First-ever Boeing Dreamliner crashed in India – UK data drop surprises Chancellor

EU mid-market update: Ratcheting up of Iran tensions ahead of weekend talks; First-ever Boeing Dreamliner crashed in India; UK data drop surprises Chancellor.

Notes/observations

- Lackluster UK economic data, weak GDP and production growth with worsening trade position, despite recent trade deals with India (FTA) and US (tariff resolution). Chancellor under extra scrutiny given large spending plans announced yesterday at triennial spending review (analysts now see tax rises as inenvitable). Sterling and yields are lower, with FTSE outperforming EU indices (by holding flat) on increased expectations of BOE rate cuts.

- Risk appetite being tested as rhetoric on middle east tensions and Iran spirals out of control (ahead of US talks on Sunday about nuclear deal). Following podcast comments from Pres Trump about being less confident on Iran deal, Israel said they were fully ready to launch operations in Iran and Trump issued evacuation order to US personnel out of parts of Mid-East. IAEA also declared Iran as non-complying with nuclear safeguard obligations for 1st time in 20-years. Could it be ‘pyschological game’ ahead of nuclear talks with US on Sunday, or an authentic escalation? Brent -0.9%, WTI -0.8%.

- An 11.5-year-old Air India Boeing 787-8 Dreamliner (VT-ANB) en route from Ahmedabad to London-Gatwick reportedly crashed shortly after takeoff from Ahmedabad airport, with conflicting reports of 130 versus 242 people aboard - marking the first-ever fatal crash of a 787.

- Tesco, UK’s largest grocery and general merchandise retailer, provided positive Q1 trading update with +5.1% LFL sales beating consensus +3.9%. CEO noted in call that inflation was below national Kantar reading and that cyber security is top of agenda (given hack at M&S and Co-op), although noted no extra business gained from competitor’s breach.

- Oracle raised its FY26 revenue outlook and CEO Larry Ellison highlighted “astronomical and insatiable” demand for data center capacity alongside no GPU supply issues.

-Asia closed mixed with Hang Seng underperforming -1.4%. EU indices -1.0% to -0.5%. US futures -0.4% to -0.5%. Gold +0.2%, DXY -0.5%; Crypto: BTC -1.5%, ETH -0.1%.

Asia

- Japan Q2 BSI Large All Industry Q/Q: -1.9 v +2.0 prior; Large Manufacturing Q/Q: -1.9 v -2.4 prior.

- Australia Jun Consumer Inflation Expectation Survey: 5.0% v 4.1% prior.

Mid-East

- Pres Trump confirmed (re Iran) US personnel being moved out of parts of the Mid-East (**Reminder: On Jun 11th Trump stated that he was less confident on Iran deal).

Global conflict/tensions

- Israel said to be 'fully ready' to launch operation in Iran; US anticipated Iran could retaliate on certain US sites in Iraq; US envoy Witkoff was still planning to meet with Iran for the 6th rounds of talks this Sunday (Jun 15th).

Europe

- Bank of France (BdF) cuts GDP forecast for 3 years through 2027 citing trade tensions. Cuts 2025 GDP growth forecast from 0.7% to 0.6%.

- UK May RICS House Price Balance: -8% v -3%e (10-month low). Results pointed to a subdued market.

- UK Spending Review: Britons face “substantial” tax rises after Rachel Reeves gambled that a significant boost to public spending would help Labour win the next election – financial press.

Americas

- US May Federal Budget Balance: -$316.0B v -$314.5Be.

- Treasury Sec Bessent: Trump Admin remained committed to maintaining the Dollar's reserve currency status (**Note: ECB Report noted that gold Bullion accounted for 20% of global official reserves in 2024. USD at 46% - Euro at 16%).

- Senate Majority Leader Thune (R-SD): Looking for ways to dial back the SALT provisions, but keep the House votes needed to pass the bill.

Trade

- President Trump said he intended to send letters to trading partners in the next one to two weeks setting unilateral tariff rates.

- China was putting a six-month limit on rare-earth export licenses for U.S. automakers and manufacturers. Reports circulated that China was demanding sensitive business information from Western firms for them to secure rare earths/magnets which is raising concerns about IP theft.

- Japan National Policy Min Maehara citing PM Ishiba: There’s a major gap in stance between Japan/US.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.59% at 548.40, FTSE +0.03% at 8,866.94, DAX -1.04% at 23,724.85, CAC-40 -0.52% at 7,735.69, IBEX-35 -0.80% at 14,022.98, FTSE MIB -0.74% at 39,881.00, SMI -0.72% at 12,249.40, S&P 500 Futures -0.36%].

Market focal points/key themes: European indices open generally lower and trended into the red through the early part of the session; lack of progress in trade negotiations seen weighing on risk appetite; better performing sectors include energy and utilities; lagging sectors include financials and materials; focus on US PPI coming out later in the day; earnings expected in the upcoming Americas session include Adobe.

Equities

- Consumer discretionary: Ryanair [RYA.IE] -1.5%, Easyjet [EZJ.UK] -2.0%, Lufthansa [LHA.DE] -3.5% (oil prices rise; readacross from American Express at Morgan Stanley Conference, after comments "Airline spending remains soft, consistent q/q") - Consumer staples: Tesco [TSCO.UK] +2.5% (Q1 trading update, LFL sales above estimates), Clas Ohlson [CLASB.SE] +13.5% (Q4 results above estimates).

- Financials: Deutsche Bank [DBK.DE] -1.5% (weak comments about Q2 in remarks from Goldman Sachs 29th Annual European Financials Conference) - Healthcare:

- Industrials: Airbus [AIR.FR] -1.0% (Exec: A350 assembly being slowed by delays in 'receiving lavatories and engines'; Have not changed delivery guidance), Halma [HLMA.UK] +8.0% (FY results) - Technology: BE Semiconductor [BESI.NL] +7.0% (raises long-term revenue target), SAP [SAP.DE] -1.0% (Oracle results).

Speakers

- ECB's Villeroy (France) commented that had no fixed position on future rate decisions.

- ECB's Simkus (Lithuania) stated that ECB had arrived at neutral rates. Rates may still have to come down as risks have increased for inflation to be below Staff Projections.

- ECB's Patsalides (Cyprus) noted that ECB was flexible and agile on rates.

- UK Chancellor (Fin Min) Reeves commented that recent monthly GDP numbers were 'clearly disappointing'. Determined to deliver growth.

- Poland Central Bank (NBP) Kotecki commented that interest rates could be cut in July.

- German IFO Institute updated its economic forecasts. Raised 2025 GDP growth forecast from 0.2% to 0.3% and raised the 2026 GDP growth from 0.8% to 1.5%. IFO cut the 2025 Inflation from 2.3% to 2.1%.

- IAEA reportedly declared Iran is in 'non-compliance' with nuclear safeguards (1st time in 20 years).

- Senior Iran Official stated that mounting regional tensions were “psychological warfare” aimed at influencing Tehran’s nuclear talks with the U.S. on Sunday.

Currencies/fixed income

- USD putting in a mixed performance as geo-political tensions and trade concerns remained on the front burners. Greenback trying to rebound from 7-week lows after Wed CPI data. Dealers also cited that tariff debate also weighed heavily against the USD. The ongoing tariff uncertainties continued as the 90-day tariff pause is set to expire on July 9th.

- GBP was softer after disappoint UK GDP, production and trade data during the session. GBP/USD at 1.3530 by mid-session. Dealers noted that the contraction in GDP data helped the case for a BOE rate cut in Aug.

- EUR/USD at 1.1550 as the pair broke above key resistance.

- USD/JPY unable to sustain a foothold above the 1.44 level during the session. BOJ expected to keep policy steady next week. Analysts note that the next hike could come in Oct.

- 10-year German Bund yield at 2.50% and 10-year Gilt yield at 4.52%. 10-year Treasury yield at 4.40%.

Economic data

- (SE) Sweden May PES Unemployment Rate: 3.6% v 3.6% prior.

- (NL) Netherlands May CPI M/M: -0.5% v +1.0% prior; CPI Y/Y (final): 3.3% v 3.3% prelim.

- (NL) Netherlands May CPI EU Harmonized M/M: -0.9% v -0.9% prelim; Y/Y: 2.9% v 3.0% prelim.

- (FI) Finland Apr Current Account: -€0.2B v -€3.3B prior.

- (UK) Apr Monthly GDP M/M: -0.3% v -0.1%e; 3M/3M: 0.7% v 0.7%e.

- (UK) Apr Industrial Production M/M: -0.6% v -0.5%e; Y/Y: -0.3% v -0.2%e.

- (UK) Apr Manufacturing Production M/M: -0.9% v -0.7%e; Y/Y: 0.4% v 0.5%e.

- (UK) Apr Construction Output M/M: 0.9% v 0.2%e; Y/Y: 3.3% v 2.5%e.

- (UK) Apr Index of Services M/M: -0.4% v -0.1%e; 3M/3M: 0.6% v 0.7%e.

- (UK) Apr Visible Trade Balance: -£23.2B v -£20.7Be; Overall Trade Balance: -£7.0B v -£4.5Be.

- (RO) Romania May CPI M/M: 0.5% v 0.4%e; Y/Y: 5.5% v 5.3%e.

- (TR) Turkey Apr Industrial Production M/M: -3.1% v +3.4% prior; Y/Y: 3.3% v 2.5% prior.

- (NO) Norway Q2 Regional Network Survey: Output Current Quarter Q/Q: 0.4% v 0.4% prior; Output Next Quarter Q/Q: 0.4% v 0.4% prior.

- (IT) Italy Q1 Unemployment Rate: 6.1% v 6.0%e.

- (HK) Hong Kong Q1 PPI Y/Y: 4.8% v 4.1% prior.

- (HK) Hong Kong Q1 Industrial Production Y/Y: 0.7% v 1.0% prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold total €6.75B vs. €5.75-6.75B indicated range in 3-year, 7-year and 30-year BTP Bonds.

- Sold €2.5B vs. €2.0-2.5B indicated range in 2.65% Jun 2028 BTP bonds; Avg Yield: 2.24% v 2.40% prior; bid-to-cover: 1.63x v 1.51x prior (May 13th 2025).

- Sold €3.0B vs. €2.75-3.0B indicated range in 3.25% July 2032 BTP bonds; Avg Yield: 3.02% v 3.28% prior; bid-to-cover: 1.48x v 1.60x prior (May 13th 2025).

- Sold €1.25B vs. €1.0-1.25B indicated range in 4.30% Oct 2054 BTP; Avg Yield: 4.26% v 4.70% prior; bid-to-cover: 1.60x v 1.85x prior.

Looking ahead

- (DE) Germany Apr Current Account Balance: No est v €34.1B prior.

- (UR) Ukraine Q1 GDP Y/Y: 3.4%e v 3.5% prior.

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

- 05:30 (ZA) South Africa Apr Total Mining Production M/M: No est v 3.5% prior; Y/Y: -4.0%e v -2.8% prior; Gold Production Y/Y: No est v -11.1% prior; Platinum Production Y/Y: No est v -9.9% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland May CPI M/M: No est v 0.4% prior; Y/Y: No est v 2.2% prior.

- 06:00 (IE) Ireland May CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y (final): No est v 1.4% prelim.

- 06:00 (PT) Portugal May Final CPI M/M: No est v 0.4% prelim; Y/Y: No est v 2.3% prelim.

- 06:00 (PT) Portugal May Final CPI EU Harmonized M/M: No est v 0.7% prelim; Y/Y: No est v 1.7% prelim.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 6-month Bills.

- 06:00 (RO) Romania to sell combined RON1.0B in 2028 and 2030 bonds.

- 06:30 (IN) India May CPI Y/Y: 3.0%e v 3.2% prior.

- 08:00 (BR) Brazil Apr Retail Sales M/M: -0.5%e v +0.8% prior; Y/Y: +3.6%e v -1.0% prior.

- 08:00 (BR) Brazil Apr Broad Retail Sales M/M: -1.3%e v +1.9% prior; Y/Y: +1.7%e v -1.2% prior.

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

- 08:00 (ES) ECB's De Guindos (Spain).

- 08:20 (DE) ECB's Schnabel (Germany) moderates panel in Brussels.

- 08:30 (US) May PPI Final Demand M/M: +0.2%e v -0.5% prior; Y/Y: 2.6%e v 2.4% prior.

- 08:30 (US) May PPI (ex-food/energy) M/M: +0.3%e v -0.4% prior; Y/Y: 3.1%e v 3.1% prior.

- 08:30 (US) May PPI (ex-food/energy/trade) M/M: +0.3%e v -0.1% prior; Y/Y: 3.0%e v 2.9% prior.

- 08:30 (US) Initial Jobless Claims: 242Ke v 247K prior; Continuing Claims: 1.91Me v 1.904M prior.

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

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e June 6th: No est v $678.7B prior.

- 10:15 (NL) ECB’s Elderson (Netherlands).

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) Q1 Financial Account Household Change in Net Worth: No est v $0.164T prior.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 13:00 (US) Treasury to sell 30-Year Bond Reopening.

- 15:00 (AR) Argentina May National CPI M/M: 2.0%e v 2.8% prior; Y/Y: 44.8%e v 47.3% prior.

- 18:30 (NZ) New Zealand May Manufacturing PMI: No est v 53.9 prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 4.50%.

- 22:00 (KR) South Korea to sell KRW700B in 50-year Bonds; Avg Yield % v 2.480% prior; bid-to-cover: x v 1.34x prior (May 15th 2025).

- 23:30 (JP) Japan to sell 3-Month Bills.