Imminent trade deal between US/UK, BoE expected to cut rates by 25bps

EU Mid-Market Update: Imminent trade deal between US/UK; BOE expected to cut rates by 25bps; Maersk still pessimistic on Red Sea return; Reports on Intel's large foundry contract with Microsoft.

Notes/observations

- European and Asian stocks rise on optimism over trade talks. US equities ended higher after volatile trading, set to break a 2-day losing streak. FOMC decision was lackluster and uneventful.

- President Trump hinted at a major trade deal with a “highly respected” country, likely the UK. NYT reports the announcement is expected Thursday morning. US-UK deal speculation lifted risk sentiment and boosted Bitcoin past $99K. Reminder of US-China talks in Switzerland this weekend.

- Most analysts view Thursday’s Trump 10 a.m. ET announcement as a symbolic framework that likely lifts only the 25 % Section 232 tariffs on UK steel, aluminum and autos while leaving the 10 % MFN duty intact. The pact, covering two-thirds of US–Japan trade but just a quarter of US–China trade, would an easy diplomatic win whose true value hinges on its evolution into a binding treaty and its use as a template for broader agreements.

- Both Norway & Sweden Central banks held rates. Norge's signaled cuts in 2025. Malaysia also left rates unchanged and noted weaker growth outlook may lead to cuts.

- Gilt yields slightly up ahead of BOE rate decision at slightly delayed time 07:02 ET (11:02 GMT), where a 25bps cut is expected to 4.25%. Slightly firmer on BOE expectations and trade deal speculation.

- Intel shares spiked premarket after it reportedly entered into a large-scale semiconductor foundry contract with Microsoft using the Intel's 18A process in the advanced foundry market, where TSMC and Samsung Electronics are competing. Elsewhere, Trump administration said to plan to repeal the Biden-era “AI diffusion” chip export rules and instead craft a simpler regime built around direct, bilateral negotiations with partners such as the UAE and Saudi Arabia.

- Asia closed higher with Nikkei225 outperforming +0.8%. EU indices -0.1% to +1.0%. US futures +0.7-1.3%. Gold -0.6%, DXY +0.2%; Commodity: Brent +1.2%, WTI +1.4%; Crypto: BTC +2.7%, ETH +5.0%.

Asia

- BOJ Gov Ueda reiterated in testimony that rice price was helping to drive up inflation. Reiterated stance to adjust degree of easing appropriately.

Global Conflict/tensions:

- Ukraine central bank Gov Pysnyi stated that had opened a review of whether the Euro should be used as reference currency, rather than the US dollar.

- Indian armed forces targeted air defense radars and systems at a number of locations in Pakistan.

- North Korea launched a ballistic missile according to South Korea’s military.

Europe

- UK Apr RICS House Price Balance: -3% v -4%e.

- National Institute of Economic and Social Research (NIESR) think-tank saw BOE cutting key rate in May, then one more cut this year; Cut UK 2025 GDP from 1.5% to 1.2%. Stated that it saw UK govt breaching its fiscal rules.

Americas

- FOMC left the Target Range unchanged at 4.25-4.50% (as expected) for its 3rd straight pause under the current phase of its easing cycle. Decision to keep policy steady was unanimous (12-0). Statement noted that uncertainty about the outlook had 'Increased further'.

- Fed Gov Powell post rate decision press conference noted that For the time being, the Fed was well positioned to wait for greater clarity . The import swing complicated GDP data; Several respondent pointed to tariffs as driving inflation expectations; The economy was still in solid position; Despite uncertainties, Inflation had come down a great deal; Avoiding persistent inflation would depend on the size and timing of tariffs, and inflation expectations The labor market was at or near maximum employment.

- US Mar Consumer Credit: $10.2B v $9.4Be.

- Brazil Central Bank (BCB) raised Selic Target Rate by 50bps to 14.75% (as expected) for its 6th straight rate hike in the current tightening cycle.

- Trump Administration said to be prepared to report trade deal with the UK (**Note: Markets to focus on the form the trade deal would take. Market would view the most significant factor being the 10% “reciprocal” tariffs. If they were removed it suggested a de-escalation in trade tensions and is a market friendly signal that would likely spur hopes others would get the same deal.

- Pres Trump: In response to tariff exemptions, "Doesn't know, will take a look; Not looking for so many tariff exemptions; Not open to pulling back on 145% China tariffs.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.47% at 535.96, FTSE +0.17% at 8,574.00, DAX +0.92% at 23,330.50, CAC-40 +0.77% at 7,685.49, IBEX-35 -0.25% at 13,446.19, FTSE MIB +0.69% at 38,586.00, SMI +0.09% at 12,114.00, S&P 500 Futures +0.89%].

Market Focal Points/Key Themes: European indices opened generally higher and advanced through the early part of the session; positive developments on trade seen lifting risk appetite; Spanish IBEX dragged after Endesa, Prosegur earnings; among sectors leading the way higher are technology and industrials; lagging sectors include utilities and health care; focus on BOE rate decision and expected trade agreement announcement by White House; earnings expected in the upcoming US session include Alice, ConocoPhillips, UPS and Ford.

Equities

- Consumer discretionary: Puma [PUM.DE] +4.0% (results), Flutter Entertainment [FLTR.UK] -2.0% (earnings) - Consumer staples: AB Inbev [ABI.BE] +3.5% (results) - Energy: Siemens Energy [ENR.DE] +3.5% (earnings) - Financials: Banco Sabadell [SAB.ES] +2.5% (results).

- Industrials: Aston Martin Lagonda Global Holdings [AML.UK] +7.5% (optimism around UK-US trade deal), Maersk [MAERSKB.DK] -2.0% (results; does not see Red Sea to reopen this year), Rheinmetall [RHM.DE] +1.5% (results) - Technology: Infineon [IFX.DE] +3.0% (results; Trump to change Biden-proposed AI chip curbs).

Speakers

- Sweden Central Bank Policy Statement noted that its economic outlook appeared to be slightly weaker that Mar Staff Projections. Saw slight easing of monetary policy going forward but wise to await further information to obtain a clearer picture of outlook.

- Sweden Central Bank (Riksbank) Gov Thedeen post rate decision press conference noted that uncertainty made the outlook slightly weaker. Stronger SEK currency was welcomed from an inflation perspective.

- Norway Central Bank Policy Statement noted that a restrictive policy was still needed to bring inflation down to target. Reiterated forward guidance that rate would 'most likely' be cut in 2025. Trade barriers had become more extensive, and there was uncertainty about future trade policies. The Committee gave special attention to the fact that this might pull the interest rate outlook in different directions.

- Russia Pres Putin stated that to sign new treaty with China today; Trade had reached new high with China but not a ceiling.

- Malaysia Central Bank Policy Statement noted that growth to be anchored by resilient domestic demand; balance of risks to the downside. Inflation to be manageable in 2025. Escalation in trade tensions and heightened global policy uncertainties would weigh on the external sector. MYR currency (ringgit) performance would continue to be primarily driven by external factors.

- China Commerce Ministry (MOFCOM) stated that the US cancellation of De Minimis exception hurt consumers. Reiterated stance that opposed US abuse of tariffs and it needed to be prepared to revoke unilateral tariffs.

- China President Xi stated that to continue to deepen political mutual trust and strategic cooperation with Russia.

Currencies/fixed income

- Session saw a flurry of central bank announcements await including Malaysia, Sweden, Norway which all kept their policy steady (as expected). Focus now turning to the BoE which was expected to cut the Bank Rate by 25bps.

- USD was firmer in the session as optimism for a US-U.K. trade framework agreement grew. Greenback also aided by Fed view that it was not in a rush to cut rates

- EUR/USD staying beow the 1.13 for the session and at 1.1293 by mid-session.

- GBP/USD at 1.3280 with focus on BOE.

- USD/JPY at 144.60.

- 10-year German Bund yield at 2.49% and 10-year Gilt yield at 4.44%. 10-year Treasury yield at 4.30%.

Economic data

- (NL) Netherlands Mar Consumer Spending Y/Y: 0.9% v 2.2% prior.

- (DE) Germany Mar Industrial Production M/M: 3.0% v 1.0%e; Y/Y: -0.2% v -2.7%e.

- (DE) Germany Mar Trade Balance: €21.1B v €19.1Be; Exports M/M: 1.1% v 1.0%e; Imports M/M: 1.4% v 0.4%e.

- SE) Sweden Apr Budget Balance (SEK): -42.2B v -4.6B prior.

- (NO) Norway Mar Industrial Production M/M: -0.3% v 1.4% prior; Y/Y: -3.2% v -0.1% p.

- (NO) Norway Mar Manufacturing Production M/M: 0.0% v 1.3% prior; Y/Y: 0.1% v 6.0% prior.

- (DK) Denmark Mar Industrial Production M/M: -3.2% v +3.7% prior.

- (ZA) South Africa Apr Net Reserves: $64.3B v $63.2B prior; Gross Reserves: $67.6B v $67.5B prior.

- (HU) Hungary Mar Industrial Production M/M: 0.1% v 0.4%e; Y/Y: -5.4% v -5.0%e.

- (ES) Spain Mar Industrial Production M/M: 0.9% v 0.1%e; Y/Y: +1.0% v -1.9% prior; Industrial Output NSA (unadj) Y/Y: +8.5% v -2.4% prior.

- (MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 3.00% (as expected).

- (MY) Malaysia end-Apr Foreign Reserves: $118.7B v $118.4B prior.

- (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 2.25% (as expected).

- (NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.50% (as expected).

- (TW) Taiwan Apr Trade Balance: $7.2B v $6.7Be; Exports Y/Y: 29.9% v 16.0%e; Imports Y/Y: 33.0% v 18.9%e.

- (HK) Hong Kong Apr Foreign Reserves: $408.7B v $413.1B prior.

- (IS) Iceland Apr Preliminary Trade Balance (ISK): -53.5BB v -38.6B prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €B vs. €5.5-6.5B indicated n 2028, 2030 and 2054 SPGB bonds.

- Sold €2.257B in 2.4% May 2028 SPGB bonds; Avg Yield: 2.086% v 2.292% prior; bid-to-cover: 1.741.74x v 1.32x prior.

- Sold €2.277B in 2.70% Jan 2030 SPGB bonds; Avg Yield: 2.375% v 2.682% prior; bid-to-cover: 1.781.78x v 1.90x prior ).

- Sold €1.632B in 4.00% Oct 2054 SPGB bonds; Avg Yield: 3.974% v 3.691% prior ; bid-to-cover: 1.641.64x v 1.84x prior.

- (ES) Spain Debt Agency (Tesoro) sold €672M vs. €250-750M indicated range in 1.0% Nov 2030 inflation-linked bonds (SPGBei) Real Yield: 0.721% v 0.700% prior; Bid-to-cover: 2.16x v 2.98x prior.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

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

- 06:00 (IE) Ireland Apr CPI M/M: No est v 0.7% prior; Y/Y: No est v 2.0% prior.

- 06:00 (IE) Ireland Apr CPI EU Harmonized M/M: No est v 0.7% prior; Y/Y: No est v 1.8% prior.

- 06:00 (IL) Israel Mar Chain Store Sales M/M: No est v 1.1% prior.

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

- 06:00 (RON) Romania to sell RON400M in 7.1% July 2034 bonds.

- 06:00 (RON) Romania to sell RON500M in 12-month bills.

- 07:00 (ZA) South Africa Mar Manufacturing Production M/M: 0.4%e v 0.3% prior; Y/Y: +1.1%e v -3.2% prior.

- 07:00 (BR) Brazil Apr FGV Inflation IGP-DI M/M: +0.4%e v -0.5% prior; Y/Y: 8.2%e v 8.6% prior.

- 07:02 (UK) Bank of England (BOE) Interest Rate Decision: Expected to cut Bank Rate by 25bps to 4.25%.

- 07:02 (UK) Bank of England (BOE) May Minutes.

- 07:02 (UK) Bank of England (BOE) Monetary Policy Report (Staff Projections).

- 07:30 (UK) BOE Gov Bailey post rate decision press conference.

- 08:00 (CL) Chile Apr CPI M/M: 0.3%e v 0.5% prior; Y/Y: 4.6%e v 4.9% prior.

- 08:00 (MX) Mexico Apr CPI M/M: 0.3%e v 0.3% prior; Y/Y: 3.9%e v 3.8% prior.

- 08:00 (MX) Mexico Apr CPI Core M/M: 0.5%e v 0.4% prior; Y/Y: 3.5%e v 3.6% prior.

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

- 08:30 (US) Q1 Preliminary Nonfarm Productivity: -0.8%e v +1.5% prior; Unit Labor Costs: 5.1%e v 2.2% prior.

- 08:30 (US) Initial Jobless Claims: 230Ke v 241K prior; Continuing Claims: 1.90Me v 1.916M prior.

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

- 09:00 (UK) Bank of England (BOE) Decision Maker Panel (DMP) Apr Survey: 3-month ahead CPI: 4.0%e v 3.9% prior; 1-year ahead CPI: 3.5%e v 3.4% prior.

- 10:00 (US) Mar Final Wholesale Inventories M/M: 0.5%e v 0.5% prelim; Wholesale Trade Sales M/M: 0.9%e v 2.4% prior.

- 10:00 (US) President Trump on Trade framework deal with UK.

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

- 10:30 (TR) Turkey Apr Cash Budget Balance (TRY): No est v -397.6B prior.

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

- 12:00 (CA) Canada to sell 5-year Bonds.

- 13:00 (US) Treasury to sell 30-year Bonds.

- 15:00 (AR) Argentina Mar Industrial Production Y/Y: 11.0%e v 5.6% prior; Construction Activity Y/Y: No est v 3.7% prior.

- 19:00 (KR) South Korea Mar Current Account Balance: No est v $7.2B prior; Balance of Goods (BOP): No est v $8.2B prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest rate decisions: Expected to leave Reference Rate unchanged at 4.75%.

- 19:00 (CO) Colombia Apr CPI M/M: 0.5%e v 0.5% prior; Y/Y: 5.0%e v 5.1% prior.

- 19:00 (CO) Colombia Apr CPI Core M/M: 0.4%e v 0.5% prior; Y/Y: 5.1%e v 5.2% prior.

- 19:30 (JP) Japan Mar Household Spending Y/Y: +0.2%e v -0.5% prior.

- 19:30 (JP) Japan Mar Labor Cash Earnings Y/Y: 2.5%e v 2.7% prior (revised from 3.1%); Real Cash Earnings Y/Y: -1.6%e v -1.5% prior (revised from-1.2 %); Cash Earnings - Same Sample Base Y/Y:2.7%e v 2.4% prior (revised from 2.4%); Scheduled Full-Time Pay - Same Base Y/Y: 2.2%e v 2.0% prior (revised from 1.9%).

- 23:00 (ID) Indonesia Apr Consumer Confidence: No est v 121.1 prior.

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

**TTN Chart of The Day: