CHINA-EU: Foreign Min-EU Needs To Readjust Attitude, Not China
(MNI) London - Reuters reports comments from a spox from China's Foreign Ministry regarding trade concerns from the EU. Says that China, "hopes the EU can look at bilateral economic and trade relations comprehensively and positively". Says China "hopes the EU can uphold a more positive and practical China policy." Spox says that the EU "needs to reajust its attitude, not China and not China-EU trade relations." Claims that "the EU's public procurement market is far from being fair and open as the EU claims."
- These comments come amid an apparent deterioration in relations between Beijing and Brussels, only two weeks before a high-profile EU-China summit on 24 July. Even the Beijing summit itself signals the cooling of ties, with the second day of the summit focused on business ties cancelled and Premier Li Qiang set to helm the event rather than President Xi Jinping, according to Politico.
- Speaking to the European Parliament on 8 July, Commission President Ursula von der Leyen claimed that “China has an entirely different system, [it has] unique instruments at its disposal to play outside the rules,” that enables it “to flood global markets with subsidized overcapacity — not just to boost its own industries, but to choke international competition.”
- On 6 July, China announced restrictions on the purchase of medical devices made in the EU, in response to Brussels shutting China out of the bidding process for certain gov't contracts for medical devices. This tit-for-tat comes alongside more long-running disputes over EU duties on Chinese-made EVs and Chinese levies on EU spirits.
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BONDS: BTP/Bund spread falls toward 90.00bps
- Continued unwind in Bonds, no new headline as such, the price action in EGBs was and is still BTP led, with interest to tighten the BTP/Bund spread, this is now trading at 90.5bps, and we are getting at levels last seen since 2015.
- Immediate small resistance in Bund is hear at 130.85, and a push all the way back to 131.28 would reverse the US NFP sell off.
STIR: Goldman Look For Steeper EUR Curves, Focus On ERZ5/Z7
Goldman Sachs “continue to like Euribor Z5/Z7 steepeners as near-term risks still point towards cuts, whereas the skew of risks further into 2026/27 will be towards better growth and higher inflation vs. current pricing. This deserves an upward sloping money market curve, and this bearish view on the rates expectation curve should limit the declines in core yields other than the very front-end”.
STIR: Just Over 1x25bp ECB Cut Priced Through Year-end; Tariffs Key To Outlook
ECB-dated OIS continue to price just over one full 25bp cut through year-end, with only 3bps of easing priced through the July decision. Following the more hawkish-than-expected stance at President Lagarde’s press conference last Thursday, the bar to another sequential 25bp cut appears high. However, it’s worth remembering that a lot can change between now and July 24, particularly with tariff reprieve deadlines set to expire in this period.
- The MNI Policy Team’s sources piece last Friday noted that tariffs are pivotal for determining [the ECB’s] next moves in 2025, though one more 25-basis-point cut in either September or December is the base-case scenario.
- Euribor futures are flat to +3.0 ticks through the blues, with a flattening bias seen at the front-end. Volumes may be limited by today’s Whit Monday public holiday in some Eurozone states, alongside and the thin data calendar.
- Weekend ECBspeak saw Nagel and Vujcic note that rates were now in neutral territory (a question Lagarde avoided answering at last Thursday’s press conference). Meanwhile, Escriva remains “very comfortable with gradualism, that is, accompanying improvements in inflation with successive 25-basis-point rate cuts”.
- This week's Eurozone calendar is fairly limited, with most interest probably in Wednesday's ECB wage tracker release. The April vintage saw negotiated wages excluding one-off payments falling to 3.024% by Q4 2024.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Cut Adjusted Effective ESTR Rate (bp) |
| Jul-25 | 1.893 | -3.0 |
| Sep-25 | 1.770 | -15.3 |
| Oct-25 | 1.738 | -18.5 |
| Dec-25 | 1.666 | -25.7 |
| Feb-26 | 1.653 | -27.0 |
| Mar-26 | 1.644 | -27.9 |
| Apr-26 | 1.649 | -27.4 |
| Jun-26 | 1.662 | -26.1 |
| Source: MNI/Bloomberg Finance L.P. | ||
