H1 comes to a close as markets muddle through latest chapter in tariff saga

EU mid-market update: H1 comes to a close as markets muddle through latest chapter in tariff saga; More focus on incoming US macro data.

Notes/observations

- Europe gradually higher amid light volume and partial market holiday. US futures are sideways, suggesting trader confusion as uncertainty rises on state of US tariff policy. After US International Court of Trade blocked Trump’s Liberation Day tariffs on Thurs, the Trump admin appealed, and subsequently granted to allow tariffs to remain in place during appeals process (typically 6-18 months). However, US admin (as had been speculated by analysts) noted they were considering a plan B in eventuality that the original ruling to block is upheld. Plan B involves rolling out ‘Stop Gap’ tariff measure under Section 122 of Trade Act, that enables tariffs of up to 15% for 150 days. This has not been invoked yet but can be at any time. Citi analysts note the ruling could impact US ability to make trade deals.

- European economic data saw UK Lloyds business barometer rise to 50 (highest since Aug 2024), Spain flash CPI came in below estimates at 1.9% YoY and 2.1% for core. German state CPI readings suggest national reading roughly in line with estimates at 2.1% YoY. Retail sales for German were mixed.

- Forecasted gross Euro Zone bond issuance expected to drop 35% in H2 compared to H1, which could help provide relief to yields.

- Elsewhere on macro, heavy slate of US data at 08:30 ET that includes personal income and spending, PCE and Core PCE price index, advance goods trade balance and whole inventories. Chicago PMI and Michigan confidence to follow.

- Asia closed lower with Hang Seng underperforming -1.2%. EU indices +0.3-0.7%. US futures -0.1% to -0.2%. Gold -0.7%, DXY +0.2%; Commodity: Brent +0.6%, WTI +0.7%; Crypto: BTC -3.0%, ETH -4.4%.

Asia

- Japan May Tokyo CPI Y/Y: 3.4% v 3.4%e; CPI (ex-fresh food) Y/Y: 3.6% v 3.5%e (highest since Jan 2023).

- Japan Apr Jobless Rate: 2.5% v 2.5%e.

- Japan Apr Preliminary Industrial Production M/M: -0.9% v -1.4%e; Y/Y: 0.7% v 0.1%e.

- Japan Apr Retail Sales M/M: 0.5% v 0.5%e; Y/Y: 3.3% v 3.0%e.

- Japan METI panel to call for business investment in preference to stock buybacks - Japanese press.

- Japan FSA said to consider higher penalty for '5% rule' violations [relates to reporting by large shareholders] - Nikkei.

- South Korea MOF to monitor Bank of Korea (BOK) rate cut yesterday in terms of impact on housing markets.

- Japan Agriculture Min Koizumi confirms Japan to partially restart seafood exports to China; Aims to seek a complete lifting of seafood ban - financial press.

- China said to announce Finance Policies at this year's Lujiazui Forum - press.

- China PBOC issues online security incident report management rules - press.

Europe

- BOE's Taylor: I'm seeing more risk piling up on the downside scenario because of global developments; A trade war is going to be negative for growth - FT.

- Turkey Central Bank (CBRT) Financial Stability Report: Tightening impact on bank asset quality is limited.

- EU Trade Commissioner Sefcovic: Spoke with US Commerce Sec Lutnick - X post.

- Turkey Fin Min Simsek: Reiterates disinflation is continuing while economy maintains moderate growth.

Americas

- US Pres Trump on US Court of International Tariffs; Court incredibly ruled against the United States of America on desperately needed Tariffs but, fortunately, the full 11 Judge Panel on the U.S. Court of Appeals for the Federal Circuit Court has just stayed the order.

- White House Chief of Staff Susie Wiles has reportedly told associates that a hacker gained access to her phone contacts - WSJ.

- US reported to reject request for publishing solar tariff ruling by June 2nd; relates to determination on solar imports from Southeast Asia; now the earliest that the US will be able to publish its injury determination is Jun 9th - US ITC comments.

- Xinhua: Ports in California face ‘economic devastation’ as tariffs ‘cripple’ trade with Asia-Pacific; cites comments from the Chief Executive of the Port of Long Beach Mario Cordero update.

Trade

- Trump Admin said to consider "Stop gap" tariffs under Trade Act provision ['Plan B']; Allows for tariffs of up to 15% for 150 days - WSJ.

- US Commerce Sec Lutnick: Countries want to make a deal with the US; Trade policy is going forward - Fox News interview.

- US Treasury Sec Bessent: A couple of large deals are close to completion; EU's deal is in motion; China talks are 'A bit stalled'.

- Reportedly Japan will propose rare earth cooperation in trade talks with the US - Asia press.

- Japan Economic Revitalization Min and Top Trade Negotiator Akazawa: Confirms to meet US Treas Sec Bessent for US-JP tariff talks, likely on May 30th US time - financial press.

Tensions/conflict

- US Trump Admin said to be aiming to 'exceed' Trump 1.0 first-term weapons sales to Taiwan ($18.3B in Trump's 1st term vs $8.4B in Biden's term)- financial press, citing anon US officials.

- China Foreign Ministry: Reiterates opposition of US arms sales to Taiwan.

- Japan reportedly could fill air defense gaps with US F-35 jets; Considering older F-2S aircraft - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.6% at 551, FTSE +0.7% at 8,780, DAX +0.7% at 24,135, CAC-40 +0.2% at 7,794, IBEX-35 +0.3% at 14,180, FTSE MIB +0.7% at 3,939, SMI +0.8% at 12,294, S&P 500 Futures -0.2%].

Market focal points/key themes: European indices open mostly higher and maintained an upward trajectory through the early part of the session; Denmark closed for holiday; risk appetite seen positive following reports of plans for high-level meetings between US and EU officials on trade; among sectors leading the way higher are real estate and financials; lagging sectors include materials and technology; Dai-Ichi Life to buy stake in M&G; focus on US PCE price index data later in the day; no major earnings expected in the upcoming Americas session.

Equities

- Energy: Drax [DRX.UK] +2.2% ofer for HEIT lapses.

- Financials: M&G [MNG.UK] +6.1% Dai-Ichi Life to take stake, enters partnership.

- Healthcare: Stratec Biomedical [SBS.DE] +5.9% results, Sanofi [SAN.FR] -5.4% itepekimab study results.

- Materials: Yara [YAR.NO] -1.6% analyst action.

- Technology: Solaria Energia [SLR.ES] +6.5% analyst action, Soitec [SOI.FR] -3.0% analyst action.

Speakers

-ECB Panetta (Italy): Reduced room to cut rates further, but macro outlook remains weak and trade tensions could worsen it.

-BOE's Taylor: I'm seeing more risk piling up on the downside scenario because of global developments; A trade war is going to be negative for growth - FT.

-RBNZ Assist Gov Silk: Reiterates 'enormous' uncertainty around US trade policy, cannot react to 'every twist and turn'.

-Fed's Logan (non-voter): If balance or risks shift, Fed is well prepared to respond; monetary policy is in a 'good place' - financial press.

-Japan BOJ Gov Ueda: We are aware of firms' aggressive price- and wage-setting behaviour continuing - parliamentary testimony.

-Fed's Kashkari (non-voter): Tariffs are likely to be pushing up inflation - financial press, speaking from event in Tokyo.

-BOE Gov Bailey: raising the UK's potential growth rate is critical.

Economic data

- (IT) Italy May Preliminary CPI M/M: 0.0% v 0.1%e; Y/Y: 1.7% v 1.7%e; CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1.9% v 1.9%e.

-(IS) Iceland Q1 GDP Q/Q: +2.7% v -1.4% prior; Y/Y: 2.6% v 2.3%e.

-(GR) Greece Mar Retail Sales Value Y/Y: 0.3% v 5.6% prior; Retail Sales Volume Y/Y: 1.2% v 6.3% prior.

-(GR) Greece Apr Unemployment Rate: 8.3% v 8.9% prior.

-(HK) Hong Kong Apr M3 Money Supply Y/Y: 6.6% v 7.7% prior.

-(ES) Spain Mar Current Account: €1.4B v €2.3B prior.

-(IT) Italy Q1 Final GDP Q/Q: 0.3% v 0.3%e; Y/Y: 0.7% v 0.6%e.

-(RU) Russia Narrow Money Supply w/e May 23rd (RUB): 18.09T v 18.17T prior.

-(CZ) Czech Apr M2 Money Supply Y/Y: 3.2% v 4.4% prior.

-(PL) Poland May Preliminary CPI M/M: -0.2% v 0.1%e; Y/Y: 4.1% v 4.3%e.

-(EU) Euro Zone Apr M3 Money Supply Y/Y: 3.9% v 3.7%e.

-(DE) Germany May CPI North Rhine Westphalia M/M: 0.2% v 0.4% prior; Y/Y: 2.0% v 1.8% prior.

-(DE) Various German States May CPI Readings: CPI Hesse M/M: 0.0% v 0.5% prior; Y/Y: 2.3% v 2.3% prior; CPI Bavaria M/M: 0.1% v 0.4% prior; Y/Y: 2.1% v 2.1% prior; CPI Brandenburg M/M: 0.0% v 0.4% prior; Y/Y: 2.2% v 2.2% prior; CPI Saxony M/M: 0.0% v 0.5% prior; Y/Y: 2.3% v 2.4% prior; CPI Baden Wuerttemberg M/M: -0.1% v 0.5% prior; Y/Y: 2.2% v 2.4% prior.

-(TH) Thailand Foreign Reserves w/e May 23rd: $257.9B v $254.7B prior.

-(AT) Austria Apr PPI M/M: -0.9% v -0.1% prior; Y/Y: -0.2% v +0.7% prior.

-(TR) Turkey Q1 GDP Q/Q: 1.0% v 1.2%e; Y/Y: 2.0% v 2.3%e.

-(TH) Thailand Apr Current Account: -$1.5B v -$0.2Be.

-(TR) Turkey Apr Unemployment Rate: 8.6% v 8.0% prior.

-(CZ) Czech Q1 Preliminary GDP Q/Q: 0.8% v 0.5%e; Y/Y: 2.2% v 2.0%e.

-(CH) Swiss May KOF Leading Indicator: 98.5 v 98.4e.

-(ES) Spain May Preliminary CPI M/M: 0.0% v 0.1%e; Y/Y: 1.9% v 2.1%e; CPI EU Harmonized M/M: -0.1% v 0.0%e; Y/Y: 1.9% v 2.0%e; CPI Core Y/Y: 2.1% v 2.2%e.

-(HU) Hungary Apr PPI M/M: -0.4% v -0.7% prior; Y/Y: 7.9% v 7.3% prior.

-(ZA) South Africa Apr M3 Money Supply Y/Y: 6.1% v 5.8% prior; Private Sector Credit Y/Y: 4.6% v 3.8%e.

-(NO) Norway May Unemployment Rate: 2.0% v 2.0%e.

-(DE) Germany Apr Retail Sales M/M: -1.1% v +0.2%e; Y/Y: +4.0% v -1.8% prior.

-(SE) Sweden Q1 GDP Q/Q: -0.2% v +0.1%e; Y/Y: 0.9% v 1.7%e.

-(FI) Finland Apr Retail Sales Volume Y/Y: +2.2% v -0.8% prior.

-(FI) Finland Q1 GDP Q/Q: 0.0% v 0.2% prior; Y/Y: 0.8% v 1.0% prior.

-(JP) Japan Apr Annualized Housing Starts: 626K v 700Ke; Y/Y: -26.6% v -18.1%e (lowest Housing Starts since Oct 2009).

-(FI) Finland Apr GDP Indicator Y/Y: 0.9% v -0.4% prior.

-(TH) Thailand Apr ISIC Manufacturing Production Y/Y: +2.2% v -3.1%e.

-(UK) May Lloyds Business Barometer: 50 v 39 prior (highest since Aug 2024).

Fixed income issuance

-India sells total INR360B vs. INR360B indicated in 2027 and 2035 bonds.

-UK DMO to sell inflation-linked Sept 2038 gilt via syndicate on week of June 9th.

-Japan sells ¥2.6T vs ¥2.6T indicated in 2-year bonds; Avg Yield: 0.7520% v 0.6910% prior; Bid-to-cover: 3.77x v 3.58x prior.

-Japan sells ¥4.5T vs. ¥4.5T indicated in 3-Month Bills; Avg Yield: 0.4083% v 0.3818% prior; bid-to-cover: 2.76x v 3.31x prior.

-Australia sells A$800M v A$800M indicated in 4.25% Mar 2036 bonds, Avg Yield: 4.3306% v 4.4074% prior, bid to cover 2.58x v 3.37x prior.

Looking ahead

- 05:30 (IN) India to sell bonds.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L Bonds.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills.

- 06:00 (IE) Ireland May Preliminary CPI EU Harmonized Y/Y: No est v 2.0% prior.

- 06:00 (PT) Portugal May Preliminary CPI M/M: No est v 0.7% prior; Y/Y: No est v 2.1% prior.

- 06:00 (PT) Portugal May Preliminary CPI EU Harmonized M/M: No est v 1.3% prior; Y/Y: No est v 2.1% prior.

- 06:00 (PT) Portugal Q1 Final GDP Q/Q: -0.5%e v -0.5% prelim; Y/Y: 1.6%e v 1.6% prelim.

- 06:00 (IT) Italy Apr PPI M/M: No est v -3.3% prior; Y/Y: No est v 5.4% prior.

- 06:30 (IN) India Q1 GDP Y/Y: 6.8%e v 6.2% prior; GVA Y/Y: 6.4%e v 6.2% prior.

- 06:30 (IN) India Apr Fiscal Deficit YTD (INR): No est v 13.469T prior.

- 07:30 (BR) Brazil Apr Nominal Budget Balance (BRL): -55.0Be v -71.6B prior; Primary Budget Balance (BRL): 18.8Be v 3.6B prior; Net Debt % GDP: 61.6%e v 61.6% prior.

- 07:30 (IN) India Forex Reserve w/e May 23rd: No est v $685.7B prior.

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

- 08:00 (DE) Germany May Preliminary CPI M/M: 0.1%e v 0.4% prior; Y/Y: 2.1%e v 2.1% prior.

- 08:00 (DE) Germany May Preliminary CPI EU Harmonized M/M: 0.1%e v 0.5% prior; Y/Y: 2.0%e v 2.2% prior.

- 08:00 (ZA) South Africa Apr Trade Balance (ZAR): 17.2Be v 24.8B prior.

- 08:00 (ZA) South Africa Apr Monthly Budget Balance (ZAR): No est v -13.1B prior.

- 08:00 (BR) Brazil Q1 GDP Q/Q: 1.5%e v 0.2% prior; Y/Y: 3.1%e v 3.6% prior; GDP 4 Quarters Accumulated: 3.5%e v 3.4% prior.

- 08:00 (MX) Mexico Apr Unemployment Rate: 2.6%e v 2.2% prior; Unemployment Rate (seasonally adj): No est v 2.6% prior.

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

- 08:30 (US) Apr Personal Income: 0.3%e v 0.5% prior; Personal Spending: 0.2%e v 0.7% prior; Real Personal Spending (PCE): 0.0%e v 0.7% prior.

- 08:30 (US) Apr PCE Price Index M/M: 0.1%e v 0.0% prior; Y/Y: 2.2%e v 2.3% prior.

- 08:30 (US) Apr Core PCE Price Index M/M: 0.1%e v 0.0% prior; Y/Y: 2.5%e v 2.6% prior.

- 08:30 (US) Apr Advance Goods Trade Balance: -$143.0Be v -$163.2B prior.

- 08:30 (US) Apr Preliminary Wholesale Inventories M/M: 0.4%e v 0.4% prior; Retail Inventories M/M: -0.1%e v -0.1% prior.

- 08:30 (CA) Canada Mar GDP M/M: 0.1%e v -0.2% prior; Y/Y: 1.6%e v 1.6% prior; Q1 Quarterly GDP Annualized: 1.7%e v 2.6% prior.

- 09:00 (IN) India announces upcoming bill issuance (held on Wed).

- 09:00 (CL) Chile Apr Retail Sales Y/Y: 4.4%e v 6.9% prior; Commercial Activity Y/Y: No est v 7.6% prior.

- 09:00 (CL) Chile Apr Industrial Production Y/Y: 2.8%e v 4.5% prior; Manufacturing Production Y/Y: 2.3%e v 5.4% prior; Total Copper Production: No est v 477.0K prior.

- 09:45 (US) May Chicago Purchase Managers Index (PMI): 45.0e v 44.6 prior.

- 10:00 (US) May Final University of Michigan Confidence: 51.5e v 50.8 prelim.

- 11:00 (CO) Colombia Apr National Unemployment Rate: No est v 9.6% prior; Urban Unemployment Rate: 9.6%e v 9.3% prior.

- 11:00 (EU) ECB's Vujcic.

- 11:00 (EU) Potential sovereign ratings after European close.

- 11:00 (MX) Mexico Apr Net Outstanding Loans (MXN): No est v 6.915T prior.

- 12:20 (US) Fed's Bostic.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 16:45 (US) Fed's Daly.

- 21:30 (CN) China May Manufacturing PMI: 49.5e v 49.0 prior; Non-manufacturing PMI: 50.5e v 50.4 prior; Composite PMI: No est v 50.2 prior.