Newsquawk European Market Wrap - 13th May 2025

• White House Executive Order said US will cut the minimum tariff on China shipments from 120% to 54%, and a minimum flat fee of USD 100 is to remain.


• Bloomberg reporting suggests China is to lift its ban on Boeing deliveries after the US-China tariff pause.


• Headline US CPI printed a little below expectations; Core M/M also cooler whilst Y/Y was in-line. Initial knee-jerk higher in stocks & pressure in DXY proved fleeting.

TRADE

• White House Executive Order said US will cut the minimum tariff on China shipments from 120% to 54%, and a minimum flat fee of USD 100 is to remain.


• 
  China removes ban on Boeing (BA) deliveries after US trade truce, via Bloomberg.


• China's Foreign Ministry, on US fentanyl tariffs, says China has repeatedly said it is a US issue. US is ignoring China's good will. Responsibility lies with the US.


• 
  USTR Greer says will talk to Indian commerce minister Tuesday, then flying to South Korea, via CNBC interview. They're moving quickly as they can on trade deals.

EQUITIES

• 
  European bourses were mostly, but modestly firmer as markets cool a touch from the significant upside seen in the prior session. Price action was relatively rangebound and sideways throughout the session, and was little moved following the US CPI data.


• To recap the inflation data, headline US CPI printed a little below expectations; Core M/M also cooler whilst Y/Y was in-line. Fleeting upside in stocks were seen on the data, whilst Fed pricing was little changed. Pantheon Macro writes that price rises driven by tariffs was offset by weakness in services prices in April; analysts write that "today’s CPI data imply that the core PCE deflator increased by 0.11%, reducing the inflation rate to 2.5%, from 2.6% in March" - focus now turns to PPI for a better estimation.


• 
  European sectors held a slight positive bias, but with the breadth of the market fairly narrow. Retail outperformed, followed closely by Autos and then Travel & Leisure to complete the top three. Insurance was hit by post-earning losses in both Hannover Re (-4.2%) and Munich Re (-4.6%).


• 
  US equity futures are mixed and trading on either side of the unchanged mark; there was a knee-jerk higher following the US inflation data but this proved fleeting - however, upside has since resumed. In terms of key movers, Coinbase (+9%, Will replace DFS in the S&P 500 BMO on May 19th), Boeing (+1%, China lifted its month-long ban on BA aircraft deliveries), United Health (-8%, Announces leadership transition; suspends 2025 outlook as medical expenditures exp. to be higher than anticipated).


• BlackRock (BLK) CEO said it still sees global investors overweighting the US; adds that US deficits are still an issue.

FX

• 
  DXY - DXY gave back some of yesterday's trade-induced gains following Monday's rally from a 100.50 base to a peak at 101.97, finding resistance around its 50 DMA (at 101.94 yesterday) and stopping shy of the 102 mark. Further, some punchier rhetoric was released from China this morning in which China's Foreign Ministry, on US fentanyl tariffs, said China has repeatedly stated it is a US issue, adding that the US is ignoring China's goodwill, and the responsibility lies with the US. On the data front, US headline CPI Y/Y and M/M, alongside Core CPI M/M printed sub-forecasts, whilst the Core Y/Y printed in-line; but nonetheless dragged DXY to fresh intraday lows of 101.32 (vs high 101.73). Fed pricing was hardly changed after the US CPI.


• 
  EUR - Underpinned by the softer Dollar throughout the day, with another boost seen after mostly softer-than-expected US CPI. Little action was seen on ECB commentary in which Makhlouf said given effects of size, scale and more persistent nature of fragmentation-induced shocks, and their impact on prices, monetary policy responses will need careful calibration, meanwhile, ECB's Escriva said they must be humble in assessing the current situation, and ECB's Nagel said they shouldn't overreact to individual announcements. Meanwhile, Reuters sources overnight suggested the ECB strategy review will largely endorse past policies, including QE, despite some policymakers’ criticisms, while the ECB is to keep reference to ‘forceful action’ when rates and inflation are low following the review. No lasting move was seen from the mixed German ZEW survey. EUR/USD found support yesterday near its 50 DMA (at 1.1083 today), with the intraday range currently at 1.1085-1.1147 after yesterday's fall from 1.1242 to 1.1064.


• 
  GBP - Buoyed by the softer Dollar, with FX markets gaining some composure after yesterday's surge in the Buck. UK jobs data this morning did little to shift the dial, with no reaction in GBP seen post-release. Overall, the labour market continues to soften but at a relatively moderate rate. The most interesting part of the series is the slowdown in the level of wage growth, though by less than market consensus and still likely at levels rate setters will see as inconsistent with the inflation target. UK Chancellor Reeves also made an appearance on Bloomberg TV this morning but said little of note. GBP/USD traded in a 1.3166-1.3249 range, still within yesterday's 1.3137-1.3299 parameter.


• 
  JPY - Haven FX clawed back some lost ground as markets take a breather following yesterday's US-China euphoria, and following the aforementioned punchier language from China this morning, coupled with the accompanying uncertainty provided by the 90-day de-escalation. USD/JPY resided towards the bottom of a 147.65-148.48 range, with the 50 DMA seen at 146.27 today. USD/CHF traded well within yesterday's 0.8310-0.8476 parameter with some CHF strength this morning, taking the pair back under 0.8400.


• 
  Antipodeans - High-beta benefited from the broadly softer Dollar despite a more cautious risk tone across the markets and amid the softer-than-expected CPI. AUD/USD traded in a 0.6359-0.6433 range (vs yesterday's 0.6355-0.6460 range) while NZD/USD resides in a 0.5845-0.5916 range (vs yesterday's 0.5845-0.5940 range).


• PBoC set USD/CNY mid-point at 7.1991 vs exp. 7.2188 (Prev. 7.2066).

FIXED

• 
  A much more contained session for benchmarks compared to the action seen on Monday both before and after the US-China announcement.


• Throughout the day there has been some modest divergence between USTs and EGBs/Gilts. USTs are a touch firmer as they pare from the marked pressure seen on Monday and as the yield curve steepens a touch and unwinds some of the upside seen at the short-end of the curve on Monday.


• Amidst this, USTs have lifted from Monday’s 110-02 base by around 10 ticks. For USTs, the main update was April’s inflation release where CPI came in cooler-than-expected and lifted the benchmark to 110-15+ peak before paring a touch.


• For PCE, Pantheon first out of the gate with their forecast and looking for a 0.11% core level from the 0.03% previously. While a pick-up, this figure would still be welcome by the Fed, particularly as the CPI release shows some signs of price pressures from tariffs; pressure is expected to be offset in PCE by declines in air travel.


• 
  Gilts opened under modest pressure following the morning’s employment release, hitting a new low for the week at 91.50. Data, in summary, showed that the labour market continues to cool but at a gradual pace with the rate of wage growth slowing but still at a level that the MPC is unlikely to regard as being consistent with the inflation target (recall recent commentary from Lombardelli). Modest hawkish reaction seen in pricing following this.


• 
  Bunds caught between the two, in the red and at a fresh 129.43 low for the week but faring better than Gilts. No reaction to supply this morning from Italy and Germany, outings which were a touch tepid, or a handful of ECB speakers.


• 
  Reuters poll: US 10yr Treasury yield to fall to 4.26% in three months (prev. 4.21% in April), 4.27% in six (prev. 4.20%), and 4.25% in a year (prev. 4.14%); 19/35 bond strategists said they were concerned about safe-haven status of US Treasuries 19/33 said they were recession risk to have bigger impact on US 10yr yields than higher inflation.


• Netherlands sells EUR 1.98bln vs exp. EUR 1.0-2.0bln 2.00% 2054 DSL: average yield 3.228%.


• UK sells GBP 1bln 0.625% 2045 I/L Gilt: b/c 3.19x (prev. 3.48x) & real yield 2.23% (prev. 1.732%).


• Italy sells EUR 7.5bln vs exp. EUR 6.0-7.50bln 2.65% 2028, 3.25% 2032 & 4.45% 2043 BTP.


• Germany sells EUR 3.401bln vs exp. EUR 4.5bln 1.70% 2027 Schatz: b/c 2.2x (prev. 1.7x), average yield 1.94% (prev. 1.67%), retention 24.42% (prev. 23.72%).

COMMODITIES

• 
  Crude Futures - Edged higher before the US open, albeit gradually, ahead of Ukraine and Russia meeting in Turkey on Thursday, along with the US-Saudi Investment Forum. It is not yet known if Russian President Putin will be in attendance, although reports earlier suggested Russia's Kremlin says its delegation is preparing for talks in Turkey, but declined further comment on the proposal from Ukrainian President Zelensky for Russian President Putin to attend the talks. Before that, a Senior Kyiv official said Zelensky would meet Russian President Putin, and not other members of the Russian delegation, on Thursday in Turkey. On today’s docket, Trump will be speaking at the Saudi Investment Forum at 15:00 BST. We are also expecting the weekly private stocks data. Softer-than-expected US CPI today provided no notable move in crude benchmarks.


• 
  Precious Metals - Spot gold eked out mild gains and benefited from the weak dollar, as well as a reversal of yesterday’s dismal performance in the haven space. US CPI offered no major move for the yellow metal. Specifically, in terms of price action, the yellow metal sits between its relatively narrow USD 3,215.85-3,265.78/oz range, and at the time of writing, is trading on either side of the USD 3,250/oz mark.


• 
  Base Metals - Base metals were broadly in the green, having seen sideways trade overnight after retreating yesterday despite the positive tariff developments, with prices subdued by recent dollar strength. Copper benefited from the softer dollar and resides in the middle of its USD 9,488.3-9,572.45/t range, after a pullback from highs at 09:00 BST, where it tested resistance at USD 9,575/t.


• 
  Saudi Aramco CEO says "we are signing MOUs today that will avail about 6.2 million tons of LNG" "Will be investing more to expand its LNG projects in the U.S. with a target to reach 7.5 million tonnes by 2030." Will sign an agreement to put USD 3.4bln into expanding refineries in the US.


• 
  China crude oil supply to China set to hold steady at around 47.5mln barrels in June, via Reuters citing sources.

EUROPEAN DATA

• 
  UK ILO Unemployment Rate (Mar) 4.5% vs. Exp. 4.5% (Prev. 4.4%); Employment Change (Mar) 112k vs. Exp. 120k (Prev. 206k)


• 
  UK Claimant Count Unem Chng (Apr) 5.2k (Prev. 18.7k, Rev. -16.9k); UK HMRC Payrolls Change (Apr) -33k (Prev. -78k, Rev. -47k)


• 
  UK Avg Wk Earnings 3M YY (Mar) 5.5% vs. Exp. 5.2% (Prev. 5.6%, Rev. 5.7%); Ex-Bonus (Mar) 5.6% vs. Exp. 5.7% (Prev. 5.9%)


• 
  UK BRC Retail Sales YY (Apr) 6.8% (Prev. 0.9%); Total Retail Sales 7.0% (Prev. 1.1%)


• 
  EU ZEW Survey Expectations (May) 11.6 (Prev. -18.5)


• 
  German ZEW Economic Sentiment (May) 25.2 vs. Exp. 11.9 (Prev. -14.0); ZEW Current Conditions (May) -82.0 vs. Exp. -77.0 (Prev. -81.2)

NOTABLE EUROPEAN HEADLINES

• 
  Barclaycard UK April Consumer Spending rose 4.5% Y/Y, which was the biggest increase since June 2023.


• 
  ECB strategy review will largely endorse past policies, including QE, despite some policymakers’ criticisms, while the ECB is to keep reference to ‘forceful action’ when rates and inflation are low following the review, according to sources cited by Reuters.


• 
  ECB's Makhlouf says given effects of size, scale and more persistent nature of fragmentation-induced shocks, and their impact on prices, monetary policy responses will need careful calibration.


• 
  BoE's Chief Economist Pill says should not assume that latest MPR forecasts is a direct endorsement of market interest rate curve; worried about potential risks to inflation He does see risk of second round effects. Remain concerned that they've seen a structural change in price and wage setting within the UK. The response of monetary policy to ensure they get inflation back to target may need to be more persistent.


• Goldman Sachs expects ECB to reach terminal rate of 1.75% in July this year (prev. 1.5% in September)


• 
  German Chancellor Merz says "I am sceptical towards financing instruments financed through debt in EU".


• 
  Goldman Sachs lifts UK's growth forecast and expects cumulative real GDP growth of 0.6% for Q2 to Q4 vs. prev. forecast of 0.4%.

GEOPOLITICS

• 
  Ukrainian President Zelensky says he expects a possible ceasefire agreement as the "number one" result of talks in Turkey US President Trump yet to confirm attendance, he has been invited. Signals of support from China on a 30-day ceasefire. A failed meeting would show that Russia is not ready for a ceasefire.


• Senior Kyiv Official says Ukrainian President Zelensky will meet Russian President Putin, and not other members of the Russian delegation on Thursday in Turkey.


• 
  Russia's Kremlin says its delegation is preparing for talks in Turkey; declines further comment on proposal from Ukrainian President Zelensky for Russian President Putin to attend the talks.


• 
  Russian Deputy Foreign Minister Ryabkov says they are ready to negotiate responsibly but doubt Ukraine's capacity for discussions, via Ria.

NOTABLE NORTH AMERICAN NEWS

• Morgan Stanley sees April core PCE at 0.23% M/M & 2.59% Y/Y


• Following US CPI, Pantheon Macroeconomics are tracking a 0.11% increase in the core PCE deflator.


• 
  WSJ's Timiraos posted that Goldman Sachs shifted the timing of its next expected Fed cut to December from July, while it stated "In light of these developments and the meaningful easing in financial conditions over the last month, we are raising our 2025 growth forecast by 0.5pp to 1% Q4/Q4 and reducing our 12-month recession odds to 35%" and "lowered our core PCE inflation path to peak at 3.6% (vs. 3.8% previously)".


• Barclays expects Fed rate cut in December (prev. saw July).


• JPMorgan says US recession risk is now below 50% and now sees Fed rate cut in December (prev. saw September).


• 
  Goldman Sachs raised 2025 China GDP growth forecast to 4.6% (prev. 4%) after the US agreed to a larger-than-expected tariff cut Although, this is still below Beijing's 5% target. For 2026, Goldman now expects 3.8% growth (prev. 3.5%). It also no longer sees a 5% export decline this year, expecting exports to stay flat.


• 
  BofA Fund Manager Survey (pre-US/China trade update): Global fund managers most underweight US dollars in May since 2006 61% of fund managers see soft landing for the economy versus 37% in April; 26% see hard landing, down from 49% in April. Prior to US/China Geneva talks, fund managers saw US tariffs on China goods at 37%. "Positive US-China trade war ceasefire prevents recession/credit event".


• "The Suez Canal Authority today announced a 15pc reduction in transit fees for container ships with a net tonnage of 130,000 tons or more - whether loaded or empty - starting from 15 May for 90 days.", via Bachar El-Halabi.

TRUMP-SAUDI

• 
  US hopes to strike deals on minerals and chips during President Trump's Middle East trip, according to the Washington Post US is negotiating AI chip exports to UAE’s G42 and Saudi Arabia’s new AI firm Humain, potentially in partnership with OpenAI. A separate USD 9bln Saudi-US minerals MoU was signed. The moves aim to counter China, but raise concerns about offshoring critical technology to authoritarian states.


• 
  US President Trump says Saudi Arabia is purchasing US military equipment.


• 
  US President Trump and Saudi Crown Prince witness signing of agreements between their two countries - Saudi State TV; signed a strategic economic agreement.

NORTH AMERICAN DATA

• 
  US CPI MM, SA (Apr) 0.2% vs. Exp. 0.3% (Prev. -0.1%); Unrounded 0.221% (prev. -0.05%); CPI YY, NSA (Apr) 2.3% vs. Exp. 2.4% (Prev. 2.4%)


• 
  US Core CPI MM, SA (Apr) 0.2% vs. Exp. 0.3% (Prev. 0.1%); Unrounded 0.237% (prev. 0.057%); Core CPI YY, NSA (Apr) 2.8% vs. Exp. 2.8% (Prev. 2.8%)


• 
  US NFIB Business Optimism Index (Apr) 95.8 (Prev. 97.4)

13 May 2025 - 15:00- MetalsData- Source: Newsquawk