FTSE stands alone amid EU holiday

EU mid-market update: FTSE stands alone amid EU holiday; Yen wobbles, oil slips and US earnings landslide approaches; Less than 24h left to elimination of de minimis exemption.

Notes/Observations

- Only UK FTSE100 open for trade, rest of Europe closed for Labor Day. China was also closed during Asia. UK and US earnings in focus before final reading of US manufacturing PMI at 09:45 ET.

- UK manufacturing PMI revised higher but remains heavy in contraction, while net mortgage lending significantly above consensus at £13.0B v £3.2Be (highest since Jun 2021). Some analysts attribute spike to lower mortgage rates (expectations of lower BOE interest rates) or increased demand.

- Japanese Yen is weaker after dovish BOJ rate decision, held rates steady but cuts forecasts; Rate hike now “if” not “when” amid trade risk.

- Brent drops to ~$60/bbl on demand fears after U.S. Q1 GDP contraction. US dollar firmer after easing trade tensions.

- Starting May 2 at 12:01 a.m. ET, U.S. Customs and Border Protection will void the $800 de minimis exemption for parcels from China and Hong Kong, instead imposing either a 120 percent ad valorem duty or a flat $100 fee per package (rising to $200 on June 1). This change closes a decades-old loophole, sharply boosting landed costs on low-value imports and forcing e-commerce players, logistics providers, retailers and consumers to overhaul pricing, fulfillment and supply-chain strategies.

- Key EU earnings: Airbus positive outlook was maintained as Q1 revenue and earnings beat expectations, 2025 delivery and supply chain risks remain key concerns; Rolls-Royce shares jumped on reaffirmed confidence in full-year targets (update seen as bullish); Lloyds profit falls 7% to £1.5B amid higher loan loss provisions linked to Trump’s tariffs; Whitbread profit was down 14% but beat forecasts with outperformance tempering concerns amid aggressive expansion plans; LSEG Q1 income slightly below consensus due to FX effects, but full-year guidance affirmed.

- Upcoming US premarket earnings in expected order: Linde, Air Products, Clear Channel, HF Sinclair, TC Energy, Thomson Reuters, Becton Dickinson, CVS Health, Eli Lilly, Hershey, Harley-Davidson, Exelon, Hyatt, DTE, Gannett, Broadridge, Estee Lauder, Intercontinental Exchange, Cardinal Health, McDonalds, Biogen, Huntington, Baxter, Southern Company, AGCO, Dominion, Parker-Hannifin, ATI, W.W Grainger, Arrow, Kellanova.

- Asia closed mixed with NZX50 outperforming +2.1%. UK FTSE100 flat. US futures +0.7-1.6%. Gold -1.6%, DXY +0.2%; Commodity: Brent -1.6%, WTI -1.8%; Crypto: BTC +0.2%, ETH +0.2%.

Asia

- Bank of Japan (BOJ) left the Target Rate unchanged at 0.50% (as expected) for its 2nd straight pause under the current phase of its tightening cycle. Vote was unanimous (9-0) to keep policy steady.

- BOJ Quarterly Outlook for Economic Activity and Prices (Staff Projections) cut the FY25/26 (current FY year) GDP growth forecast from 1.1% to 0.5% and cut FY26/27 GDP growth forecast from 1.0% to 0.7%. Projections cut FY25/26 CPI forecast from 2.4% to 2.2% and cut FY26/27 CPI forecast from 2.0% to 1.7%.

- Japan Apr Final PMI Manufacturing: 48.7 v 48.5 prelim (confirmed 10th month of contraction).

- Australia Apr Final PMI Manufacturing: 51.7 v 51.7 prelim (confirmed 4th month of expansion).

- Australia Mar Trade Balance (A$): 6.9B v 3.2Be; Exports M/M: +7.6 v -4.2% prior; Imports M/M: -2.2% v +1.8% prior.

- Australia Q1 Import Price Index Q/Q: 3.3% v 0.2% prior; Export Price Index Q/Q: 2.1% v 3.6% prior.

- South Korea Apr Trade Balance: $4.9B v $4.2Be; Exports Y/Y: +3,7% v -2.0%e; Imports Y/Y: -2.7% v -6.7%e.

- China said to be holding off on trade talks with the US to determine which "way the wind blows" in the divided White House and how other countries respond to the 90-day pause on tariffs; Trump administration said to be “too divided” and China was in no rush to negotiate an end to the tariff deadlock that US initiated.

- US said to have reached out to China through various channels to initiate talks on the massive tariffs imposed on China.

Global conflict/tensions

- US Treasury Dept confirmed that govt had signed agreement with Ukraine to establish reconstruction investment fund; This agreement was a strong signal to Russia that Trump Admin was committed to a long term peace process, centered on a free and prosperous Ukraine.

Europe

- Ireland Apr PMI Manufacturing: 53.0 v 51.6 prior.

- EU officials said to present U.S. trade proposals next week. To propose lowering trade and non-tariff barriers, boosting European investments in the US, and cooperating on global challenges.

Americas

- USTR Greer had meetings that are 'close', within weeks, including India. No official talks with China are under way.

Energy

- Saudi Arabia Officials reportedly said that they can sustain prolonged periods of low oil prices..Expected to lead OPEC+ to increase production.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.03% at 8,497.71, S&P 500 Futures +1.08%].

Market focal points/key themes: European bourses closed for holiday, with the exception of UK and Denmark which remain open; FTSE 100 struggled to gain headway through the early part of the session; materials and communication services sectors outperform; underperforming sectors include energy and utilities; oil & gas subsector under pressure as Brent continues days-long drop; earnings expected in the upcoming Americas session include Apple, Eli Lilly, McDonald’s and Amazon.

Equities

- Consumer discretionary: Whitbread [WTB.UK] +4.5% (FY25 results, initial FY26 guidance).

- Financials: Lloyds [LLOY.UK] -2.5% (Q1 results, in line with estimates, affirms FY25 guidance), London Stock Exchange [LSEG.UK] -0.5% (trading update; conf call comments).

- Industrials: Rolls-Royce [RR.UK] +2.5% (trading update, affirms guidance despite tariff and supply chain challenges) - Technology: Computacenter [CCC.UK] +2.5% (trading update).

- Real Estate: Persimmon [PSN.UK] +0.5% (trading update).

Speakers

- BOJ Gov Ueda post rate decision press conference noted that timing of underlying inflation to achieve the 2% target would be somewhat delayed. Uncertainty from trade policy hsd heightened sharply over tariffs. Reiterated overall economic assessment that domestic economy was recovering moderately although some weakness seen. Economic growth likely to moderate. Economic and price projections could change vastly depending on how countries address US tariffs. Reiterated stance that expected to raise interest rates if economy and prices moved in line with projections.

Currencies/fixed income

- USD at 2-week highs amid optimism that the global trade war was easing.

- EUR/USD at 1.1320.

- USD/JPY tested the mid-143 area after BOJ kept its policy steady and cut the GDP and inflation outlook for both current and next fiscal years. BOJ Gov Ueda conference noted that timing of underlying inflation to achieve the 2% target would be somewhat delayed. Markets now saw 30% change of a rate hike at the next BOJ meeting in June.

- 10-year German Bund yield at 2.44% and 10-year Gilt yield at 4.44%. 10-year Treasury yield at 4.17%.

Economic data

- (NL) Netherlands Mar Retail Sales Y/Y: 3.4% v 2.2% prior.

- (CH) Swiss Mar Real Retail Sales Y/Y: 2.2% v 1.2% prior.

- (UK) Apr Final Manufacturing PMI: 45.4# v 44.0 prelim.

- (UK) Mar Net Consumer Credit: £0.9B v £1.2Be; Net Lending: £13.0B v £3.2Be.

- (UK) Mar Mortgage Approvals: 64.3K v 64.5Ke.

- (UK) Mar M4 Money Supply M/M: 0.3% v 0.2% prior; Y/Y: 3.4% v 3.9% prior; M4 (ex-IOFCs) 3-month Annualized: 5.6% v 4.9% prior.

Fixed income issuance

- None seen.

Looking ahead

- (ZA) South Africa Apr Naamsa Vehicle Sales Y/Y: No est v 12.5% prior.

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

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 07:30 (US) Apr Challenger Job Cuts Y/Y: No est v 204.8% prior- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Initial Jobless Claims: 223Ke v 222K prior; Continuing Claims: 1.87Me v 1.841M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:30 (CA) Canada Apr Manufacturing PMI: No est v 46.3 prior.

- 09:45 (US) Apr S&P Final Manufacturing PMI: 50.5e v 50.7 prelim- 10:00 (US) Apr ISM Manufacturing: 48.0e v 49.0 prior.

- 10:00 (US) Mar Construction Spending M/M: 0.2%e v 0.7% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (PE) Peru Apr CPI M/M: 0.2%e v 0.8% prior; Y/Y: 1.5%e v 1.3% prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 18:45 (NZ) New Zealand Mar Building Permits M/M: No est v 0.7% prior.

- 19:00 (KR) South Korea Apr CPI M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 2.1% prior; CPI (ex-food/energy) Y/Y: 1.9%e v 1.9% prior.

- 19:30 (JP) Japan Mar Jobless Rate: 2.4%e v 2.4% prior; Job-To-Applicant Ratio: 1.25e v 1.24 prior.

- 19:50 (JP) Japan Apr Monetary Base Y/Y: No est v -3.1% prior.

- 20:30 (KR) South Korea Apr PMI Manufacturing: No est v 49.1 prior.

- 20:30 (TW) Taiwan Apr PMI Manufacturing: No est v 49.8 prior.

- 20:30 (ID) Indonesia Apr PMI Manufacturing: No est v 52.4 prior.

- 20:30 (MY) Malaysia Apr PMI Manufacturing: No est v 48.8 prior.

- 20:30 (PH) Philippines Apr PMI Manufacturing: No est v 49.4 prior.

- 20:30 (TH) Thailand Apr PMI Manufacturing: No est v 49.9 prior.

- 20:30 (VN) Vietnam Apr PMI Manufacturing: No est v 50.5 prior.

- 21:30 (AU) Australia Q1 PPI Q/Q: No est v 0.8% prior; Y/Y: No est v 3.7% prior.

- 21:30 (AU) Australia Mar Retail Sales M/M: 0.4%e v 0.2% prior.

- 21:30 (AU) Australia Q1 Retail Sales (Ex Inflation) Q/Q: 0.3%e v 1.0% prior.

- 22:00 (ID) Indonesia Apr CPI M/M: 1.0%e v 1.7% prior; Y/Y: 1.5%e v 1.0% prior; CPI Core Y/Y: 2.5%e v 2.5% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.