Market News

• CPI +3.0% vs +3.0% y/y prelim
• Prior +2.6%
• Core CPI +2.2% vs +2.2% y/y prelim
• Prior +2.3%

Services inflation continues to be the main sticking point, but is at least seen easing to 3.0% in April (previously 3.3%). Meanwhile, food price inflation is still keeping thereabouts at 2.4% (previously 2.5%). But with regards to the headline reading, energy price inflation is the main category that is bringing up prices. On a monthly basis, energy prices were up 3.0% and up 10.8% on an annual basis. On the latter, that is a marked step up from the 5.1% estimate in March.

All in all, this just points to a continued uptick in headline price pressures as the US-Iran conflict drags on. And the impact of that will be more evident in broader categories as…

It's still early in the day and even if we are seeing risk trades keep steadier, the overall market mood is more tepid at best. Major indices in Europe are starting the day with just minor losses while S&P 500 futures are seen up 0.2%. It's not hinting at much though, especially with bond markets globally still being under pressure.

10-year yields in France closed in on the 4% mark once again yesterday and are still up some 26 bps this month to the highest levels since 2009. Meanwhile, 10-year yields in the US continue to push up and are sitting around 4.65% today - the highest since early 2025. Even in Japan, the pressure is on with 10-year yields hovering near 2.80% - the highest in 30 years.

As such, that will continue to apply pressure…

• PPI +1.2% vs +1.0% m/m expected
• Prior +2.5%

German producer prices moved up more than estimated in April, with the year-on-year estimate also reflecting a strong 1.7% increase. On the annual estimate, that is the highest since May 2023. Producer prices continue to ramp up amid higher energy prices, also showing some impact in spreading to other key categories.

Even if you exclude energy prices from the equation, German producer prices were still up by 0.7% compared to March.

Looking at the breakdown, energy prices rose by 2.4% on the month. In particular, mineral oil prices rose particularly sharply in April (+10.7%). Besides that, there were also increases in prices for capital goods (+0.3%) and intermediate goods (+1.2%). On the latter,…

• CPI +2.8% vs +3.0% y/y expected
• Prior +3.3%
• CPI +0.7% vs +0.9% m/m expected
• Prior +0.7%
• Core CPI +2.5% vs +2.6% y/y expected
• Prior +3.1%
• Core CPI +0.7% vs +0.8% m/m expected
• Prior +0.4%

A note of this report from earlier: There will be more to the UK CPI report than what meets the eye later today

The monthly increases were much softer with services inflation only up 0.9% on the month, compared to the 1.2% estimate expected. Put together with the caveats pointed out in the linked post above, that is making for a softer read as a whole on the annual estimate.

Of note, services inflation is the big one falling on the annual reading with it dropping to 3.2% (vs 3.5% expected) from 4.5% in March.

A lot of that is tied to one-off factors and base effects…

As the broader market focus stays on the fallout from the Middle East crisis, it is easy to expect inflation to keep running up on the back of higher energy prices. But as we look to the UK CPI report later, the expectation is for price pressures to ease in April. That at least on an annual basis. So, what's the deal here?

Let's take a quick look as to why that is and what can we expect.

The headline numbers are still very much expected to be impacted by higher energy prices from the US-Iran conflict. That should lead to monthly inflation jumping by around 0.9%. However, the annual estimate is expected to ease to 3.0% (from 3.3% previously) due to a couple of adjustments and base effects.

In particular, services inflation is the one that…

China announced it will purchase 200 Boeing jets, review rare earth export licences for civilian use and pursue reciprocal tariff cuts on $30 billion or more of goods with the US as part of a broad trade package.

Summary: The following is drawn from a China Commerce Ministry statement.

• China will purchase 200 Boeing jets, with the US committing to provide engines, parts and supply guarantees for components as part of the deal
• Beijing will review rare earth export licence applications for civilian use and both sides agreed to jointly study and resolve each other's concerns on rare earths, a significant softening of China's posture on a critical strategic commodity
• China is restoring registration of eligible US beef exporters and will send a…

• Samsung Electronics union to strike Thursday after South Korea mediation talks collapse
• Citi bull case Brent hitting $150 near term as oil markets under-price disruption risk
• Oil slips a little on Trump peace talk but supply fears keep prices elevated
• EU strikes provisional deal to cut US tariffs ahead of Trump's July 4 deadline
• PBOC sets USD/ CNY central rate at 6.8397 (vs. estimate at 6.8072)
• The People's Bank of China has left its Loan Prime Rates (LPR)s unchanged for the 12 month
• Preview: Australia April jobs data eyed as AUD rally and RBA rate path hang in balance
• China to scrap SME loan targets in shift toward market-driven credit, report says
• More from Fed's Paulson, says risks are super-elevated and hike on table if growth surges
• Japan…

The EU has struck a provisional agreement to implement its Turnberry trade deal with the US, paving the way for duty cuts on American goods before Trump's July 4 deadline and averting the threat of higher US tariffs on European products.

Summary:

• The European Parliament and the Council of the EU reached a provisional agreement on legislation to remove import duties on US industrial goods and grant preferential access to US farm and sea produce, implementing the trade framework agreed at Trump's Turnberry resort in Scotland last July
• Under the Turnberry deal, the EU agreed to cut duties on US goods in exchange for the United States maintaining tariffs of 15% on most EU products, down from higher threatened levels
• Trump had warned of much…

Australia's April jobs data, due Thursday, is expected to show employment rising around 10k-15k with unemployment steady at 4.3%, though Easter distortions and Middle East risks cloud the outlook.

Summary: The following draws on notes from Westpac, Commonwealth Bank of Australia and a Reuters market analysis:

• Both Westpac and CBA expect a softer April employment print after recent strong momentum, with Westpac forecasting a gain of 10,000 jobs and CBA forecasting 15,000, down from March's 17,900
• Both banks expect the unemployment rate to hold at 4.3% and the participation rate steady at 66.8%, with CBA noting the unemployment rate would remain unchanged due to rounding
• Westpac flagged a seasonal distortion risk: the April survey window…

• Major US stock indices close lower
• WSJ: Little progress in US/Iran talks
• VP Vance: Made a lot of progress on Iran
• Al Hadath: Trump has made decision to attack Iran
• Japan's Finance Katayam: Ready to take decisive action on forex
• Trump: We may have to give Iran another hit. I am not sure
• NATO warns alliance buildup will take years
• Bessent: Trump Admin. is not in a hurry to extend China trade truce due to expire in Nov
• US Pending home sales 1.4% vs 1.0% estimate.
• More from Treas Sec Bessent: U.S. expects European partners to support Iran sanctions
• US Treasury Secretary Bessent. Excess FX volatility is undesirable.
• Canada CPI inflation YoY for April 2.8% vs 3.1% estimate
• Canada March building permits +10.3% vs +3.0% expected
• ADP Weekly NER pulse 42.25K…

The WSJ is reporting:

• Iran’s negotiating position remains largely unchanged, with mediators and U.S. officials saying there has been little progress toward a breakthrough deal.
• Trump said he halted planned U.S. strikes on Tuesday due to what he described as positive developments in negotiations.
• Iran continues demanding:
  • An end to hostilities
  • Financial relief and reparations
  • Oversight role in the Strait of Hormuz
  • While resisting U.S. demands to shut down or suspend its nuclear program
• The U.S. and Israel were preparing additional strikes, with some regional sources warning attacks could still happen as early as next week.
• Trump suggested more military action remains possible, saying the U.S. may need to give Iran “another big hit.”
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