Trade war concerns continue to dent sentiment

Notes/observations

- Trade war concerns continue to sap risk appetite.

- EU bond yields higher in session; USD on soft footing.

Asia

- Australia May Final PMI Manufacturing: 51.0 v 51.7 prelim (confirmed 5th month of expansion).

- South Korea May PMI Manufacturing: 47.7 v 47.5 prior [5 month of contraction].

- Japan May Final PMI Manufacturing: 49.4 v 49.0 prelim (confirmed 11th month of contraction).

- Japan Q1 Capital Spending (CAPEX) Y/Y: 6.4% v 3.8%e.

- China Commerce Ministry (MOFCOM) issued comments on the US: 'Urged' the US to safeguard the consensus reached during the Geneva talks [no specific countermeasures seen]. US continued to provoke new trade frictions.

-Japan PM Ishiba: Reiterates no intention to compromise on US tariffs.

-Japan Econ Min Akazawa met with US Treasury Sec Bessent and Commerce Sec Lutnick 'strongly requested' US to rethink its tariff measures; Made progress in trade talks and agreed to accelerate talks.

- BOJ confirmed that levels of provision for possible losses on bond transactions was 100% for fiscal 2024.

Global conflict/tensions

- Ukraine claimed to have hit more than 40 Russian bombers.

Europe

- Poland Electoral Commission: Opposition Candidate Nawrocki (Conservative) expected to win the Presidential vote (as expected).

- Poland PM Tusk said to consider asking Parliament for a vote of confidence.

Americas

- President Trump stated on Friday that he planned to increase tariffs on imported steel and aluminum to 50% from 25%.

- Fed's Waller (voter) noted that did not see how tariffs would create persistent inflation. Rate cuts remain possible later in 2025.

- Fed’s Daly (non-voter for 2025) noted that April PCE was 'good relief', but incomplete as a picture. Comfortable with projection for two rate cuts this year.

- US Treasury Sec Bessent reiterated stance that the US would 'never' default on its debt.

Energy

- OPEC+ delegates agree to 411K bpd oil production in July (in line with initial expectations); Could be paused or reversed subject to market conditions.

- IAEA: Iran has increased its enriched uranium by 50%.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 % at #, FTSE % at #, DAX % at #, CAC-40 % at #, IBEX-35 % at #, FTSE MIB % at #, SMI % at #, S&P 500 Futures %].

Market focal points/key themes: European indices opened generally lower and remained downbeat through the early part of the session; Israel closed for holiday; among sectors managing gains are energy and telecom; sectors leading to the downside include consumer discretionary and technology; Sanofi to acquire Blueprint Medicines in the US; French state to acquire Atos’ advanced computing unit; BASF offering to sell its coating business; focus on US ISM Manufacturing PMI; earnings expected in the upcoming Americas session include SAIC and Campbell Soup.

Equities

- Consumer discretionary: International Consolidated Airlines [IAG.UK] +1.7% (CEO commentary).

commentary- Financials: abrdn [ABDN.UK] +3.8% (analyst action).

- Healthcare: Sanofi [SAN.FR] -0.9% (to acquire Blueprint Medicines).

- Industrials: Qinetiq [QQ.UK] +3.1% (UK defense review), Hensoldt [HAGG.DE] +9.1% (analyst action).

- Technology: Atos [ATO.FR] -2.6% (French state to acquire advanced computing unit).

Speakers

- UK PM Starmer presented the Strategic Defense Review and stressed that it could not ignore the threat that Russia posed.

- EU said to be poised to curb China's access to medical device procurement.

- BOJ Minutes of the 22nd Round of the "Bond Market Group" Meetings noted Medium-to-long-term zone supply and demand conditions remained tight. Long-term zone supply and demand conditions deteriorated markedly and interest rates rose significantly.

- Iran Foreign Ministry spokesperson noted that the US had not clarified how sanctions would be lifted.

Currencies/Fixed income

- Continued trade concerns weighed upon the USD sentiment during the session. USD Index hitting a 6-week low. President Trump on Friday announced plans to double tariffs on steel and aluminum up to 50%. Dealers noted that prospects of renewed trade negotiations among major economies could offer some upside risk-sentiment potential.

- EUR/USD moved above the 1.1420 level with the pivotal 1.15 seen as key resistance.

- USD/JPY hovering below the 143.00 area.

- 10-year German Bund yield at 2.54% and 10-year Gilt yield at 4.69%. 10-year Treasury yield at 4.43%.

Economic data

- (NL) Netherlands Apr Retail Sales Y/Y: 4.2 v 4.0% prior.

- (NL) Netherlands May Manufacturing PMI: 49.0 v 49.2 prior.

- (UK) May Nationwide House Price Index M/M: 0.5% v 0.0%e; Y/Y: 3.5% v 2.8%e.

- (RU) Russia May Manufacturing PMI: 50.2 v 49.3 prior (1st expamsion in 3 months).

- (CH) Swiss Apr Real Retail Sales Y/Y: 1.3% v 2.1% prior.

- (SE) Sweden May PMI Manufacturing: 53.6 v 54.2 prior.

- (HU) Hungary May Manufacturing PMI: 50.1 v 50.1e.

- (PL) Poland May Manufacturing PMI: 47.1 v 50.2e (1st contraction in 4 months).

- (TR) Turkey May Manufacturing PMI: 47.2 v 47.3 prior.

- (CH) Swiss Q1 GDP Q/Q: 0.5% v 0.4%e; Y/Y: 2.0% v 1.6%e; Final GDP (Sport Adj) Q/Q: 0.8% v 0.7% prelim.

- (ES) Spain May Manufacturing PMI: 50.5 v 48.4e (1st expansion in 4 months).

- (CH) Swiss May PMI Manufacturing: 42.1v 48.0e; Services PMI: 56.3 v 52.4 prior.

- (CZ) Czech May Manufacturing PMI: 48.0 v 49.3e.

- (TH) Thailand May Business Sentiment Index: 46.7 v 47.1 prior.

- (IT) Italy May Manufacturing PMI: 49.2 v 49.6e (14th month of contraction).

- (FR) France May Final Manufacturing PMI: 49.8 v 49.5 prelim (confirmed 28th month of contraction).

- (DE) Germany May Final Manufacturing PMI: 48.3 v 48.8 prelim (confirmed 35th month of contraction).

- (EU) Euro Zone May Final Manufacturing PMI: 49.4 v 49.4 prelim (confirmed 35th month of contraction).

- (NO) Norway May PMI Manufacturing: 51.2 v 46.2 prior.

- (GR) Greece May Manufacturing PMI: 53.2 v 53.2 prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 444.9B v 443.4B prior; Domestic Sight Deposits: 434.3B v 435.7B prior.

- (PL) Poland Q1 Final GDP Q/Q: 0.7% v 0.7% prelim; Y/Y: 3.2% v 3.2% prelim.

- (UK) May Final Manufacturing PMI: 46.4 v 45.1 prelim (confirmed 8th month of contraction).

- (UK) Apr Net Consumer Credit: £1.6B v £1.2Be; Net Lending: -£0.8B v +£1.4Be.

- (UK) Apr Mortgage Approvals: 60.5K v 62.8Ke.

- (UK) Apr M4 Money Supply M/M: 0.0% v 0.3% prior; Y/Y: 3.2% v 3.4% prior; M4 Ex IOFCs 3M-Annualised: 3.0% v 5.8% prior.

- (HK) Hong Kong Apr Retail Sales Value Y/Y: -2.3% v +3.2%e; Retail Sales Volume Y/Y: -3.3% v +2.6%e.

- (NG) Nigeria May PMI (whole economy): 52.7 v 54.2 prior.

- (ZA) South Africa May Manufacturing PMI: 43.1 v 44.7 prior.

- (CY) Cyprus Q1 Final GDP Q/Q: 1.3% v 1.3% prelim; Y/Y: 3.0% v 3.0% prelim.

Fixed income issuance

- None seen.

Looking ahead

- (IT) Italy May Budget Balance: No est v -€20.5B prior.

- (RO) Romania May International Reserves: No est v $72.0B prior.

- (ZA) South Africa May Naamsa Vehicle Sales Y/Y: No est v 11.9% prior.

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

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

- 05:30 (EU) European Union to sell combined €6.0B in 2028, 2033 and 2042 NGEU bonds.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills.

- 06:00 (PT) Portugal Apr Retail Sales M/M: No est v -1.3% prior; Y/Y: No est v 1.6% prior.

- 06:00 (PT) Portugal Apr Industrial Production M/M: No est v -4.0% prior; Y/Y: No est v -5.5% prior.

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

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

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

- 08:00 (CZ) Czech May Budget Balance (CZK): No est v -126.1B prior.

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

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

- 08:30 (CL) Chile Apr Economic Activity Index (Monthly GDP) M/M: 0.2%e v 0.8% prior; Y/Y: 2.2%e v 3.8% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.0-7.6B in 3-month, 6-month and 12-month bills.

- 09:00 (SG) Singapore May Purchasing Managers Index: No est v 49.6 prior; Electronics Sector Index: No est v 49.8 prior.

- 09:00 (BR) Brazil May Manufacturing PMI: No est v 50.3 prior.

- 09:30 (CA) Canada May Manufacturing PMI: No est v 45.3 prior.

- 09:45 (US) May Final Manufacturing PMI: 52.3e v 52.3 prelim.

- 10:00 (US) May ISM Manufacturing: 49.5e v 48.7 prior.

- 10:00 (US) Apr Construction Spending M/M: +0.2%e v -0.5% prior.

- 10:15 (US) Fed’s Logan.

- 11:00 (MX) Mexico May Manufacturing PMI: No est v 44.8 prior.

- 11:00 (MX) Mexico Apr Total Remittances: $5.2Be v $5.2B prior.

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

- 12:00 (IT) Italy May New Car Registrations Y/Y: No est v 2.7% prior.

- 12:30 (EU) ECB chief Lagarde.

- 12:45 (US) Fed’s Goolsbee.

- 13:00 (US) Fed Chair Powell.

- 14:00 (MX) Mexico May IMEF Manufacturing Index : No est v 45.5 prior; Non-Manufacturing Index : No est v 49.0 prior.

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

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 87.0 prior.

- 17:30 (UK) BOE’s Mann.

- 18:45 (NZ) New Zealand Q1 Terms of Trade Index Q/Q: 3.5%e v 3.1% prior.

- 19:50 (JP) Japan May Monetary Base Y/Y: No est v -4.8% prior.

- 20:01 (IE) Ireland May PMI Manufacturing: No est v 53 prior.

- 20:30 (MY) Malaysia May PMI Manufacturing: No est v 48.6 prior.

- 21:30 (AU) Australia May RBA Minutes.

- 21:30 (AU) Australia Q1 Current Account Balance (A$): -12.5Be v - 12.5B prior; Company Operating Profit Q/Q: 1.3%e v 5.9% prior; Inventories Q/Q: 0.2%e v 0.1% prior; Net Exports of GDP: 0.0%e v 0.2 prior.

- 21:45 (CN) China May Caixin PMI Manufacturing: 50.7e v 50.4 prior.