AMD's guidance alleviates some concerns about AI demand

EU mid-market update: Nerves percolating with India/Pakistan escalation; Waiting on FOMC decision; AMD's guidance alleviates some concerns about AI demand.

Notes/observations

- Mixed market ahead of FOMC decision, expected to hold rates; Some analysts see markets being too optimistic on cuts. FedWatch sees 95.6% chance of hold today and 70.2% chance of hold at next meeting in June (29% for 25bps cut).

- On trade, U.S. and China to hold first high-level talks since April's tariff flare-up; Meeting aims to de-escalate rather than finalize a trade deal. UK-India deal confirmed; speculation of imminent UK-U.S. deal; GBP (sterling) slightly down but supported by optimism over trade deals.

- Germany’s factory orders surged to 3.8% YoY; French trade deficit narrowed.

- German politician Merz vows economic reboot after securing chancellorship with second-round vote. Defense Min targets massive increasing in defense spending to >€60B per year.

- India-Pakistan tensions rise but have no major market impact yet.

- PBoC’s 7-day Reverse Repo small 10bps cut seen as cautious; further easing expected.

- AMD’s in-line guidance helping some European chip names; Novo Nordisk cut Revenue outlook citing lower-than-planned GLP-1 penetration impacted by compounded GLP-1s.

- Asia closed mixed with Shanghai Composite outperforming +0.8%. EU indices -0.4% to +0.1%. US futures +0.5-0.6%. Gold -1.4%, DXY +0.2%; Commodity: Brent +0.7%, WTI +0.9%; Crypto: BTC +3.0%, ETH +2.4%.

Asia

- China PBOC announced to cut 7-Day Reverse Repo Rate by 10bps to 1.40% effective from Thurs, May 8th (**Note: Key Policy rate). To banks' Broad RRR by 50bps to 9.00% which would increase approx ~CNY1.0T in liquidity.

- New Zealand Q1 Unemployment Rate: 5.1% v 5.3%e.

-New Zealand Q1 Employment Change Q/Q: 0.1% v 0.1%e; Y/Y: -0.7% v -0.5%e.

- Japan Apr Final PMI Services: 52.4 v 52.2 prelim (confirmed 6th month of expansion).

Global conflict/tensions

- India Army official stated that it had carried out strike at terrorist camps within Pakistan.

Europe

- German CDU leader Merz secures Chancellor position on 2nd try.

- UK Times shadow MPC voted 6-3 that BOE should cut interest rates by 25bps.

Americas

- Treasury Sec Bessent testified that perhaps as early as this week we'll be announcing trade deals with some of our largest trading partners. Was negotiating with 17 of 18 key trading partners, only China missing. Stressed that on warning track for reaching debt ceiling X date; X date estimate would be forthcoming; US would never default; Treasury Dept won't use gimmicks to get around debt ceiling.

- Treasury Sec Bessent and USTR Geer to meet with China's lead economic official (likely Vice Premier He Lifeng) in Geneva on Thurs, May 8th "to launch trade talks".

- Canada PM Carney spokesperson: PM Carney agreed with US Pres Trump to continue talks over coming weeks.

Energy

- Weekly API Crude Oil Inventories: -4.5M v +3.8M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.22% at 535.16, FTSE -0.28% at 8,573.05, DAX +0.04% at 23,247.72, CAC-40 -0.43% at 7,663.88, IBEX-35 -0.40% at 13,455.00, FTSE MIB -0.01% at 38,555.00, SMI -0.31% at 12,186.40, S&P 500 Futures +0.61%].

Market focal points/key themes: European indices open generally lower and remained under pressure through the early part of the session; geopolitics seen weighing on risk appetite; among better performing sectors are industrials and communication services; lagging sectors include health care and consumer discretionary; Veolia takes CDPQ’s stake in its Water Technologies and Solutions unit; focus on FOMC rate decision later in the day; earnings expected in the upcoming Americas session include Uber, Walt Disney, ARM Holding, and Qiagen.

Equities

- Consumer discretionary: LVMH [MC.FR] -0.5% (China PBOC cut rates) - Consumer staples: Ahold Delhaize [AD.NL] +3.5% (results).

- Energy: Orsted [ORSTED.DK] -2.0% (results).

- Healthcare: Novo Nordisk [NOVOB.DK] +6.5% (results; Cut Rev outlook citing GLP-1s compounders), Siemens Healthineers [SHL.DE] -1.0% (results), Fresenius [FRE.DE] +1.0% (results).

- Industrials: BMW [BMW.DE] +2.5% (results), Rheinmetall [RHM.DE] +1.0% (German Defence Min Pistorius targets >€60B per year in defense spending from 2025), BAE Systems [BA.UK] -1.0% (trading update).

- Technology: ASML Holding [ASML.NL] +1.0% (AMD results).

Speakers

- Pakistan Foreign Ministry stated that India was warned that reckless behavior posed a serious threat to regional stability and peace.

- China official commented that upcoming trade meeting with US was made by the US side; had always been open to dialogue. Stressed that China to safeguard out interest in talks.

Currencies/fixed income

- FX markets were steady with focus on the FOMC rate decision later today. Dealers noted that little was expected from the Fed, which was widely seen to be waiting for additional information and really to see how the Trump administrations tariffs, and the fallout from those tariffs, affected the domestic economy and global markets. Markets also awaiting the US-China trade talks that are now set to take place on the weekend in Switzerland.

- EUR/USD at 1.1365 in quiet trade.

- USD/JPY at 143.35.

- 10-year German Bund yield at 2.54% and 10-year Gilt yield at 4.51%. 10-year Treasury yield at 4.362%.

Economic data

- (DE) Germany Mar Factory Orders M/M: 3.6% v 1.3%e; Y/Y: 3.8% v 1.2%e.

- (SE) Sweden Apr Preliminary CPI M/M: 0.1% v 0.3%e; Y/Y: 0.3% v 0.5%e.

- (SE) Sweden Apr Preliminary CPIF M/M: 0.2% v 0.4%e; Y/Y: 2.3% v 2.4%e.

- (SE) Sweden Apr Preliminary CPIF (ex-energy) M/M: 0.5% v 0.7%e; Y/Y: 3.1% v 3.2%e.

- (FI) Finland Mar Preliminary Trade Balance:-€0.9B v -€0.2B prior.

- (RU) Russia Apr Services PMI: No est v 50.1 prior; Composite PMI: No est v 49.1 prior.

- (HU) Hungary Mar Retail Sales Y/Y: 0.4% v 1.7%e.

- (FR) France Mar Trade Balance: -€6.2B v -€7.7B prior; Current Account Balance: +€1.4B v -€1.6B prior.

- (FR) France Q1 Preliminary Wages Q/Q: 0.7% v 0.4% prior; Private Sector Payrolls Q/Q: 0.0% v -0.3% prior.

- (CH) Swiss Apr Foreign Currency Reserves (CHF): 702.9B v 725.6B prior.

- (AT) Austria Apr Wholesale Price Index M/M: -0.4% v -0.8% prior; Y/Y: -1.0% v -0.2% prior.

- (CZ) Czech Mar Industrial Output Y/Y: 4.5% v 3.1%e; Construction Output Y/Y: 12.1% v 0.7% prior.

- (CZ) Czech Mar Trade Balance (CZK): 32.5B v 31.0Be.

- (CN) China Apr Foreign Reserves: $3.282T v $3.295Te v $3.240T prior.

- (DE) Germany Apr Construction PMI: 45.1 v 40.3 prior.

- (IT) Italy Mar Retail Sales M/M: -0.5% v+ 0.2%e; Y/Y: -2.8% v -1.4% prior.

- (CZ) Czech Apr International Reserves: $156.3B v $151.1B prior.

- (RU) Russia Narrow Money Supply w/e May 2nd (RUB): 18.13T v 18.04T prior.

- (TW) Taiwan Apr CPI Y/Y: 2.0% v 2.1%e; CPI Core Y/Y: 1.7% v 1.6%e; PPI Y/Y: 0.9% v 3.7% prior.

- (UK) Apr UK Construction PMI: 46.6 v 46.0e (4th month of contraction).

- (EU) Euro Zone Mar Retail Sales M/M: -0.1% v -0.1%e; Y/Y: 1.5% v 1.6%e.

- (SG) Singapore Apr Foreign Reserves: $389.2B v $381.1B prior.

Fixed income issuance

- (IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK1.9B in 2035 and 2052 DGB Bonds.

- (FR) France Debt Agency (AFT) sold total €11.996B vs. €10.0-12.0B indicated range in 2035, 2038 and 2041 bonds.

- Sold €7.768B in 3.20% May 2035 Oat; Avg Yield: 3.24% v 3.37% prior; Bid-to-cover: 2.80x v 4.14x prior.

- Sold €2.198B in 1.25% in May 2038 Oat; Avg Yield: 3.51% v 3.33% prior; bid-to-cover: 3.77x v 4.83x.

- Sold €2.030B in 4.50% Apr 2041 Oat; Avg yield: 3.62% v 0.38% prior; Bid-to-cover: 2.78x v 2.97x prior.

- (UK) DMO sold £4.5B in 4.375% Mar 2030 Gilts; Avg Yield: 3.977% v 4.142% prior; bid-to-cover: 3.23x v 2.95x prior; Tail: 0.4bps v 1.0bps prior.

- (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2029 and 2035 bonds.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 5.75%.

- (UR) Ukraine Apr Official Reserve Assets: No est v $42.4B prior.

- (IL) Israel Apr Foreign Currency Balance: No est v $218.8B prior.

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

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal Q1 Unemployment Rate: No est v 6.7% prior- 06:00 (RU) Russia to sell OFZ Bonds.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell OLO Bonds through Ori Auction.

- 06:00 (EU) EU Commission to sell combined €4.0B in 3-month, 6-month and 12-month Bills.

- 07:00 (US) MBA Mortgage Applications w/e May 2nd: No est v -4.2% prior.

- 08:00 (PL) Poland Apr Official Reserves: No est v $237.5B prior.

- 08:00 (BR) Brazil Mar Industrial Production M/M: +0.3%e v -0.1% prior; Y/Y: 1.4%e v 1.5% prior.

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

- 08:30 (CL) Chile Apr Trade Balance: $1.8Be v $1.9B prior; Exports: No est v $8.7B prior; Imports: No est v $6.8B prior; Copper Exports: No est v $4.5B prior.

- 08:30 (CL) Chile Apr International Reserves: No est v $45.1B prior.

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to cut 2-week Repurchase Rate by 25bps to 3.50%.

- 09:00 (CL) Chile Mar Nominal Wage Y/Y: No est v 8.7% prior.

- 09:00 (CZ) Czech Central Bank (CNB) Post rate decision press conference.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (CO) Colombia Mar Exports FOB: $4.0Be v $3.8B prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 14:00 (US) FOMC (Federal Open Market Committee) Interest Rate Decision: Expected to leave Target Range unchanged at 4.25-4.50%.

- 14:00 (BR) Brazil Apr Monthly Trade Balance: $8.3Be v $8.2B prior; Exports: $30.5Be v $29.2B prior; Imports: $22.2Be v $21.0B prior.

- 14:30 (US) Fed Gov Powell post rate decision press conference.

- 15:00 (US) Mar Consumer Credit: $9.4Be v -$0.8B prior.

- 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to raise Selic Rate by 50bps to 14.75%.

- 19:01 (UK) Apr RICS House Price Balance: -4%e v +2% prior.

- 22:00 (PH) Philippines Q1 GDP Q/Q: 1.6%e v 1.8% prior; Y/Y:5.7%e v 5.3% (revised from 5.2%).

- 23:00 (ID) Indonesia Apr Foreign Reserves: No est v $157.1B prior.

- 23:30 (JP) Japan to sell 6-month Bills.

- 23:35 (JP) Japan to sell 10-year JGB Bonds.