Newsquawk European Market Wrap - 14th May 2025

• European indices mixed, DXY hit and made a fresh WTD low, Crude falls on constructive Trump-Syrian remarks


• PBoC says China and EU had in-depth exchanges on global economic uncertainties; countries discussed optimising market access


• "There has been no progress in the talks being held by US envoy Witkoff in Doha on the hostage deal. An Israeli official told me that Netanyahu has so far shown “zero flexibility” when it comes to changes to the Witkoff outline", via Ravid on X.

TRADE

• 
  PBoC says China and EU had in-depth exchanges on global economic uncertainties; countries discussed optimising market access.


• 
  USTR Greer arrives in South Korea ahead of APEC Ministers meeting, via YTN.


• 
  US-China trade ceasefire is to drive early Black Friday and Christmas stockpiling with ports and shipping companies expecting a surge in demand as retailers take advantage of lower tariffs on Chinese imports, according to the FT.


• 
  China criticised a trade deal between the UK and US that could be used to squeeze Chinese products out of British supply chains, according to the FT.

EQUITIES

• 
  European bourses opened modestly mixed and on either side of the unchanged mark, before dipping into the red as the risk tone deteriorated in early morning trade. Into the afternoon, sentiment once again improved to display a mixed picture in Europe.


• 
  European sectors opened mixed but looked to close the European session around flat. Construction & Materials took the top spot, whilst Consumer Products underperformed. In terms of stock specifics, Burberry (+18%, better-than-expected results, with China figures also topping expectations; the Co. also said its cost-saving measures may lead to job cuts of around 1,700 people), Alstom (-16.2%, sees softer cash flow after reporting a beat on its Q1 results.), ABN AMRO (+4.5%, better-than-expected Net Profit, whilst other figures were in-line).


• 
  US equity futures are mixed with the ES/NQ in modest positive territory, whilst the RTY is slightly lower. As for key movers; Tesla (+2.3%, Board has formed a special two-person committee to consider a new stock option package for Musk), Novartis (+2%, To collab on oral small molecular modules w/ deal worth up to USD 2.2bln for Septerna, now +60%).


• 
  Barclays raises its 2025 year-end price target for STOXX 600 to 540 (prev. 490, currently 545.09).


• 
  Barclays European Equity Strategy downgrades Consumer Staples to Underweight; upgrades Consumer Discretionary to Market Weight (prev. Underweight).


• 
  Goldman Sachs lifts its Stoxx 600 target for the next 12-months to 570 (prev. 520).


• China's market regulator holds a meeting on supporting individual business owners.

FX

• 
  The Dollar is seemingly still on sale, following the upside seen following the US-China trade announcement on Monday. Early morning action saw the index dip to a fresh WTD trough of 100.27, but looked to close the European session around the midpoint of a 100.27-101.02 range.


• Fresh fundamental updates have been lacking today; to recap overnight reporting, White House Economic Adviser Hassett suggested that more than 20-25 deals are on the table and President Trump will announce them when he returns. Do note some have been pointing towards a meeting between Minister Choi and Kaproth of the US Treasury, who discussed FX.
  


• On Fed speak; Goolsbee reiterated the Fed’s wait-and-see approach. Jefferson's comments largely reiterated that of Chair Powell. Interestingly he did suggest that Q1 GDP data overstated deceleration in activity.


• The EUR and GBP both benefited from the broader Dollar weakness; the Single Currency made a fresh WTD high at 1.1265, but cooled off best levels as the session progressed. ECB’s Nagel spoke today, but overall just highlighted the uncertain environment. As for Cable, it traded within a 1.3292-1.3360 range. Unsurprisingly hawkish remarks from Mann had little impact on the pair; Breeden’s text release focused on supervision.


• 
  The JPY was the G10 outperformer today, largely thanks to softer US yields in early morning trade. Into the afternoon, the Dollar reclaimed some of its earlier downside and as such the USD/JPY clambered off a 145.62 low to a current 146.22.


• The Antipodeans were initially firmer vs the Dollar, benefitting from its broader weakness. Though the Aussie and Kiwi gave back those earlier gains, and are now the worst G10 performers.


• PBoC set USD/CNY mid-point at 7.1956 vs exp. 7.1813 (Prev. 7.1991).

FIXED

• Initially a fairly contained session for benchmarks which began once again with divergence between USTs and EGBs/Gilts.


• 
  USTs a touch firmer but in reality trading little better than flat in very narrow parameters. At this point, Bunds and Gilts in the red with Gilts lagging but again the action relatively modest overall, limited drivers behind this aside from the morning’s supply docket.


• Additionally, Gilt underperformance was perhaps explained by remarks from BoE’s Mann, though she was her usual activist/hawk self and didn’t add anything new. We also had Breeden, but she stayed clear of monetary policy.


• Thereafter, supply hit from Germany and the UK, both outings were well received and seemingly allowed benchmarks to pick up a touch, bringing Bunds briefly/modestly into the green. Gilts also lifted off lows but failed to breach the breakeven mark. At best, got as high as 129.68 and 91.67 respectively.


• Since, as the risk tone inches higher and newsflow slows once again, benchmarks have returned to their earlier negative bias and USTs are now following suit, to a 110-00 low with losses of a tick or two into Fed’s Daly after Waller and Jefferson added little.


• Bunds and Gilts set to end the day with downside of 15 and 56 ticks, Bunds just off a 129.41 worst while Gilts are back to their 91.10 base which is another new WTD trough.


• 
  UK sells GBP 4.25bln 4.50% 2035 Gilt: b/c 3.13x (prev. 2.85x), average yield 4.673% (prev. 4.638%) & tail 0.3bps (prev. 0.4bps).


• 
  Germany sells EUR 1.313bln vs exp. EUR 1.5bln 1.25% 2048 Bund and EUR 0.818 vs exp. EUR 1bln 2.50% 2054 Bund.

COMMODITIES

• 
  The crude complex is set to finish the European session lower by some USD 0.30/bbl but clear of the morning's lows by around double that. In terms of the pressure, there are a number of factors, including US President Trump’s constructive rhetoric on the Middle East & profit taking after yesterday’s rally, influencing and outmuscling any potential readacross from the softer dollar.


• Towards the US cash equity open, Crude saw a bout of support, which has lifted it to pre-Trump/Syria levels, potentially spurred by reports that there has not been any progress in the talks being held by US envoy Witkoff in Doha.- Spot Gold, like Crude, failed to benefit from the weaker dollar. In recent trade, the yellow metal has added to losses, now trading at session lows of USD 3175/oz, action that occurs without a clear/fresh fundamental driver behind it and has only taken the benchmark marginally beneath Tuesday's parameters.


• 
  Copper traded firmer, currently at session highs as base metals broadly benefited from Dollar weakness. 3M LME Copper is currently in a USD 9,562.6-9,661/t range.


• Kazakhstan's oil output fell 3% in April from March to 1.82mln BPD, remaining above the OPEC+ quota, according to Reuters calculations.


• Libya's Sirte Oil Company says it suspends land transportation to Western region due to to deteriorating security conditions.


• 
  OPEC MOMR: 2025 & 2026 global oil demand forecasts maintained at 1.3mln BPD, supply forecasts cut to 0.8mln BPD (prev. 0.9mln BPD)

EUROPEAN DATA

• German and Spanish Final Inflation metrics were unrevised.

NOTABLE EUROPEAN HEADLINES

• 
  ECB supervisors step up checks on banks' dollar funding on Trump concerns, according to Reuters sources; some of EU's largest banks assessing unprecedented scenarios of Fed not providing dollars.


• 
  BoE's Mann says the UK labour market has been more resilient than expected. Worried that household inflation expectations have increased. Need to see a loss of pricing power by firms, however, goods price inflation is increasing. Trade aversion will result in lower global good prices. Firms will look for the opportunity to rebuild their margins. "Dollar is still king".


• 
  BoE's Breeden: "A macro-prudential approach to the supervision of CCPs is essential given their central role in the financial system".


• 
  ECB's Nagel says there is a good probability the inflation target will be maintained; current uncertainty will be the new "normal", central banks have to get used to manage it Very supportive of the new (German) fiscal debt brake, however, it is clear that Germany will need to return to fiscal rules in the future. USD is very important, but the EUR's role will become stronger as a reserve currency in the next few years.


• 
  Hapag Lloyd (HLAG GY) CEO says they have seen an increase in orders for China-US shipments by more than 50% W/W; demand is considerably higher compared with the time before US tariffs.

GEOPOLITICS

MIDDLE EAST

• 
  "There has been no progress in the talks being held by US envoy Witkoff in Doha on the hostage deal. An Israeli official told me that Netanyahu has so far shown “zero flexibility” when it comes to changes to the Witkoff outline.", via Ravid on X.


• 
  Iranian Foreign Ministry spokesman said they have made it clear that no agreement will be reached with the US without concrete guarantees, according to Iran International. It was also reported that Iran is to hold talks with European parties on Friday in Istanbul, according to European and Iranian sources cited by Reuters.


• 
  Israel's military said it identified the launch of a missile towards Israeli territory from Yemen which was intercepted.


• 
  Jordanian army said a rocket of unknown origin landed in a desert area in the Ma'an, according to a source via X.


• 
  US President Trump says the US wants to do a deal with Iran. Reiterates that Iran cannot have a nuclear weapon. Lifting sanctions on Syria. Exploring normalising relations with them. Wants a peaceful and prosperous Middle East. Special relationship with Saudi Arabia.


• Syria's President told US President Trump that they are inviting US firms to invest in Syria's oil and gas sector.


• 
  US President Trump says his trip to the Middle East does not sideline Israel "Think it's very good for Israel"; says his meeting with Syria's President Sharaa was "great".

RUSSIA-UKRAINE

• 
  US President Trump says maybe news on Russia/Ukraine happening today.


• US President Trump says he does not know whether Russian President Putin will attend Ukraine peace talks Are always considering secondary sanctions on Russia.


• 
  Senior Russian Lawmaker says the makeup of the Russian delegation to Istanbul for the Ukraine talks will be known on Wednesday evening, via Telegram.


• 
  Ukraine will decide on the next steps for talks in Turkey once there is clarity on whether Russian President Putin will attend, via Reuters citing sources.

NOTABLE NORTH AMERICAN NEWS

• JPM on PCE: Based on the latest CPI report, tracking 0.22% rise in Core PCE for April. Which would hold the annual core rate at 2.6%.


• 
  Fed's Goolsbee (2025 Voter) says some part of April inflation represents the lagged nature of data and the Fed is still holding its breath. It will take time for current inflation trends to show up in data. Right now is a time for the Fed to wait for more information and try get past the noise in the data. Cannot jump to conclusions about long-term trends given all the short term volatility.


• 
  Fed's Jefferson (voter) says current moderately restrictive policy rate in a good place to respond to economic developments; Q1 GDP data overstated deceleration in activity Recent inflation data consistent with further progress toward 2% goal, but future path uncertain due to tariffs. Watching closely for signs in hard data of weaker activity. Tariffs could lead to higher inflation, still uncertain if impact would be temporary or persistent. Expect lower growth due to trade policy but expect economy to still expand over the year. Labour market still solid. Whether tariffs create persistent inflation depends on implementation, response of supply chains, and other factors.


• US House Speaker Johnson said the GOP will likely reach a deal on the state and local taxes cap on Wednesday.

14 May 2025 - 15:01- EquitiesData- Source: Newsquawk