OIL: India Could Cut Product Exports If Hormuz Blocked: Oil Minister

Service firms in the Philadelphia Fed district were far more optimistic about their own outlook than the dismal prospects for their own region in May, with the largest discrepancy on this basis since the series started in 2011. The net share who saw an increase in full-time employees in May was also the highest since Jan 2024. 

• The Philly Fed non-manufacturing only inched up to -41.9 in May after the -42.7 in April has only seen lower in Apr/May 2020 for a series starting in 2011.
• Survey responses were collected from May 5-15, offering some time to start processing the de-escalation in US-China trade policies on May 12.
• It’s a somewhat similar story to the mild improvement seen in last week’s NY Fed services index which ticked up from -19.8 to -16.2 in May, only that -19.8 isn’t as outwardly weak on a historical basis.
• Back to the Philly survey, there was interestingly a greater improvement at a firm- rather than regional-level, with the firm-specific index increasing from -26.7 to -16.3.
• This discrepancy between the firm-level and broader assessment of activity, which could point to some upside ahead, is more pronounced in the six-month forward-looking index.
• Specifically, the 6-mth regional index only increased from -31.8 to -30.6, which aside from the -31.8 is the lowest since Apr 2020. However, the 6-mth firm index jumped to +11.6 after two negative months with -23.0 in Apr and -19.8 in Mar. The latter compares with the 31.5 averaged in 2024, including 44.7 in the month of the presidential election, plus 20.8 averaged in 2023.
• There were some mixed, but ultimately encouraging, signs for employment as well. The full-time employees index jumped from -7.2 to +11.3 for its highest since Jan 2024 whilst the part-time employees index fell from -7.9 to -11.9 for its lowest since Jul 2020. 

President Donald Trump is shortly due to address a House Republican conference meeting on Capitol Hill, where he will remind lawmakers it is in their best interests to swallow objections to the 'Big Beautiful' Republican reconciliation bill that covers the bulk of Trump's domestic agenda. 

• House Speaker Mike Johnson (R-LA) teed up a Rules Committee hearing at 01:00 ET 06:00 BST tomorrow morning, where there is likely to be extended debate over items conservatives and moderates want included in the final text. A full House vote could come as soon as tomorrow.
• The outcome of the Rules meeting will determine if Johnson remains on track to pass the bill by Memorial Day. Johnson has promised to keep the House in session until the bill is passed, so lawmakers will be staying in Washington, regardless.
• The most likely sweeteners for conservatives include bringing forward the date for stricter work requirements for Medicaid from 2029 to 2027 and more aggressive language on repealing tax credits from the Biden-era Inflation Reduction Act.
• A Monday meeting between Johnson and SALT Republicans failed to secure an agreement on the State and Local Tax (SALT) deduction cap. The group has repeatedly stated that they are prepared to torpedo the whole agenda without a raise to the cap, but GOP leadership thinks they will ultimately fold with a slightly revised offer.  
• Conventional wisdom states that looming recesses tend to lubricate Congress’ moving parts. So that, paired with pressure from Trump, suggests that Johnson will manage to advance the package from the Rules Committee. 

Danske Bank expect the Riksbank to keep rates on hold at 2.25% in June, viewing current market pricing assigning a 50% implied probability of a cut to be excessive. Since Danske cannot rule out rate cuts after the June meeting, they recommend receiving the March 2026 FRA against paying the June 2025 SWESTR OIS at -5bp. They set a profit target of -20bp and a stop-loss of +7bp.

• In the event of an on-hold decision in June, “The SWESTR leg should provide a 11-13bp profit (depending on SWESTR fixings) at the same time as we expect markets to continue pricing 1-2 rate cuts beyond the June meeting, leaving the MAR-26 FRA roughly unchanged”.
• Meanwhile, if rates are cut in June, “markets likely will add more cuts, and the MAR-26 FRA could profit a few basis points from the cut, reducing the lost 11-13bp on the SWESTR leg”.
• Danske expect a June hold because the meeting is “too soon for the Riksbank to have gathered sufficient evidence that the recent signs of a possible reacceleration of inflation pressures can be dismissed”. Additionally, they note that the May policy statement wording around future easing was more vague than previous meetings.