MNI US OPEN - US CPI Provides Early Look at Tariff Impact
EXECUTIVE SUMMARY
- MNI US CPI PREVIEW - AN EARLY LOOK AT THE TARIFF HIT
- US-CHINA TRADE REPRIEVE BUYS SHEIN AND TEMU TIME TO RESTOCK US INVENTORY
- TRUMP LANDS IN SAUDI ARABIA, KICKING OFF TOUR OF GULF STATES
Figure 1: Recent US inflation developments
NEWS
MNI US CPI PREVIEW: An Early Look at the Tariff Hit
Analyst unrounded estimates see core CPI inflation re-accelerating to 0.27% M/M in April after a surprisingly soft 0.06% M/M in March. The unrounded range we’ve seen of 0.20-0.34% M/M hinges on expectations behind some volatile categories such as lodging away from home after its sharpest decline in over three years in March. The broad assumption is that April is too early to have seen the impact from sharp increases in tariffs in April, with summer months more likely as inventories are reduced after significant front-running.
US/CHINA (RTRS): US-China Trade Reprieve Buys Shein and Temu Time to Restock US Inventory
An agreement between the United States and China to temporarily slash tariffs stopped short of reinstating the U.S. "de minimis" duty exemption for ecommerce packages from China, but still gives online retailers like Shein and Temu a window to adapt their businesses. The Chinese firms, which have taken market share from dollar stores and mall rivals to surge to among the top ten downloaded apps in the U.S., will likely use the 90-day reprieve to bring in bulk shipments and restock their U.S. warehouses, trade experts said.
US/CHINA (BBG): Bessent Upbeat on China Trade Talks Thanks to ‘Good Framework’
US Treasury Secretary Scott Bessent said the trade deal from Donald Trump’s first tariff war with China gives the world’s two biggest economies “a very good framework” for upcoming discussions after the temporary lifting of levies between them. “We are not starting from ground zero,” Bessent said at a Saudi-US Investment Forum in Riyadh on Tuesday. “We have a framework and we can go from there.” When asked whether any subjects were off limits between China and the US, he said “everything is on the table.”
US (NYT): Trump Lands in Saudi Arabia, Kicking Off Tour of Gulf States
President Trump arrived on Tuesday morning in Saudi Arabia, his first stop on a four-day tour through the Gulf, the first major overseas trip of his second term. Mr. Trump is focused on signing business deals with the three countries, which manage trillions of dollars in assets around the world. He has told advisers he wants to sign agreements worth more than $1 trillion. Deals are expected to include investments in artificial intelligence companies and energy production, as well as multibillion-dollar arms purchases from U.S. weapons manufacturers.
US/INDIA (BBG): India Proposes First Counter Move Against Trump’s Tariff Regime
India has proposed levies on some US goods in response to Washington’s duties on steel and aluminum, marking its first retaliation against President Donald Trump’s tariff regime, even as the two countries move closer to finalizing a trade deal. The South Asian nation has informed the World Trade Organization that the US tariffs on these metals are “safeguard measures” — trade restrictions — that will adversely impact India’s trade, according to a notification on Monday. New Delhi reserves its right to “suspend concessions or other obligations” as a counter measure to the US duties, the notification said, citing WTO rules.
US/JAPAN (BBG): Japan Will Seek Talks with Bessent on FX in Canada, Kato Says
Japanese Finance Minister Katsunobu Kato says he will seek an opportunity to discuss currency matters with US Treasury Secretary Scott Bessent if the timing works out when the two are in Canada for a meeting of Group of Seven officials. Kato refrains from commenting further on potential bilateral talks, noting that no specifics have been set. The finance minister reiterates that Japan won’t use the topic of Treasury sales as leverage in its trade talks with the US.
US/EU (BBG): EU Plagued by ‘Collective Action Problem’ on Trade, Bessent Says
US Treasury Secretary Scott Bessent said the European Union suffers from a “collective action problem” that’s hampering trade negotiations, downplaying the possibility of a quick agreement with the US’s largest trading relationship. “I think the US and Europe may be a bit slower,” Bessent said when asked at a Saudi-US Investment Forum in Riyadh about progress on tariff talks. “My personal belief is Europe may have a collective action problem; that the Italians want something that’s different than the French. But I’m sure at the end of the day, we will reach a satisfactory conclusion,” he continued.
EU/RUSSIA (FT): EU Readies Capital Controls and Tariffs to Safeguard Russia Sanctions
Brussels is preparing to use capital controls and tariffs against Russia in case Hungary blocks the extension of the EU’s economic sanctions imposed on Moscow in response to its war in Ukraine. The European Commission has told national capitals that a large portion of the sanctions, including €200bn in frozen Russian state assets, could be moved on to a different legal basis to circumvent Budapest’s veto, five officials briefed on the ongoing discussions told the Financial Times.
UK (The Times): Pension Funds ‘Volunteer’ to Invest £25b More in UK Assets
Seventeen of the country’s leading defined-contribution scheme providers, including Aviva, Legal & General, Phoenix and Royal London, will sign a voluntary agreement on Tuesday to invest at least 10 per cent of their default funds in potentially higher-returning but riskier private markets by the end of the decade with half, or 5 per cent, allocated to the UK.
UK (BBG): Reeves Says ‘Never Say Never’ on Mandating UK Pension Investment
Chancellor of the Exchequer Rachel Reeves said she didn’t rule out mandating pension funds to allocate money to UK assets, as the government seeks to channel more investment into the domestic economy. “Never say never,” Reeves said in a Bloomberg TV interview on Tuesday, when asked if she was considering forcing funds to invest in British companies and infrastructure projects. “But I don’t think it’s necessary. We don’t need to mandate them if people are willing to sign a voluntary accord.”
CHINA (MNI): PBOC to Increase Role of Price Tools - Deputy
MNI (Beijing) The People’s Bank of China will downplay quantitative targets and focus more on price-based tools like interest rates in future, Deputy Governor Xuan Changneng said at the Central Bank of Iceland's Annual Economic Conference, according to a statement on the PBOC website Tuesday. Xuan noted that officials aim to enhance the market-based, interest-rate framework and work to clarify the 7-day reverse repo rate as the main policy benchmark.
CHINA (MNI EXCLUSIVE): China Won't Make Japan's Mistake With FX Deal - Advisors
MNI speaks to policy advisors in Beijing about the prospects for a "Mar-a-Lago Accord". On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA (MNI EXCLUSIVE): China Has Room for Further Monetary Easing
MNI speaks to Chinese government advisor Sun Lijian, director of the Financial Research Center at Fudan University. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA/LATAM (BBG): Xi Courts Latin America as Trump’s Tariffs Pressure Region
Chinese President Xi Jinping vowed to deepen economic cooperation with Latin American and Caribbean nations and offered visa-free entry to some countries, as he seeks to position China as a better partner than the US. China will provide a 66 billion yuan ($9.2 billion) credit line to support development in the region, known in short as LAC, Xi told the fourth ministerial meeting of the China-Community of Latin American and Caribbean States Forum in Beijing on Tuesday. Visa-free arrangements will also be extended to five countries from the group, Xi said, without specifying them.
BOJ (MNI EXCLUSIVE): Spending Concerns Weigh on BOJ Hikes
MNI discusses the impact of consumer spending on the BOJ's outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
SOUTH KOREA (MNI): PPP Discord Could Further Bolster Lee's Bid w/Campaign Underway
The presidential election campaign officially got underway on 12 May, with opposition liberal Democratic Party of Korea (DPK) candidate Lee Jae-myung the strong favourite to win office in the 3 June contest. Lee was already seen as the frontrunner for the presidency following the confirmation by the Constitutional Court of Yoon Suk-yeol's impeachment following his abortive imposition of martial law in Dec 2024. A bitter dispute within the conservative People Power Party (PPP) could boost his standing further.
PHILIPPINES (MNI): VP Impeachment Trial Set to Be On Knife-Edge After Senate Elections
The midterm elections that took place on 12 May have delivered something of a rebuke to President Ferdinand 'Bongbong' Marcos Jr. ahead of what is expected to be a high-profile and bitter impeachment trial for Vice President Sara Duterte in July. The main focus was on the election for 12 of the 24 seats in the Senate. This is because Duterte is set to face an impeachment trial in the Senate as early as July. Should the chamber decide to convict her by a two-thirds majority (16 of 24), she will be removed from office and likely barred from running for the presidency in 2028.
CORPORATE (BBG): Nissan Skips Profit Guidance, Shuts Factories as Crisis Deepens
Nissan Motor Co. withheld its annual profit guidance and said it will shut production plants as the carmaker struggles with the combined headwinds of surging restructuring costs and the fallout of President Donald Trump’s trade war. The company decided against issuing an operating profit forecast for the fiscal year ending March 2026, it said Tuesday in its earnings report. Profit for the year that ended in March 2025 came in at ¥134 billion ($906 million), just short of estimates for about ¥139 billion. Nissan said it will reduce its production facilities to 10 factories from 17 by the 2027 fiscal year, and also plans to cut 20,000 jobs.
DATA
UK DATA (MNI): Private AWE a Little Soft, Higher Bonus Payments, Quantities in Line
- UK MAR AVE WEEKLY EARNINGS +5.5% YY
- UK MAR AVE WEEKLY EARNINGS EX-BONUS +5.6% YY
- UK APR CLAIMANT RATE +4.5%
- UK APR CLAIMANT CHG +5200
Private regular AWE a tenth lower than consensus expectations at 5.6%Y/Y in the 3-months to March (BOE had forecast 5.76%). But there were some bonus payments that have skewed whole economy AWE inc bonus higher (we can normally look through those). The LFS quantities side largely in line with expectations - unemployment rate
at 4.5% and 3-month employment change at 112k. Payrolled employees also in line with expectations with an upward revision to March (the revision was expected). There was an upward revision to the March 2024 single month data (as well as a downward revision to the April 2024 single month data). This put the single month data at 5.95%Y/Y in March 2024 (revised up from 5.81%Y/Y). So there was a decent base effect here.
GERMANY DATA (MNI): ZEW Beats Consensus But Remains Below March Recent High
- GERMANY ZEW MAY ECONOMIC EXPECTATIONS 25.2
- GERMANY ZEW MAY CURRENT CONDITIONS -82
The German ZEW expectations index rose from -14.0 to 25.2 in May, outperforming consensus of 11.3 but remaining below March's 3-year high of 51.6. The current conditions index meanwhile disappointed as it deteriorated slightly from -81.2 to -82.0 (consensus -77.0). The improvement in expectations comes after global trade tensions eased following the 90-day US tariff pause announced by the US administration on Apr 9. The German DAX index has erased its losses seen initially after 'Liberation Day' on April 2 and traded at all-time highs yesterday. The survey of 191 analysts was conducted May 5-12.
AUSTRALIA DATA (MNI): NAB Business Conditions Continue to Trend Lower, Labor Costs Steady
The NAB Australian business survey saw conditions ease to +2 from a revised +3 reach in March. On the confidence front, the reading edged up to -1 from -3 prior. These headline measures aren't suggesting a sharp turnaround in domestic economic growth momentum in the near term. In terms of the detail, trading conditions edged down to 5.2 from 5.7, while profitability fell to -4.2 from around flat prior. This is the weakest profit reading since 2020.
FOREX: Dollar Index Resistance Holds for Now, US CPI Up Next
- Risk appetite has consolidated following Monday's surge, allowing USD indices to track moderately lower early Tuesday. The Ice USD index broadly held its first main resistance point at the 50-day EMA, an average that has capped DXY gains since March. With that said, the greenback is holding the majority of yesterday’s advance, and with US CPI providing the next impulse later today, the short-term trajectory for the DXY will be closely monitored.
- A similar dynamic for major equity benchmarks is allowing the likes of AUD and NZD to outperform on the session, both rising over half a percent against the dollar, while the Euro has been unable to garner much support.
- Recent EURUSD weakness appears corrective as key trend signals remain bullish. However, the pair has breached the 20-day EMA and pierced 1.1082, the 50-day EMA. A clean break of the average would strengthen a bear threat and signal scope for a move towards 1.1026, the 38.2% retracement of the Feb 3 - Apr 21 bull cycle.
- USDCHF (-0.61%) has also respected its 50-day EMA as well, pulling lower from its 0.8476 recovery high to approach the 0.8400 mark. Overnight straddle pricing incorporates a move of just +/- 45 pips from current spot levels, suggesting that resistance will likely remain intact. However, should yesterday’s boost to risk dominate any developments regarding US inflation and the dollar rally continue, USDCHF will eye a move towards 0.8578, the April 10 high.
- The quantity side of the UK labour market report broadly met expectations, which has kept GBPUSD steady, just above the 1.32 handle. A minor head and shoulders formation on the daily chart highlights a reversal and reinforces the likelihood of a corrective pullback near-term. Key support to watch is 1.3087.
EGBS: Bunds Consolidate Yesterday's Selloff; Focus on US CPI
Bund futures have consolidated yesterday’s sell-off. Today’s sovereign and corporate supply has helped limit rallies, with markets awaiting this afternoon’s US CPI report and any further tariff headline flow. While the US and China have agreed to a temporary tariff rollback, there remains a lack of progress on the EU/US trade front. This will be a key focus in the Eurozone until hard data for April starts filtering in later this month.
- Bunds are -31 ticks at 129.47, narrowing the gap to support at 129.28 (50.0% retracement of the Mar 11 - Apr 7 rally). For now, the latest move down in Bund futures is considered corrective.
- Initial resistance is the 50-day EMA at 130.57 and the 20-day EMA at 130.85.
- The German 10s30s curve is bear steeper (+1bp today), while 2s10s is slightly bear flatter owing to this morning’s E4.5bln 1.70% Jun-27 Schatz supply.
- Given the recent string of weak German auctions across the curve, today’s 2.16x bid-to-cover ratio for the Schatz (vs 1.69x prior) will come as somewhat of a relief.
- We have also seen 30-year supply from the Netherlands and 3/7/15+ year supply from Italy, while the EU is holding a 20-year syndication.
- 10-year EGB spreads to Bunds are biased slightly tighter.
- The German ZEW expectations component was much stronger-than-expected at 25.2 (vs 111.3 cons, -14.0 prior), with the DAX continuing its recovery from the April 9 lows in May.
- ECB’s Escriva and Makhlouf have spoken about the value of scenario analysis in comments this morning.
GILTS: Curve Twist Steepens, Soft Wages Data Supports Short End
Gilt futures are struggling to recover from lows, with Bunds experiencing some light pressure after a firmer-than-expected round of ZEW expectations data. Contract last -22 at 91.59 vs. lows of 91.51, breaking yesterday’s low.
- Next support located at the April 15 low (91.43).
- Yields 1.5bp lower to 3.0bp higher, curve steeper.
- 2s anchored by the dovish takeaways from the wage metrics in the monthly labour market report.
- SONIA futures +2.0 to -2.5, strip twist steepens.
- BoE-dated OIS showing ~49bp of cuts through year-end vs. ~46bp late yesterday, next 25bp cut fully discounted through the September MPC (~21bp priced through August).
- Meanwhile a relatively heavy morning for EGB & EU-bond supply applies pressure further out the curve.
- 2s10s and 5s30s curves both stick within multi-week ranges, failing to retest April cycle highs.
- The DMO’s consolation with market participants yielded no major surprises, with the DMO noting that it is planning to schedule one syndicated offering during Q2 2025-26 for the sale of a new medium conventional gilt with the transaction planned to take place in September 2025.
- BoE chief economist & hawkish dissenter Pill doesn’t offer much in the way of fresh monetary policy-related comments (pointing to his appearance scheduled for next week when it comes to more meaningful comments on that front), while long end I/L supply passed smoothly.
EQUITIES: Monday's Rally in E-Mini S&P Reinforces Bullish Conditions
Strong gains in the Eurostoxx 50 futures contract on Monday reinforce current bullish conditions. The contract is extending the recent breach of 5263.01, 76.4% of the Mar 3 - Apr 7 bear leg. The continuation higher signals scope for a climb towards 5516.00, the Mar 3 high and the key bull trigger. Initial firm support to watch lies at 5142.89, the 20-day EMA. Clearance of this level would signal a possible reversal. A bullish trend condition in S&P E-Minis remains intact and Monday’s strong gains reinforce bullish conditions. The contract has pierced an important resistance at 5837.25, the Mar 25 high and a bull trigger. This strengthens the bullish theme, paving the way for a continuation near-term. Sights are on 5896.25, a Fibonacci retracement. Initial firm support to watch lies at 5637.98, the 50-day EMA.
- Japan's NIKKEI closed higher by 539 pts or +1.43% at 38183.26 and the TOPIX ended 30.06 pts higher or +1.1% at 2772.14.
- Elsewhere, in China the SHANGHAI closed higher by 5.627 pts or +0.17% at 3374.871 and the HANG SENG ended 441.19 pts lower or -1.87% at 23108.27.
- Across Europe, Germany's DAX trades higher by 8.45 pts or +0.04% at 23574.34, FTSE 100 higher by 4.55 pts or +0.05% at 8609.25, CAC 40 up 14.27 pts or +0.18% at 7864.37 and Euro Stoxx 50 up 3.69 pts or +0.07% at 5396.05.
- Dow Jones mini down 96 pts or -0.23% at 42395, S&P 500 mini down 26 pts or -0.44% at 5838.25, NASDAQ mini down 117.25 pts or -0.56% at 20827.75.
Time: 10:00 BST
COMMODITIES: Short-Term Gains for WTI Futures Still Considered Corrective
A downtrend in WTI futures remains intact and short-term gains are considered corrective. For now, the corrective cycle remains in play and price has traded through the 20-day EMA. Key resistance to watch is $63.55, the 50-day EMA, a clear break of this level would highlight a stronger reversal. This would open $66.41, the Apr 4 high. For bears a reversal lower would refocus attention on $54.67, the Apr 9 low and bear trigger. The latest pullback in Gold appears corrective. Key short-term support to watch is $3202.0, the May 1 low. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3164.3, 61.8% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA is at $3161.0. The medium-term trend condition remains bullish, a reversal would refocus attention on $3500.1, the Apr 22 high and bull trigger.
- WTI Crude up $0.35 or +0.57% at $62.22
- Natural Gas up $0.07 or +1.81% at $3.714
- Gold spot up $18.97 or +0.59% at $3255.99
- Copper up $3.6 or +0.78% at $465.5
- Silver up $0.53 or +1.63% at $33.14
- Platinum up $9.89 or +1.01% at $992.49
Time: 10:00 BST
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 13/05/2025 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 14/05/2025 | 0130/1130 | *** |  AU | Quarterly wage price index |
| 14/05/2025 | 0600/0800 | *** |  SE | Final Inflation Report |
| 14/05/2025 | 0600/0800 | *** |  DE | HICP (f) |
| 14/05/2025 | 0700/0900 | *** |  ES | HICP (f) |
| 14/05/2025 | 0715/0815 |  GB | BOE Breeden At ISDA Conference | |
| 14/05/2025 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 14/05/2025 | 0915/0515 | US | Fed Governor Christopher Waller | |
| 14/05/2025 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 14/05/2025 | - | *** |  CN | Money Supply |
| 14/05/2025 | - | *** | CN | New Loans |
| 14/05/2025 | - | *** | CN | Social Financing |
| 14/05/2025 | 1230/0830 | * |  CA | Building Permits |
| 14/05/2025 | 1240/1440 | EU | ECB's Cipollone On Liquidity Issues Panel | |
| 14/05/2025 | 1310/0910 | US | Fed Vice Chair Philip Jefferson | |
| 14/05/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 14/05/2025 | 2140/1740 | US | San Francisco Fed's Mary Daly |
