Russia fuel troubles triggers possible diesel export ban

EU mid-market update: Tech rout deepens; Major VW reshuffle in focus; Russia fuel troubles triggers possible diesel export ban.

Notes/observations

- Technology remains the dominant driver of negative sentiment, with European indices opening lower and the Tech sector down 1.4%. ASML, Infineon and STMicro are all trading flat to 2% lower, tracking US and Asian tech weakness overnight and compounded by memory input-cost pressures. The deeper story is a sentiment shift dated to June 3rd, when Broadcom was heavily sold off despite solid earnings - merely affirming forward guidance was enough to turn the charts. Since then, Mag 7 stocks posted their worst day ever relative to the Nasdaq 100, with Microsoft tracking its worst month since December 2000 (the dotcom lows). A "circular liquidity trap" appears to be at work, with coordinated selling across Gold (below $4,000/oz), Bitcoin (down to $58K, its lowest since before Trump's late-2024 election), Mag 7 names and SpaceX, whose blockbuster IPO is now trading below its opening-day price. Notably, the overnight US session erased a 2% futures gain built on strong Micron earnings within 30 minutes, while Apple weighed on news of 16–24% price hikes. Asia then extended the rout on no specific catalyst: the Kospi fell as much as 8%, the Nikkei 4.5%, and Chinese/HK indices over 2% (Alibaba again a drag). Adding to nerves: markets may be sensing that the "Fed put" is less reliable under new Chair Warsh, and OpenAI is reportedly worried about waning retail appetite post-SpaceX, potentially pushing its listing to 2027. On the cost side, AWS is raising hourly rates on several high-end GPU capacity blocks by ~20% from July 1st.

- OpenAI is reportedly now eyeing a 2027 IPO debut, instead of this year, to reach a $1T valuation after confidentially filing with the SEC, as CEO Sam Altman refuses any lower valuation for an earlier listing amid market caution. OpenAI’s situation is currently also very different from Anthropic’s recent achievement of operating profitability (with compute costs falling sharply and gross margins expanding dramatically). OpenAI’s advisers pointed to SpaceX’s volatile post-IPO drop (from $225+ to ~$153) and waning retail appetite for high-burn AI plays as risks, allowing OpenAI to sustain heavy infrastructure spending out of the spotlight while revenue grows rapidly.

- Renewed media reports have prompted a sharp pushback from IG Metall, which warns that threats to Volkswagen's bylaws, co-determination and German sites are "irresponsible" and is pressing the board to focus on competitive products and job security. The reports suggest up to 100K jobs could be cut across the VW Group over the coming years, alongside a CEO plan to spin off the core passenger-car brand into a separate entity. This escalates earlier expectations, which had pointed to roughly 50K German cuts by 2030 and 19K by end-2026 - worth watching for labour-relations and regional-political fallout in Germany.

- Ukraine executed its largest drone attack of the war overnight, with Russia claiming to have intercepted 660 Ukrainian drones, hitting the Azot chemical plant in Tula and sparking a fire near the Novomoskovsk power station. Drone barrages have surged dramatically — Russia reported 8,849 intercepts in May (v 3,676 in January and 2,504 last May) — exposing critical weaknesses in Russian short-range air defenses, particularly the Pantsir-S1’s four-channel guidance limitation that makes it vulnerable to saturation tactics using cheap decoys followed by precision strikes. Amid these attacks, including the largest Ukrainian strike on Moscow and a spreading fuel crisis that affected roughly one in four Russian gas stations, public trust in Putin fell to a wartime low of 69% according to the Kremlin-linked FOM poll (down 5 points), with disapproval rising to 18% and approval of his performance dropping to 71%.

- SemiAnalysis warns that US grid headroom — the spare firm, dispatchable capacity after peak demand and required reserves — is already nearing zero and will turn negative by 2027 due to minimal additions of reliable generation over the next two years. This power bottleneck is forcing major datacenter operators to increasingly rely on Behind-The-Meter (BTM) solutions, with expectations that BTM will power over half of new US datacenters from 2028 onward and the market for such equipment surpassing 50GW per year by 2029. Utilities continue to delay promised load ramps despite massive commitments, shifting the burden to buyers, while some AI labs and hyperscalers (like Meta) are adapting by accepting lower uptime targets — such as just two nines — and forgoing traditional backup generators entirely.

- On the EU macro and policy front, ECB consumer inflation expectations cooled at the 1-year horizon (3.5% vs 3.9%e) while the 3-year ticked up slightly (2.9%) - broadly supportive of moderating rate-hike pricing, though some ECB officials still flag one possible further hike; the BoE looks most likely to stay on the sidelines. EU also agreed to extend its tariff suspension on US products tied to the Boeing-Airbus dispute, and the Commission is drafting plans to extend economic benefits to candidate countries pre-accession.

- SpaceX said to be pivoting from its carrier-partner direct-to-cell model to launch a full US consumer Starlink mobile service, including its own retail mobile contracts and potentially building a terrestrial network, as revealed by President Gwynne Shotwell during the Starlink IPO roadshow. Starlink reportedly aims to sell directly to individuals and compete head-on with Verizon, AT&T, and T-Mobile, leveraging its growing direct-to-device capabilities, T-Mobile partnership, and newly acquired EchoStar spectrum assets.

- Asia closed lower with KOSPI underperforming -5.8%. EU indices -0.5% to -1.2%. US futures -0.1% to -1.1%. Gold +0.3%, DXY -0.2%; Commodity: Brent -3.3%, WTI -3.4%; Crypto: BTC -2.7%, ETH -5.3%.

Asia

- Japan Jun Tokyo CPI Y/Y: 1.7% v 1.6%e; CPI (ex-fresh food) Y/Y:1.6% v 1.6%e.

- Japan Fin Min Katayama stated that would not rely on debt to fund the food sales tax cut, and will instead review subsidies and spending to pay for it.

Global conflict/tensions

- IAEA Chief Grossi stated that was undeniable of an agreement to have access to Iran for inspection; Hope to be in Iran soon.

Americas

- Fed's Williams (moderate, voter) stated that delays hitting target 2% inflation from 2027 to 2028. Inflation pressures would diminish if the Middle East war disruptions were resolved.

Trade

- White House: Trump signed an agriculture related executive order. Soon US would be buying wheat, soybeans and corn with Iranian funds.

Energy

- UN shipping agency noted on Thurs a temporarily pausing evacuation plan for stranded ships and crews out of Hormuz after an attack on a commercial vessel.

- President Trump stated that the Strait was open.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.79% at 635.16, FTSE -0.71% at 10,455.30, DAX -1.15% at 24,714.14, CAC-40 -0.51% at 8,388.24, IBEX-35 -0.28% at 19,458.33, FTSE MIB -1.16% at 51,180.50, SMI -0.60% at 14,146.40, S&P 500 Futures -0.50%].

Market focal points/key themes: European indices open generally lower and declined through the early part of the session; sell off in tech stocks weighing on risk appetite; among sectors managing gains are consumer staples and real estate; sectors leading the way lower include technology and financials;KBC completes risk transfer of corporate bond portfolio; focus on US advance goods trade balance coming out later in the day; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: Pandora [PNDORA.DK] +4.5% (analyst upgrade), Zalando [ZAL.DE] -4.5% (Bafin probes Zalando 2025 accounts).

- Financials: Wise [WISE.UK] +8.5% (earnings; buyback).

- Industrials: Volkswagen [VOW3.DE] +0.5% (potentially up to 100K jobs worldwide could be cut at Volkswagen Group over the next few years; CEO plans to spin off core passenger-car brand into separate entity).

- Technology: ASML [ASML.NL] -1.5% (Korean tech stock sell-off; OpenAI mulls to postpone IPO).

Speakers

- Finland Treasury saw 2026 Net Borrowing at €13.35B; Gross Borrowings at €44.9B.

- Russia said to consider short-term ban on diesel export for months. Planning to increase gas exports to China.

- Thailand Central Bank Gov Vitai stated that would not raise rates if it was not necessary; Inflation to stay within target in 2026-27.

- China PBOC said to have told some commercial banks to boost lending in June as credit demand remained weak.

- Japan said to plan to fund proposed consumption tax reduction through review of subsidies instead of issuing deficit-covering bonds.

- Iran Foreign Ministry stated that the US military presence in Gulf was a source of insecurity and division in the region. Strait of Hormuz shipping to be governed by terms of end-of-war MOU with Oman. Urged Gulf States to prevent use of their own territories for any future attack. US-GCC joint statement contained interventionist and irrepressible provocative positions.

Currencies/fixed income

- USD was a touch softer and not able to capitalize on any safe-haven flows as risk sentiment soured on concerns in the chip sector.

- EUR/USD edging back towards the 1.14 area after registering 1-year lows earlier in the week.

- USD/JPY stayed below the 162 handle and not able to make any fresh multi-decade low for the yen currency. Traders continued to weigh any potential FX intervention risks at this time as official continued to warn they were watching “excessive” moves.

- 10-year German Bund yield last at 2.84%, France 10-year Oat at 3.51% and 10-year Gilt yield at 4.69% 10-year Treasury yield: 4.38%; 10-year JGB: 2.61%.

Economic data

- (SE) Sweden May PPI M/M: 1.3% v 1.1% prior; Y/Y: 6.6% v 4.7% prior.

- (SE) Sweden May Household Lending Y/Y: 3.1% v 3.0% prior.

- (NO) Norway May Retail Sales M/M: -2.1% v +0.3% prior.

- (HU) Hungary Q1 Current Account Balance: €0.3B v €0.2Be.

- (SE) Sweden Jun Consumer Confidence: 93.6 v 92.8 prior; Manufacturing Confidence: 103.6 v 103.6 prior; Economic Tendency Survey: 101.7 v 99.9 prior.

- (CN) Weekly Shanghai Deliverable Copper Inventories (SHFE): 135.7K v 143.8K tons prior.

- (TH) Thailand May Foreign Reserves w/e Jun 19th: $282.6B v $283.9B prior.

- EU) Euro Zone May Consumer Expectation Survey: 1-year ahead CPI expectations: % v 3.9%e; 3-year ahead CPI expectations: % v 2.8%e.

- (AT) Austria Jun Manufacturing PMI: 50.9 v 51.7 prior.

- (IT) Italy Jun Consumer Confidence Index: 92.4 v 94.3e; Manufacturing Confidence: 88.4 v 88.3e.

- (IS) Iceland Jun CPI M/M: 0.9% v 0.1% prior; Y/Y: 5.2% v 5.1% prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold total €B vs. €5.5-7.0B indicated range in 5-year and 10-year BTP bonds.

- (IT) Italy Debt Agency (Tesoro) sold €2.0B vs. €1.5-2.0B indicated range in Apr 2036 Floating Rate bond (CCTeu).

Looking ahead

- (BR) Brazil May Total Federal Debt (BRL): No est v 8.798T prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2043 and 2050 Bonds.

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

- 07:30 (BR) Brazil May Current Account Balance: -$4.5Be v -$1.8B prior; Foreign Direct Investment (FDI): $6.2Be v $8.9B prior.

- 07:30 (IN) India Forex Reserve w/e Jun 19th: No est v $671.6B prior.

- 08:00 (BR) Brazil May National Unemployment Rate: 5.6%e v 5.8% prior.

- 08:00 (MX) Mexico May Trade Balance: $4.9Be v $4.5B.

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

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

- 08:30 (US) May Advance Goods Trade Balance: -$85.0Be v -$83.0B prior (revised from -$82.4B); Exports M/M: 2.1%e v 3.8% prior (revised from 4.0%); Imports M/M: 2.1%e v 2.0% prior (revised from1.9 %).

- 08:30 (US) May Preliminary Wholesale Inventories M/M: 0.4%e v 0.6% prior; Retail Inventories M/M: 0.5%e v 0.7% prior.

- 09:45 (DE) ECB’s Schnabel (Germany).

- 10:00 (US) Jun Final University of Michigan Confidence: 50.0e v 48.9 prelim.

- 11:00 (US) Jun Kansas City Fed Services Activity: No est v -7.7 prior.

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

- 11:30 (US) Fed’s Kashkari.

- 12:00 (EU) ECB’s Vujcic (Croatia).

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 21:30 (CN) China May Industrial Profits Y/Y: No est v 24.7% prior; Industrial Profits YTD Y/Y: No est v 18.2% prior.