Key Highlights

• APAC equities down on profit-taking and U.S.-Iran uncertainties.
• Local elections in the U.K. produce a shift from Labour to Reform, adding to the pressure on PM Sir Keir Starmer.
• A U.S. court rules against Trump’s Section 122 levy of 10% tariffs but issues only a narrow block before they roll off in two months.

Chart of the Day

Cross-border investors can return to U.S. Treasury markets on a far greater scale

^{Source: BNY}

The general directional bias and relative magnitudes for MENA currencies in April remain unchanged from March. The main oil-producing economies have managed to avoid large outflows, while real rate and/or fiscal pressures continue to undermine the likes of EGP and KWD.

OMR has now solidified its status as the regional safe haven, and its flows continue to materially outperform peers, even though current magnitudes are far lower than the surge flow witnessed in March. Since the conflict began, we have highlighted how OMR has been totally transformed. It has gone from a currency that registered barely any activity, to the extent that we worried about data density, to being seen as a local safe haven for its location and ability to help move some crude out of the region avoiding the Strait of Hormuz.

Omani crude itself is now seen as a crucial benchmark, and until the conflict is fully resolved, premiums in different crude products will persist, generating marginal demand for Omani assets. Due to the need to invest proceeds, we also have seen a pick-up in transactions in Omani equities, and this process could perpetuate itself as the country sees material loosening in financial conditions.

AED is finally seeing some recovery interest after a torrid period which began even before the outbreak of the conflict. However, the currency will likely undergo a lengthy period of repricing, as the UAE’s exit from OPEC will have implications for balance-of-payments performance over the long term. The country’s financial account remains under close scrutiny since news of a potential swap line with the U.S. was revealed. Our fixed income data show why this is being discussed: flows since February have been very poor, although in a similar story to Saudi debt there was some respite around early April as a ceasefire gradually materialized. Even so, current momentum is once again deteriorating and approaching the extremes seen in the first two weeks of the conflict.

What's Changed?

Markets are awaiting more information about the U.S./Iran talks, the U.S. labor market and the fallout from the U.K. elections. That all leaves risk-taking across markets modestly lower: oil is bid, USD has held firm and bond performance has been mixed, with U.S. and U.K. holding up while the EU is down; equities were offered from APAC to EMEA, while U.S. futures were higher.

AI and the economy: An article by Greg Ip in the WSJ highlights the distortions that AI is causing for jobs and growth. The scale of investment in AI is seen as rising with some calls now for $800bn in 2026 and $1.1tn in 2027. This is adding to pressure on free cash flow from all equities, hurting liquidity in some markets. Under this scenario, AI is to add 2% to U.S. GDP, while in Q1 the AI economy accounted for 70% of the growth story. The WSJ also reports on the White House’s shift to discussing AI limits and regulation with CEOs in view of cybersecurity risks.

Strait of Hormuz traffic and markets: The vessel trackers reports no commercial traffic for three days, which leaves the current escalation and the modest reaction in both equities and oil as a correlation break. In particular, the correlation between oil and gold flipping positive looks worrying. There are mixed signals as we head into the weekend, reflecting doubts about the timing of escalation, with a focus on the Trump/Xi meeting along with the blockade and Project Freedom in flux.

Weekend conversations and EUR/JPY: Geopolitics continues to dominate headlines and market risks, with the EU considering direct discussions with Russia’s Vladimir Putin to end the Ukraine conflict. The visit to Japan by U.S. Treasury Secretary Scott Bessent (May 11-14)  and talks are adding to the focus on the JPY intervention so far in May. The BoJ is estimated to have sold $35bn of USD from May 1-6, casting doubt on whether the action goes beyond the IMF’s “freely floating” limits.

Bottom line: The role of jobs Friday driving the FOMC expectations for investors should be the main story today, but the narrative of the week has gone full circle and the hopes for clarity on the Strait of Hormuz has turned again. The spinning of headlines about the conflict and talks dominates all markets leaving the oil price in charge still and the clock ticking for resolution. Our iFlow Mood Index has traveled full circle as well moving into negative territory on global share selling this week. The role of bond yields in balancing out equity risks should return with the jobs report today as well, yet again, expectations about inflation may be more powerful to trading risk today with the flash consumer sentiment survey. Fridays since February 28 have been more volatile than Monday-Thursday and today, despite the narrowing of volumes, looks no different.

What You Need to Know

Early results in local elections in the U.K. indicate a poor showing by the ruling Labour Party, adding to the pressure on Prime Minister Sir Keir Starmer. The party is expected to lose control of the Welsh Senedd for the very first time, along with a significant number of local council seats and control of councils. However, early indications suggest the results are not catastrophic enough to warrant an immediate change of leadership. Starmer himself has taken responsibility for the loss but stressed that he is “not going to walk away” and pledged to “set out the further steps” for the country in the next few days. The Reform party is the biggest winner so far, having taken its first London council, the borough of Havering. FTSE 100 -0.66% to 10209, GBPUSD +0.355% to 1.3603, 10y gilt -4.4bp to 4.904%.

A U.S. federal trade court has ruled that President Trump’s 10% global tariffs are unlawful, blocking enforcement against two companies and the state of Washington but not issuing a universal injunction. The tariffs, imposed in February under Section 122 of the Trade Act of 1974, were challenged for misusing the law by conflating trade deficits with balance-of-payments deficits. The ruling marks a setback for the administration’s tariff strategy, with potential appeals pending. The decision follows a Supreme Court overturn of earlier tariffs under a different law, and the Justice Department may appeal. The ruling may weaken U.S. leverage ahead of upcoming trade talks with China. S&P Mini +0.29% to 7384, DXY +0.051% to 98.117, 10y UST -0.7bp to 4.379%.

President Trump has extended the deadline for the EU to ratify its trade agreement to July 4, warning that tariffs on EU goods will increase if the deal is not finalized by then. The EU failed to finalize the pact during recent talks, risking a rise in auto tariffs from 15% to 25%. European Commission President Ursula von der Leyen affirmed that both sides remain committed, with progress toward tariff reductions expected by early July. Negotiations continue amid efforts to resolve outstanding issues and implement the agreement reached in July 2025. Euro Stoxx 50 -0.79% to 5926, EURUSD -0.187% to 1.1745, BBG AGG Euro Government High Grade EUR -10bp to 3.251%.

The IMF has highlighted mounting financial stability risks as AI accelerates cyberattacks by enabling faster, more widespread exploitation of vulnerabilities in shared digital infrastructure. It said AI-driven attacks could trigger systemic disruptions, affecting payments, liquidity and market confidence. While AI also aids defense through threat detection and vulnerability reduction, resilience and rapid recovery remain critical. Policymakers must enhance supervision, resilience standards and public-private cooperation, emphasizing cyber stress testing and governance. International coordination is essential to address cross-border risks and support resource-constrained economies, ensuring the global financial system withstands AI-enabled cyber threats. MSCI World -0.06% to 1103, DXY +0.051% to 98.117, BBG Global Aggregate 0bp to 3.768%.

What We're Watching

U.S. April change in nonfarm payrolls forecast to slow to 65k vs. 178k with average hourly earnings expected at 0.3% m/m, 3.8% y/y vs. 0.2% m/m, 3.5% y/y in March while average weekly hours are seen holding at 34.2.

U.S. April unemployment rate is expected to hold at 4.3% vs. 4.3% as the labor force participation rate is expected to rise to 62.0% vs. 61.9%.

U.S. May preliminary University of Michigan Consumer Sentiment Survey forecast to ease to 49.5 vs. 49.8, with current conditions expected at 52.3 vs. 52.5. Expectations are also expected to hold at 48.1, but 1-year inflation expectations are expected to rise to 4.8% vs. 4.7% and 5-10-year inflation expectations are expected to hold at 3.5%.

U.S. March final wholesale inventories forecast to hold at 1.4% m/m vs. flash 1.4% and 0.9% in February, while wholesale trade sales are expected at 1.6% m/m vs. 2.7%.

Canada April net change in employment is forecast to ease to 10.0k vs. 14.1k, with the unemployment rate expected to hold at 6.7%; the participation rate is also expected to hold at 64.9%.

Canada April hourly wage rate for permanent employees is expected to ease to 4.8% y/y vs. 5.1% y/y.

Central bank speakers: Chicago Fed President Austan Goolsbee speaks on a panel at the Hoover Institution Monetary Policy Conference 2026.

What iFlow is Showing Us

Mood: iFlow mood deteriorated further into negative territory (-0.023), driven by sustained outflows from global equities, while core government bond flows remained steady.

FX: USD saw the strongest inflows, followed by NOK and HUF. Outflows were concentrated in COP, MXN and CHF. Elsewhere, flows across EMEA, LatAm and APAC were mixed, with broader selling pressure in G10 FX.

FI: Strong buying was seen in Eurozone government bonds and U.K. gilts. Chinese and Malaysian government bonds faced heavy selling. LatAm and EMEA bonds recorded moderate inflows.

Equities: U.S. equities led the G10 with net buying, while Europe, particularly Sweden, saw significant outflows. EMEA equities were broadly sold. Flows in LatAm and APAC were mixed: China and Thailand attracted inflows, whereas Hong Kong and South Korea saw substantial selling.

Quotes of the Day

“This is not a full circle. It’s life carrying on. It’s the next breath we all take. It’s the choice we make to get on with it.” – Alexandra Fuller

“Life is a full circle, widening until it joins the circle motions of the infinite.” – Anaïs Nin

Economic Details

German exports rose 0.5% m/m to €135.8bn in March (February: 3.6% m/m), while imports were up 5.1% m/m to €121.5bn, resulting in a trade surplus of €14.3bn (February: €19.6bn). Exports to EU countries grew 3.4% m/m to €78.4bn, with €54.8bn to euro area destinations (+4.1%) and €23.6bn to non-euro area countries (+1.7%). Exports to non-EU countries fell 3.3% m/m to €57.4bn. Key destinations: U.S.-bound exports declined by 7.9% m/m to €11.2bn, U.K.-bound exports rose 3.2% to €7.4bn and China-bound exports decreased by 1.8% to €6.0bn. Imports from China climbed 4.9% to €15.6bn. DAX -0.94% to 24431, EURUSD -0.196% to 1.1744, 10y Bund +1.2bp to 3.015%.

Germany’s industrial production declined by 0.7% m/m in March in seasonally adjusted, calendar-adjusted terms and by 2.8% y/y, indicating continued weakness in the producing sector. The monthly contraction was driven primarily by declines in energy production (-4.0%) and mechanical engineering (-2.7%), while the construction and the automotive sectors provided partial offsets with gains of 1.9% each. Excluding energy and construction, industrial output fell 0.9% m/m, with sizable declines in capital goods and consumer goods production, while intermediate goods rose modestly. Over the three months to March, total production decreased by 1.2%, reinforcing the subdued industrial momentum.

In March, Spain’s industrial production index rose 2.3% m/m in seasonally adjusted, calendar-adjusted terms and 1.8% y/y, indicating a rebound in industrial activity. The annual growth rate improved significantly compared with February, reflecting strengthening momentum across sectors. By components, non-durable consumer goods recorded the strongest y/y increase at 4.2%, followed by capital goods and intermediate goods, while durable consumer goods remained a drag with a contraction of 6.6% and energy output also fell. M/m gains were led by intermediate goods, up 3.1%, while durable goods fell slightly. By region, performance was mixed, though a majority of regions recorded y/y rises. IBEX 35 -0.79% to 17904, EURUSD -0.196% to 1.1744, 10y Bono +1.2bp to 3.441%.

Switzerland’s consumer sentiment index improved to -40.0 points in April from -42.9 in March, indicating a modest recovery in household confidence despite remaining in negative territory. The improvement was driven primarily by a less pessimistic outlook on the general economic situation, with the expected economic development subindex rising to -58.0 from -66.5, while perceptions of past financial conditions edged up slightly to -40.1. Expectations of future financial conditions also improved marginally to -32.1. However, willingness to make major purchases weakened, with the corresponding subindex declining to -29.7, suggesting continued caution among households. Overall, while sentiment has firmed somewhat, the data still reflect subdued consumer confidence and restrained spending intentions. SMI -0.52% to 13067, EURCHF +0.027% to 0.91511, 10y Swiss GB -0.5bp to 0.385%.

Sweden’s household consumption increased by 1.4% m/m in March in seasonally adjusted, calendar-adjusted constant prices, while rising 4.1% y/y on a calendar-adjusted basis. Growth was broad-based across categories, with the notable exception of housing, electricity, gas and heating, which fell 1.7% m/m and 0.3% y/y. Among major components, recreation and culture led gains, rising 3.7% m/m and 11.1% y/y, followed by retail trade including food and beverages, which increased by 3.1% m/m and 3.5% y/y. February data were revised up slightly, confirming a modest consumption recovery trend. OMX -1.1% to 3077, EURSEK -0.311% to 10.8626, 10y Swedish GB +3.4bp to 2.781%.

Sweden’s industrial orders decreased by 1.4% m/m (seasonally adjusted) in March and 7.3% y/y (calendar-adjusted), signaling continued external demand weakness. The m/m decline was driven by export markets, where orders dropped 3.5%, while domestic orders rose by 2.7%, with most subsectors still recording positive monthly developments. On a y/y basis, domestic demand remained resilient, increasing by 6.5%, but export orders contracted sharply (-14.5%), weighing on the overall outcome. YTD, total orders are down 4.0% compared with the same period in 2025, reflecting ongoing divergence between stronger domestic and weaker external demand conditions.

Sweden’s private sector production increased by 1.1% m/m in March in seasonally adjusted terms and by 4.9% y/y on a calendar-adjusted basis, indicating solid overall activity. The m/m expansion was driven by strong gains in services and construction, up 2.2% and 6.6%, respectively, while industrial production declined by 2.0%, acting as a drag. On a y/y basis, all major sectors recorded growth, with construction leading at 7.4%, followed by services at 5.7% and industry at 3.0%. The data point to a broad-based recovery in domestic activity, with services and construction offsetting ongoing volatility in the industrial sector.

Sweden’s Services Producer Price Index increased by 0.7% q/q in Q1, following a 1.4% y/y rise in Q4 2025. Domestic market prices rose 0.9% q/q (2.6% y/y), driven mainly by higher costs for real estate rental and operation, land transport and management consulting. Export prices fell 0.6% q/q (-4.1% y/y), led by declines in computer programming and freight services, partially offset by gains in publishing and advertising. Import prices were unchanged q/q (-2.7% y/y), with mixed movements across advertising, transport and IT-related services. The overall y/y increase in the Services Producer Price Index was 1.6%.

Norway’s industrial production increased by 0.6% q/q in Q1 in seasonally adjusted terms, while rising by 2.0% m/m in March, indicating modest but improving industrial activity. The q/q increase was driven mainly by strong growth in the petroleum refining, chemical and pharmaceutical industries, which rose by 5.4%, alongside gains in food production and machinery repair and installation. However, machinery manufacturing declined by 2.3%, partially offsetting broader gains. Petroleum-related supplier industries recorded a smaller increase of 0.4%, while manufacturing excluding this segment grew by 0.7%. Overall, the data point to gradual strengthening in industrial output despite divergence across sectors. OSE -0.17% to 1976, EURNOK -0.34% to 10.8818, 10y NGB +1bp to 4.392%.

Norway’s Q1 industrial turnover was up 2.7% q/q in seasonally adjusted terms, signaling a solid expansion in industrial activity, while monthly data showed a 1.6% rise from February to March. The overall increase was driven primarily by strong contributions from the food, beverage and tobacco industries, which recorded notable growth, alongside gains in the refined petroleum, chemical and pharmaceutical industries, and basic metals. M/m changes indicate broad-based strength across both the domestic and export markets, with higher prices, particularly in export-oriented sectors, supporting turnover growth. Despite some offset from declines in parts of the food industry, the data point to resilient industrial demand conditions.

Hungarian consumer price inflation rose by 2.1% y/y in April and 0.4% m/m, indicating moderate price pressures. Annual inflation was driven primarily by services, which increased by 4.0%, alongside rises in alcoholic beverages and tobacco (+4.1%) and consumer durables (+2.7%), while energy prices declined slightly (-0.4%). Food prices rose by 1.5% overall, though with significant divergence across components, including sharp increases in bakery and fruit products but substantial falls in items such as canned meat and dairy. On a m/m basis, price growth was supported by higher services and fuel costs, while energy prices fell, pointing to mixed inflation dynamics across sectors. Budapest SI -1.58% to 133008, EURHUF -0.468% to 355.44, 10y HGB -3bp to 5.87%.

Türkiye’s industrial production in March 2026 was down 0.8% m/m in seasonally adjusted, calendar-adjusted terms and 1.1% y/y, indicating a softening in industrial activity. The y/y contraction was driven by falls in mining and quarrying (-5.6%) and manufacturing (-1.3%), while electricity, gas and steam output increased by 5.8%, partially offsetting broader weakness. On a m/m basis, mining fell by 1.6% and manufacturing by 1.1%, whereas energy output rose 3.9%. Sector analysis also shows mixed trends, with strong gains in durable consumer goods and energy segments, but significant weakness in high technology production, highlighting uneven industrial momentum. BI 100 -0.43% to 14975, USDTRY -0.264% to 45.3653, 10y TGB +23bp to 33.49%.

Japan’s real earnings rose 1.0% y/y in March, below the estimated 1.8% and down from 2.0% in February. Cash earnings increased by 2.7% y/y, slightly lower than February’s 3.4%. Scheduled earnings grew 3.2% y/y, while overtime pay rose 1.9% y/y. Bonus payments declined by 1.5% y/y in March, a sharp reversal from February’s 7.5% increase. Hours worked remained flat m/m, with scheduled hours up 0.2% m/m but overtime hours down 3.0% m/m. Employment increased by 1.1% y/y, slightly below February’s 1.3%. Nikkei -0.19% to 62714, USDJPY -0.256% to 156.8, 10y JGB +0.7bp to 2.486%.

Japanese service sector growth slowed in April, with the Services PMI Business Activity Index falling to 51.0 from 53.4 in March – the softest expansion in 11 months. New work growth eased to its slowest since last October, partly due to weaker overseas demand and the first decline in new export business in five months. Input costs rose at the sharpest rate in a year, driven by factors including the Middle East war, leading to near-record output charge increases. Business confidence remained near post-pandemic lows, while employment grew modestly. The composite PMI showed overall business activity rising at the softest pace in four months, at 52.2.

South Korea posted a record-high current account surplus of $37.33bn in March, up from $23.19bn in February, on a 56.9% y/y surge in exports to $94.32bn and a 17.4% y/y rise in imports to $59.24bn. The goods account surplus reached $35.07bn, while the services account posted a $1.29bn deficit. Primary income showed a $3.58bn surplus. The financial account saw a net asset increase of $36.99bn, led by portfolio investment inflows. Domestic outbound equities flows slowed to $3.94bn from $10.4bn in February and $13bn in January. South Korea has maintained a current account surplus for 35 consecutive months, ever since May 2023. KOSPI +0.11% to 7498, USDKRW -0.882% to 1468.65, 10y KTB -5.9bp to 3.876%.

Taiwanese exports, measured in USD, rose 39.0% y/y in April to $67.62bn, driven by information, communication and audio-video products (+62.3%), electronic parts (+38.9%) and machinery (+12.9%). Exports to the U.S. (+63.8%), Europe (+64.2%), ASEAN (+36.8%) and South Korea (+39.3%) saw strong growth. Imports increased by 29.2% y/y to $53.27bn, led by electronic parts (+61.3%), information and communication products (+33.2%) and mineral products (+31.5%). Imports from South Korea (+78.3%), ASEAN (+52.9%) and the U.S. (+32.0%) expanded significantly. The trade surplus slowed to U.S.$14.35bn vs. $21.27bn in March. TAIEX -0.79% to 41604, USDTWD -0.023% to 31.416, 10y TGB -0.2bp to 1.52%.

Singapore’s Ministry of National Development announced that the minimum occupation period for executive condominiums (ECs) will double from five to ten years. New ECs will be fully privatized after 15 years, up from ten. The first-timer quota will increase from 70% to 90% for the first two years post-launch, after which remaining units can be sold to all eligible buyers. Developers can no longer offer the Deferred Payment Scheme; all buyers must use the Normal Payment Scheme. These measures are aimed at supporting first-time home buyers amid rising prices and at curbing speculative buying. STI -0.47% to 4919, USDSGD -0.213% to 1.2685, 10y SGB -1.3bp to 2.083%.

Singapore Prime Minister Lawrence Wong has urged swift ratification of the ASEAN Petroleum Security Agreement and the upgraded ASEAN Trade in Goods Agreement amid the Middle East conflict, highlighting Asia’s vulnerability due to dependence on Gulf energy and supplies. Wong emphasized the need to strengthen collective energy security, supply chains and intra-ASEAN networks for critical goods such as food. He also called for realization of the ASEAN power grid to be accelerated so as to enhance resilience and sustainable growth. He noted the crisis’s prolonged impact and welcomed Timor-Leste’s ASEAN membership and upcoming chairmanship in 2029.

Singapore’s tourism receipts reached a record SG$32.8bn in 2025, from SG$29.8bn in 2024, driven by 16.9 million visitors and a record 70 million passenger movements at Changi Airport. The government projects SG$31-32.5bn in tourism receipts this year, and between 17-18 million international visitor arrivals. The government will add SG$740mn to the Tourism Development Fund over five years to support Tourism 2040, aiming for receipts of SG$47-50bn by 2040. New cruise facilities will open in July 2026, and plans for an integrated cruise and ferry terminal are underway.

Malaysia Industrial Production Index (IPI) rose by 3.1% y/y in March, matching February’s growth rate. Manufacturing output led with a 5.5% increase (February: 4.2%), driven by a 6.7% y/y rise for export-oriented industries, notably in computer, electronics and optical products (+14.8%) and vegetable and animal oils and fats (+13.5%). Domestic industries grew 2.8% y/y. Electricity output increased by 4.9% y/y, while mining declined by 6.5% y/y due to drops in crude oil (-11.3%) and natural gas (-3.4%). M/m, the IPI rallied by 9.3%. Across Q1, it rose 4.0% y/y, with manufacturing up 5.7% and mining down 2.9%. KLCI -0.56% to 1749, USDMYR -0.37% to 3.9223, 10y MGB -1.5bp to 3.559%.

Malaysia’s manufacturing sales rose 5.3% y/y to MYR 173.1bn in March 2026, accelerating from 3.9% in February. Electrical and electronics products led with 13.3% growth, supported by food, beverages and tobacco (7.8%) and non-metallic mineral products (3.7%). Export-oriented industries, representing 71.7% of sales, grew 6.5% y/y, led by computer, electronics and optical products (15.2%) and vegetable and animal oils and fats (10.2%). There was a 2.5% y/y rise for domestic-oriented industries. Employment rose 1.1% y/y to 2.4 million, with wages up 2.2% y/y to MYR 8.56bn. Q1 sales grew 5.5% y/y to MYR 501.5bn.

Bank Indonesia Governor Perry Warjiyo has announced an extraordinary 24-hour global intervention to defend the rupiah, including in offshore NDF markets, amid speculative pressure. Despite $1.7bn of net outflows in Q1, foreign portfolio inflows reached $3.3bn between January and April, driven by high-yield Bank Indonesia Rupiah Securities (SRBI). YTD SRBI inflows have hit IDR 78.1tn ($4.5bn), offsetting outflows from equities (IDR 38.6tn) and government bonds (IDR 11.7tn). The central bank is active in offshore NDF markets and has eased restrictions on offshore rupiah transactions to maintain liquidity. Indonesia’s foreign exchange reserves stand at $148.2bn, deployed to stabilize the currency. JCI -0.8% to 7117, USDIDR -0.179% to 17373, 10y IDGB +0.1bp to 6.606%.

Indonesia’s Q1 Residential Property Price Survey shows limited growth in primary market residential property prices. The Residential Property Price Index rose 0.62% y/y, slightly down from 0.83% y/y in Q4 2025. Sales indicate an increase in mid-type residential units, while small and large unit sales remain weak. Overall primary market residential property sales declined by 25.67% y/y, reversing 7.83% y/y growth in Q4 2025. Financing is mainly from developers’ internal funds (80.66%), and most homebuyers (69.87%) use mortgage schemes (KPR).

The Bank of Thailand is considering extending its relaxed mortgage lending rules for another year, to June 30, 2027, to support the slowing property market and large unsold housing inventory. Current rules allow loan-to-value ratios of up to 100% for second-home loans below THB 10mn and first-home loans of THB 10mn or more. The central bank cited ongoing real estate weakness, geopolitical risks from the Middle East conflict and cautious lending as factors. It sees limited financial stability risks and is seeking public feedback between now and June 5 before finalizing the decision. SET -0.27% to 1503, USDTHB -0.298% to 32.243, 10y TGN -3.6bp to 2.18%.