emerging US-Iran MOU; Trump did speak with him about this deal.

-Japan Government to select vessels to dispatch to Hormuz [timeframe uncertain] - US financial press.

-China has arrested US scholar U Min Zin who studies Myanmar politics, cited the 'endangering' of national security'; the arrest occurred in early Jun – NYT.

-Russia's Defense Ministry: Russia downs 231 drones overnight - Newagencies [citing defense ministry].

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +1.73% at 632.32, FTSE +1.35% at 10,442.48, DAX +1.84% at 24,654.57, CAC-40 +2.14% at 8,375.99, IBEX-35 +2.56% at 18,757.64, FTSE MIB +2.04% at 51,533.50, SMI +1.43% at 13,723.40, S&P 500 Futures +0.29%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; risk appetite supported on hopes US-Iran have reached a deal; among sectors leading the way higher are financials and industrials; lagging sectors include energy and utilities; oil & gas subsector under pressure after Brent falls below $90; reportedly US private equity interested in acquiring stake in Eramet; Barclays acquires GoHenry from Acorns; Adyen acquires Orb; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Air France-KLM [AF.FR] +8.5% (jet fuel supply comment), Flutter Entertainment [FLUT.UK] -0.5% (intends to delist from LSE), McBride [MCB.UK] -9.0% (trading update; cuts outlook).

- Energy: Shell [SHEL.UK] -3.0% (oil prices drop after Trump said the Iran war is over).

Speakers

-ECB’s Dolenc (acting Slovenia member): ECB rate hike just enough for now to follow baseline; Had robust set of data on table to make decision.

-ECB's Nagel (Germany): The supply shock triggered by the war in the Middle East is proving to be strong and persistent - Comment by E-mail.

-ECB’s Kocher (Austria): War's impact on price trends is increasingly clear; Want to avoid unnecessary rate hikes.

-ECB's Makhlouf (Ireland): To consider further hikes or hold in next months; Need to get ahead of inflation; Crucial that price shock doesn’t get entrenched.

- ECB's Rehn (Finland): Hike will help prevent inflation spillovers; No signs yet of ‘critical’ second-round effects.

-ECB's Moulin (France): Clear that energy shock will be persistent; Oil jump has started to shift to other prices; Not yet seeing second round effects via wages.

-Japan Chief Cab Sec Kihara: Declines to comment on ECB rate hike.

-South Korea Fin Min: Higher consumer prices and slower job market expected due to fall out from Middle East war; cites a report from the Ministry - Yonhap.

Economic data

-(HK) Hong Kong Q1 PPI Y/Y: 17.7% v 9.5% prior

-(HK) Hong Kong Q1 Industrial Production Y/Y: 3.1% v 5.8% prior.

-(CZ) Czech Apr Monthly Current Account (CZK): 1.2B v 20.0Be.

-(TH) Thailand May Foreign Reserves w/e Jun 5th: $283.5B v $287.5B prior.

-(TR) Turkey Apr Current Account Balance: -$5.7B v -$5.5Be.

-(ES) Spain May final CPI M/M: 0.1% V 0.1%E; Y/Y: 3.2% V 3.2%E; CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 3.6% v 3.6%e; CPI Core M/M: 0.2% v 0.8% prior; (final): 3.0% v 2.9%e.

-(FR) France May Final CPI M/M: 0.1% v 0.1%e; Y/Y: 2.4% v 2.4%e; CPI Harmonized M/M: 0.1% v 0.1%e; Y/Y: 2.8% v 2.8%e; CPI Index (ex-tobacco): 102.37 v 102.38e.

-(UK) Apr visible trade balance: -£26.0B V -£22.5BE; Overall trade balance: -£8.5B v -£5.7Be; Visible trade balance (ex precious metals): -£21.0B v -£21.0B prior; Overall Trade Balance (ex precious metals): -£3.4B v -£4.0Be.

-(UK) Apr Index of Services M/M: -0.2% v -0.1%e; 3M/3M: 0.8% v 0.8%e.

-(RO) Romania May CPI M/M: 0.6% v 0.8%e; Y/Y: 10.9% v 10.7%e.

-(DE) Germany May Final CPI M/M: -0.2% v -0.2%e; CPI Y/Y: 2.6% v 2.6%e; CPI EU Harmonized M/M: -0.1% v -0.1%e, Y/Y: 2.7% v 2.7%e.

-(UK) APR MONTHLY GDP M/M: -0.1% V -0.1%E; GDP 3M/3M: 0.7% v 0.7%e.

-(UK) APR INDUSTRIAL PRODUCTION M/M: 0.0% V 0.1%E; Y/Y: -0.2% V -0.1%E; Manufacturing Production M/M: +0.4% v -0.2% prior; Y/Y: 1.0% v 0.0% prior; Construction Output M/M: +0.1% v -0.7%e; Y/Y: -1.0% v -1.7%e.

-(JP) Japan Apr Final Industrial Production M/M: 0.5% v 0.8% prelim; Y/Y: 2.0% v 2.3% prelim; Capacity Utilization M/M: -0.8% v -1.2% prior.

Fixed income issuance

-(IN) India sells total INR320B vs. INR320B in 2031 and 2066 bonds.

Looking ahead

- 05:30 (IN) India to sell combined INR in bonds.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2038, 2046 and 2058 Bonds.

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills.

- 06:00 (IL) Israel Q1 Current Account Balance: No est v 3.4B prior.

- 06:00 (PT) Portugal May Final CPI M/M: No est v 0.3% prelim; Y/Y: No est v 3.3% prelim.

- 06:00 (PT) Portugal May Final CPI EU Harmonized M/M: No est v 0.4% prelim; Y/Y: No est v 3.1% prelim.

- 06:30 (IN) India May CPI Y/Y: No est v 3.5% prior.

- 07:30 (IN) India Jun Foreign Exchange Reserves w/e Jun 5th: No est v $682.3B prior.

- 08:00 (BR) Brazil May IBGE Inflation IPCA M/M: No est v 0.7% prior; Y/Y: No est v 4.4% prior.

- 08:00 (IS) Iceland May Unemployment Rate: No est v 4.6% prior.

- 08:00 (PL) Poland Apr Current Account (PLN): No est v -0.2B prior; Trade Balance: No est v -0.5B prior; Exports: No est v 32.4B prior; Imports: No est v 32.9B prior.

- 08:30 (CA) Canada Q1 Capacity Utilization Rate: No est v 78.5% prior.

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

- 09:00 (IN) India announces upcoming bill issuance (held on Wed).

- 09:30 (US) SpaceX IPO.

- 10:00 (US) Jun Preliminary University of Michigan Confidence: No est v 44.8 prior.

- 11:00 (EU) Potential sovereign ratings after European close.