EU CONSUMER CYCLICALS: Kering: (Denied) may sell (instead of buy) Valentino (x2)

SFRH6 96.50/97.00/98.00 broken call fly vs. 96.375 paper paid 2.5 on 5.5K all day.

• As usual, the June MPR contains alternative scenarios. In the dovish scenario, "increased uncertainty could dampen demand and lead to lower inflation" and rates are seen troughing around 1% in late 2026. In the hawkish scenario, "large and widespread trade conflict caused prices to rise rapidly", and rates are seen peaking at 2.75% in early 2027. Notably, the hawkish scenario is one of stagflation, where the level of GDP is permanently below the baseline and dovish scenario in the latter half of the forecast horizon.
• Upside scenario: “It is assumed in the scenario that several of the ongoing negotiations between the United States and its trading partners will fail to reach an agreement”...” These measures will in turn lead to counter measures”
  • “During the third quarter of this year, rising commodity prices and tariffs entail significant cost increases on many goods that are imported to Sweden,”.
  • “The Riksbank begins to tighten monetary policy as early as September”…“During 2026, the policy rate is therefore raised on one further occasion”
• Downside scenario: “It is assumed that the uncertainty regarding the trade conflict and the security policy situation will gradually lead to increasingly large falls in confidence among households and companies. The effects on economic activity will become clear during the third quarter of this year”
  • “At the same time, the krona exchange rate appreciates”
  • “Because of the weak inflation outlook and the weak resource utilisation, the Riksbank will pursue a more expansionary monetary policy during the fourth quarter. The policy rate will then continue to be lowered in 2026”.
• Despite the dovish leaning nature of the decision, the Riksbank still notes that “the probability that inflation will be higher than in the forecast is assessed as roughly the same as the probability that it will be lower”.
• The Riksbank also gives an early opinion on the latest Israeli/Iran escalation: “Even though the [oil] price increase is not insignificant the impact on the inflation outlook is expected to be limited. In a scenario where the conflict in the Middle East escalates further, with a larger increase in oil prices, the consequences for energy prices in Sweden are also likely to be greater. In such a scenario, the economic outlook would also be affected and the Riksbank would then need to assess the overall effects on Swedish inflationary pressures.”

BBG sources note that “Japan’s financial regulator plans to ramp up scrutiny of about $67 billion of high-yield loans backed by government bonds and other assets that have become popular among regional banks”.

• The story notes that a senior FSA official asked lenders to disclose the size and market value of the related holdings earlier today. The Agency will review the disclosures and could take further action if deemed necessary, per the sources.
• The ramp up in the use of these structured notes have generated some fear surrounding risk management and the potential for large losses.
• The piece highlights that holdings can be counted as loans for accounting purposes, despite them bundling together JGBs and derivatives in a bid to enhance returns.
• Buyers of the structures do not have to mark to market.
• Regulators previously pointed to deeper scrutiny of the products.
• Brokerages selling these products are also set to come under scrutiny, with MUFJ already ceasing the sale of structured loans, per the report.