MNI EUROPEAN OPEN: China Trade Flows Shift As Tariffs Impact

May-09 05:15By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

TRUMP, STARMER HAIL LIMITED US_UK TRADE DEAL, BUT 10% DUTIES REMAIN - RTRS
TRUMP TEAM SEEKS TARIFF CUTS, RARE EARTHS RELIEF IN CHINA TALKS - BBG
3Y INFLATION EXPECTATIONS HIGHEST IN 3YRS - NY FED - MNI BRIEF
JAPAN MARCH REAL WAGE STAYS NEGATIVE - MNI BRIEF
MNI LOOKS AT WHAT TO EXPECT FROM THE NEW RBA MONETARY POLICY DEPARTMENT - MNI

Fig 1: China's Trade Surplus With EU Now Larger than Surplus With US

Source: MNI - Market News/Bloomberg

TRADE (RTRS): “The United States said on Thursday Britain would purchase $10 billion of Boeing jets and industry sources said British Airways owner IAG would also buy some 30 jets from Europe's Airbus in a fleet expansion split between transatlantic rivals. U.S. Commerce Secretary Howard Lutnick revealed the U.S. part of the jet order on Thursday during the announcement of a bilateral trade deal between Britain and the United States.

TRADE (BBG): "Commerce Secretary Howard Lutnick says the European Union is “probably the most interesting” region the US is negotiating on trade with, noting the EU’s deficit with China and its surplus with the US."

TRADE (BBG): " China’s export growth rose even as shipments to the US slumped sharply in the first month after President Donald Trump hit its goods with tariffs above 100%, a boost for a domestic economy that’s been increasingly reliant on foreign demand. "

TRADE DEAL (RTRS): “U.S. President Donald Trump and British Prime Minister Keir Starmer on Thursday announced a limited bilateral trade agreement that leaves in place Trump's 10% tariffs on British exports, modestly expands agricultural access for both countries and lowers prohibitive U.S. duties on British car exports.”

TARIFFS (BBG): “US President Donald Trump said he believed trade negotiations launching this weekend with China would result in tangible progress, predicting Beijing would be willing to make concessions and saying he could consider cutting punishing tariffs against the country if there was significant momentum.”

FISCAL (BBG): “President Donald Trump is pushing lawmakers to increase tax rates on some of the wealthiest Americans as a way to offset other cuts in his signature economic package. The president’s proposal calls for creating a new 39.6% tax bracket for individuals earning at least $2.5 million, or couples making $5 million, according to people familiar with the discussion.”

INFLATION (MNI BRIEF): The New York Fed's survey-based measure of year-ahead and three-year-ahead inflation expectations increased in April, while the five-year-ahead measure dipped 0.12 pp to 2.74%. The year-ahead measure, up 0.05 pp to 3.63%, was the highest since September 2023 and the three-year-ahead measure, up 0.17 pp to 3.17%, was the highest since July 2022.

OTHER

CANADA (MNI BRIEF): Bank of Canada Governor Tiff Macklem said Thursday he remains cautious about risks from the global trade war after some recent positive developments, and it's too soon to revisit economic scenarios laid out in the last interest-rate decision.

CANADA (MNI BRIEF): Bank of Canada Governor Tiff Macklem said Thursday that even with some recent market rumblings there's little evidence the U.S. dollar is losing its global reserve currency status.

JAPAN (MNI BRIEF): Inflation-adjusted real wages, a barometer of households' purchasing power, stayed in negative territory in March for the third straight month, down 2.1% vs. -1.5% in February, preliminary data released by the Ministry of Health, Labour and Welfare on Friday showed.

JAPAN (BBG): “Japan’s exports slowed in the first 20 days of April as the US tariff campaign intensified with new car and across-the-board levies.”

AUSTRALIA (MNI): MNI looks at what to expect from the RBA's new monetary policy department. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

PAKISTAN/INDIA (RTRS): Pakistan's armed forces launched "multiple attacks" using drones and other munitions along India's entire western border on Thursday night and early Friday, the Indian army said, as conflict between the nuclear-armed neighbours intensified.

CHINA

US/CHINA (BBG): "The Trump administration is weighing a dramatic tariff reduction during weekend talks with China to de-escalate tensions and temper the economic pain both are already starting to feel. People familiar with preparations for the talks, which are due to begin in Geneva on Saturday led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, say the US side has set a target of reducing tariffs below 60% as a first step that they feel China may be prepared to match. Progress in two days of scheduled discussions could see those cuts being implemented as soon as next week, they said.

TRADE (RTRS): "China's exports rose faster than expected in April, while imports narrowed their declines, customs data showed on Friday, giving Beijing some relief ahead of ice-breaker tariff talks with the U.S. this weekend."

ECONOMY (NDRC): Authorities will actively support private enterprises in the construction of major national projects, according to Zheng Bei, deputy director at the National Development and Reform Commission.

TECH (SECURITIES TIMES): Several Chinese securities firms have announced plans to issue more than CNY16 billion of science and technology innovation bonds, Securities Times has reported.

CHINA MARKETS

MNI: PBOC Net Injects CNY77.0 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY77.0 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY77.0 billion as no repos mature today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4429% at 09:44 am local time from the close of 1.6112% on Thursday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Thursday, compared with the close of 47 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.2095 Fri; -0.22% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.2095 on Friday, compared with 7.2073 set on Thursday. The fixing was estimated at 7.2520 by Bloomberg survey today.

MARKET DATA

JAPAN MAR LABOR CASH EARNINGS Y/Y 2.1%; MEDIAN 2.5%; PRIOR 2.7%
JAPAN MAR REAL CASH EARNINGS Y/Y -2.1%; MEDIAN -1.6%; PRIOR -1.5%
JAPAN MAR CASH EARNINGS - SAME SAMPLE BASE Y/Y 2.4%; MEDIAN 2.7%; PRIOR 2.5%
JAPAN MAR SCHEDULED FULL-TIME PAY - SAME BASE Y/Y 2.0%; MEDIAN 2.2%; PRIOR 2.0%
JAPAN MAR HOUSEHOLD SPENDING Y/Y 2.1%; MEDIAN 0.2%; PRIOR -0.5%

CHINA APR EXPORTS Y/Y8.1%; MEDIAN 2.0%; PRIOR 12.4%
CHINA APR IMPORTS Y/Y -0.2%; MEDIAN -6.0%; PRIOR -4.3%
CHINA APR TRADE BALANCE $96.18BN; MEDIAN $93.9BN; PRIOR $102.64

SOUTH KOREA MAR BOP CURRENT ACCOUNT BALANCE $9144.6MN; PRIOR $7177.7MN
SOUTH KOREA MAR BOP GOOD BALANCE $8493.1MN; PRIOR $8175.2MN

MARKETS

US TSYS: Asia Wrap - Yields Drift Lower

TYM5 has traded higher within a range of 110-24 to 110-30 during the Asia-Pacific session. It last changed hands at 110-28, up 0-02 from the previous close.

The US 2-year yield is a little lower, dealing around 3.863%, down 0.01 from its close.
The US 10-year yield is a little lower, dealing around 4.363%, down 0.02 from its close.
“Trump is said to be seeking a new 39.6% tax bracket for Americans earning at least $2.5 million as a way to offset other cuts in his signature economic package.”(BBG)
(Bloomberg) -- “The Japanese government is not considering using the sale of US Treasuries as part of its trade negotiation with the US, Finance Minister Katsunobu Kato says.”
“Kato says that he confirmed with US Treasury Secretary Scott Bessent that excessive volatility and disorderly movements in exchange rates would adversely impact economic and financial stability, in line with existing G-7 agreements.”
Asia has seen some of the big overnight moves be retraced. In the US 10-Yr yield price has bounced nicely off the 4.25/30% support as the supply takes its toll, target is back towards the top end of the range 4.45/50%.

JGBS: Cheaper Led By 7-10Y, 40YY Sets Record High

JGB futures are weaker, -36 compared to settlement levels, hovering near the middle of today’s range.

Outside of the previously outlined household spending and labour earnings, there hasn't been much by way of domestic drivers to flag.
Cash US tsys are ~1bp richer in today's Asia-Pac session after yesterday's heavy session.
“On May 9, municipalities of prefectures including Saitama and Kanagawa were forced to price their bond offerings at wider spreads for a second straight month.” (per BBG)
Cash JGBs are flat to 3bps cheaper across benchmarks, with the futures-linked 7-year leading the way. The benchmark 10-year yield is 2.9bps higher at 1.364% after yesterday's poor auction.
The 40-year yield climbed to its highest level on record (3.374%) today amid heightened volatility from the global trade war and concerns about worsening supply and demand for super-long debt.
“Life insurers do not need to rush to buy super-long JGBs, and lack of demand in that sector still persists, according to Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo.” (per BBG)
Swap rates are flat out to the 10-year but 2-3bps higher beyond. Swap spreads are mixed.
On Monday, the local calendar will see Current Account & Trade Balance and Bank Lending data.

AUSSIE BONDS: Cheaper, Fedspeak Returns Later Today, Light-Local Calendar,

ACGBs (YM -7.0 & XM -5.5) remain cheaper after the overnight lead-in from US tsys.

Cash US tsys are 1-2bp richer in today's Asia-Pac session after yesterday's heavy session.
Today, the local calendar has been light apart from the AOFM's sale of Nov-29 bond, which was well received. The cover ratio surged to a strong 5.4143x, up from 4.1286x at the previous auction, while the number of successful bidders fell to just three — highlighting highly concentrated demand.
Cash ACGBs are 5-6bps cheaper with the AU-US 10-year yield differential -7bps.
The bills strip has bear-steepened, with pricing -2 to -6.
RBA-dated OIS pricing is flat to 6bps firmer across meetings today. A 50bp rate cut in May is given a 2% probability, with a cumulative 99bps of easing priced by year-end.
"The three-year battle to tame Australia's worst inflation surge in four decades has been wearying for the Reserve Bank of Australia. At last, the guns have fallen silent, and a string of interest-rate cuts are being locked and loaded." (DJ via BBG)
On Monday, the local calendar will be empty.
Next week, the AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond on Wednesday and A$800mn of the 2.50% 21 May 2030 bond on Friday.

BONDS: NZGBS: Cheaper, Mid-Range, NZ Outperforms $-Bloc STIR Over The Week

NZGBs closed 2-3bps cheaper, but off the session's worst levels. The local calendar was light today and will remain so until Card Spending data next Wednesday.

Cash US tsys are 1-2bps richer in today's Asia-Pac session after yesterday's heavy session. Fed speakers will return from the media blackout on Friday: Barr, Kugler, Williams, Barkin, Waller, Hammack, and Cook are expected.
The NZ–US 10-year yield spread closed 3bps lower at +16bps, hovering near the midpoint of its trading range over the past month.
Swap rates closed 2bps higher.
RBNZ dated OIS pricing closed flat to 2bps firmer across meetings, with late 2025 / early 2026 leading. 26bps of easing is priced for May 28, with a cumulative 77bps by November 2025.
Interest rate expectations across dollar-bloc economies have generally firmed through December 2025 over the past week. The US saw the most significant shift with a 20bps increase in expected year-end rates, while Canada and Australia both firmed by approximately 12bps. New Zealand remained broadly unchanged.

FOREX: G10 Wrap - USD Can The Bounce Extend

The BBDXY has had an Asian range of 1229.53 - 1232.75, Asia is currently trading around 1230. Finally a sustained move higher in the USD off levels that were overdone in the short-term, can it extend ?. “ The US said it's developing a fast-track process for screening foreign investments in the US, an effort Trump administration officials expect could smooth the way for billions from wealth funds in Saudi Arabia, the United Arab Emirates and Qatar.” - per BBG. "GOLDMAN SACHS NOW EXPECTS BOE TO HOLD INTEREST RATES AT THE JUNE MEETING VS PRIOR FORECAST OF A 25 BP CUT - [RTRS]"

EUR/USD - Asian range 1.1197 - 1.1233, Asia is currently trading 1.1225. Intra-day support has been broken, price is now testing longer-term support around 1.1200, a sustained break below here would then target 1.1000. The market is still expected to use dips as a buying opportunity.
GBP/USD - Asian range 1.3212 - 1.3253, Asia is currently dealing around 1.3235. GBP held up against its crosses but against the USD it has broken through the support around 13250. If sustained we could see this correction extend further, buyers are expected to return back towards 1.3000/3100.
USD/JPY - Asian range 145.47 - 146.19, the Asia session has seen a reversal of some of the overnight moves. The 146.00/1.4700 area remains the first area in which sellers should be eager to get involved, then the more important 149/151 area.
USD/CNH - Asian range 7.2378 - 7.2528, the USD/CNY fix printed 7.2095. Asia is currently dealing around 7.2475, sellers have capped the 7.2500 in Asia. A move through this area targets 7.27/30.
Cross asset : SPX +0.11%, Gold $3315, US 10-Year 4.36%, BBDXY 1230, Crude oil $60.16.
Data/Events : Italy Industrial Production, Greece CPI

Fig 1: EUR/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg

FOREX: Antipodean Wrap - NZD Leading The Correction Lower

The Asian session tried to run with the moves from overnight with both the AUD and NZD making new lows before bouncing back with only the NZD ending marginally down on the day. Commerce Secretary Lutnick said trade deals with South Korea and Japan would take significantly more time than the agreement with the UK, if so how long does that imply a US-China deal could take ? China’s Vice Foreign Minister Hua made some comments: "What the United States is doing cannot be sustained," Hua said. "Ordinary people in the U.S. already feel suffering from the tariff war."

AUD/USD - Asian range 0.6371 - 0.6405, the AUD is currently dealing around 0.6400. Price is testing the intra-day support just below 0.6400, decent option interest around expiring tonight. A break below 0.6300 needed to reverse direction.
AUD/JPY - Asian range 93.00 - 93.43, price goes into London trading around 93.25. Price continues to stall back towards the resistance seen around 94.00, a break needed to have a look back at longer-term resistance towards 95.00/9600. Support seen back towards the 91.50/92.00 area.
NZDUSD - Asian range 0.5871 - 0.5908, going into London trading around 0.5895. The NZD slipped below its lows going back to 16th April having a look at what stops might be lurking, it has since bounced back. The bigger Long-term support lies back towards 0.5800/50.
AUD/NZD - Asian range 1.0833 - 1.0865, the Asian session is currently trading 1.0865. Price is pushing through the resistance around 1.0850 as the NZD underperforms, can it hold under 1.0900 ?

Fig 1 : NZD/USD Spot Hourly Chart

Source: MNI - Market News/Bloomberg

ASIA STOCKS: Stocks Hold Their Breath Ahead of US China Talks

The announcement of a trade deal between the UK and the US has the attention of the markets with hopes that some form of truce or moderation in a trade war. The deal comes just prior to a proposed meeting between US and Chinese officials in which President Trump said he believes tangible results will come from. Markets felt like they were in a holding pattern today with China stocks down whilst regional bourses were mixed.

The Hang Seng did very little all day and remains where it opened whereas the CSI 300 fell -0.23%, Shanghai -0.26% and Shenzhen down -0.95%. For teh week all have delivered strong positive returns with the Hang Seng almost 3% higher.
The KOSPI followed the lead of the Hang Seng and has barely moved from where it opened and has delivered modest gains of about +0.50% for the week.
The FTSE Malay KLCI gained a modest +0.10% today which is in line with its overall performance for the week.
The Jakarta Composite rose +0.25% and will deliver yet another week of positive gains, up +0.45%.
The FTSE Straits Times is up +0.60%, 0.67% for the week and the Philippines PSEi gained +1.10%, pushing it into the positive for the week.
The NIFTY 50 in India down again by -1.2%, having fallen -0.58% yesterday on concerns as to the conflict between India and Pakistan.

Oil Pauses Ahead of US China Talks

Oil prices had a strong night as the news of a trade deal with the UK drove optimism across markets that a global slowdown may be avoided but couldn't continue with the rally in Asia, falling marginally.
As US and China face off for negotiations over the weekend oil markets will watch closely for signs that some kind of agreement can be made with President Trump suggesting he remains positive.
Oil prices have faced downward pressure from an OPEC+ led increase in supply and concerns that a global slowdown will detract from overall demand.
WTI opened at US$60.25 bbl and dropped -0.22% yet remains on track to deliver over 3% gains for the week.
Brent opened at $63.07 and has hovered around the level all day. Brent is on track to finish the week +2.9% higher.
OPEC+ continues to be frustrated at Kazakhstan which again intends to exceed its OPEC+ obligations and output targets.
Russia's oil exports declined to their lowest in over two years, worth about $4.96 billion in the four weeks to May 4 on lower prices, putting pressure on their fiscal position.

Gold Delivers Minor Gains in Asia

After two days of significant declines, gold had a minor bounce in Asia today, gaining +0.28% at US$3,314.60.
With the European and US trading days still to come, gold so far this week is up +2.25% despite the falls on Wednesday and Thursday.
Gold last ground last night as the USD reasserted itself following the announcement of a trade deal between the UK and the US.
The deal comes just prior to a proposed meeting between US and Chinese officials in which President Trump said he believes tangible results will come from.
Markets then focused on the fact that US rates are on hold, piling back into the dollar which in turn sent gold lower.
Gold has steadied just marginally above the 20-day EMA of $3,284.08 as all major moving averages remain upward sloping; a sign that the bullish momentum remains.

UP TODAY (TIMES GMT/LOCAL)

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	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