LNG: China’s 2025 LNG Imports Seen Falling 22%: OilChem

SONIA futures have come under some pressure over the last ~40 minutes, now underperforming Euribor and SOFR counterparts on the session. We haven’t seen a clear headline trigger for the weakness, which may instead represent a delayed assessment of Chief Economist Pill’s remarks earlier this morning (see above for our thoughts).

• Yesterday’s low of 96.220 has contained downside in SFI Z5 today, with the contract now -2.0 ticks at 96.225.
• That sees the Sonia/Euribor Z5 spread pierce 200bps for the first time since April 22, and before that April 3.
• MNI's preview of tomorrow's April UK inflation print will be released in due course.
• Eurozone headline and data flow has been relatively light. The hawkish-leaning Knot did not rule out a June ECB cut, but needs to see the June macroeconomic projections before making a decision.
• It’s likely that the ECB will revise its GDP and inflation projections lower relative to March, even after the recent reduction in US/China tariff rates.
• A reminder that the ECB’s March projections saw headline inflation at 2.3% in 2025 and 1.9% in 2026. In its Spring forecasts released yesterday, the EC projected 2025 inflation at 2.1% and 2026 at 1.7%. That provides an initial indication of where the ECB’s June forecasts might end up, assuming broadly similar methodologies across the EC and national central banks/the ECB.

• The most interesting thing Pill said was that he thought there should be cuts - but that quarterly of 25bp were too fast, particularly since the first cut was delievered earlier than he would have preferred.
• He stated that 15bp per quarter wasn't something the MPC really considered but made it sound as though if there weren't any limitations, that would be more in line with view. (He's not likely to start voting for cuts that are a smaller size - he doesn't see the need for that, but with 25bp being too fast her used it as an illustration).
• Given that to some extent it sound as though Pill is looking at cumulative cuts, the bar is probably relatively high to him voting for a 25bp cut in August - higher than we probably thought ahead of today's speech.
• If he thought a skip was justified in May and wasn't delivered and he is looking cumulatively, then he'd presumably think that unless things get a lot worse that the skip that wasn't delivered in May would still be justified in August. And a vote for a cut from him in June wasn't even a remote possibility.
• What will change his view? No inidividual data point by the sounds of it, he'd need more confidence that there isn't a structural change to inflation persistence and that wages wouldn't surprise to the upside again (like they have in the past with BOE forecasts).

Reuters reporting comments from Finance Minister Lars Klingbeil, who has been speaking on a number of topics. On the aims of the 'grand coalition' gov't, Klingbeil says, "We have a historical responsibility as a coalition to improve economic conditions...We need to invest in the future, but also consolidate our finances for the future." Klingbeil claims the "coalition has shown that it can reach agreements...I am sure this gov't will build bridges at the centre [of the political spectrum]."

• On US-EU relations, Klingbeil adds, "US tariffs are threatening German jobs [and] EU negotiations must continue [in order] to find a solution." Says that, at present, "I do not see the need for common EU borrowing at the moment."
• Klingbeil, the Finance Minister and Vice Chancellor, is running for re-election as co-chair of the centre-left Social Democrats (SPD), the junior partner in the gov't. The party's federal congress takes place from 27-29 June. Labour Minister Bärbel Bas has indicated her intention to run to replace outgoing co-chair Saskia Esken.
• Hailing from the party's right, Klingbeil, who spearheaded the SPD negotiating team during talks with Chancellor Friedrich Merz's conservative Christian Democratic Union, ensured the appointment of several leftist figures from within the party to ministerial posts in order to solidify his leadership position.
• Klingbeil has talked recently that the SPD has lost its historical position as the party of organised labour and the working classes, and has called for a 'sharpening' of its image.