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• Tariffs are clearly at the forefront, EGBs and Bund have brushed aside the weaker German PMIs, Bund now tests Yesterday's low, with the Risk Tone tilted to the upside following Trump's comment on Powell, and offers of a good deal for China on any potential trade talks.
• Yesterday's low in Bund is still holding right now, but downside traction will Open to 130.87, the 17th April low.

The German April flash services PMI was weaker than expected at 48.8 (vs 50.2 cons, 50.9 prior). This was the first contractionary reading since November 2023, and the lowest since February 2024. Taken alongside the soft French services reading, the Eurozone-wide print is set to miss expectations of 50.5. The manufacturing index softened a touch to 48.0 (vs 47.6 cons, 48.3 prior), implying a slightly contractionary composite reading of 49.7 (vs 50.5 cons, 51.3 prior).

Tariff-related impacts are apparent, with services firms suffering from heightened uncertainty and manufacturers citing order frontloading and stock building. 

Key notes from the release:

• "Service providers commented on the influence of concerns over tariffs and related uncertainty, with some clients reportedly delaying decision-making and reining in spending amid worries about the economic and political outlook".
• "Goods producers meanwhile noted a second straight monthly rise in new orders, supported by a first increase in export sales in over three years"..."there was evidence from panellists of the increases being partly driven by the frontloading of orders and related stockbuilding".
• "Both manufacturers and services firms revised down their growth expectations for the coming year, with the latter seeing sentiment deteriorate particularly sharply to the weakest since September 2023".
• "The decline in German private sector employment extended to an eleventh straight month in April"..."Further retrenchment in the manufacturing sector contrasted with sustained job creation in the service sector".
• "A slight uptick in the rate of inflation in average prices charged for goods and services"..."Manufacturers raised charges despite reporting a steep and accelerated reduction in input costs in April....Services firms, on the other hand, recorded a sharp and slightly quicker increase in operating expenses".
• "Data were collected 9-22 April".

Front end of the German ASW curve leads this morning’s move lower, driven by broader risk-on price action largely derived from President Trump pushing back against the idea that he is looking to fire Fed Chair Powell and some comments pointing to a potential moderation in the Sino-U.S. trade war.

• Spreads vs. 3-month Euribor 1.2-3.0bp lower on the day.
• No meaningful reaction to the flash PMI data, Bunds incrementally weaker in the time since.