Market News

• Retail sales -0.3% vs -0.5% m/m expected
• Prior -2.0%; revised to -0.3%

The report here needs to be taken into context alongside the revision to the March numbers as well. There was a sharp revision higher to March retail sales, so that at least paints a better backdrop to work with during the onset of the Middle East conflict. So, the added drop in April doesn't hurt as badly and if anything it also comes in better than estimated.

The adjustment also sees April retail sales being down by just 0.3% in real terms compared to the same month last year. That owes much to a drop in petrol station sales, which are seen down over 10% annually (including sales in petrol station shops).

And even when you put a comparison to the previous month, petrol…

• House prices -0.6% vs -0.2% m/m expected
• Prior +0.4%
• House prices +1.7% vs +2.2% y/y expected
• Prior +3.0%

The average price of a dwelling in the UK eased slightly in May to £278,024, as Nationwide records a price drop of 0.6% on the month in May. Housing sentiment was more resilient in April but it seems that the uncertainty from the Middle East conflict is starting to bite now. That said, house prices are still keeping higher compared to the same month a year ago - even if the measure has declined modestly.

Nationwide notes that:

"Given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates, some loss of momentum was to be expected. Indeed, consumer confidence has weakened…

I think that pretty much sets the tone of what we can expect this week. That being another week where we go back and forth on the same issues awaiting both sides to strike a compromise, just so that we can get on with the optics of a deal. Trump's full tweet:

"Iran really wants to make a deal, and it will be a good one for the U.S.A. and those that are with us. But don’t the Dumocrats, and various seemingly unpatriotic Republicans, understand that it is MUCH tougher for me to properly do my job and negotiate, when political hacks keep negatively “chirping,” at levels never seen before, over and over again, that I should move faster, or move slower, or go to war, or not go to war, or whatever. Just sit back and relax, it will all work out…

As a reminder, the mood when we returned last week was that the deal was "imminent". One week later, we're still caught in the same negotiating position once again.

The US and Iran are continuing exchanging military blows in trying to posture ahead of the supposed framework agreement or memorandum of understanding (MOU). However, the latest communique from both sides continue to indicate a standoff between them.

US president Trump wants Iran to at least commit to a baseline guarantee on nuclear/uranium. And that sees a constant change in the terms that both sides are seeking from the deal/MOU. As for Iran, they continue to defend that they will not make any commitments on nuclear/uranium. That led to chief negotiator Ghalibaf blasting the…

• Reports of another likely ballistic missile interception near Ali Al Salem Airbase, Kuwait
• Japan Q1 capex growth stalls at near zero, raising risk of GDP revision lower
• ECB's Schnabel says Iran war inflation too broad to look through, flags rate hikes
• China tightens outbound investment rules to curb technology and data transfers
• Rubio pushes Lebanon ceasefire but US says Hezbollah blocked deal on Iran's orders
• Is Palantir a Buy?
• China May private survey Rating Dog Manufacturing PMI 51.8 (expected 51.4, prior 52.2)
• Reports of Iran drafting its own deal amendments as Tehran pushes back on Trump's terms
• PBOC sets USD/ CNY reference rate for today at 6.8167 (vs. estimate at 6.7643Z)
• Nasdaq technical analysis today at investingLive.com
• Japan…

Japan's Q1 capital spending rose just 0.047% year on year, sharply missing the 4.0% forecast and slowing from 6.5% in Q4, with an analyst warning the data points to a downward revision to Q1 GDP.

Data post earlier, though I've duplicated below if you prefer:

• Japan Capital Spending Q1: 0.0% y/y (expected 4.0%, prior 6.5%)

Also today:

• Japan manufacturing PMI eases to 54.5 in May. Cost pressures hit 32-month high

Summary: Source: Japanese Ministry of Finance; analyst comments from Meiji Yasuda Research Institute and Mizuho Securities

• Japan Q1 capital spending rose just 0.047% year on year, expected 4.0%, prior 6.5%; fell 2.0% on a seasonally adjusted quarterly basis
• Capital spending ex-software fell 1.4% year on year, expected 5.4%, prior 7.3%
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Kuwaiti air defenses are currently confronting hostile missile and drone attacks. The General Staff of the Army notes that if explosion sounds are heard, they result from the air defense systems intercepting the hostile attacks.

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War is ongoing, Oil positive.

China's State Council has issued sweeping new rules broadening regulatory oversight of outbound investment, covering overseas deals involving Chinese technology, data and national security considerations.

Taking effect July 1, the measures require authorisation for exports of restricted goods, technologies and related data, and ban indirect transfers through technical staff deployments or training arrangements.

US Secretary of State Rubio spoke with Lebanon's president and Israel's PM Netanyahu in the past 48 hours to advance a ceasefire, but Washington says Hezbollah blocked progress on Tehran's orders.

Summary: Source: Axios

• Rubio spoke with Lebanese President Joseph Aoun and Israeli Prime Minister Netanyahu within the past 48 hours to advance a new ceasefire initiative, per a US official
• The proposal calls for Hezbollah to halt all attacks on Israel as a first step, with Israel refraining from escalation in Beirut in return, to create space for gradual de-escalation
• President Aoun attempted to advance the proposal but parliament speaker Nabih Berri's response was described as evasive and disappointing, with Berri placing the burden on Israel to…

China's RatingDog/S&P Global Manufacturing PMI eased to 51.8 in May from 52.2 in April, staying above 50 for a sixth straight month, as input price inflation eased for the first time in six months.

Over the weekend we had the official PMIs:

• China's official manufacturing PMI slipped to 50.0 in May from 50.3, matching forecasts, as export orders contracted sharply; the non-manufacturing PMI rose to 50.1, beating the 49.5 consensus.

Summary: Source: RatingDog/S&P Global

• The RatingDog China General Manufacturing PMI eased to 51.8 in May from 52.2 in April, remaining above the 50.0 threshold for a sixth consecutive month and above the long-run survey average of 50.8
• New orders growth eased from April but remained among the highest recorded over…

Japan's S&P Global Manufacturing PMI eased to 54.5 in May from April's 51-month high of 55.1, with input costs and selling prices rising at rates rarely seen in over 24 years of data.

Summary: Source: S&P Global

• The headline Japan Manufacturing PMI fell to 54.5 in May from April's 51-month high of 55.1, marking a fifth consecutive month of improvement in sector health
• Output and new orders both rose at historically strong rates, though the pace of expansion eased from April; new export orders grew at the fastest pace in five years
• Stock building by manufacturers and clients, driven by Middle East war disruption and rising costs, was cited as a significant driver of the apparent demand strength
• Input costs rose to their highest since September…

Flat capex in Q1 the headline data point, Disappointing.

Japan Capital Spending Ex Software Q1: -1.4% y/y

• expected 5.4%, prior 7.3%

Japan Company Sales Q1: 1.1% y/y

• prior 0.7%

Japan Company Profits Q1: 14.6% y/y

• expected 5.3%, prior 4.7%

I'll have more to come on this separately, details etc.