A week of important data releases amid ongoing tariff uncertainty

In focus today

In the euro area, focus turns to the final manufacturing PMI data for May. Manufacturing rose more than expected to 49.4 in the flash release showing limited signs of trade uncertainty.

From the US, ISM manufacturing survey for May is due for release in the afternoon. Regional Fed manufacturing indices and the flash PMI released earlier pointed towards a modest rebound, which could be partially explained by renewed front-loading after the US-China trade deal. Federal Reserve's Powell, Goolsbee and Logan are scheduled to give speeches in the evening.

Overnight, China releases PMI manufacturing from Caixin, the private version. After dropping in April on the back of a big drop in export orders, we look for a rebound in May following the US-China deal on a 90-day truce in the trade war. This should lead to a lift in export orders and the overall PMI level.

In Sweden, manufacturing PMIs are due today. Swedish manufacturing PMIs have stayed above 50 since mid-2024 and April marked its fourth straight monthly increase. We expect the main index to remain in expansionary territory, albeit sub-indices such as prices paid are likely to be even more interesting as markets are concerned given the upcoming Riksbank meeting and the fact that inflation remains above target. 

After the sharp drop in Norwegian PMI in April, we expect a solid rebound as trade worries have eased significantly.

Throughout the rest of the week there are several interesting data releases and meetings to look forward to. Most important, we look out for the May euro area inflation and the April US JOLTS Job Openings report on Tuesday. On Wednesday, the Bank of Canada will publish a statement on the rate decision, while the ECB board meets on Thursday, where we expect a 25bp cut in the policy rate to 2.0%. We will also look out for the release of the Chinese services PMI from Caixin on Thursday. Friday's releases include May US non-farm payrolls and a revision of Q1 euro area GDP.

Economic and market news

What happened since Wednesday

In the global trade war, several big stories have unfolded since our latest Danske Morning Mail. On Friday evening, Trump announced a doubling of the earlier tariffs on steel and aluminium to 50% on 4 June. The announcement came just a few hours after he accused China of violating an agreement with the US on Truth Social. Last week, the US Trade Court ruled against tariffs imposed with the authority of International Economic Emergency Powers Act (IEEPA), but the product-specific tariffs imposed under Section 232 authority were not part of the ruling. As such, we could see more product-specific tariffs replacing the current country-specific measures, if the US Supreme Court ends up confirming the Trade Court ruling over summer. These legal challenges have introduced considerable uncertainty into ongoing trade negotiations, with US trading partners now reassessing the most likely outcomes.

In the US, the tariff uncertainty continues to distort US macro data. University of Michigan's May consumer sentiment rebounded, and inflation expectations declined in the final release as these also contained responses collected after the US-China trade deal. The Atlanta Fed's 'nowcast' model for Q2 GDP growth rebounded sharply to 3.8% (from 2.2%), but underlying growth remains weaker. The uptick was purely driven by the preliminary April trade balance data showing a rapid narrowing in US trade deficit after the Q1 import front-loading ended around the 'Liberation Day'.

Core PCE inflation landed close to expectations in April. Real consumption slowed down to just 0.1% m/m SA (from +0.7%) despite a decent uptick in personal income. As such, the savings rate ticked up to 4.9% (from 3.9%), which is the highest since May 2024.

In Sweden, final Q1 GDP growth surprised to the downside, coming in at -0.2% q/q (cons. +0.1% q/q), amid a decline in fixed investments and household spending, marking the first contraction in GDP since Q4 2023. Conversely, April saw quite strong retail sales, a +0.9% m/m growth led by non-durables rising by 1.3%. Over the most recent three-month period (Feb-April) we have seen retail sales volumes growing by 1.1% compared to previous 3m-window (Nov-Jan), highlighting a discrepancy between household sentiment (c.f the NIER ETS release) and spending behaviour.

In Norway, retail sales increased +0.7 % m/m in April, taking the 3M/3M average growth to 1.5 %. Hence, the decent upward trend seen since last autumn continued into Q2. High real wage growth, fading headwinds from higher mortgage rates, strong employment growth and a normalisation of the saving ratio are all contributing to this trend. Furthermore, unemployment (SA) rose from 2.0% to 2.1% in May, marking the first sign of weakness in the labour market since last August. That said, the number of unfilled vacancies is still elevated, signalling continued strong demand for labour.

In the euro area, Spanish inflation in May came in slightly lower than expected (+1.9% y/y, cons. 2.0% y/y), while Italian inflation came in as expected, also at +1.9% y/y. Despite German May inflation coming in at bit higher than expected at 2.1% y/y in May, we still expect euro area HICP in May to decline to 2.0% y/y when it releases tomorrow.

In China, non-manufacturing PMI from NBS surprised to the downside, declining to 50.3 in May (prior 50.4, cons. 50.6). The latest reading underscored concerns over the impact of rising US tariffs on China's service sector, despite a temporary trade war pause between Beijing and Washington. The manufacturing PMI came in as expected, increasing to 49.5 in May (prior 49.0).

In Oil, OPEC+, announced a production increase of 411,000 barrels per day for July, aiming to regain market share and address over-production by members like Iraq and Kazakhstan.

Equities: Investors locked in solid gains last week (MSCI World +1.6%). The strong performance abated over the course of the week, however. Defensives outperformed cyclicals on Thursday and Friday, while Nordics were closed for holidays. Drivers were many; Nvidia earnings, upset tariff tweets and court rulings whiplashed investors. VIX worth noting in this regard, which, despite all the tariff noise, remained stubbornly below 20 over the last week, in a sign that investors put less emphasis on the Trump trade. US and European futures are half a percent lower this morning, while Asian markets are selling off 1-2% following Trump tweets over weekend.

FI and FX: Tariff uncertainty is on the rise again following Trump's Friday evening announcement of a doubling of the steel and aluminium tariffs, to 50% starting 4 June. EUR/USD is back above 1.1350 and US yields are ticking higher, all whilst equity futures are well in red. The Scandies are up for some interesting weeks to come, and EUR/NOK has found its way back to 11.60 whilst NOK/SEK has reversed down to 0.94. Nationalist candidate Karol Nawrocki, backed by Donald Trump, won the polish presidential election, a heavy blow against PM Tusk's ambition for closer ties between Poland and EU. The result is likely to weigh on the Zloty, with EUR/PLN potentially moving to 4.30 once again.