MNI ASIA OPEN: Trump EU Tariff Deferral Supports Equities

EXECUTIVE SUMMARY

• TRUMP AGREES TO EXTEND EU TRADE TALKS AFTER 50% TARIFF THREAT
• GERMANY’S MERZ SAYS U.S. TECH PERKS COULD BE TARGET IN TRADE WAR
• EU PLANS TO ‘FAST TRACK’ TRADE TALKS WITH U.S. AMID TARIFF FIGHT
• MINNEAPOLIS FED’S KASHKARI EXPECTS RATES TO BE ON HOLD ‘FOR A WHILE’
• EURO COULD BECOME THE DOLLAR'S ALTERNATIVE, LAGARDE SAYS
• PUTIN CONTINUES TO BATTER UKRAINE WITH MISSILES AS TRUMP CALLS HIM ‘CRAZY’
• CHINA RAISES CROSS-BORDER YUAN USE REQUIREMENT FOR MAJOR BANKS

Figure 1: Euro Stoxx 50 Futures Close Friday's Gap Lower As Trump Delays 50% EU Tariff Deadline

Source: MNI - Market News/Bloomberg

NEWS

GLOBAL TRADE (BBC): Trump Agrees To Extend EU Trade Talks After 50% Tariff Threat

US President Donald Trump has agreed to extend a deadline to negotiate tariffs with the European Union by more than a month.

GLOBAL TRADE (Newsmax): Trump: 'World' Seeking Trade Deals

President Donald Trump said "countries from all over the world" are seeking trade deals with the U.S.

GLOBAL TRADE (RTRS): EU Sees 'New Impetus' In Trade Talks From Weekend Call With Trump

EU Trade Commissioner Maros Sefcovic will have a call with U.S. Commerce Secretary Howard Lutnick on Monday afternoon, the Commission said.

GLOBAL TRADE (BBG): Germany’s Merz Says U.S. Tech Perks Could Be Target in Trade War

The European Union could retaliate against US technology companies if the trade conflict with Donald Trump’s administration escalates, German Chancellor Friedrich Merz said.

GLOBAL TRADE (BBG): EU Plans to ‘Fast Track’ Trade Talks With U.S. Amid Tariff Fight

The European Union said it agreed to accelerate negotiations with the US to avoid a transatlantic trade war, signaling a more amicable approach just days after President Donald Trump criticized the bloc for taking advantage of the US and slow-walking talks. 

GLOBAL TRADE (RTRS): Chinese Customs Caution Slows Some Rare Earth Magnet Exports, Sources Say

Chinese customs are holding up some shipments of lower-performance rare earth magnets used in appliances and consumer electronics because of confusion over how to apply Beijing's export curbs, according to three sources.

GLOBAL TRADE (MNI): MNI EM INTERVIEW: UK-China Deal Unlikely, But Ties To Deepen

A leading British business leader in China shares insight into UK-China trade relations -- on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

FED (CNBC): Minneapolis Fed’s Kashkari Expects Rates To Be On Hold ‘For A While’

Minneapolis Federal Reserve President Neel Kashkari says he expects to see interest rates on hold for now as U.S. data have yet to show the full impact of tariffs. He also shares his thoughts on the U.S. housing market and the Fed’s independence.

FED (Fortune): Jerome Powell Tells Princeton Grads Not To Take Universities For Granted And That ‘Integrity Is All We Have—Guard It Carefully’

Federal Reserve Chairman Jerome Powell urged Princeton graduates to consider public service, while also calling on them to preserve democracy and reminding them that U.S. universities shouldn’t be taken for granted.

U.S. (CNN): Trump Lashes Out At Political Opponents And Judges In Memorial Day Post

In a Memorial Day post to his Truth Social platform Monday, President Donald Trump marked the solemn occasion honoring America’s war dead by blasting his political opponents and perceived enemies as “scum,” members of the federal judiciary as “USA hating” as well as “monsters,” and his predecessor, former President Joe Biden, as “incompetent.”

U.S. (RTRS): Trump Considering Taking $3 Billion In Harvard Grants, Giving Them To Trade Schools

U.S. President Donald Trump said on Monday he is considering taking $3 billion of previously awarded grant money away from Harvard University and giving it to trade schools across the United States.

CANADA (MNI): BOC Cutting Interest Rate On Tariff Pain, OECD Predicts

The Bank of Canada will lower interest rates later this year as the tariff war drags down growth more than it sparks inflation according to an OECD report Monday.

ECB (RTRS): Euro Could Become The Dollar's Alternative, Lagarde Says

The euro could become a viable alternative to the dollar, earning the 20-nation bloc immense benefits, if governments could only strengthen the bloc's financial and security architecture, ECB President Christine Lagarde said on Monday.

ECB (MNI): Weekly ECB Speak Wrap - Reaction To Latest Trade Developments Eyed

ECB officials haven’t had enough time to react to US President Trump’s shock announcement of 50% tariffs on EU goods last Friday, let alone yesterday evening’s delay to July 9 (from June 1 originally). However, the current backdrop can still be regarded as more dovish than a week ago, particularly when taken alongside last week’s weaker-than-expected May flash PMIs and Q1 negotiated wages data.

BOJ (MNI): BOJ Weighs Trade Impacts, Oct Hike Potential

MNI discusses the impact of China-U.S. relations on the BOJ's plans -- on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

CHINA (BBG): China Raises Cross-Border Yuan Use Requirement for Major Banks

China’s central bank asked its major lenders to raise the share of yuan when facilitating cross-border trade, in its latest push for the use of the currency as the world grapples with the onslaught of tariffs by the US.

RUSSIA (POLITICO): Putin Continues To Batter Ukraine With Missiles As Trump Calls Him ‘CRAZY’

Russia hammered Ukraine with another 350 killer drones and nine missiles in the early hours of Monday morning, the Ukrainian Air Force said in a statement.

IRAN (RTRS): Iran Says It Could Survive If U.S. Nuclear Talks End Without A Deal

Iran would be able to survive if negotiations with the U.S. over its nuclear programme fail to secure a deal, President Masoud Pezeshkian said on Monday, after President Donald Trump described weekend talks with Tehran as "very good".

ISRAEL (Times Of Israel): Witkoff Denies Hamas Accepted His Truce Proposal, Says Group’s Stance ‘Disappointing And Unacceptable’

US special envoy to the Mideast Steve Witkoff denies claims from Hamas officials that the terror group has accepted his proposal for a ceasefire and hostage release deal in Gaza.

HUNGARY (MNI): NBH Preview - May 2025: Another Cautious Hold

The National Bank of Hungary is expected to keep its base rate on hold at 6.50% again this month, despite a further slowdown in headline inflation in April.

MARKETS

US: Memorial Day Trading Hours

Memorial Day operating hours for the major U.S. exchanges and asset classes can be found below.

• CME
• ICE
• NASDAQ
• NYSE
• SIFMA
• Note that U.S. cash Treasury and equity markets are closed today.

US TSYS: TY Closes Opening Gap Lower

Tsy futures have closed the gap lower seen at the Asia open, with the contract last flat at 110-02+.

• This comes with e-minis and crude oil futures moving away from session highs, helping counter the sell off that was driven by Trump delaying the imposition of the 50% tariff on the EU.
• The contract’s technical bear cycle that started in early May remains intact.
• Initial support and resistance located at 109-13 & 110-21+, respectively.
• A reminder that activity ahs been limited by the presence of the Memorial Day holiday in the U.S., with cash Tsys closed and futures set to close early (13:00 NY/18:00 London).
• Roll activity has synthetically boosted volumes, latest completion estimates provided below:
• TU: 56.2%
• FV: 54.5%
• TY: 56.2%
• UXY: 44.3%
• US: 57.9%
• WN: 59.9%
• Minneapolis Fed President Kashkari underscored the need for the central bank to remain on hold for “a while” over the weekend, given the macro uncertainty evident at present.
• Fed Funds futures show ~46.5bp of cuts through December vs. ~48bp late on Friday.
• Durable goods and consumer confidence data headline the U.S. calendar on Tuesday, with comments from Fed’s Kashkari & Barkin also slated. Elsewhere, the Treasury will sell 2-Year paper.

US TSY FUTURES: CFTC Shows Asset Managers Covering Some Of Long Position

The latest CFTC CoT report points to asset managers reducing their curve-wide net long by ~$12mln DV01, with the cohort only extending net longs in WN futures.

• Meanwhile, leveraged funds added to net shorts in TY & WN futures, while they trimmed net shorts across the rest of the curve. They still extended their curve-wide net short position by ~$1.5mln, with the size of the net short build in WN futures (~$4.7mn) dominating.
• Broader non-commercial net positioning saw a mix of net short setting and cover (detailed in the table below). The cohort remain net short across the curve.

Source: MNI - Market News/CFTC/Bloomberg

EGBS: Major Futures Happy To Continue Grinding Higher

Reports that the EU has agreed to accelerate trade negotiations with the US were worth a few ticks of upside in major EGB futures, but it’s hard to read too much into the moves with activity still very muted. EGBs have been happy to grind higher throughout the session.

• BTP and OAT futures still lead the rally intraday. BTPs are now +34 at 120.57, through Friday’s 120.40 high. Key resistance and the bull trigger is at 120.72, the May 8 high. Clearance of this level would solidify the recent uptrend, and expose the Feb 7 high at 121.00 on the continuation chart.
• Bunds have also closed the opening gap, now +9 at 130.74. The technical outlook is bullish, with Friday’s high at 130.94 presenting initial resistance.
• German long-end yields have turned lower on the session, helping the curve twist flatten (versus earlier bear flattening). Schatz yields are still almost 3bps higher, with year-end ECB implied rates somewhat more hawkish than Friday’s close.
• The 10-year BTP/Bund spread is now 2.5bps tighter at 99.5bps.
• French flash May inflation headlines tomorrow’s regional calendar, with the EC’s May consumer and business survey also set to garner interest.
• EGB supply is due from Italy (BTP Short Term/BTPei auction and the launch of the new 7-year BTP Italia) and the Netherlands, while ECBspeak comes from Villeroy and Nagel.

EUROPEAN INFLATION: EUR 5y5y Inflation Swap Still Close To 2%

EUR traded inflation swaps are little changed relative to a month ago. The 5y5y HICP ex-tobacco inflation swap remains close to 2% at 2.09%, while 1-, 2- and 5-year swaps are comfortably below the 2% handle. 

• The trade agreement between the US and China in early May saw market-implied EUR inflation expectations rise, as it implied a reduced risk of disinflationary trade diversion from China into the Euro-area compared to when tariffs were at triple-digit levels.
• However, the combination of soft Eurozone data (May flash PMIs and Q1 negotiated wages) and US President Trump’s latest threats of tariffs as high as 50% on the EU has prompted a renewed softening of traded inflation metrics.
• The May 2025 HICP ex-tobacco inflation swap fixing is currently 189bps. 

FOREX: USD Set To Finish Off Of Worst Levels

The USD has underperformed many of its G10 FX peers for much of the day, with ongoing policy uncertainty continuing to provide headwinds for the greenback after President Trump delayed the timeline for the imposition of 50% tariffs on the EU following a conversation with EC President Von Der Leyen.

• The BBDXY registered a fresh ’25 low, piercing the Dec ’23 low in the process. Bears will look to force a break of the ’23 closing low (1,200.41) next.
• A reminder that liquidity was thinned by the U.S. & UK public holidays.
• EUR/USD extended the recent bullish move, trading as high as 1.1419 before fading back to 1.1380. Next resistance of note seen at the 76.4% retracement of the Apr 21 - May 12 bear leg (1.1453).
• GBP/USD topped out at 1.3593 before a pullback to 1.3560. The 1.382 projection of the Feb 28 - Apr 3 - 7 price swing (1.3605) presents the next upside area of note.
• USD/JPY has recovered from the lowest levels registered in May (142.23 printed in Tokyo trade), with the wider risk reaction to the delay of the tariffs on the EU providing some counter. Spot last deals at 142.80 after reaching 143.08, with bears remaining in technical control. A move through today’s lows would expose the 76.4% retracement of the Apr 22 - May 12 bull leg (141.96). Bulls need to retake the 20-day EMA (144.66) to start turning the tide in their favour.
• Risk proxy FX (AUD, NZD, NOK & SEK) outperformed for much of the session on the U.S.-EU tariff relief but also faded from best levels against the USD.
• Note that AUD/USD cleared next resistance at 0.6515 before fading back to 0.6500.
• U.S. consumer confidence & durable goods data headlines on Tuesday, complimented by Fedspeak from Kashkari & Barkin and ECB speak from Villeroy & Nagel.

USDJPY TECHS: USDJPY Approaches Pivot Support

• A key medium-term support has been defined at the 140.00, in USDJPY.
• A clear break of this level is required to highlight a stronger reversal.
• Moving average studies on the daily and weekly frequencies are - for now - in a bear-mode position.
• The monthly set-up however, is bullish.
• This does suggest that weakness since last year’s July high, is a correction.
• A clear break of the 140.00 pivot support, if seen, would undermine this argument and signal scope for a deeper retracement
• Initial key resistance to watch is the 148.65, the May 12 high. 

EQUITIES: Stoxx Closes Tariff Threat Gap Lower As Trump Delays 50% Levy On EU

Euro Stoxx 50 futures hold onto the bulk of the gains that came after U.S. President Trump delayed the imposition of 50% tariffs on the EU over the weekend, with the market now familiar with Trump pushing back tariff deadlines/moderating tariff sizes as a deadline nears.

• A recent BBG report noted that “the European Union said it agreed to accelerate negotiations with the US to avoid a transatlantic trade war, signalling a more amicable approach just days after President Donald Trump criticized the bloc for taking advantage of the US and slow-walking talks.”
• Euro Stoxx 50 futures closed the gap lower that followed Trump’s 50% tariff threat on Friday, last +1.35% or 72 points.
• Our technical analyst notes that a bullish theme in Euro Stoxx 50 futures remains intact and suggests that the recent pullback appears corrective. Moving average studies are in a bull-mode setup, highlighting a clear uptrend and recent gains maintain the sequence of higher highs and higher lows. Sights are on 5,516.00, the Mar 3 high and key bull trigger. Key support to watch lies at 5,223.87, the 50-day EMA.
• Sector-wise, industrials, IT and materials outperform, while utilities lag, a setup you would probably expect on trade-positive news.
• In terms of stock-specific moves, Thyssenkrupp has rallied over 7% after Bild pointed to a restructuring for the name as it looks to cut overheads and divest units.

OIL: Little Changed As Negative MT Fundamentals Counter Latest Crude Positives

Crude oil futures are little changed on the day, with the crude-supportive developments in the EU-U.S. trade talks, in addition to geopolitical risks in the form of the potential for a further intensification in the Israel-Hamas conflict and the latest Russian missile launches on Ukraine, neutralised by some ongoing fundamental headwinds.

• That leaves WTI & Brent futures little changed, with medium-term bearish technical themes intact despite the recent bounce.
• Bulls need to break the 50-day EMA’s in the contracts ($62.75 & $66.24, respectively), to turn the tide more in their favour.
• Meanwhile, the respective April 9 lows present key support and the technical bear triggers.
• Our commodity team notes that fundamental pressure remains evident amid general economic headwinds, coupled with expectations for a more meaningful OPEC+ production increase from July.
• BBG have warned that OPEC+’s seemingly hardline approach to punishing its overproducing members risks plunging crude into a full-blow price war.
• Elsewhere, some downward pressure seemingly came from U.S. President Trump noting that he was “optimistic” following the last round of talks with Iran on limiting their nuclear programme in exchange for sanctions relief.
• Also, note that the Trump administration is preparing to use a narrowly tailored license for Chevron to allow it to perform minimal maintenance of essential operations in Venezuela.

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