MNI ASIA OPEN:"Breakthrough" US/UK Trade Deal May Take A While
EXECUTIVE SUMMARY
- MNI BOE WATCH: MPC Cuts Policy Rate, But Two Back Hold
- MNI US DATA: Jobless Claims Mostly Still Resilient
- MNI US STOCKS: Boeing Shares Elevated But Off Highs
- MNI US DATA: A Sharp Increase In ULCs But Trend Far More Subdued
US
MNI US/UK: Trump And Starmer Tout "Breakthrough" US-UK Trade Deal
[TARIFFS] Trump And Starmer Tout "Breakthrough" US-UK Trade Deal:
US President Donald Trump, speaking at the Oval Office: https://www.youtube.com/watch?v=j2dTaFl9nM0 alongside UK Prime Minister Sir Keir Starmer on a telephone link, have touted a new trade agreement characterised by Trump as the "first in a series of agreements on trade" that the administration has been negotiating over the "past four weeks." Trump describes the deal with the UK as a "breakthrough trade deal" and says the UK's participation affirms that "reciprocity and fairness is an essential and vital principle of international trade."
NEWS
MNI UK: Starmer Delivers Presser After US Trade Deal Announced
PM Sir Keir Starmer posts on X "Today I've secured a deal with the US that boosts British businesses and saves thousands of British jobs. I promised to protect British car makers and save our steel. This deal delivers on that promise. And British workers, families, and firms will feel the benefit." Starmer is holiding a press conference shortly on the deal.
- The deal (see 'TARIFFS: Trump And Starmer Tout "Breakthrough" US-UK Trade Deal', 1609BST), will - according to a UK gov't statement: US tariffs on autos cut from 27.5% to 10%, steel and aluminum tariffs reduced to zero, 'unprecedented market access' to the US for UK farmers 'with protections on food standards maintained; the Digital Services Tax remains unchanged; the two sides agree to work on a Digital Trade deal 'that will strip back paperwork for UK firms trying to export to the US'; remove tariff on ethanol coming into the UK from US to zero; reciprocal market access on beef with UK farmers given tariff-free quota for 13k metric tonnes.
- Speaking to employees at Jaguar Land Rover, Starmer criticises those who argue negotiations with Trump wouldn't work, Starmer says "We don't storm off, we stay in the room and we negotiate, we work for our country. Jobs saved, jobs won - not job done, because we're more ambitious for what the US and UK can do together."
- Truth Social post from President Trump outlines bare bones of the deal, but highlights tariffs will still be 10% after the deal, much higher than the UK had dealt with prior to 'Liberation Day'.
MNI US STOCKS: Boeing Shares Elevated But Off Highs
Boeing shares remain elevated at 192.95 (+7.39, +3.97%) but off earlier high of 194.75 after Commerce Sec Lutnick said UK would purchase $10B worth of Boeing planes at Pres Trump's UK trade annc earlier. Some details via Bbg: "IAG POISED TO ORDER ABOUT 30 787 JETS FROM BOEING", IAG: International Consolidated Airlines Group.
MNI BOE WATCH: MPC Cuts Policy Rate, But Two Back Hold
The Bank of England delivered the expected 25-basis-point cut in May, taking Bank Rate to 4.25%, but the Monetary Policy Committee splintered three-ways with the vote more fractured and hawkish than analysts had predicted. Only five of nine members backed the 25bp reduction, with two, Chief Economist Huw Pill and external member Cathy Mann, both voting for unchanged policy, and external members Swati Dhingra and Alan Taylor in favour of a 50bp cut. Analysts had expected a decisive majority for a 25bp cut, with an eight-one or seven-two vote in favour, with dissents only for a 50bp cut.
MNI BRIEF: EC Moots Countermeasures Against U.S. Tariffs
The European Commission will launch WTO legal action against the U.S.’s 20% reciprocal tariffs on EU exports and has launched public consultations on a new round of possible countermeasures, it said on Thursday. Around EUR95 billion in U.S. imports could be targeted, including a broad range of industrial and farm products. It will also consult on possible restrictions on the export of steel scrap and chemical products to the U.S. currently worth around EUR4.4 billion.
MNI CHINA-RUSSIA: Xi & Putin Cement Ties With State Visit Underway
(MNI) London - Chinese state-run Xinhua reports comments from President Xi Jinping following his meeting with Russian President Vladimir Putin in Moscow. Xi says that "China is ready to work with Russia to safeguard the authority and status of the United Nations, and resolutely defend the rights and interests of the two nations as well as those of developing countries in the face of unilateralism and bullying." Says the two countries should "promote an equal and orderly multipolar world and a universally beneficial and inclusive economic globalisation." Putin and Xi called one another 'dear friend' as Xi is set to observe Russia's Victory Day military parade as part of a four-day state visit.
MNI INDIA: PAKISTAN-EU Encourages 'Restraint', But Rhetoric Remains Escalatory
The US Consulate in Lahore has issued a 'shelter in place' order amid what it says are "reports of drone explosions, downed drones, and possible airspace incursions in and near Lahore", amid the continued escalation in action and rhetoric between India and Pakistan. As noted earlier (see "INDIA: Pakistan Minister Says 'Rest Assured' Nation Will Retaliate', 1024BST), both sides have accused the other of attacks while also restating their intentions to retaliate in response.
US TSYS
MNI US TSYS: Near Late Session Lows, Unit Labor Costs Rises, US/UK Trade Deal
- Treasuries look to finish near late Thursday session lows (TYM5 110-26, -23.5 vs. 110-22.5 low), initially triggered by higher than expected rise in Unit Labor Costs and a $25B 30Y bond auction that tailed.
- While Pres Trump's annc of a "breakthrough" US/UK trade deal did little to forestall the steady decline in rates, Pres Trump's suggestion: "better go out and buy stocks now" did help to buoy equity markets through midday.
- Commerce Sec Lutnick said UK would purchase $10B worth of Boeing planes at Pres Trump's UK trade annc, this will apparently be International Consolidated Airlines Group (IAG).
- The BoE lowered the policy rate to 4.25%, but the committee splintered with a three-way vote on the decision.
- Cross asset roundup: Bbg US$ index finished near May 2 highs (BBDXY +8.23 at 1230.92), Gold weaker at 3292.25 (-72.21), Crude firmer (WTI +1.87 at 59.94), while stocks have scaled off second half highs, SPX eminis currently +73.00 at 5725.0.
- Friday look ahead: Data supplanted by return of Fed speakers from media blackout: Barr, Kugler, Williams, Barkin, Waller, Hammack and Cook expected.
OVERNIGHT DATA
MNI US DATA: A Sharp Increase In ULCs But Trend Far More Subdued
Preliminary Q1 productivity and unit labor cost (ULC) data fired a warning shot with a sharp increase in ULCs, although it’s just one quarter of data and with more encouraging longer-term trends. It’s unlikely to alter Powell’s view that “the labor market is not a source of significant inflationary pressures”.
- ULCs increased 5.7% annualized in Q1 (cons 5.1) after a marginally downward revised 2.0% (initial 2.2%) in Q4, with the actual level of ULCs in Q4 only revised down a non-annualized -0.06%.
- ULC data are volatile from quarter-to-quarter, with this acceleration following an average -1.2% in 2Q/3Q24 which in turn followed a huge 8.3% back in 1Q24.
- Productivity meanwhile was as expected at -0.8% annualized after a marginally upward revised 1.7% (initial 1.5%). Similarly, the actual level in Q4 was only revised up 0.06% non-annualized.
- It’s a rare weak patch for productivity growth amidst tariff front-running that has distorted national accounts in Q1, but it follows some robust growth over the past two years.
- Y/Y rates give a better sense of trends, with productivity growth of 1.4% Y/Y (down from the 2.7% averaged in 2024) helping limit ULC growth to 1.3% Y/Y (down from 2.3% in 2024).
- As Fed Chair Powell once again repeated at yesterday’s FOMC press conference, “a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. The labor market is not a source of significant inflationary pressures.”
MNI US DATA: Jobless Claims Mostly Still Resilient
The weekly jobless claims data continue to show relatively low levels of layoffs whilst re-hiring activity is still on slowly moderating trend. Continuing claims pulled back from a break of recently well-defined ranges but the NSA values are still on the high side compared to recent years.
- Initial jobless claims: 228k (sa, cons 230k) in the week to May 3 after an unrevised 241k, supporting what had looked like a prior increase on the later than usual timing of Easter this year.
- The four-week average continues to slowly drift higher and at 227k is now at its highest since mid-March although it’s still low historically. We often compare with the 218k averaged in 2019 for a previous period of historical labor tightness (and that’s not allowing for sizeable population growth since then).
- The four-week average bottomed out at 213k in the weeks just prior to President Trump’s administration, but the climb has been slow, helped by DOGE-driven deferred resignations not showing until September.
- Continuing claims: 1879k (sa, cons 1895k) in the week to Apr 26 after a downward revised 1908k (initial 1916k), back into more typical ranges after hitting a 3+ year high.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 500.22 points (1.22%) at 41616.06
S&P E-Mini Future up 67.25 points (1.19%) at 5719.25
Nasdaq up 309.9 points (1.7%) at 18049.33
US 10-Yr yield is up 10.9 bps at 4.3785%
US Jun 10-Yr futures are down 24.5/32 at 110-25
EURUSD down 0.0082 (-0.73%) at 1.1218
USDJPY up 2.23 (1.55%) at 146.06
WTI Crude Oil (front-month) up $1.95 (3.36%) at $60.02
Gold is down $65.56 (-1.95%) at $3298.93
European bourses closing levels:
EuroStoxx 50 up 58.75 points (1.12%) at 5288.94
FTSE 100 down 27.72 points (-0.32%) at 8531.61
German DAX up 236.73 points (1.02%) at 23352.69
French CAC 40 up 67.6 points (0.89%) at 7694.44
US TREASURY FUTURES CLOSE
3M10Y +10.701, 4.904 (L: -6.768 / H: 5.1)
2Y10Y -0.304, 48.375 (L: 45.296 / H: 49.222)
2Y30Y -4.416, 94.604 (L: 91.672 / H: 99.411)
5Y30Y -6.106, 84.364 (L: 82.965 / H: 90.661)
Current futures levels:
Jun 2-Yr futures down 6.25/32 at 103-17 (L: 103-15.875 / H: 103-24)
Jun 5-Yr futures down 17.75/32 at 108-1.75 (L: 108-00.25 / H: 108-20.5)
Jun 10-Yr futures down 24.5/32 at 110-25 (L: 110-22.5 / H: 111-19)
Jun 30-Yr futures down 1-01/32 at 114-11 (L: 114-08 / H: 115-15)
Jun Ultra futures down 1-08/32 at 118-2 (L: 117-31 / H: 119-13)
MNI US 10YR FUTURE TECHS: (M5) Monitoring Support
- RES 4: 113-22 1.382 proj of the Apr 11 - 16 - 22 price swing
- RES 3: 113-04 76.4% retracement of the Apr 7 - 11 bear leg
- RES 2: 112-20+ High May 1 and key new-term resistance
- RES 1: 112-01+ High May 2
- PRICE: 110-26 @ 1445 ET May 8
- SUP 1: 110-22+ Intraday low
- SUP 2: 110-16+/109-08 Low Apr 22 / 11 and the bear trigger
- SUP 3: 110-00 100-dma
- SUP 4: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
Treasury futures are trading toward recent lows. This further undermines the recent bull cycle. The contract has breached the 20-day EMA, and pierced support at the 50-day EMA, at 110-31+. A clear break of this average would strengthen a bearish threat and expose 110-16+, Apr 22 low. For bulls, price needs to trade above key short-term resistance at 112-20+, the May 1 high, to reinstate a bullish theme.
SOFR FUTURES CLOSE
Jun 25 -0.015 at 95.745
Sep 25 -0.070 at 96.055
Dec 25 -0.115 at 96.330
Mar 26 -0.145 at 96.530
Red Pack (Jun 26-Mar 27) -0.16 to -0.155
Green Pack (Jun 27-Mar 28) -0.155 to -0.15
Blue Pack (Jun 28-Mar 29) -0.145 to -0.13
Gold Pack (Jun 29-Mar 30) -0.12 to -0.11
REFERENCE RATES (PRIOR SESSION)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.30% (-0.02), volume: $2.535T
- Broad General Collateral Rate (BGCR): 4.29% (-0.02), volume: $1.060T
- Tri-Party General Collateral Rate (TCR): 4.29% (-0.02), volume: $1.023T
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $111B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $298B
FED Reverse Repo Operation
RRP usage recedes to $139.768B this afternoon from $154.859B yesterday, total number of counterparties at 32. Usage had fallen to $54.772B last 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: $5.5B HSBC 3Pt Launched
- Date $MM Issuer (Priced *, Launch #)
- 05/08 $5.5B #HSBC $2.25B 6NC5 +125, $1.25B 6NC5 SOFR+157, $2B 11NC10 +140
- 05/08 $1.5B Fair Isaac 8NC3 6%
- 05/08 $700M #Caixa Economica 5Y 5.875%
- 05/08 $Benchmark AIB Group 6NC5 +165a
MNI EGBS: /GILTS CASH CLOSE: Session Lows On Trade Optimism And A Hawkish BoE Cut
- EGBs and Gilts have extended session lows along with equity futures firming through US President Trump’s press conference on the US-UK trade deal.
- Gilts led the sell-off, with moves extending a sharp reaction to a more hawkish than expected BoE earlier today. The latter is clear to see in today’s bear flattening:
- 2Y yields: 12.5bp Gilts, +5.9bp Bunds, +5.3bp OATs, +4.2bp BTPs and +5.4bp for Spain.
- 10Y yields: 8.7bp Gilts, +5.9bp Bunds, +4.3bp OATs, +3.4bp BTPs and +4.5bp for Spain.
- The firmer risk back-drop has supported the periphery, with GGBs 3.5bp tighter and BTPs 2.5bp tighter to Bunds. IRISH leads however at 4.2bp tighter, aided by strong demand at today’s 2034 sale (2x sold vs prior offering) and the trade backdrop considering Ireland’s particular sensitivity.
- BTP-Bund spreads are one standout more broadly, at 104.6bps being right at the low end of recent ranges and last lower in late 2021.
- RXM5 has recently touched session lows of 130-91 (-0.60) to reverse most of yesterday’s gains which saw a high of 131.72. The trend needle has been pointing north, with resistance at a bull trigger of 132.03 (Apr 7 high) but should today’s decline become more entrenched it could see support at 130.58 (50-day EMA).
- EU-focused trade headlines following the US-UK deal: "*TRUMP: WE INTEND TO MAKE A DEAL WITH THE EU […] HOPE TO MEET EUROPE'S VON DER LEYEN” - bbg
- When asked more broadly rather than just EU: *TRUMP: 10% BASE RATE FOR UK NOT A TEMPLATE, WILL BE HIGHER”.
- Earlier today, Bloomberg reported the EU is planning to hit €95 billion of US exports with additional tariffs if ongoing trade talks with Trump’s team fail to yield a satisfactory result.
MNI FOREX: USD Index Rises to Fresh Recovery Highs Amid Sentiment Boost/Patient Fed
- Major equity indices have rallied significantly on Thursday as progress on trade talks/deals provides a more constructive tone for risk sentiment. Outperformance for the US benchmarks is providing a firm underlying bid for the US dollar, with the patient FOMC providing an additional greenback tailwind.
- As a result, the ICE dollar index has risen to fresh recovery highs above 100.50, with the index looking likely to close above its 20-day EMA, the first daily close above this average since February 28 and undoubtedly a bullish development.
- The renewed dollar optimism has been most pronounced against the Japanese yen, particularly benefiting from the 10bp move higher for front-end US yields and the boosted risk backdrop. The 1.3% USDJPY rally has seen the pair narrow the gap substantially to the post-BOJ highs at 145.92, and the key 50-day EMA resistance, intersecting at 146.23. A breach of this average would signal scope for a stronger recovery towards 148.27 (Apr 9 high) and 149.28 (Apr 3 high).
- EURUSD (-0.65%) has printed fresh pullback lows at 1.1221 on Thursday, as downside momentum extended below the May 01 low of 1.1266. The 20-day EMA has also remained key on the EURUSD chart, having supported the pair extremely well since the break higher in early March. A close below 1.1279 would signal scope for a deeper pullback, initially looking for 1.1144, the April 03 high.
- GBP relatively outperforms following a hawkish lean to the May BOE decision. Two votes for an unchanged decision were a surprise, and the seemingly close call for the majority who voted for a 25bp cut garnered support for GBP. The stronger dollar helped cable reverse back to pre-BOE levels, however the half a percent decline for EURGBP remains noteworthy.
- China trade data, Canadian employment and comments from FOMC members will be highlights on the Friday economic calendar.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 09/05/2025 | 0600/0800 | *** |  NO | CPI Norway |
| 09/05/2025 | 0800/1000 | * |  IT | Industrial Production |
| 09/05/2025 | 0840/0940 |  GB | BOE Bailey Keynote Address at Reykjavik Economic Conference | |
| 09/05/2025 | 0955/0555 |  US | Fed Governor Michael Barr | |
| 09/05/2025 | 1045/0645 | US | Fed Governor Adriana Kugler | |
| 09/05/2025 | 1115/1215 | GB | BOE's Pill At National MPC Agency Briefing | |
| 09/05/2025 | - | *** |  CN | Trade |
| 09/05/2025 | 1230/0830 | *** |  CA | Labour Force Survey |
| 09/05/2025 | 1230/0830 | US | New York Fed's John Williams | |
| 09/05/2025 | 1230/0830 | *** | CA | Labour Force Survey |
| 09/05/2025 | 1230/0830 | US | Richmond Fed's Tom Barkin | |
| 09/05/2025 | 1235/0835 | US | New York Fed's Roberto Perli | |
| 09/05/2025 | 1530/1130 | US | Fed Governor Christopher Waller | |
| 09/05/2025 | 1530/1130 | US | New York Fed's John Williams | |
| 09/05/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 09/05/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 09/05/2025 | 2345/1945 | US | St. Louis Fed's Alberto Musalem | |
| 09/05/2025 | 2345/1945 | US | Fed Governor Michelle Bowman | |
| 10/05/2025 | 2345/0145 |  EU | ECB's Schnabel on Monetary Policy Panel | |
| 09/05/2025 | 2345/1945 | US | Cleveland Fed's Beth Hammack | |
| 09/05/2025 | 2345/1945 | US | Fed Governor Lisa Cook | |
| 10/05/2025 | 0130/0930 | *** | CN | CPI |
| 10/05/2025 | 0130/0930 | *** | CN | Producer Price Index |
