Bombastic breakup between Trump and Musk rattles political sphere and Tesla stock

EU mid-market update: Bombastic breakup between Trump and Musk rattles political sphere and Tesla stock; Call scheduled today; ECB's Holzmann emerges as sole dissenter.

Notes/observations

- Tesla bounces back 5% in premarket after 14% drop on Thurs, triggered by relationship breakup between Trump and Musk; Musk sent a barrage of X posts attacking Trump, including accusation of being in Epstein files, lying to press, calling for his impeachment and pulling back Dragon spacecraft out of operation. Potentially an olive branch has been extended with call between the two scheduled today (no confirmed time) and Musk retracting Dragon decommissioning move.

- In Europe, Euro Zone Q1 GDP revised higher and Apr retail sales beat consensus. German and French trade balance and industrial production data were weak, missing expectations, causing DAX and CAC to underperform slightly. Overall though, market is mixed to flat as focus turns to nonfarm payrolls and any further developments with Trump/Musk and trade talks.

- ECB speakers are plentiful, in typical fashion after rate decision. Comments mirror Lagarde yesterday, about approaching/entering neutral rate. July still up for debate whether to pause or cut again; Holzmann revealed he was the sole dissenter; Heard from Rehn, Holzmann, Stournaras, Simkus, Kazaks, Villeroy, Muller.

- EU bond yields have stabilized with Italian-German 10-year spread nearing post-Eurozone debt crisis low.

- Surprise move out of India Central Bank with 50bps cut (25bps was expected), alongside a 100bps cut to Cash Reserve Ratio. Indian Sensex and Nifty 50 outperformed Asia.

- Japan proposed car tariff reductions to US after a 2 hour meeting between Japan Trade Min Akazawa and US Commerce Sec Lutnick.

- Asia closed mixed with KOSPI outperforming +1.5%. EU indices -0.2% to 0.0%. US futures +0.4%. Gold +0.2%, DXY +0.3%; Commodity: Brent -0.5%, WTI -0.6%; Crypto: BTC -1.3%, ETH -5.7%.

Asia

- India Central Bank (RBI) cuts Repurchase Rate by 50bps to 5.50%; Not expected; (rates now at lowest since Aug 2022; Changes stance back to Neutral from Accommodative in April); Cuts Cash Reserve Ratio (CRR) by 100 BPS to 3.00% [unchanged was expected].

- Japan consumers said to be queuing for 'hours' to buy rice as shortage crisis intensifies.

- Korea Finance Ministry: To continue to discuss FX 'closely' with the US - statement, following Treasury semi-annual FX report.

- Taiwan Central Bank (CBC); Reiterates that the US did Not ask for a stronger TWD.

- Hong Kong authorities: Stablecoins ordinance to start ops on Aug 1st.

Americas

- US Senate Finance Committee to convene hearing on FY26 budget on June 12th.

- Senate Majority Leader Thune: Musk-Trump conflict won't affect the Senate tax bill.

- Judge pauses US Pres Trump's ban on Harvard foreign students entering the US.

Europe

- ECB's Holzmann (hawk, Austria): I dissented at rate decision yesterday (only dissenter against 25bps cut).

- Germany Chancellor Merz: Will remain dependent on US for foreseeable future.

- Scottish Labour defeats SNP to win Hamilton, Larkhall & Stonehouse by-election.

- Swiss National Bank (SNB): SNB does not engage in any manipulation of the Swiss franc; Do not seek to prevent adjustment in balance of trade or to gain unfair competitive advantages for the Swiss economy.

- France Foreign Min Barrot: Hopes European Commission will put forward new Russians sanctions package before end of June.

- Italy Stats Agency (Istat) updates economic forecasts (bi-annually): Cuts 2025 GDP growth.

- German Bundesbank updates economic forecasts (bi-annual): Cuts nearterm GDP and inflation forecasts.

Trump/Musk dispute

- Pres Trump's aides have scheduled a call with Musk on Friday; Time not disclosed - Politico.

- Trump: I don’t mind Elon turning against me, but he should have done so months ago. This is one of the Greatest Bills ever presented to Congress.

- Musk shared a post on social media calling for Trump's impeachment.

- Musk: Trump tariffs will cause a recession in second half of the year - X.

- Musk: Trump asking him to leave is 'a lie'; realDonaldTrump is in the Epstein files.

- Musk: “Good advice. OK, we won’t decommission Dragon” - post on X, in reply to a regular user of X plea to "cool off and take a step back for a couple of days'. (Earlier Musk threatened on an X post to 'begin decommissioning its Dragon spacecraft "immediately").

- Reportedly Top US White House aides have held multiple meetings to discuss fallout from Musk's tweets - press.

- White House Press Sec Leavitt: Musk has a right to speak for his companies; Pres Trump's focus in on passing Republican tax bill.

Trade

- Canada PM Carney and China Premier Li Qiang discussed bilateral relations and trade.

- Japan Trade Negotiator Akazawa met with US Commerce Sec Lutnick earlier today (Jun 5th) for 110 minutes - Japan govt.

Tensions/conflicts

- Iran said to have ordered material from China that could make "hundreds of ballistic missiles" - WSJ.

- Australia reported to have signed long-range precision strike missile agreement with the US.

- Russia Dep FM Ryabkov: Returning to New START arms control agreement with US becoming less and less realistic.

- Ukraine Pres Zelenskiy: West should ramp up pressure on Russia and ‘we need to act decisively’.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.1% at 552, FTSE 0.0% at 8810, DAX -0.2% at 24265, CAC-40 -0.3% at 7770, IBEX-35 +0.0% at 14197, FTSE MIB +0.1% at 3949, SMI -0.1% at 12314, S&P 500 Futures +0.4%].

Market focal points/key themes: European indices opened mixed with a downward bias, and failed to gain direction through the early part of the session; Sweden closed for holiday; ECB’s hawkish cut yesterday seen muddling risk appetite; among outperforming sectors are energy and real estate; underperforming sectors include materials and industrials; apparel subsector under pressure following disappointing earnings from Lululemon yesterday; defense subsector seeing support on pledges to increase NATO spending; Unicredit reportedly proposed sale of around 200 branches to meet regulatory to acquire Banco BPM; focus on US NFP later in the day; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: CANAL+ SA [CAN.UK] +7.9% (trading update).

- Healthcare: Galderma [GALD.CH] +2.2% (study results).

- Industrials: Fraport [FRA.DE] +1.3% (analyst upgrade); Demant [DEMANT.DK] +6.4% (analyst action), PostNL [PNL.NL] -9.7% (analyst action), OCI [OCI.NL] -3.0% (analyst action).

- Technology: Sonova [SOON.CH] +1.1% (analyst upgrade), Bango [BGO.UK] -0.5% (FY24 results).

Speakers

- ECB's Rehn (Finland): Reiterates not pre-committing to any rate path.

- ECB's Holzmann (hawk, Austria): I dissented at rate decision yesterday (only dissenter against 25bps cut).

- Poland Central Bank (NBP) Litwiniuk: Rates can still be cut by 100–125 bps this year; Due to certain risks regarding disinflation path we need to be cautious.

- ECB's Stournaras (Greece): Best thing for ECB is to wait and see; Rate cutting is nearly done.

- Japan Former Top FX Diplomat Furusawa: US wants to avoid further dollar rises while Japan wants to prevent weak JPY (yen) from pushing up inflation.

- India Central Bank (RBI) Gov Malhotra: Liquidity is abundant, inflation is under control.

- ECB's Simkus (Lithuania): Interest rates are now at neutral.

- ECB's Kazaks (Latvia): Further rate cuts would be fine tuning; It may well be the case that we pause in July.

- ECB's Villeroy (France): Will not see low rates again that we saw a few years ago; We have tools to react if there is deflation.

- ECB's Muller (Estonia): Agree with Lagarde that cycle almost finished; Hard to say what is coming next on rates.

- Poland Central Bank (NBP) Member Wnorowski: Sees two more rate cuts this year.

- Japan PM Ishiba: Need negotiations with the US for a 'win-win' relationship.

- Poland Central Bank (NBP) Kotecki: Not clear if will cut rates in July or Sept; Monetary Policy Committe is turning "cautious" towards rate cuts.

- Japan Fin Min Kato: Reiterates will leave specifics of monetary policy to the BOJ; Will not comment on US FX reports - financial press.

Economic data

- (IS) Iceland May Preliminary Trade Balance (ISK): -63.4B v -53.9B prior.

- (EU) EURO ZONE Q1 FINAL GDP Q/Q: 0.6% V 0.4%E; Y/Y: 1.5% V 1.2%E; Household Cons Q/Q: 0.2% v 0.4% prior; Govt Expend Q/Q: 0.0% v 0.4%e; Gross Fix Cap Q/Q: 1.8% v 0.6%e; Final Employment Q/Q: 0.2% v 0.3% prelim; Y/Y: 0.7% v 0.8% prelim; Compensation per Employee Y/Y: 3.8% v 4.1% q/q (highlighted as key metric by ECB Chief Lagarde on monitoring wage-price spiral).

- (EU) Euro zone Apr Retail Sales M/M: 0.1% V 0.2%E; Y/Y: 2.3% V 1.5%E.

- (GR) Greece Q1 GDP Q/Q: 0.0% v 0.8% prior; Y/Y: 2.2% v 2.5% prior; GDP NSA (unadj) Y/Y: 1.8% v 2.7% prior.

- (HK) Hong Kong May Foreign Reserves: $431.0B v $408.7B prior.

- (UN) May FAO World Food Price Index: 127.7 v 128.3 prior.

- (TH) Thailand Foreign Reserves w/e May 30th: $257.6B v $257.9B prior.

- (CZ) Czech Apr Industrial Output Y/Y: -1.1% v -1.6%e; Construction Output Y/Y: 1.9% v 12.5% prior.

- (ES) Spain Q1 INE House Price Index Q/Q: 3.5% v 1.8% prior; Y/Y: 12.2% v 11.3% prior.

- (CH) Swiss May Foreign Currency Reserves (CHF): 703.6B v 702.9B prior.

- (CZ) Czech Apr Trade Balance (CZK): 23.2B v 24.7Be.

- (FR) France Apr Industrial Production M/M: -1.4% V 0.0%E; Y/Y: -2.1% V -0.3%E; Manufacturing Production M/M: -0.6% v 0.6% prior; Y/Y: -1.6% v 0.2% prior.

- (FR) France Apr trade balance: -€8.0B V -€6.3B PRIOR; Exports: -5.9% v 5.6% prior (€49.3B v €52.4B m/m) (prior revised from €52.6B); Imports: -2.4% v +2.3% prior (€57.2B v €58.6B m/m) (prior revised from €58.8B); Current Account: -€4.1B v €1.0B prior.

- (TH) Thailand May CPI M/M: 0.3% v 0.0%e; Y/Y: -0.6% v -0.8%e; Core CPI Y/Y: 1.1% v 1.0%e.

- (HU) Hungary Apr Retail Sales Y/Y: 5.0% v 2.4%e.

- (HU) Hungary Apr Industrial Production M/M: +1.5% v -0.5%e; Y/Y: -2.3% v -4.3%e.

- (AU) Australia May Foreign Reserves (A$): 105.6B v 102.4B prior.

- (RO) Romania Q1 Preliminary GDP Q/Q: 0.0% v 0.0%e; Y/Y: 0.3% v 0.2%e.

- (ZA) South Africa May Net Reserves: $64.8B v $64.5Be; Gross Reserves: $68.1B v $67.5B prior.

- (DK) Denmark Apr Current Account (DKK): 40.7B v 33.7B prior.

- (DK) Denmark Apr Industrial Production M/M: +2.0% v -3.2% prior.

- (NO) Norway Apr Industrial Production M/M: 2.1% v -0.4% prior; Y/Y: 0.3% v -3.2% prior; Manufacturing Production M/M: 2.8% v 0.0% prior; Y/Y: 10.3% v 0.2% prior.

- (DE) Germany Apr trade balance: €14.6B V €19.1BE; Exports M/M: -1.7% v -1.4%e; Imports M/M: 3.9% v +0.5%e.

- (DE) Germany Apr Industrial Production M/M: -1.4% V -1.0%E; Y/Y: -1.8% V -1.0%E.

- (UK) MAY HALIFAX HOUSE PRICE INDEX M/M: -0.4% V +0.3% prior; Y/Y: 2.5% V 3.2% prior.

- (JP) Japan Apr Preliminary Leading Index CI: 103.4 v 103.9e; Coincident Index: 115.5 v 115.4e.

- (NL) Netherlands Apr Consumer Spending Y/Y: 0.2% v 1.2% prior.

Fixed income issuance

- France Debt Agency (AFT) announces upcoming issuance; To sell €5.8-7.4B in 3-month, 6-month and 12-month bills on Mon, June 9th (4 tranches)

- Finland to sell 2032 and 2043 RFGB bonds on Tues, June 10th.

- Australia sells A$800M v A$800M indicated in 1.50% Jun 2031 bonds; Avg Yield: 3.7539% v 4.1259% prior; bid-to-cover: 2.48x v 4.56x prior.

Looking ahead

- 05:30 (IN) India to sell combined INR320B in 2039 and 2065 bonds.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2043 and 2050 Bonds.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£1.5B, £2.0B and £3.0B respectively).

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 1-Week auction Rate unchanged at 21.00%.

- 07:00 (PT) ECB’s Centeno (Portugal).

- 07:30 (IN) India Forex Reserve w/e May 30th: No est v $692.7B prior.

- 08:00 (PL) Poland May Official Reserves: No est v $242.4B prior.

- 08:00 (PL) Poland Central Bank (NBP) Minutes (2 decisions ago).

- 08:00 (CL) Chile May CPI M/M: No est v 0.2% prior; Y/Y: No est v 4.5% prior.

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

- 08:00 (UK) BOE Pill (chief economist).

- 08:30 (US) May Change in Nonfarm Payrolls: +130Ke v +177K prior; Private Payrolls: No est v +167K prior; Manufacturing Payrolls: +3.0Ke v -1.0K prior.

- 08:30 (US) May Unemployment Rate: 4.2%e v 4.2% prior; Underemployment Rate: No est v 7.8% prior; Labor Force Participation Rate: No est v 62.6% prior.

- 08:30 (US) May Average Hourly Earnings M/M: 0.2%e v 0.2% prior; Y/Y: 3.7%e v 3.8% prior; Average Weekly Hours All Employees: No est v 34.3 prior.

- 08:30 (CA) Canada May Net Change in Employment: +5.0Ke v +7.4K prior; Unemployment Rate: 7.0%e v 6.9% prior; Full Time Employment Change: No est v +31.5K prior; Part Time Employment Change: No est v -24.2K prior; Participation Rate: No est v 65.3% prior; Hourly Wage Rate: No est v 3.5% prior.

- 09:00 (RU) Russia May Official Reserve Assets: No est v $680.3B prior.

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

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

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

- 15:00 (US) Apr Consumer Credit: $9.0Be v $10.172B prior.