Taiwanese Dollar and Oil prices remain volatile – Fed and BoE decisions later in week

EU Mid-Market Update: Light volumes across Europe as UK shuts for holiday; Huawei aims to break China’s dependence on foreign tech; Taiwanese dollar and oil prices remain volatile; Fed and BOE decisions later in week.

Notes/observations

- European stocks mostly higher in thin trading; UK and Irish markets closed. Asia mixed with many markets (Japan, China, Korea) shut. US equity futures -0.7% on track to end 9-day win streak. Crude falls post-OPEC+ hike, Gold rebounds, Bitcoin eases.

- Following strong US jobs report, Fed futures now price only 34% chance for 25bps cut by June 18th's meeting v 61% w/w.

- USD weaker across majors, especially in Asia. CNH, NT$, KRW, HK$ all surges. TWD breaks 30 to strongest since Jun 2022, which, according to Taiwan Central Bank Gov, could be fueled by foreign capital inflows into local markets. Treasuries steady, yields elevated. Fed decision due Wednesday.

- Huawei said to be building a Shenzhen production line to manufacture its first in-house 7 nm smartphone and Ascend AI processors as part of a broader domestic semiconductor network aimed at reducing reliance on foreign technologies from Nvidia, ASML, SK Hynix, and TSMC.

- For data, Swiss Apr CPI flat y/y (vs +0.3% prior), lowest in 4+ years. Eurozone Sentix came in above all analyst estimates at -8.1.

- Latest on trade war saw Trump impose 100% tariff on foreign films; NZ, Australia voiced concerns. China signals willingness to restart talks via fentanyl negotiations.

- Berkshire Hathaway is -2.5% to -3.0% in premarket after Buffett announced intention to step down at year end and have Greg Abel succeed him.

- Asia closed mixed with Hang Seng outperforming +1.7%. EU indices +1.2% to -0.6%. US futures -0.7% to -1.0%. Gold +1.4%, DXY -0.3%; Commodity: Brent -2.0%, WTI -2.2%; Crypto: BTC -1.0%, ETH 0.0%.

Asia

- Australia Apr Final PMI Services: 51.0 v 51.4 prelim (confirms 15th month of expansion).

- Australia PM Anthony Albanese's Labour Party won reelection. Labour Party projected to win 85 seats in the 151 seat lower house, improving upon a narrow 77 seat majority pre-election.

- Japan Fin Min Kato stated that Japan would not use the sale of US Treasury holdings in its trade talks with the US [Note: appearing to walk back comments he made last week].

Europe

- French PM Bayrou said not to be ruling out referendum on budget given concerns that big cost-cutting plans could result in widespread protests.

Americas

- President Trump stated that he would not remove Jerome Powell as Federal Reserve Board chairman before his term ended in May 2026.

- President Trump stated that wanted a fair trade deal with China. He also stated that would slap a 100 per cent tariff on all films produced abroad.

- Treasury Sec Bessent wrote an WSJ Op-ed that defended Pres Trump’s “economic rebalancing”; His tariffs, tax cuts and deregulation efforts made up a coherent strategy to benefit Main Street.

Energy

- OPEC+ countries with voluntary cuts agree to boost oil production by 411K bpd in June.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.06% at 536.72, FTSE closed, DAX +0.58% at 23,191.54, CAC-40 -0.52% at 7,730.13, IBEX-35 +0.54% at 13,494.81, FTSE MIB -0.10% at 38,290.00, SMI +0.30% at 12,296.60, S&P 500 Futures -0.84%].

Market focal points/key themes: European indices opened mixed with a bias towards the red that was maintained through the early hours of trade; UK and Ireland closed for holiday; light trading with several major holidays in Asia as well; lack of catalysts seen leaving risk appetite wavering; among sectors managing to stay in the green are health care and telecom; sectors trending lower include energy and materials; oil & gas subsector impacted after OPEC+ agreed further large production increase; Erste bank to acquire stake in Santander Polska; reportedly ABF and Hovis are in merger talks; earnings expected in the upcoming Americas session induced Ford, Mattel, Cummins and BioNTech.

Equities

- Energy: BP [BP.DE] +4.5% (reportedly Shell talking with advisers about potential future bid for BP).

- Financials: Santander Bank Polska [BZI.DE] -5.0% (Erste to acquire 49% stake in Santander Polska for €6.8B and 50% of Polish asset management business for €0.2B, total €7B).

- Industrials: Stabilus [STM.DE] -1.5% (Q2 results), Skanska [SKAB.SE] -0.5% (receives SEK880M order to rebuild part of Lundbyleden).

- Technology: ASML [ASML.NL] -0.5% (Foxconn monthly sales; Huawei said to be building a production line for 7nm chips as part of a network of semiconductor facilities in Shenzhen that seeks to break China’s dependence on foreign technologies).

- Telecom: Eutelsat [ETL.FR] -2.0% (appoints new CEO and affirms FY25 guidance).

Speakers

- ECB Panetta (Italy) stated that protectionism threatened to weaken prosperity.

- EU reportedly planned to propose banning Russian gas imports by end-2027.

- Taiwan Trade Office noted that tariff talks with US last week did not discuss FX rate.

- Taiwan Central Bank stated that would not manipulate the currency.

- China PBOC Gov Pan Gongsheng called on other Asian nations to work together on US tariffs.

Currencies/fixed Income

- FX markets were tightly range bound with UK markets closed for holiday and little participation on the continent. The week will see some key rate decisions highlighted by the Fed on Wed. Dealers noted that stronger-than-expected US jobs data on Fri damped rate-cut expectations. Markets aided by appearance of an early sign of a thawing in US-China trade talk.

- EUR/USD steady at 1.1325.

- GBP/USD at 1.3280 with focus on Thurs BOE rate decision and quarterly staff projections.

- USD/JPY holding above the 144 level.

- 10-year German Bund yield at 2.51% and 10-year and the 10-year Treasury yield at 4.31%. Gilt market closed.

Economic data

- (FI) Finland Mar House Price Index M/M: +1.0% v -0.4% prior; Y/Y: -1.6% v -1.5% prior.

- (RU) Russia Apr Manufacturing PMI: 49.3 v 48.2 prior (2nd month of contraction).

- (SE) Sweden Apr PMI Services: 54.2 v 49.4 prior (returns to expansion).

- (CH) Swiss Apr CPI M/M: 0.0% v 0.2%e; Y/Y: 0.0% v 0.2%e.

- (CH) Swiss Apr CPI EU Harmonized M/M: +0.7% v -0.1% prior; Y/Y: 0.3% v 0.1% prior; CPI Core Y/Y: 0.6% v 0.8%e.

- (TR) Turkey Apr CPI M/M: 3.0% v 3.1%e; Y/Y: 37.9% v 38.0%e; CPI Core Y/Y: 37.1% v 37.0%e.

- (TR) Turkey Apr PPI M/M: 2.8% v 1.9% prior; Y/Y: 22.5% v 23.5% prior.

- (HU) Hungary Mar Manufacturing PMI: 50.2 v 50.9e (5th straight expansion).

- (CH) Swiss Weekly Total Sight Deposits (CHF): 454.1B v 451.1B prior; Domestic Sight Deposits: 443.1B v 442.6B prior.

- (BR) Brazil Apr FIPE CPI (Sao Paulo): 0.5% v 0.6%e.

- (EU) Euro Zone May Sentix Investor Confidence: -8.1 v -11.5e.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 (DE) Germany to sell €2.0B in 6-month BuBills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel to sell bonds.

- 06:00 (RON) Romania to sell RON500M in 6.3% Apr 2029 bonds.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 (FR) France Debt Agency (AFT) to sell €5.7-7.3B in 3-month, 6-month and 12-month bills.

- 09:30 (CA) Canada Apr Services PMI: No est v 41.2 prior; Composite PMI: No est v 42.0 prior.

- 09:45 (US) Apr S&P Final Services PMI: 51.2e v 51.4 prelim; Composite PMI: 51.2e v 51.2 prelim.

- 10:00 (US) Apr ISM Services Index: 50.3e v 50.8 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 16:00 (US) Weekly Crop Progress Report.

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 98.3 prior.

- 19:01 (IE) Ireland Apr Consumer Confidence Index: Noe st v 67.5 prior.

- 20:01 (IE) Ireland Apr PMI Services: No est v 55.3 prior; PMI Composite: No est v 54.6 prior.

- 20:30 (SG) Singapore Apr PMI (whole economy): No est v 52.7 prior.

- 21:00 (NZ) New Zealand Apr ANZ Commodity Price M/M: No est v -0.4% prior.

- 21:00 (PH) Philippines Apr CPI M/M: -0.1%e v -0.2% prior; Y/Y: 1.8%e v 1.8% prior.

- 21:30 (AU) Australia Mar Building Approvals M/M: -1.8%e v -0.3% prior; Private Sector Houses M/M: No est v 1.0% prior.

- 21:30 (AU) Australia Mar Household Spending M/M: 0.2%e v 0.2% prior; Y/Y: 3.9%e v 3.3% prior.

- 21:45 (CN) China Apr Caixin PMI Services: 51.8e v 51.9 prior; PMI Composite: No est v 51.8 prior.

- 22:05 (VN) Vietnam Apr CPI Y/Y: 3.3%e v 3.1% prior.

- 22:05 (VN) Vietnam Apr Trade Balance: $0.8Be v $1.6B prior; Exports Y/Y: 11.9%e v 14.5% prior; Imports Y/Y: 17.0%e v 19.0% prior.

- 22:05 (VN) Vietnam Apr Industrial Production Y/Y: No est v 8.6% prior.

- 22:05 (VN) Vietnam Apr Retail Sales Y/Y: No est v 10.8% prior.

- 23:00 (TH) Thailand Apr CPI M/M: 0.0%e v -0.2% prior; Y/Y: -0.1%e v +0.8% prior; CPI Core Y/Y: 0.9%e v 0.9% prior.