KBC Sunset Market Commentary 10/06/2025 via Trader Talent

KBC Sunset

Tuesday, June 10, 2025

Daily Market Overview

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Markets

Trade talks between the US and China entered their second day in London. The presence of US Treasury Secretary Bessent, commerce secretary Lutnick, trade representative Greer and Chinese Vice Premier He Lifeng and commerce minister Wang Wentao underscores the importance of that gathering one week after US President Trump and Chinese President Xi Jinping spoke a first time on the phone. Comments by Bessent “good meeting” and Lutnick “fruitful discussions” aren’t sufficient to lift market sentiment like for example in the wake of Geneva talks which led to the US and China dropping high tariff walls for 90 days. Topic of debate is (amongst others) dropping US export curbs on some tech exports in exchange for assurances on easing limits on Chinese rare earth shipments. An announcement, positive or negative, can be expected within the next couple of hours and might shift markets in a significant manner.

Awaiting the trade talk outcome, the eco calendar offered little inspiration to guide trading. ECB governors speak with one voice in saying that policy and inflation are now in a favorable zone, allowing for a wait-and-see approach. This obviously doesn’t mean that the ECB would sit back and watch when economic developments take a turn for the worse or should upside inflation risks materialize. Dovish ECB member Villeroy today suggested that the ECB managed to successfully normalize monetary policy. The EMU agenda remains light throughout the week while US CPI inflation (tomorrow) and June University of Michigan consumer confidence (Friday) hand the Fed some final input for deciding on policy next week. It’s obvious that for now, the US central bank will continue to err on the side of upside inflation risks rather than already hinting at a stronger focus on downside employment risks. Core bonds are slightly better bid today after the end of last week sell-off in Europe (ECB) and the US (payrolls). Core curves bull flatten with yield changes in Germany and the US ranging between -1 bp at the front end and -4 bps at the very long end. Fortunes for the dollar haven’t improved yet with EUR/USD currently changing hands around 1.1440. Stock markets are currently mixed. Sterling lost ground after this morning’s labour market report showed significant job cuts in May (-109k) with wage growth slower than feared. UK Gilt yields drop 8 to 9 bps across the curve with money markets now fully pricing two more BoE rate cuts this year. EUR/GBP rose from 0.8425 to 0.8470.

News & Views

• The Hungarian Debt Agency AKK modified its 2025 financing plan. In line with the Economy Ministry increasing the expected 2025 cash-flow-based-budget deficit to HUF 4,774bn, AKK plans to cover the resulting HUF 651bn increase of funding needs for 2025 with FX bond issuance. The amended plan contemplates FX bond issuance in the amount of EUR 3bn which exceeds the additional financing need which will facilitate the accumulation of intra-year liquid reserves and enhance the flexibility of debt management. Timing, currency, and maturity of any issuance will be determined by ÁKK based on market conditions. FX bond issuance will also allow ÁKK to reduce slightly the net issuance target for the institutional HUF market by HUF 344bn. As a result of the new financing plan, the share of FX debt relative to total debt could reach 30% by the end of the year, but the FX share could fall back below the 30% benchmark limit following the end of the year.
• Norwegian headline CPI inflation rose 0.4% M/M and 3% Y/Y (from 2.5% in April). Underlying inflation (CPI-ATE, excluding energy and adjusted for tax changes) eased to 0.2% M/M and 2.8% Y/Y (from 3% April). In its Q1 monetary policy report published end March, the Norges Bank (NB) projected headline and CPI-ATE inflation for May at respectively 2.7% Y/Y and 3.1% Y/Y. In a monthly perspective prices increased for food & drinks (2.8% M/M), clothing & footwear (0.9%) utilities (0.8%), communications (0.5%) and hotels, cafes and restaurants (0.6%). Prices of transportation (-0.9%) and some household goods (-0.8%) declined. The NB holds its policy rate unchanged at 4.5% since December 2023 and indicates that it will mostly likely be reduced in the course of 2025. However, the MPC said to give special attention to the rapid rise in prices for many goods (including food) and services as high business costs likely stoke inflation. The NB meets again on June 19 and has a new monetary policy report with forecasts available. It is most likely too early for the NB to ease policy next week. Markets see a first cut at the September meeting. The krone is holding little changed in the 11.51 area.