MNI EUROPEAN OPEN: Risk Higher Amid Trade Optimism
EXECUTIVE SUMMARY
- US, CHINA HAIL 'CONSTRUCTIVE’ GENEVA TRADE TALKS, DETAILS DUE ON MONDAY - RTRS
- TRUMP SEEKS TO ALIGN US DRUG COSTS WITH CHEAPEST ONES ABROAD - BBG
- ZELENSKIY TELLS PUTIN TO COME TO TURKEY IF HE WANTS TALKS, AFTER TRUMP INTERVENTION - RTRS
- INDIA-PAKISTAN CEASEFIRE HOLDS AFTER FOUR DAYS OF CLASHES - BBG
- CHINA APRIL CPI REMAINS NEGATIVE FOR THIRD MONTH - MNI BRIEF
- MNI DISCUSSES RAPID GROWTH OF CHINA’S MAIN EV MANUFACTURING PROVINCE - MNI INTERVIEW
Fig 1: US Equity Futures Rise Further On Trade Hopes
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
SANCTIONS (BBG): “UK Foreign Secretary David Lammy is set to unveil fresh sanctions targeting Russia as Britain hosts a security meeting of European ministers for the first time.”
EU
UKRAINE (RTRS): “Ukrainian President Volodymyr Zelenskiy said he was ready to meet Vladimir Putin in Turkey on Thursday after U.S. President Donald Trump told him publicly to immediately accept the Kremlin leader's proposal of direct talks.”
ECB (BBG): “The European Central Bank will lower borrowing costs more than expected this year to below 2% as inflation is seen undershooting the institution’s target in early 2026, according to economists surveyed by Bloomberg.”
US
US/CHINA TRADE (RTRS): “The U.S. and China ended high-stakes trade talks on a positive note on Sunday, with U.S. officials touting a "deal" to reduce the U.S. trade deficit, while Chinese officials said the sides had reached "important consensus" and agreed to launch another new economic dialogue forum.”
PHARMA (BBG): “President Donald Trump said he plans to order a cut in US prescription drug costs by mandating that Americans pay no more than people in countries that have the lowest price.”
FED (MNI): Federal Reserve policymakers cannot count on the notion that tariff-related inflation will be fleeting, and the current interest rate setting is appropriate for an economy facing risks to both sides of the central bank's mandate, St. Louis Fed President Alberto Musalem said Friday.
FED (MNI): Elevated risks of inflation and unemployment make a holding pattern the best near-term course for monetary policy, Cleveland Federal Reserve Bank President Beth Hammack said Friday.
FED (MNI): Tariffs and the uncertainty around how trade policy will evolve will hold down productivity growth in the near term and argues for holding interest rates higher for longer, Federal Reserve Governor Lisa Cook said Friday, adding wider adoption of AI could also counter some of that productivity drag.
IRAN (BBG): “The US and Iran will continue talks over the Islamic Republic’s nuclear program, after discussions on Sunday that were described as encouraging by Washington and “difficult but useful” by Tehran.”
OTHER
INDIA (RTRS): “India and Pakistan have stepped back from the brink of all-out war, with a nudge from the U.S., but New Delhi's aspirations as a global diplomatic power now face a key test after President Donald Trump offered to mediate on the dispute over Kashmir, analysts said.”
INDIA/PAKISTAN (BBG): “A ceasefire between India and Pakistan appeared to be holding on Sunday after four days of clashes that brought the two nuclear-armed nations close to a full-blown war.”
HONG KONG (BBG): “Contemporary Amperex Technology Co. Ltd. has started taking investor orders for a Hong Kong stock offering that is likely to be the world’s biggest listing this year.”
JAPAN (BBG): “Japan won’t accept any initial trade agreement with the US that excludes auto tariffs, according to Prime Minister Shigeru Ishiba.”
PHILIPPINES (RTRS): “Voting was underway in the Philippines on Monday for a normally low-key midterm election that is showcasing an emotionally charged proxy battle between President Ferdinand Marcos Jr. and ally-turned-foe, Vice President Sara Duterte.”
CHINA
US/CHINA (XINHUA): “China and the U.S. have agreed to establish a formal mechanism for economic and trade negotiations, with further details and a joint statement expected to be released on Monday, according to Xinhua News Agency.”
INFLATION (MNI BRIEF): “China's Consumer Price Index fell 0.1% y/y in April, the same as March's 0.1% decline, meeting market expectations, mainly affected by falling global oil prices, data from the National Bureau of Statistics showed on Saturday.”
BANKS (SECURITIES DAILY): “Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily.”
SMES (SME ASSOCIATION): “China’s SME Development Index fell 0.3 points m/m to 89.2 in April, data from the China Association of Small and Medium Enterprises showed.”
EVS (MNI INTERVIEW): MNI discusses the rapid growth of China's main EV manufacturing province. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA MARKETS
MNI: PBOC Net Injects CNY43.0 Bln via OMO Monday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY43.0 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY43.0 billion as no repos mature today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4255% at 09:30 am local time from the close of 1.5409% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 46 on Friday, compared with the close of 45 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.2066 Mon; -0.38% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.2066 on Monday, compared with 7.2095 set on Friday. The fixing was estimated at 7.2441 by Bloomberg survey today.
MNI: China CFETS Yuan Index Up 0.33% In Week of May 9
The CFETS Weekly RMB Index was 96.53 on May 9, up 0.33% compared with 96.20 as of Apr 30.
The gauge, which compares the yuan to a basket of currencies from China's 24 major trading partners, has decreased 4.87% this year, when compares with 101.47 on Dec. 31, 2024.
MARKET DATA
JAPAN MAR BOP CURRENT ACCOUNT BALANCE ¥3678.1bn; MEDIAN ¥3790.8bn; PRIOR ¥4060.70bn
JAPAN MAR BOP CURRENT ACCOUNT ADJUSTED ¥2723.1bn; MEDIAN ¥2464.9bn; PRIOR ¥2316.80bn
JAPAN MAR TRADE BALANCE BOP BASIS ¥516.5; MEDIAN ¥547.7bn; PRIOR ¥712.9bn
JAPAN APR BANK LENDING INCL TRUSTS Y/Y 2.4%; PRIOR 2.8%
JAPAN APR ECO WATCHERS SURVERY CURRENT 42.6; MEDIAN 44.6; PRIOR 45.1
JAPAN APR ECO WATCHERS SURVERY OUTLOOK 42.7; MEDIAN 44.6; PRIOR 45.2
SOUTH KOREA MAY EXPORTS 10 DAYS Y/Y-23.8%; PRIOR 13.7%
SOUTH KOREA MAY IMPORTS 10 DAYS Y?Y-15.9%; PRIOR 6.5%
MARKETS
US TSYS: Asia Wrap - Yields Extend Higher
TYM5 has traded lower within a range of 110-15+ to 110-19+during the Asia-Pacific session. It last changed hands at 110-19, down 0-07 from the previous close.
- The US 2-year yield is higher, dealing around 3.91%, up 0.02 from its close.
- The US 10-year yield is higher, dealing around 4.40%, up 0.02 from its close.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily. Following the adjustment, interest rates on certain banks’ three- and five-year medium- to long-term deposits have fallen below 2%. Analysts anticipate this downward trend will persist, citing ongoing pressure from narrowing interest rate spreads, the report said.
- Yields have all moved higher this morning as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, target back towards the top end of the range 4.45/50%.
- Data/Events : US CPI Tomorrow
JGBS: Sell-Off Pared But Bear-Steepener Remains, BoJ SoO Tomorrow
JGB futures are weaker, -29 compared to the settlement levels, but above session lows.
- Today's heavy session aligns with weaker US tsys, which are trading 2-4bps cheaper in today's Asia-Pac session, as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks. US Treasury Secretary Bessent said that further details would be shared today.
- The US data calendar is light today, ahead of US CPI on Tuesday and Retail Sales on Thursday.
- Japan’s April economy watchers survey current condition index fell to 42.6, compared with the median estimate of 44.6.
- Japan’s bank deposits increased at the slowest pace since April 2007 as households seek to safeguard their assets from inflation. Deposits climbed 0.7% in April from a year earlier, decelerating for a third straight month.
- Cash JGBs are 1-6bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 2.2bps higher at 1.391% versus the session high of 1.41%
- Swap rates are 2-4bps higher, with swap spreads mixed.
- Tomorrow, the local calendar will see BoJ Summary of Opinions (April MPM) and Money Stock data alongside 30-year supply.
AUSSIE BONDS: Heavy Session To Start Week, Risk-On Weighs
ACGBs (YM -6.0 & XM -6.5) are sharply cheaper and near Sydney session lows.
- This move aligns with weaker US tsys, which are trading 2-4bps cheaper in today's Asia-Pac session, as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks.
- US Treasury Secretary Bessent said there had been 'substantial progress' in the two days of talks with China and that further details would be shared today.
- The US data calendar is light today, ahead of US CPI on Tuesday and Retail Sales on Thursday.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Cash ACGBs are 5bps cheaper with the AU-US 10-year yield differential at -6bps.
- The bills strip is cheaper with pricing -2 to -5 (late whites leading).
- RBA-dated OIS pricing is flat to 5bps firmer today, leaving meetings 2-24bps firmer than levels before the release of Q1 CPI data on April 30.
- Tomorrow, the local calendar will see Westpac Consumer and NAB Business Confidence measures.
- 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: Closed At Cheaps With Focus On Trade Deals
NZGBs closed at session cheaps, with benchmark yields 3-4bps higher. NZ-US and NZ-AU 10-year yield differentials were little changed.
- With the domestic calendar empty, attention was focused abroad.
- Cash US tsys are trading 2-3bps cheaper in today's Asia-Pac session as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. US Treasury Secretary Bessent said there had been 'substantial progress' in the two days of talks with China and that further details would be shared today.
- “The Reserve Bank of New Zealand (RBNZ) is "well-placed" to offset the impact of the projected lower discretionary fiscal spending on aggregate demand as the effect of the government's fiscal consolidation is likely to be limited at the macroeconomic level, ANZ Research said in a budget preview report on Monday.” (per MTN via BBG)
- Swap rates closed 3-4bps higher.
- RBNZ dated OIS pricing closed slightly firmer across meetings. 25ps of easing is priced for May, with a cumulative 75bps by November 2025.
- Tomorrow, the local calendar will be empty ahead of Card Spending and Net Migration data on Wednesday.
FOREX: G10 Wrap - Risk Holds Gains From Asian Open
The BBDXY has had an Asian range of 1227.85 - 1229.76, Asia is currently trading around 1229. “China and the U.S. have agreed to establish a formal mechanism for economic and trade negotiations, with further details and a joint statement expected to be released on Monday, according to Xinhua News Agency. The high-level talks, held in Geneva over the weekend, were described as candid, in-depth, and constructive, with significant consensus reached and substantial progress made, Xinhua reported, citing China’s top trade negotiator, He Lifeng.” “Goldman expects the onshore yuan to strengthen to 7 per dollar in 12 months”(BBG). This is pretty significant considering only a month or 2 ago the thinking was USD/CNH would have to weaken considerably due to the tariffs. It also aligns with the broader view starting to gain traction that Usd/Asia could just be starting a bigger move lower.
- EUR/USD - Asian range 1.1193 - 1.1243, Asia is currently trading 1.1230. EUR/USD gapped 50/60 points lower on the open to test below 1.1200 in early trade, 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 1.3262 - 1.3295, Asia is currently dealing around 1.3285. GBP dipped on the Asian open but has since clawed back most of its losses. GPB has found buyers back towards 1.3200, if this support breaks buyers are expected to return back towards 1.3000/3100.
- USD/JPY - Asian range 145.70 - 146.28, the Asia session is currently dealing around 145.85. 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. Support seen back towards 1.4400.
- USD/CNH - Asian range 7.2198 - 7.2298, the USD/CNY fix printed 7.2066. Asia is currently dealing around 7.2250. Sellers capped the 7.2500 area on Friday, and would think any move back should again be met by supply. A move through this area targets 7.27/30.
- Cross asset : SPX +1.5%, Gold $3278, US 10-Year 4.40%, BBDXY 1229, Crude oil $61.37
- Data/Events : BOE’s Lombardelli, Greene, Mann and Taylor to speak.
Fig 1: USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
FOREX: Antipodean Wrap - AUD & NZD Outperform
The S&P is up 1.4% this morning after gapping on thin liquidity at the Asian open. It has held these gains remarkably well for now, with these early Monday morning moves having a habit of failing. There seems to be a view that the outcome of these talks could have significant implications going forward as China now sees itself coming to the negotiating table as a peer and not as a subordinate. Hu Xijin, former Editor-in-Chief of the Global Times, remarked in a recent Weibo post: “China has achieved the most equal negotiation with the United States among all nations. The two sides had been at loggerheads, but their first official contact yielded substantial results—an unexpected turn of events. I believe this breakthrough is precisely the result of China’s readiness to stand firm and its unwavering commitment to principle.” See this X link for more details https://x.com/ShanghaiMacro/status/1921759301284376957
- AUD/USD - Asian range 0.6410 - 0.6432, the AUD is currently dealing around 0.6435. AUD has outperformed this morning especially in the crosses. Good demand was seen on Friday sub 0.6400, on the day this could continue to provide support. A break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 93.40 - 93.99, price goes into London trading around 93.75. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen between 94.00/96.00 where sellers should remerge.
- NZDUSD - Asian range 0.5910 - 0.5931, going into London trading around 0.5935. On the day there is potential for NZD to continue to outperform as the market digests an outcome from the talks that many thought not possible. First support is right here around the 0.5900 area but more importantly the support around 0.5800 needs to hold to keep the bulls in the drivers seat.
- AUD/NZD - Asian range 1.0833 - 1.0859, the Asian session is currently trading 1.0845. Sellers continue to provide headwinds for the cross just above 1.0850, a sustained move back above 1.0900 would negate the bearish trend.
Fig 1 : AUD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
ASIA STOCKS: Stocks by News from Geneva
Asia stocks have been in a positive mood today with gains across all major markets following positive noises coming out of the US China discussions. Chinese tech names have performed strongly whilst Pharma companies have struggled given President Trump's plans to reduce prescription costs on pharmaceuticals.
Overall markets were strong with gains of over 2% by some key bourses.
- China's key indexes were up strongly with the Hang Seng up +0.95%, the CSI 300 +0.60%, Shanghai +0.35% and Shenzhen up +1.05%
- The TAIEX in Taiwan is up +0.92% having enjoyed strong inflows over the last week.
- The KOSPI shrugged off poor economic data to rise +0.68%, following last week's gains.
- With Jakarta, Singapore and Malaysia closed.
- Having fallen last week on concerns as to the escalating conflict with Pakistan, India's NIFTY 50 is up strongly in morning trade rising by +2.90%
- The idea that weekend talks between China and the US have made progress, has given a strong boost to many markets today including oil.
- WTI is up over +0.60% to add to last week's gain of +4.68%.
- The move this morning sees WTI break through the 20-day EMA of $61.06, with the next key level the 50-day EMA $63.96 to be trading at $61.41
- Brent is up this morning by +0.55%, following last week's gain of +4.27% to be touching the 20-day EMA of $64.34
- A trade war has the potential to materially detract from global growth and has been one of the contributing factor to gold being lower by more than 10% this year.
- After two days of negotiations in Geneva, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said that they was progress and would share more information on Monday, with the same positive sentiment echoed by their Chinese counterparts.
- Ongoing concerns about Iran's nuclear program sees US and Iran in dialogue and has potential to escalate if common ground can't be met.
- Ukraine's Volodymyr Zelenskiy is set to meet with Vladimir Putin in Istanbul on May 15 for direct negotiations, following a weekend of hectic diplomacy. The meeting is conditional on Russia beginning a 30-day ceasefire on Monday.
- In potential signs that relationships are shifting, Indonesia will cut its fuel imports from Singapore and source supplies from the US and Middle Eastern countries instead.
- Saudi Aramco's net income declined 4.6% to 97.5 billion riyals in the first quarter due to lower crude prices. The company's total dividend for the quarter fell to $21.36 billion, compared with $31 billion in the same three months of last year, which will add to the strain on the Saudi budget.
- House Republicans will include money to “begin” refilling the nation’s depleted strategic oil reserves as part of their massive bill to extend President Donald Trump’s tax cuts, a key committee chairman said in an op-ed published Sunday.
Gold Falls Again as Optimism Grows
- Gold started the week lower and is trading at US$3,281.41 in afternoon trade, a decline of 1.32%.
- This morning's move sees gold breach the 20-day EMA of $3,284.60 with the 50-day EMA below at $3,162.71.
- Evidence of trade talks and the somewhat easing of tensions has taken some of the safe haven bid out of gold this morning and given the strength of last week's performance, it is likely profit taking is behind this morning's move.
- US and China reported 'substantial' progress after two days of talks in Switzerland with markets looking for a de-escalation of a trade war that could materially lower global growth.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 12/05/2025 | 0800/0900 |  GB | BOE Lombardelli At BOE Bank Watcher's Conference | |
| 12/05/2025 | 1030/1130 | GB | BOE Greene On Monetary policy outlook | |
| 12/05/2025 | - | *** |  CN | Money Supply |
| 12/05/2025 | - | *** | CN | New Loans |
| 12/05/2025 | - | *** | CN | Social Financing |
| 12/05/2025 | - |  EU | ECB's Cipollone At Eurogroup Meeting | |
| 12/05/2025 | 1250/1350 | GB | BOE Mann On Neutral Rate Of Interest | |
| 12/05/2025 | 1425/1025 |  US | Fed Governor Adriana Kugler | |
| 12/05/2025 | 1430/1530 | GB | DMO likely to publish FQ2 consultation agenda | |
| 12/05/2025 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 12/05/2025 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 12/05/2025 | 1600/1200 | *** | US | USDA Crop Estimates - WASDE |
| 12/05/2025 | 1600/1700 | GB | BOE Taylor Fireside Chat With Ed Balls | |
| 12/05/2025 | 1800/1400 | ** | US | Treasury Budget |
| 13/05/2025 | 2301/0001 | * | GB | BRC-KPMG Shop Sales Monitor |
| 13/05/2025 | 0600/0700 | *** | GB | Labour Market Survey |
| 13/05/2025 | 0900/1100 | *** |  DE | ZEW Current Expectations Index |
| 13/05/2025 | 0900/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 13/05/2025 | 0900/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 13/05/2025 | 1000/0600 | ** | US | NFIB Small Business Optimism Index |
| 13/05/2025 | - | EU | ECB's De Guindos At ECOFIN Meeting | |
| 13/05/2025 | 1230/0830 | *** | US | CPI |
| 13/05/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
