Stagflationary UK job report increases Bank of England rate cut bets

EU mid-market update: Stagflationary UK job report increases Bank of England rate cut bets; US-China talks continue in London; Macron did not rule out another snap elections.

Notes/observations

- UK job data painted a picture of rising unemployment (highest since 2020) and disappointing wages (0.2% below estimates), lifting the FTSE on increasing expectations for more BOE rate cuts. Gilt yields and GBP (sterling) fell, with 10-year yield down 7bps and GBP/USD down 0.6%. Elsewhere in Europe, mild movement with DAX underperforming.

- US futures saw unexplained volatility to the downside at approx 01:15 ET, within the context that we are waiting for second day of US-China talks in London.

- At GTC Paris 2025, NVIDIA guided for sequential Q2 gross margin expansion, aiming for mid-70s% by year-end, despite U.S. restrictions limiting shipments to China’s ~$50B market, where domestic competitors are gaining ground. It also highlighted rapid GB200 system deployments, with customers achieving significant inferencing improvements, and a supply chain now supporting 1,000 racks per week.

- Apple flat premarket, readout from analysts at WWDC highlight underwhelming innovation and growing divergence between leading AI companies and Apple’s own AI progress.

- Asia closed mixed with ASX200 outperformed +0.8%. EU indices -0.8% to +0.3%. US futures -0.1%. Gold +0.1%, DXY +0.1%; Commodity: Brent +0.3%, WTI +0.2%; Crypto: BTC +2.0%, ETH +6.7%.

Asia

- Australia Jun Westpac Consumer Confidence Index: 92.6 v 92.1 prior.

- Australia May NAB Business Confidence: +2 v -1 prior.

- BOJ Gov Ueda stated that had limited room to underpin growth with rate cuts with short-term rate still at 0.5%, if the economy and prices came under 'strong' downward pressure. To raise interest rates, if had enough confidence that underlying inflation neared 2.0% or moves around 2.0% [target].

- Japan Fin Min Kato stated that would conduct appropriate fiscal policy; Confirmed seeking more JGB holdings by domestic investors.

- Japan ruling party (LDP) reported to have decided on cash handout as measure for inflation.

Europe

- ECB's Holzmann (hawk/dissenter, Austria): ECB may take longer pauses on rate cuts.

- UK May BRC Sales Like-For-Like Y/Y: 0.6% v 2.6%e.

Americas

- House Speaker Johnson said to be asking the Senate to modify SALT as little as possible. Hopes to meet July 4th deadline on Tax Bill.

Trade

- US/China talks in London will continue Tuesday; scheduled to resume at 10 am local time in London (**Note: Chinese press highlighted that London trade talks were the key to bridging differences and Seeking win-win outcome in US trade talks).

- Japan PM Ishiba and Pres Trump to hold bilateral talks on sidelines of G7 in Canada.

- Japan Trade Negotiator Akazawa reiterated that key was if Japan - US could agree on trade package; Trade negotiations with US 'still in fog’. Had 'frank' constructive talks with the US side. To visit US and Canada from Jun 13-18th for tariff talks.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.23% at 551.96, FTSE +0.29% at 8,858.03, DAX -0.75% at 23,994.01, CAC-40 -0.15% at 7,779.53, IBEX-35 -0.03% at 14,245.00, FTSE MIB -0.16% at 40,396.00, SMI -0.52% at 12,301.44, S&P 500 Futures -0.02%].

Market focal points/key themes: European indices opened mixed with an upward bias but failed to gain momentum through early part of the session; markets seen in holding pattern as US-China trade negotiations carry on; among outperforming sectors are energy and health care; underperforming sectors include financials and telecom; oil & gas subsector supported after Brent rose above $67/bbl; Sacyr sells three assets in Colombia; Frasers selling Revolution Beauty unit; earnings expected in the upcoming US session include JM Smucker and GameStop.

Equities

- Consumer discretionary: Marks & Spencer [MKS.UK] +3.0% (reportedly resumes online orders after cyber incident).

- Financials: Caixabank [CBK.ES] -1.5% (analyst downgrade), Bellway [BWY.UK] +4.5% (trading update, raises FY home volume output and ASP, affirms margins).

- Healthcare: Novo Nordisk [NOVOB.DK] +2.5% (reportedly activist hedge fund Parvus Asset Management building stake), Sanofi [SAN.FR] -1.0% (US HHS Sec Kennedy (RFK) totally reconstituting Advisory Committee for immunization practices), Molecular Partners [MOLN.CH] +1.0% (cuts ~24% of workforce to extend cash runway), Idorsia [IDIA.CH] -1.5% (new CEO).

- Technology: ASML [ASML.NL] -1.0% (TSMC monthly sales growth decelerates) - Materials: Umicore [UMI.BE] +10.5% (analyst upgrade).

Speakers

- ECB's Villeroy (France) noted that ECB had successfully normalized policy and that policy and inflation were now in ‘favorable zone’.

- ECB’s Rehn (Finland) reiterated stance to take decisions meeting-by-meeting and must avoid complacency over inflation outlook.

- Sweden Central Bank (Riksbank) Business Survey noted that the economic situation had weakened over the spring. Economic outlook had become gloomier.

- Finland Central Bank updated its economic outlook which cut 2025 GDP growth forecast from 0.8% to 0.5% and cut 2026 GDP growth forecast from 1.8% to 1.5%.

- Hungary Finance Ministry noted that growth was falling short of target but was not expected to have substantial impact on revenues. 2025 budget deficit seen at 4.1% of GDP, 2026 deficit seen at 3.7% of GDP.

- Hungary Debt Agency (AKK) updated its financing plan and noted that 2025 net financing needed to rise by HUF651B.

Currencies/fixed income

- Session saw a firmer USD as dealers noted Fed would remain on pause until either tariff-related uncertainty fades or there was a clear deterioration in the labor market. Markets awaiting the 2nd day of meeting between US-Chinese officials on the trade front. Looking ahead the Wed release of US CPI data will move to the front burner.

- GBP was soft as weaker labor data brought forward calls for the next BOE rate cut. Dealers noted that BOE futures now fully priced the next rate cut by Sept compared to Nov before jobs data release. Press reports noted that Britain had lost over 275K jobs since Chancellor Reeves’ tax-raising budget.

- EUR/USD edged back above the 1.14 level just ahead of the NY morning.

- USD/JPY tested above 145 level during Asia but yen regained some composure as BOJ Gov Ueda reiterated that would raise interest rates if it had enough confidence that the underlying inflation neared 2% or moves around 2%.

- 10-year German Bund yield at 2.54% and 10-year Gilt yield at 4.56%. 10-year Treasury yield at 4.45%.

Economic data

- (SE) Sweden May Maklarstatistik Housing Prices: 0.4% v 1.1% prior.

- (NL) Netherlands Apr Manufacturing Production M/M: -1.1% v +0.5% prior; Y/Y: -0.5% v +1.4% prior; Industrial Sales Y/Y: -0.9% v +4.1% prior.

- (FI) Finland Apr Industrial Production M/M: 1.6% v 3.7% prior; Y/Y: 10.1% v 7.8% prior.

- (UK) May Jobless Claims Change: +33.1K v -21.2K prior; Claimant Count Rate: 4.5% v 4.4% prior; Payrolled Employees (monthly change): -109K v -20Ke.

- (UK) Apr Average Weekly Earnings 3M/Y: 5.3% v 5.5%e; Weekly Earnings (ex-bonus) 3M/Y: 5.2% v 5.3%e; Private Earnings (ex-bonus) 3M/Y: 5.1% v 5.3%e.

- (UK) Apr ILO Unemployment Rate: 4.6% v 4.6%e; Employment Change 3M/3M: +89K v +40Ke.

- (NO) Norway May CPI M/M: 0.4% v 0.4%e; Y/Y: 3.0% v 2.7%e.

- (NO) Norway May CPI Underlying M/M: 0.2% v 0.3%e; Y/Y: 2.8% v 2.9%e.

- (NO) Norway May PPI (including Oil) M/M: -3.0% v -5.4% prior; Y/Y: -0.1% v +2.1% prior.

- (SE) Sweden Apr GDP Indicator M/M: 0.4% v 0.3%e; Y/Y: 1.2% v 0.7% prior.

- (SE) Sweden Apr Private Sector Production M/M: +2.3% v -0.7% prior; Y/Y: +3.4% v -1.5% prior.

- (SE) Sweden Apr Industrial Orders M/M: -6.3% v +5.7% prior; Y/Y: 7.0% v 11.6% prior.

- (SE) Sweden Apr Industry Production Value Y/Y: +5.0% v -3.4% prior; Service Production Value Y/Y: +3.4% v -1.4% prior.

- (SE) Sweden Apr Household Consumption M/M: +0.5% v -0.1% prior; Y/Y: 2.7% v 1.4% prior.

- (DK) Denmark May CPI M/M: 0.1% v 0.1% prior Y/Y: 1.6% v 1.5% prior.

- (DK) Denmark May CPI EU Harmonized M/M: 0.0% v 0.1% prior; Y/Y: 1.5% v 1.5% prior.

- (JP) Japan May Preliminary Machine Tool Orders Y/Y: 3.4% v 7.7% prior.

- (CH) Swiss May SECO Consumer Confidence: -36.5 v -38.0e.

- (AT) Austria Apr Industrial Production M/M: 2.1% v 0.6% prior Y/Y: 3.7% v 1.2% prior.

- (CZ) Czech May Final CPI M/M: 0.5% v 0.5% prelim; Y/Y: 2.4% v 2.4% prelim.

- (CZ) Czech Apr Import Price Index Y/Y: -0.8% v +0.7% prior; Export Price Index Y/Y: -0.5% v +0.8% prior.

- (IT) Italy Apr Industrial Production M/M: +1.0% v -0.1%e; Y/Y: +0.3% v -1.1%e; Industrial Production NSA (unadj) Y/Y: -1.2% v -0.4% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 438.1B v 444.9B prior; Domestic Sight Deposits: 426.3B v 434.3B prior.

- (EU) Euro Zone Jun Sentix Investor Confidence: +0.2 v -5.5e (1st positive reading since Jun 2024).

- (GR) Greece May CPI Y/Y: 2.5% v 2.0% prior; CPI EU Harmonized Y/Y: 3.3% v 2.6% prior.

- (GR) Greece Apr Industrial Production Y/Y: -4.3% v +1.6% prior.

- (HU) Hungary May Budget Balance YTD (HUF): -2.801T v -2.931T prior.

Fixed income issuance

- (EU) ESM opened its book to sell EUR-denominated 3-year bonds; guidance seen +15bps to mid-swaps.

- (UK) DMO opened its book to sell inflation-linked 2038 Gilts via syndicate; guidance seen +11.75-12.25bps.

- (NL) Netherlands Debt Agency (DSTA) sold €2.45B vs. €2.0-2.5B indicated range in 2.5% July 2035 DSL bonds; Avg Yield: 2.749% v 3.011% prior.

- (ES) Spain Debt Agency (Tesoro) sold total €2.48B vs. €2.0-3.0B indicated range in 3-month and 9-month bills.

Looking ahead

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

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.0B in 2.4% Apr 2030 Bunds.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €2.4B in 3-month and 12-month bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2037, 2044 and 2048 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (US) May NFIB Small Business Optimism: 96.0e v 95.8 prior.

- 06:00 (FI) Finland to sell 2032 and 2043 RFGB Bonds.

- 06:30 (TR) Turkey to sell Bonds (2 tranches).

- 07:00 (ZA) South Africa Apr Manufacturing Production M/M: +0.9%e v -2.2% prior; Y/Y: -4.5%e v -0.8% prior.

- 07:00 (CZ) Czech Central Bank comments on May Final CPI reading.

- 08:00 (BR) Brazil May IBGE Inflation IPCA M/M: 0.4%e v 0.4% prior; Y/Y: 5.4%e v 5.5% prior.

- 08:00 (IS) Iceland May Unemployment Rate: No est v 3.9% prior.

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

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:30 (CL) Chile Central Bank Economist Survey.

- 08:30 (UR) Ukraine May CPI M/M: No est v 0.7% prior; Y/Y: 15.3%e v 15.1% prior.

- 08:30 (UR) Ukraine Q1 GDP Q/Q: No est v NA prior; Y/Y: No est v -0.1% prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.8-7.4B in 3-month, 6-month and 12-month bills.

- 10:30 (TR) Turkey May Cash Budget Balance (TRY): No est v -183.5B prior.

- 11:30 (US) Treasury to sell 52-Week Bills.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 16:30 (US) Weekly API Crude Oil Inventories.

- 18:45 (NZ) New Zealand Apr Net Migration: No est v 2.48K prior.

- 19:00 (KR) South Korea May Unemployment Rate: 2.7%e v 2.7% prior.

- 19:50 (JP) Japan May PPI (domestic CGPI) M/M: 0.2%e v 0.2% prior; Y/Y: 3.5%e v 4.0% prior.

- 20:00 (KR) South Korea Jun 1-10th Exports Y/Y: No est v -23.8% prior; Imports Y/Y: No est v -15.9% prior.

- 21:10 (KR) Bank of Korea to sell KRW500B in 1-Year Bonds.

- 23:00 (KR) South Korea May Total Bank Lending to Households (KRW): No est v 1,150.1T prior.

- 23:00 (TH) Thailand to sell THB in 2030 Bonds.

- 23:35 (CN) China to sell CNY170B in 2026 Bonds.