Markets
April payrolls in the US were stronger than expected (115k vs 65k) and confirm outgoing Fed chair Powell’s message at the presser of the April policy meeting. He said the labour market is showing “more and more signs of stability” after a year of near-zero job growth. Inflation, by contrast, was “kind of misbehaving”. With upside risks posed by the Iran war looming, there’s no reason to expect any near-term policy easing. Markets price a long rates status quo at least through the end of the year. Treasuries gained ground, outperforming Bunds in the process. US rates lost a couple of basis points, between 2.7 and 3.8 bps. German rates steadied with some minor underperformance at the front end of the curve, where the 2-yr yield added 1.5 bps. Oil prices on Friday weren’t guiding much by flatlining around but above $100. The black gold stayed on the sidelines while awaiting Iran’s response to the latest US proposal to end the war. That finally came over the weekend and received a hard pass from president Trump. “I have just read the response from Iran’s so-called ‘Representatives.’ I don’t like it — TOTALLY UNACCEPTABLE!” Brent jumps more than 4% at the Asian open today. A barrel currently trades at $105+. Treasury yields erase Friday’s limited gains by adding 3-4.5 bps across the curve. The US dollar recoups some of the losses it incurred end last week. EUR/USD turns lower to 1.175 after having flirted with the 1.18 barrier. The greenback on a trade-weighted basis hovers around 98. USD/JPY finds a short-term equilibrium between 156 and 158 after a series of FX interventions since April 30 by Japanese authorities. Sterling digested Labour’s devastating election blow, which included a historical loss in the Welsh parliament, very well. EUR/GBP depreciated to 0.864. Prime minister Starmer vowed to stay on as prime minister – easing concerns that a change could lead to less fiscal prudence – but he is not out of the woods. He planned a speech today to outline plans to overturn the party’s fate. If deemed insufficient, it might prompt leadership challenges.
The eco calendar today is pretty uninspiring, so we’ll mostly be looking for the fall-out of the US disapproval of Iran’s counterproposal. It leaves president Trump with little, if any, progress in the war with Iran before his closely watched encounter with his Chinese counterpart on Thursday and Friday. Key talking points include trade (truce extension), Tehran and Taiwan but there’s not much expected in terms of a breakthrough. Important economic data later this week is limited to tomorrow’s US April CPI and Friday’s retail sales. The country kicks of its mid-month refinancing operations with a $58bn 3-year bond sale today. A 10-yr and 30-yr bond sale (tomorrow and Wednesday) are the ones to follow-up on closely.
News & Views
KMPG and REC’s monthly UK reports on jobs showed permanent placements falling at a quicker rate in April amid greater market uncertainty. The report, compiled by S&P global, also throw rising business costs in the mix. Although conditions remain more favourable than they were through much of 2025, hiring decisions are being referred because of uncertainty stemming from the war in Iran. While slightly rising temp billings offered some counterweight, total demand for workers was still declining (13th consecutive month). The overall availability of workers continued to increase markedly in April. Redundancies and lower demand were key factors for the latest rise in candidate numbers. Starting salaries for permanent workers increased again, but the rate of pay growth remains below the series long-term average.
Chinese producer prices increased at the quickest pace since October 2021 in April. They rose by 1.7% M/M, up from 1% in March and moving the annual PPI pace from 0.5% to 2.8%, the fastest increase since July 2022. The Iran war is the obvious catalyst of rising factory-gate prices. Consumer price inflation rose by 0.3% M/M and from 1% Y/Y to 1.2% on a headline level. Core CPI went from 1.1% Y/Y to 1.2% Y/Y. Apart from transportation and energy costs, there was a price boost from holiday travel demand. Separate details showed consumer goods inflation picking up from 1.3% to 1.4% Y/Y and services inflation moving from 0.8% to 0.9% Y/Y.
