MNI ASIA OPEN: Headline Risk Up Pre-Jobs, Trump/Musk Part Way
EXECUTIVE SUMMARY
- MNI US LABOR MARKET: MNI U.S. Payrolls Preview: A Test Of Two Cuts Eyed For 2025
- MNI US-CHINA: Trump And Xi Tout Progress In Call, Exchanges Invitations To Visit
- MNI BRIEF: ECB Cuts Rates As 2026 Inflation Outlook Slashed
- MNI US DATA: Another Strong Rise In Challenger Layoffs But Less Than Recent Months
- MNI US DATA: Continued Rise Of Unit Labor Costs Poses Headwinds To Disinflation
- MNI US DATA: Typical Seasonality Pushes Initial Claims To 34-Week High
US
MNI FED: Gov Kugler: Full Tariff Impacts Yet To Come
Fed Gov Kugler (permanent FOMC voter), sounds increasingly patient on the rate cut front in a speech Thursday (link), repeating her previous view from a few weeks ago: "I view our current stance of monetary policy as well-positioned for any changes in the macroeconomic environment." She also continues to see "greater upside risks to inflation at this juncture" combined with "potential downside risks to employment and output growth down the road", and this "this leads me to continue to support maintaining the FOMC's policy rate at its current setting if upside risks to inflation remain."
MNI: Fed Must Maintain Credibility On Inflation - Schmid
The Federal Reserve must maintain credibility on its inflation mandate as prices rise under President Trump's tariffs, even as trade policy will likely also hurt economic activity and jobs, Kansas City Fed President Jeff Schmid said Thursday. "Policy will need to remain nimble as the FOMC balances the two sides of its mandate. While the tariffs are likely to push up prices, the extent of the increase is not certain, and likely will not be fully apparent for some time."
MNI: Fed Must Wait And See On Policy Amid Uncertainty - Harker
Federal Reserve officials must wait for more clarity on the effect of tariff policies before making any decisions on interest rates, Philadelphia Fed President Patrick Harker said Thursday in his last public speech as an FOMC member. That's because trade frictions pose risks to both the price stability and full employment sides of the central bank's mandate, he said, and thus making the wrong move could be especially costly.
NEWS
MNI US-CHINA: Trump And Xi Tout Progress In Call, Exchanges Invitations To Visit
Reuters reporting comments from Chinese newswires on today’s call between US President Donald Trump and Chinese President Xi Jinping. While no major breakthroughs were announced, the first known contact between the leaders since Trump’s inauguration, is likely to send a signal to markets that Washington and Beijing will work to prevent a further deterioration of relations.
- Xinhua notes that the talks “were at Trump's request”, and that Xi said “Trump is welcome to visit China again”. Trump later confirmed on Truth Social that he reciprocated the invitation. CCTV notes that Xi told Trump that the US should, “cancel negative measures taken against China,” and both sides, “should enhance exchanges in diplomatic, economic and trade, military, law enforcement”.
- Trump said in a statement on Truth Social that the call “resulted in a very positive conclusion for both Countries.” He said, “There should no longer be any questions respecting the complexity of Rare Earth products,” hinting at a resolution to the issue that derailed the tariff truce agreed in Geneva last month.
MNI SECURITY: Trump Will Greenlight Russia Sanctions If A Deal Appears Out Of Reach
US President Donald Trump has told reporters in the Oval Office that he will greenlight new sanctions on Russia if he sees a moment "when we're not going to make a deal and this thing won't stop." When asked if there is a deadline, Trump says, "yeah it's in my brain, the deadline". Trump adds that when that moment comes, he's going to be "very, very tough... and it could be on both countries, to be honest."
MNI ECB: Little New From Statement
The ECB cuts its policy rates 25bps including the deposit rate to 2.00% as unanimously expected. The decision statement was unsurprisingly non-committal. One small dovish change in the statement was the removal of “The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions” although that had already been caveated by the second half of the previous phrase.
MNI BRIEF: ECB Cuts Rates As 2026 Inflation Outlook Slashed
The European Central Bank cut its three key interest rates on Thursday, as projections for inflation in 2026 were slashed by eurosystem staff. The key deposit rate was cut by 25 bps to 2.0%, with the refinancing rate and the marginal lending rate also cut to 2.1.5% and 2.4% respectively. Headline inflation was projected at 2.0% in 2025, before slipping to 1.6% in 2026 and then rising back to target at 2% in 2027.
MNI NATO: US' Hegseth Signals Backing Of Mooted 3.5%+1.5% Of GDP Def Spend Split
US Secretary of Defense Pete Hegseth speaking at the NATO ministerial meeting in Brussels. On levels of defence spending, he says that "3.5% [of GDP] in hard military and 1.5% in infrastructure, that is a real commitment." This points towards a US acceptance of the split that has been talked up by Secretary General Mark Rutte, and other European NATO countries recently.
MNI GERMANY: Merz Faces Trump Oval Office Test
Later today, Chancellor Freidrich Merz faces the most significant foreign policy challenge of his time in office to date: a White House meeting with US President Donald Trump. World leaders' meetings in the Oval Office have historically been seen as a sign of prestige, but since Trump's return to office now carry the threat of a diplomatic ambush as experienced by Ukraine's Volodymyr Zelenskyy and South Africa's Cyril Ramaphosa.
MNI RUSSIA: Kremlin Confirms Putin Told Trump Of Response To Ukraine Drone Strike
Reuters reports comments from Kremlin spox Dmitry Peskov regarding the latest call between US President Donald Trump and Russian President Vladimir Putin. Confirms that Putin told Trump Russia would respond to recent Ukrainian attacks. Says that Putin told Trump this would be "how and when the Russian military deems it necessary to be".
US TSYS
MNI US TSYS: Headline Risk Rattles Markets Ahead of Friday's Headline Jobs Report
- After gapping higher early Thursday, Treasuries look to finish at/near late session lows as markets try to absorb a raft of trade-related headline risk, higher weekly claims & labor costs, several Fed speakers and the ECB's 25bp rate cut decision earlier.
- Treasury futures extend gains briefly then pared move after higher than expected weekly claims while continuing claims come out a little lower than expected, prior down-revised; unit labor costs higher than expected. Rates continued to pare gains as details of Pres Trump/Xi phone call emerge - less optimistic regarding trade than when the headline first aired.
- Initial jobless claims unexpectedly rose in the week of May 31, rising to 247k (235k expected) from 239k (rev from 240k) prior. Continuing claims meanwhile went in the opposite direction, ticking lower in the May 24 week to 1,904k. Unit labor costs (ULCs) were revised substantially higher in the Bureau of Labor Statistic's Q1 final release, rising 6.6% Q/Q SAAR (rev from 5.7% prelim, and up from 3.8% prior).
- Meanwhile, ahead of Friday's headline jobs report for May, the Challenger Gray report for May saw 93.8k job cut announcements, after 105k in Apr, 275k in Mar (of which 217k was govt) and 172k in Feb.
- Note, late headline risk saw stocks tumble after the bell as Trump/Musk spat really heats up after the bell, Pres Trump musing about ending Musk's government contracts while Musk responds with claim that Trump is in the Epstein files.
- The U.S. Treasury on Thursday added Ireland and Switzerland to its currency manipulator watch list, and officials warned continued strengthening of global currencies relative to the dollar could see more foreign exchange market interventions and rising current account surpluses that would land more countries on the list.
OVERNIGHT DATA
MNI US LABOR MARKET: MNI U.S. Payrolls Preview: A Test Of Two Cuts Eyed For 2025
Nonfarm payrolls are seen increasing a seasonally adjusted 126k in May in the Bloomberg survey after a stronger than expected 177k in April (albeit one that was more than offset by negative revisions). Primary dealer analysts also see 125k whilst the Bloomberg whisper is weaker again, currently at 119k after Wednesday’s weak ADP release continued a clearly moderating trend.
MNI US DATA: Continued Rise Of Unit Labor Costs Poses Headwinds To Disinflation
Unit labor costs (ULCs) were revised substantially higher in the Bureau of Labor Statistic's Q1 final release, rising 6.6% Q/Q SAAR (rev from 5.7% prelim, and up from 3.8% prior). This was a 4-quarter high, coming alongside a downward revision to nonfarm productivity to -1.5% Q/Q SAAR (-0.8% prelim), an 11-quarter worst.
- ULCs, which were revised up 0.9pp, are a combination of two variables: the aforementioned productivity contraction which was 0.7pp worse than initially thought, and hourly compensation, which was 0.2pp upwardly revised to 5.0% Q/Q SAAR.
- On productivity, hours worked grew more than twice as quickly as originally estimated (1.3% Q/Q SAAR vs 0.6% previously published), with output failing to keep pace (falling 0.2% Q/Q SAAR, vs -0.3% previously published). Productivity was slightly softer than thought in the manufacturing sector (4.4% vs 4.5% prelim), but non-manufacturing business productivity was substantially revised lower to -1.8% (-1.1% prelim), driving the overall revision.
MNI US DATA: Typical Seasonality Pushes Initial Claims To 34-Week High
Initial jobless claims unexpectedly rose in the week of May 31, rising to 247k (235k expected) from 239k (rev from 240k) prior. That's two consecutive weeks of rises to the highest weekly total in 34 weeks, bringing the 4-week average up to 235k (31-week high). Continuing claims meanwhile went in the opposite direction, ticking lower in the May 24 week to 1,904k (1,910k, after a decent 12k downward revision to 1,907k prior) for the first downward move in 4 weeks. More focus will naturally be on the rise in initial claims therefore.
- From a seasonality perspective, there was nothing out of the ordinary for early summer, with the typical seasonal adjustments pushing the SA figure higher: NSA claims if anything were tame, ticking 3k lower to 209k (by comparison, 196k the equivalent week of the prior year translated into 229k SA). NSA claims are set to continue rising over coming weeks as is usually the case for summer.
- State-by-state, Ohio (+6.7k), Minnesota (+6.6k) and Kentucky (+5.9k) each saw the biggest W/W % rises on an NSA basis, but not atypical for this time of year.
- There was also no major rise in DC-region (quite the opposite, ticking lower), with DOGE cuts still failing to make a major mark.
MNI US DATA: Another Strong Rise In Challenger Layoffs But Less Than Recent Months
The Challenger Gray report for May saw 93.8k job cut announcements, after 105k in Apr, 275k in Mar (of which 217k was govt) and 172k in Feb. It left a 47% Y/Y increase after the 63% in Apr, 205% in Mar and 103% in Feb.
- The largest contributor this month was services (22.5k), “which includes companies that service other companies such as commercial cleaning services and temporary staffing firms”. It was followed by retail (11.5k) and tech (10.6k).
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 108 points (-0.25%) at 42319.74
S&P E-Mini Future down 37 points (-0.62%) at 5942
Nasdaq down 162 points (-0.8%) at 19298.45
US 10-Yr yield is up 3.9 bps at 4.3945%
US Sep 10-Yr futures are down 10.5/32 at 110-25
EURUSD up 0.0027 (0.24%) at 1.1444
USDJPY up 0.81 (0.57%) at 143.57
WTI Crude Oil (front-month) up $0.53 (0.84%) at $63.38
Gold is down $16.07 (-0.48%) at $3356.52
European bourses closing levels:
EuroStoxx 50 up 5.4 points (0.1%) at 5410.55
FTSE 100 up 9.75 points (0.11%) at 8811.04
French CAC 40 down 14.4 points (-0.18%) at 7790.27
US TREASURY FUTURES CLOSE
3M10Y +5.022, 5.216 (L: -3.545 / H: 5.808)
2Y10Y -2.051, 46.611 (L: 45.636 / H: 49.193)
2Y30Y -5.478, 95.42 (L: 94.108 / H: 101.589)
5Y30Y -6.451, 88.798 (L: 87.977 / H: 95.785)
Current futures levels:
Sep 2-Yr futures down 3.375/32 at 103-21.625 (L: 103-21.25 / H: 103-28.125)
Sep 5-Yr futures down 9.5/32 at 108-3 (L: 108-01.75 / H: 108-19)
Sep 10-Yr futures down 10.5/32 at 110-25 (L: 110-23.5 / H: 111-14.5)
Sep 30-Yr futures down 3/32 at 113-14 (L: 113-08 / H: 114-10)
Sep Ultra futures up 2/32 at 116-28 (L: 116-17 / H: 117-28)
MNI US 10YR FUTURE TECHS: (U5) Clears Resistance
- RES 4: 112-04+ High May 2
- RES 3: 111-30 76.4% retracement of the May 1 - 22 downleg
- RES 2: 111-20 1.0% 10-dma envelope
- RES 1: 111-14+ High Jun 5 & 61.8% retracement of the May 1 - 22 downleg
- PRICE: 110-25.5 @ 1625 ET Jun 5
- SUP 1: 110-11 Low Jun 3 and a key near-term support
- SUP 2: 109-26/12+ Low May 29 / 22 and the bear trigger
- SUP 3: 109-09+ Low Apr 11 and key support
- SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing
Treasury futures spiked Thursday before meeting a key retracement level and staging an intraday reversal. Despite the reversal, the latest climb has resulted in a breach of resistance at 110-23, the May 16 high. This has also resulted in a move above the 50-day EMA, undermining a recent bearish theme. Sights are on 111-14+, a Fibonacci retracement. On the downside, initial support to watch lies at 110-11, the Jun 3 low. A break of it would signal a possible reversal.
SOFR FUTURES CLOSE
Jun 25 +0.003 at 95.695
Sep 25 -0.020 at 95.925
Dec 25 -0.035 at 96.195
Mar 26 -0.040 at 96.415
Red Pack (Jun 26-Mar 27) -0.07 to -0.05
Green Pack (Jun 27-Mar 28) -0.07 to -0.065
Blue Pack (Jun 28-Mar 29) -0.055 to -0.05
Gold Pack (Jun 29-Mar 30) -0.045 to -0.025
REFERENCE RATES (PRIOR SESSION)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.28% (-0.04), volume: $2.625T
- Broad General Collateral Rate (BGCR): 4.27% (-0.03), volume: $1.060T
- Tri-Party General Collateral Rate (TCR): 4.27% (-0.03), volume: $1.033T
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $114B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $294B
FED Reverse Repo Operation
RRP usage retreats to $152.727B this afternoon from $168.882B yesterday, total number of counterparties at 29. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.
MNI PIPELINE: Corporate Bond Update: $4B Rocket Co, $2B Delta Air Launched
- Date $MM Issuer (Priced *, Launch #)
- 06/05 $4B Rocket Companies $2B 5NC2 6.125%, $2B 8NC3 6.375%
- 06/05 $2B #Delta Air Lines $1B 3Y +105, $1B 5Y +130
- 06/05 $750M Acrisure 7NC3 7%a
- 06/05 $Benchmark Target 3Y +45, +10Y +90
MNI BONDS: EGBs-GILTS CASH CLOSE: ECB Bear Flattens Bund Curve
European yields rose sharply Thursday, with the ECB signalling that rate cuts are on hiatus.
- While the ECB cut rates 25bp as widely expected, the tone of communications was perceived hawkishly.
- The decision statement was non-committal on future moves, and Pres Lagarde provided multiple hints that the Governing Council was as she said "getting to the end of a monetary policy cycle".
- A Bloomberg post-meeting sources piece pointed to consensus among policymakers for a pause in July, and markets eye no more than one more cut the rest of the year (December).
- Adding bearish fuel to the bond fire was an apparent rapprochement between US's Trump and China's Xi.
- The German curve bear flattened, with the UK's belly underperforming.
- Periphery EGB spreads fell, with 10Y BTP/Bund closing at the tightest levels in 4 years.
- Friday's calendar includes German industrial production (after today's factory orders) and trade data, and French IP/manufacturing, as well as the final reads of Eurozone GDP and Employment in Q1, alongside several ECB speakers including Lagarde and Holzmann.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 7.5bps at 1.873%, 5-Yr is up 7.3bps at 2.171%, 10-Yr is up 5.4bps at 2.582%, and 30-Yr is up 2.6bps at 3.025%.
- UK: The 2-Yr yield is up 0.2bps at 4.007%, 5-Yr is up 1.1bps at 4.126%, 10-Yr is up 1bps at 4.616%, and 30-Yr is up 0.3bps at 5.325%.
- Italian BTP spread down 2bps at 94.4bps / French up 0.6bps at 67.9bps
MNI FOREX: EUR Boosted by Hawkish ECB Presser, JPY Underperforms
- The Japanese yen has underperformed on Thursday, prompting USDJPY to consolidate back above 143.50, having recovered healthily from the overnight 142.53 lows. Contributing to the recovery was cautious optimism surrounding progress between US/China talks, which initially had boosted major equity benchmarks.
- However, late headlines surrounding the Trump/Musk feud and potential sanctions on Russia & Ukraine dented overall sentiment. This had less of an impact on USDJPY, with higher front-end US yields providing support.
- In contrast to the yen’s underperformance, the Euro is higher on the day following President Lagarde giving a clearly more hawkish/congratulatory tone in the press conference, noting policy is well positioned and that “we are getting to the end of a monetary policy cycle that was responding to compounded shocks.” EURUSD printed a high of 1.1495 on the session, keeping bullish conditions firmly intact, and signalling scope for a move to cycle highs at 1.1573.
- EURJPY is 0.8% higher as we approach the APAC crossover and sights remain on a cluster of resistance around the 165.00 mark, a level of pivotal significance dating back to the BOJ’s intervention back in July last year. 165.21, the May 13 high remains the technical bull trigger, of which a breach would target a move towards 166.10, the Nov 6 high.
- Elsewhere, USDCAD temporarily breached support – trading below 1.3643 for the first time since early October last year. Below here, attention will be on 1.3579, the 1.5 Fibonacci projection of the Feb 3 - 14 - Mar 4 price swing, before the September lows at 1.3420 will garner attention.
- The USD index is unchanged as we approach tomorrow’s US employment report for May, where Canadian jobs figures will also be published.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 06/06/2025 | 0600/0800 | ** |  DE | Trade Balance |
| 06/06/2025 | 0600/0800 | ** | DE | Industrial Production |
| 06/06/2025 | 0645/0845 | * |  FR | Industrial Production |
| 06/06/2025 | 0645/0845 | * | FR | Foreign Trade |
| 06/06/2025 | 0830/1030 |  EU | ECB Lagarde Video Message For CIBP Anniv | |
| 06/06/2025 | 0900/1100 | ** | EU | Retail Sales |
| 06/06/2025 | 0900/1100 | *** | EU | GDP (final) |
| 06/06/2025 | 0900/1100 | * | EU | Employment |
| 06/06/2025 | 1230/0830 | *** |  CA | Labour Force Survey |
| 06/06/2025 | 1230/0830 | *** |  US | Employment Report |
| 06/06/2025 | 1230/0830 | *** | CA | Labour Force Survey |
| 06/06/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 06/06/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 06/06/2025 | 1900/1500 | * | US | Consumer Credit |
