In focus today

 In the euro area, we follow the Sentix investor confidence indicator, which is the first confidence indicator collected in June. The indicator rebounded sharply in May following the post-liberation day plunge in April and we think there is further room for a small increase in June.

In Sweden, a collection of data is released. The highlight of the day is the Riksbank's business survey at 9:30 CET, which is crucial for future monetary policy decisions. Early insights suggest a dovish tone, and its results will significantly influence the Riksbank's policy meeting next week. Other key data releases include household consumption and the Production Value Index for April, along with the monthly GDP indicator, all at 08.00 CET. Despite typically being unreliable, a strong GDP indicator, combined with last week's robust retail sales, could suggest a Q2 growth rebound.

Norwegian inflation figures for May are released today, with an expected decline in core inflation to 2.9%. Food prices are likely to rise, but air fares may drop due to post-Easter effects. The risk is tilted slightly to the upside, as prices on imported goods ex. food dropped in May last year and could give a positive base effect. If accurate, inflation will fall below Norges Bank's March estimate of 3.1%.

US-China trade talks resume today at 11:00 CET, focusing on tech restrictions and export limits.

Economic and market news

What happened overnight

US-China trade talks will resume today after kicking off yesterday. Talks came into place after a call between Xi and Trump on Thursday last week and followed a period where both sides accused the other of violating the deal reached in Geneva on 10-11 May. The crux of the talks in London are new US tech restrictions on China and China's limits to exports of rare earth minerals to the US in response. Trump said to reporters overnight "We are doing well with China. China is not easy". The US side has expressed willingness to ease some tech restrictions but not on some of the recent controls on the advanced H20 Nvidia AI chips. China also wants the US side to withdraw new limiting guidelines on Huawei AI chips that was released shortly after the Geneva talks. Trade talks are set to resume today at 11:00 CET.

What happened over the weekend and yesterday

In China, data were released for both inflation and trade yesterday. CPI inflation was slightly better than expected, remaining unchanged at -0.1% y/y (cons: -0.2%) and the core CPI measure (excluding energy and food) increased to 0.6% y/y (prior: 0.5% y/y). Producer price inflation, however, dropped to -3.3% y/y (prior: -2.7% y/y). The numbers underline that deflationary pressures in China continue, although the rise in core inflation is slightly positive. On the trade side, Chinese export data for May were weaker than expected dropping 4.8% y/y (cons: 6.0%, prior: 8.1%). A big decline in exports to the US pulled lower but likely reflected a stand-still in the first two weeks of the month when US tariffs were around 150%. We look for a rebound in the June exports as US-China trade has picked up after the trade war truce set in on 12 May.

In the US, the nonfarm payrolls released on Friday for May increased by +139k (cons: +130k, prior: +147k). The unemployment rate remained steady at 4.2%, and average hourly earnings growth rose by 0.4% m/m SA, slightly exceeding expectations. However, labour supply shrunk by 625k, largely due to a reduction in foreign-born workers. These figures illustrate positive employment growth alongside a declining labour supply, suggesting a tighter labour market, which can be perceived as hawkish.

In the euro area, the final estimates for the national accounts in Q1 2025 revealed revised GDP growth of 0.6% q/q (prior: 0.4%). This growth was mainly attributed to a significant rise in gross fixed capital formation (+1.8%) and exports (+1.9%). Household consumption made a modest positive contribution, while government spending had little impact. The positive balance between exports and imports added +0.3 percentage points to the overall growth.

In Norway, data on Friday showed manufacturing experienced a notable increase in April, with production rising by 2.8% m/m, leading to 2.4% growth over the past three months. This recovery was largely driven by a 3.8% m/m surge in oil-related industries, while mainland industries also showed upward movement. Despite market volatility, the manufacturing sector remains resilient, showing no signs of impact from a global trade war or a decline in oil investments.

Equities: Equities have traded with a positive tone over the past two sessions — Friday and Monday. The key catalyst was Friday's US jobs report, which investors interpreted as a sign of underlying economic resilience. It was not just the level of gains in equities that mattered, but the nature of the move: cyclicals outperformed, defensives underperformed, and implied volatility (VIX) dropped notably. In other words, a classic pro-cyclical pattern. Notably, the move came alongside a sharp rise in both short- and long-end US Treasury yields on Friday, a combination that clearly signals increasing confidence in the US economy's ability to navigate geopolitical uncertainty - particularly the evolving US-China trade tensions. In the US yesterday, Dow 0.0%, S&P 500 +0.1%, Nasdaq +0.3%, Russell 2000 +0.6%. This morning, Asian equities are trading higher, and futures in both Europe and the US point to a continuation of that upbeat tone.

FI and FX: US-China trade talks will resume today after kicking off yesterday. The seemingly positive tone has supported Asian equities alongside European and US futures. The USD firmed with EUR/USD back at the 1.14 level. USD/CNY has been fairly calm while gold dropped. US yields and the 10y2y curve are basically flat with US10y at 4.48 ahead of this week's 3y/10y/30y auctions. Today's Swedish data and Riksbank's company survey may have a marginal impact on Riksbank pricing and, by extension, EUR/SEK which has moved toward the upper end of the 10.80-11.00 range. EUR/NOK is back below the 10.50 level while NOK being supported by risk on and higher energy prices.