9th June, 2025

European markets are poised for a tepid start to the week amid the Whit Monday holiday, with Euro Stoxx 50 futures dipping 0.147% despite Friday's robust performance on Wall Street, where the S&P 500 and Nasdaq both surged over 1%. Asian markets have largely tracked these positive moves, with the Nikkei and Hang Seng both climbing just under 1% as they approach their respective closes.

Asian participants appeared content to follow Friday's market trajectory, with minimal reaction to weekend developments. The US dollar, Treasuries, gold, and crude oil have largely maintained their Friday positions, while E-minis trade approximately 0.1% to 0.2% softer, trimming some of Friday's gains.

All eyes turn to London today as high-level trade discussions between the US and China take shape. Treasury Secretary Bessent, Commerce Secretary Lutnick, and Trade Representative Greer will meet with Chinese officials led by Vice Premier He Lifeng. This gathering of heavyweights follows last week's phone conversation between US President Trump and Chinese President Xi, with the attendance roster alone fuelling expectations for positive outcomes.

Meanwhile, ECB President Lagarde sees a "window of opportunity" to enhance the euro's global role, continuing her push for European financial autonomy amid tensions with the United States. Lagarde highlighted increasing investment flows into Europe and praised Germany's shift away from austerity as positive factors for the euro. Her recent suggestions that the eurozone should consider joint debt issuance to finance continental public goods underscore this strategic direction. ECB colleague Escriva reinforced this narrative Sunday, suggesting "the dollar's dominance as an international reserve currency seems to be peaking."

Friday's US employment report revealed a moderately slower pace of hiring than projected, with May adding 139,000 jobs against expectations of 126,000. However, downward revisions totalling 95,000 jobs over the previous two months suggest the labour market may be less robust than previously thought. The unemployment rate held steady at 4.2%, though labour force participation dipped slightly to 62.4%. Average hourly earnings came in firmer than expected at 0.4% MoM and 3.9% YoY, though these figures remain broadly consistent with the Fed's inflation target.

Treasury markets have bull steepened in Asian trading, with shorter-dated securities outperforming while the long end remains virtually flat. Ten-year yields hover just below 4.50%, having surged through that level Friday following the employment report – marking a nearly 20 basis point increase from Thursday's four-week low of approximately 4.32%.

Chinese economic concerns persist as May inflation figures marked a fourth consecutive month of deflation, while producer prices remained negative for a staggering 32nd straight month – the lowest reading in nearly two years. The outlook remains challenging amid trade tensions, price wars, and soft domestic consumption, with little immediate relief in sight.

Japanese final Q1 GDP figures showed upward revisions to quarterly growth, primarily due to better-than-expected inventory contributions and slightly improved private consumption. Nevertheless, the economy remained firmly in contraction at -0.2% QoQ, raising recession risks for Q2 as external headwinds intensify.

The European calendar offers little by way of major economic releases today, with no significant central bank communications scheduled. Across the Atlantic, the economic docket remains light with only April wholesale trade sales and the NY Fed's May Survey of Expectations on tap. The Federal Reserve maintains its customary pre-FOMC media blackout ahead of its June 18th monetary policy decision, leaving markets to digest existing data points as they position for next week's announcement.

For more on latest developments see the European Breakfast Briefing.

Monday's supply prospects

It is set to be a blank start to the new week with much of Europe out for the Whit Monday holiday. When market participants return tomorrow the market is expected to get back into full swing though, with a number of names already sat in the pipeline after recent roadshows. On average, bankers are calling for an average EUR31.5bn (ex-HY corps) of euro paper to cross the tape this week, to follow another bumper week last week which produced a final number of EUR48.25bn (ex-HY corps), with the full breakdown here.

The Street isn't really expecting any change from last week's level of activity in the US high-grade primary market with the average estimate coming in at a rather modest USD23bn (final tally last week USD26.75bn). There are some who believe we could see as much as USD30bn in ex-SSA issuance cross the tape this week, although there are also those who believe no more than USD15bn is on the cards. See the IG WEEKLY WRAP UP.

What to watch Monday (and the week)

** Key data: US Apr F Wholesales Inventories (15:00)

** Key events/speakers: No key events scheduled for Monday 9^th Jun

** Auctions: No major term auctions scheduled for Monday 9^th Jun

** Holidays: Whit Monday in much of Europe

** Viewpoint - The week ahead:

- Fed entered pre-June FOMC purdah on Saturday 7th June. April wholesale inventories (Monday). May CPI (Wednesday). May PPI (Thursday).

- UK Spending Review (Wednesday). ECB talk throughout the week.

- UK May BRC sales/Labour market report (Tuesday). April GDP (Thursday). KPMG/REC job report (Friday).

- EMU April IP/Trade plus May final German/France/Spain final CPI (Friday).

- Sweden April GDP indicator/household consumption/private sector production (Tue). Final May CPIF (Fri).

- China May CPI/PPI/Trade (Monday). South Korea June first 10-day exports (Wednesday).

All times BST