Key Highlights

• U.S. Vice President JD Vance says a deal with Iran is “close” but “not there yet.”
• ECB staff warn past supply shocks may “amplify” current inflation expectations.
• Japanese Finance Minister Satsuki Katayama warns again on JPY volatility, will take “bold action” against volatile FX.

Chart of the Day

Funder rate hikes back in play

^{Source: BNY}

Earlier this week, we highlighted that flows into developed market cash and short-term instruments (CAST) had started to react very strongly to the prospect of inflation and inflation expectations becoming more entrenched. This would require a central bank reaction, even with the Fed joining the fray. However, our focus was largely on economies that are normally subject to stagflation and with a strong demand component, which does not include the Asia-Pacific region.

For these export-dependent, high-savings economies, demand suppression (voluntary or otherwise) has limited inflation impulse, even during extreme supply shocks. During the COVID reopening period, North Asian inflation significantly underperformed global peers. This was in part due to lack of fiscal stimulus beforehand, but fears of gains in real effective exchange rates jeopardizing export models continue to loom large over industrial policy. Yesterday’s BoK decision, which should be considered a “hawkish hold,” suggests that this may be about to change. The common thread in the region is that input-driven inflation needs to be offset by a stronger exchange rate, requiring higher rates. Secondly, especially in South Korea and Taiwan, windfall profits from the AI theme will cascade into raising nominal earnings, with multiplier effects for the economy. This is a classic case of gains in real wages after a technological leap going on to raise the real effective exchange rate.

To counter these income gains feeding through into higher inflation, rates may also need to rise, and FX flows will follow. KRW is now the best-held currency of all the funders, though we note that EUR is also the best-bought: anticipated and realized hikes are now shaping flow dynamics for funding currencies.

What's Changed?

Month-end has brought a renewed rally in global equities, extended by AI and hopes for a prolongation of the U.S./Iran ceasefire. Oil is down 19% across May – its biggest m/m decline since 2020 - but has moved down less than 1% today. Breaking the correlations that have dominated this month and since the war started, USD has gained ground modestly despite intervention threats in APAC from Japan, South Korea and India. Bond yields are down on lower-than-expected CPI reports in Japan, France and Spain, but central bank commentary remains hawkish. There is a holding pattern for more risk across markets, as they await clarity over the U.S.-Iran 60-day ceasefire extension.

• IPOs and cash: SpaceX has cut its IPO valuation goal, while Anthropic edged out OpenAI in its fundraising round. SpaceX is now targeting a valuation of $1.8tn for its initial public offering, down from $2.0tn, as it looks to raise $75bn and prepares for a June 4 marketing start. Total revenues for the firm in 2025 were $18.7bn. Yesterday, Anthropic reported that it had raised $65bn in its latest round, lifting its value to $965bn and beating out rival OpenAI. Expectations of a Q3 IPO for both are driving concerns about market liquidity over the summer as investors make room for the new listings in public stock indices.
• Gold vs. Bitcoin: Gold has rallied back above $4500 oz, gaining 0.7% on the day and 0.25% on the week. Peace deal hopes in Iran have shifted some of the concerns on gold as a liquidity tool for intervention from central bankers and as a cash tool for investors. Bitcoin held at $73k overnight after testing lower yesterday. It represents about 61% of all money held in crypto. A key focus in BTC trading will be on liquidity needs linked to month-end and U.S. Treasury coupon sales.
• AI demand: Dell shares jumped almost 40% on a raised $60bn AI server revenue outlook for FY 2026. Overall, the company beat EPS estimates for the quarter ending in April: sales jumped 88% to $43.8bn, lifting overall revenue expectations to $167bn for the year from $140bn. Both the South Korean KOSPI and Taiwan’s TAIEX indexes surged by 3% on AI flows. However, month-end rebalancing pressure in South Korean chipmakers drove volatility, as investors hit 10% single-stock market cap rules. The sharp gains in May for Samsung and SK Hynix have led to record foreign outflows because of fund risk management rules. Part of this was offset by NPS’s plans to raise its domestic equity holdings.

Bottom line: The question now is how much of a relief trade will follow confirmation of a pending MoU on talks to end the U.S.-Iran conflict, which would extend the current ceasefire by 60 days. Investors have been looking through inflation shocks and hoping for better growth. AI investments have been a key part of the narrative for the month. Few expect this to change today, as May draws to a close. The news docket for the U.S. session ahead is full but seems unlikely to shift thinking around bonds, stocks or the dollar. The uneasy balancing of risk today leaves June as a critical month for larger-scale rethinking of key themes driving money flows. There is a clash between rebuying of consumer discretionary companies, with a focus on travel and leisure in Europe, and the ongoing FX pressures in emerging markets linked to oil supply shocks. Cash – and the need for cash – look pivotal to trading as we head into next week and month.

What You Need to Know

An ECB research post has warned that consumer expectations following the Iran war point to renewed stagflation concerns, although the reaction has so far been less severe than that which followed Russia’s invasion of Ukraine in 2022. ECB Consumer Expectations Survey data show that in March 2026, one month after the outbreak of the conflict, average 12-month-ahead inflation expectations had risen by around 2.5 percentage points, while growth expectations had fallen by about 1.2 percentage points. Medium-term inflation expectations also increased, with consumers already starting from a higher inflation baseline than in 2022. The analysis highlights a “double scar” effect, in which memories of the post-pandemic inflation surge and earlier geopolitical tensions have made households more sensitive to new shocks. Consumers remain highly attentive to inflation and concerned about geopolitical risks, increasing the risk of persistent stagflation fears. The post argues that maintaining credibility, trust and clear communication is critical to preventing longer-term inflation expectations from becoming de-anchored. Euro Stoxx 50 +0.32% to 6075, EURUSD -0.086% to 1.1641, BBG AGG Euro Government High Grade EUR -0.7bp to 3.235%.

Federal Reserve Bank of St. Louis President Alberto Musalem has stated that policymakers should not rely on a potential AI-driven productivity boom to reduce the currently elevated U.S. inflation, which remains significantly above the 2% target. He highlighted a stable labor market and rising long-term inflation expectations. Musalem warned that if disinflation is not observed within the next one to two quarters, a rate hike might be necessary. He emphasized the need to base monetary policy on strong evidence rather than optimism about AI productivity gains. The Fed’s preferred inflation measure rose 3.8% y/y in April. S&P Mini +0.12% to 7591, DXY -0.006% to 99.015, 10y UST +0.4bp to 4.451%.

Japan’s population declined by a record 2.5% over five years to 123 million in 2025, a drop of over 3 million since 2020, according to the latest census. This marks the largest decrease since 1920 and is more than triple the 2015-20 decline. The country faces persistent demographic challenges, with one of the world’s lowest birth rates and an aging population. Births fell for a tenth consecutive year in 2025, totaling 705,809. Despite government efforts to encourage marriage and childbirth, including dating apps and parental leave subsidies, the population decline continues, while immigration remains a contentious issue. Nikkei +2.53% to 66330, USDJPY +0.151% to 159.23, 10y JGB -3.3bp to 2.668%.

The Indian government is expected to announce measures within a week to boost foreign capital inflows, aimed at supporting the weakening rupee and easing the widening current account deficit. Potential steps include reducing long-term capital gains tax on equities and government bonds, cutting withholding tax on interest income for foreign investors and reviewing the Liberalized Remittance Scheme limit. The Reserve Bank of India and Securities and Exchange Board of India are also considering regulatory easing for foreign investors’ market access. Foreign portfolio investors have withdrawn around INR 2.2tn so far in 2026, with March seeing a record sell-off amid geopolitical tensions and rising crude oil prices. SENSEX -0.1% to 75794, USDINR +0.262% to 95.4463, 10y INGB -0.6bp to 6.99%.

What We're Watching

Germany preliminary May HICP is expected to soften to 2.8% y/y from 2.9% y/y.

U.S. April advance goods trade balance forecast to narrow to -$87.2bn vs. -$87.9bn, with imports expected at 1.7% vs. 3.5% m/m prior and exports expected at 2.4% vs. 3.0% m/m prior.

U.S. April retail inventories forecast at 0.5% vs. 0.6% m/m, while wholesale inventories are expected at 0.8% vs. 1.3% m/m, which could be important given the downward revision in Q1 GDP.

U.S. May MNI Chicago PMI forecast to rise to 50.3 vs. 49.2.

Canada Q1 GDP is expected to rise to 1.5% q/q vs. -0.6% q/q, with the monthly March GDP forecast at 0.1% m/m, 0.9% y/y vs. 0.2% m/m, 1.0% y/y in February.

Central bank speakers: The Fed’s Michelle Bowman speaks on monetary policy at the Reykjavik Economic Conference, the Fed’s Anna Paulson speaks on economic outlook, the ECB’s Madis Müller speaks in Reykjavik.

What iFlow is Showing Us

Mood: iFlow Mood has deteriorated further to -0.305, the most strongly risk-off level since the April 2025 “Liberation Day” episode, driven by continued equity outflows and a sharp rise in demand for core government bonds.

FX: Signs of stabilization have emerged after recent outflows, with most EMEA, LatAm and APAC currencies posting inflows. Within G10, flows remained highly divergent, with large outflows in NZD, DKK and CAD offset by strong inflows into SEK, EUR and JPY, alongside moderation in USD buying.

FI: Strong demand concentrated in Eurozone government bonds, Chinese government bonds and U.S. Treasurys, while Peruvian, Brazilian and Indonesian bonds faced substantial selling pressure. Elsewhere, flows remained broadly biased toward buying.

Equities: Aggressive selling persisted across the iFlow universe, particularly in U.K., Japanese, Hungarian, Turkish, Hong Kong, Indonesian and South Korean equities. Selective and modest buying was seen in Chinese, Thai, New Zealand and Norwegian equities. The DM Americas region posted broad-based buying across sectors, led by utilities, followed by industrials, consumer staples, health care and information technology.

Quotes of the Day

“Can anything be sadder than work left unfinished? Yes, work never begun.” – Christina Rossetti

“I know what a ghost is. Unfinished business.” – Salman Rushdie

Economic Details

German import prices rose 5.3% y/y in April, accelerating from 2.3% in March and marking the strongest annual increase since January 2023. On a m/m basis, import prices increased by 1.2%. The sharp rise was driven primarily by energy costs, which surged 31.0% y/y and 22.8% m/m, reflecting disruptions linked to the Iran conflict and higher prices for crude oil, petroleum products and coal. Excluding energy, import prices increased by a gentler 2.8% y/y. Intermediate goods prices rose 7.8%, while capital goods were up 3.4%. Export prices also strengthened, rising 2.9% y/y and 0.8% m/m in the fastest annual increase since March 2023. Higher prices for intermediate goods and energy exports were the main contributors, while agricultural and consumer goods prices generally remained softer. DAX +0.08% to 25113, EURUSD +0.388% to 1.1649, 10y Bund +1.1bp to 2.973%.

German employment data for April showed a broadly stagnant labor market. The number of employed people stood at around 45.61 million, with seasonally adjusted employment essentially unchanged from March, following average monthly declines of around 17,000 between May 2025 and March 2026. On a non-seasonally adjusted basis, employment increased by 88,000 people, or 0.2%, m/m, broadly in line with typical seasonal patterns for April. Compared with April 2025, however, employment fell by 184,000 people, a decline of 0.4%, extending the downward trend that has been in place since August 2025. The annual rate of change remained negative after declines of 0.3% in January and February and 0.4% in March. Separate labor force survey estimates showed the employment rate at 77.4%, slightly below a year earlier, while the seasonally adjusted employment rate remained stable.

The preliminary estimate of French consumer prices showed a rise of 2.4% y/y in May, up from 2.2% in April. Monthly CPI rose 0.1%, marking a fourth consecutive increase. The acceleration in annual inflation was driven primarily by energy prices, where inflation rose to 16.8% from 14.3%, reflecting higher gas prices. Services inflation also strengthened to 2.0% from 1.8%. Food inflation remained broadly stable at 1.2%, while manufactured goods prices continued to decline, down 0.6% y/y. The harmonized index of consumer prices rose 2.8% y/y, up from 2.5% in April, while monthly HICP inflation was 0.1%. Overall, the data point to a modest reacceleration in French inflation led mainly by energy costs. CAC 40 +0.37% to 8219, EURUSD +0.388% to 1.1649, 10y OAT +1.3bp to 3.583%.

French payroll employment was broadly stable in Q1, edging down by 0.1% q/q, equivalent to a loss of around 4,900 jobs. Private payroll employment declined by 0.1%, its fifth consecutive quarterly fall, while public payroll employment rose 0.1%. Temporary employment decreased by 0.4%, continuing a gradual weakening trend. By sector, employment fell in agriculture, industry and construction, while market services were broadly unchanged and non-market services increased by 0.2%, supported by health and education. Compared with a year earlier, total payroll employment was down 0.2%, although it remained 4.7% above its pre-pandemic level. Non-salaried employment rose by 0.6% q/q, leaving total employment broadly stable overall.

France’s household consumption of goods fell by 0.5% m/m in April after increasing by 0.9% in March. The decline was driven mainly by a sharp 2.9% fall in energy consumption, reflecting lower purchases of petroleum products and reduced gas and electricity use given unusually warm weather. Consumption of engineered goods slowed to 0.2% growth from 1.7% previously, while spending on durable goods shrank by 0.5%. Textile and clothing purchases remained resilient, rising 1.3%, and other engineered goods increased by 0.7%. Food consumption was broadly unchanged, slipping just 0.1%, while tobacco consumption rose slightly. The data suggest that weaker energy demand was the principal drag on overall goods consumption in the first month of Q2.

French GDP contracted by 0.1% q/q in Q1 after growing 0.2% in Q4 2025. Household consumption weakened, falling 0.2%, while gross fixed capital formation contracted by 0.6%, led by a 2.2% decline in construction investment. Exports fell sharply by 3.5%, due in particular to weaker aeronautics exports, and imports declined by 0.9%, leaving net trade as a significant drag on growth. Inventory accumulation provided a positive contribution of 1.0 percentage point to GDP, offsetting some weakness elsewhere. Household purchasing power per consumption unit slipped 0.1%, while the household saving rate increased to 17.9%. The profit margin of non-financial corporations fell sharply to 31.7% from 32.5%, largely reflecting deteriorating terms of trade linked to higher global energy prices.

Italy’s preliminary CPI inflation estimate saw price rises accelerating to 3.2% y/y in May from 2.7% in April, with m/m inflation at 0.4%. The pickup was driven mainly by stronger energy inflation, with non-regulated energy prices accelerating to 12.6% y/y from 9.6% and regulated energy prices rising to 5.8% from 5.3%. Services inflation also strengthened, particularly in transport services, which accelerated to 1.8% from 0.6%, and recreational, cultural and personal care services, which rose to 3.0% from 2.6%. Core inflation excluding energy and fresh food increased to 1.8% from 1.6%, while inflation excluding all energy products rose to 2.1% from 1.9%. Food, household and personal care goods inflation remained stable at 2.3%, and the harmonized inflation rate accelerated to 3.3% from 2.8%. The carry-over inflation rate for 2026 increased to 2.6%. FTSE MIB +0.3% to 49974, USDJPY +0.032% to 159.29, 10y BTP +0.1bp to 3.683%.

The Italian labor market strengthened further in April, with employment rising by 123,000 from March, a 0.5% m/m increase, bringing the total number of employed people to 24.34 million. As a result, the employment rate increased to 63.1%, up 0.3 percentage points. At the same time, the unemployment count fell by 18,000, or 1.3%, lowering the unemployment rate to 5.1% from 5.2%, while youth unemployment declined to 16.9% from 17.7%. Inactivity also decreased, with 102,000 fewer inactive people aged 15- 64, pushing the inactivity rate down to 33.4%. Compared with April 2025, employment was up by 269,000 people, or 1.1%, driven by gains among permanent employees and the self-employed, while fixed-term employment declined. Over the February-April period, employment increased by 108,000 compared with the previous three months, confirming continued labor market resilience.

Spain’s CPI inflation remained unchanged at 3.2% y/y in May, according to the preliminary estimate, matching the rate recorded in April. While headline inflation was stable, underlying inflation increased by one-tenth to 2.9%, indicating a modest strengthening in core price pressures. The stability in headline inflation reflected offsetting forces across components. Upward pressure came from transport and recreation, culture and sporting activities, where prices fell less sharply than a year earlier. In contrast, clothing and footwear prices declined compared with increases in May 2025, while food and non-alcoholic beverage prices were unchanged after rising in the same month last year. On a m/m basis, consumer prices edged 0.1% higher. The harmonized measure of inflation accelerated slightly, with HICP rising 3.6% y/y from 3.5% in April, while monthly HICP inflation was 0.1%. IBEX 35 +0.47% to 18396, EURUSD +0.388% to 1.1649, 10y Bono +1.1bp to 3.39%.

Spain’s balance of payments for March showed the economy’s financing capacity remaining strong at 4.0% of GDP on a rolling 12-month basis, equivalent to €67.8bn and broadly unchanged from a year earlier. The current account surplus stood at 3.0% of GDP, or €50.9bn, while the capital account surplus remained elevated at 1.0% of GDP. Tourism continued to be the main driver of external surpluses, generating a surplus of €70.7bn. This is equivalent to 4.1% of GDP and close to recent historical highs. Non-tourism goods and services improved to a deficit of just 0.1% of GDP from 0.3% a year earlier. On a one-month basis, Spain’s financing surplus increased to €5.9bn in March from €4.4bn a year earlier, supported by a stronger surplus in non-tourism goods and services, while the tourism surplus remained stable at €5.2bn despite higher tourism receipts and payments.

The U.K.’s Lloyds Business Barometer for May showed business confidence rising three points to 47%, indicating tentative stabilization after April’s decline and remaining close to the 12-month average of 48%. Firms’ trading outlook improved by four points to 58%, with two-thirds expecting stronger output over the next year, while confidence in the wider economy rose two points to 35%. Businesses continued to cite economic uncertainty, cost pressures and weaker demand as key concerns, although worries about higher interest rates eased. Sector performance was mixed, with construction confidence rebounding 15 points to 44% and retail rising eight points to 53%, while manufacturing fell four points to 43%. Investment intentions strengthened, with firms showing greater willingness to invest in training, technology and AI. By region, confidence gains were led by the North East and West Midlands. FTSE 100 +0.02% to 10428, GBPUSD +0.322% to 1.3432, 10y gilt +0.6bp to 4.82%.

Switzerland’s KOF Economic Barometer edged up to 98.0 points in May from a revised 97.8 in April, marking a second consecutive monthly increase but remaining below its long-term average, indicating that the economic outlook remains subdued. The slight improvement reflected mixed developments across sectors. On the production side, manufacturing indicators remained under pressure, although weakness was partly offset by a more favorable outlook for financial and insurance services. On the demand side, foreign demand indicators improved, while private consumption indicators deteriorated. Within manufacturing, assessments of order backlogs, finished goods inventories and the general business situation strengthened, but indicators related to exports and production activity weakened. Performance was also uneven across sectors, with paper and printing products showing substantial improvement, while textile and electrical industries experienced a setback. Overall, the survey suggests only modest economic momentum and continued caution regarding Switzerland’s near-term growth prospects. SMI +0.42% to 13562, EURCHF -0.097% to 0.91241, 10y Swiss GB -0.7bp to 0.427%.

Sweden’s Q1 GDP was down 0.2% q/q/ on a seasonally adjusted basis, marking a modest setback after stronger growth in late 2025. Household consumption rose 0.6% and inventory accumulation contributed positively to growth, while gross fixed capital formation fell 2.3% and public consumption declined by 2.1%, led by a 7.6% drop in central government consumption. Exports increased by 2.2%, but stronger import growth of 2.5% meant net trade ate into GDP growth. On the production side, manufacturing and other goods-producing industries remained resilient, while service sector value added declined by 0.8%. Nevertheless, Q1 GDP was still 2.0% higher y/y in calendar-adjusted terms. Labor market indicators were mixed, with employment up 0.3%, hours worked down 0.3% and business sector productivity up 0.6%. Real household disposable income rose 3.0% from a year earlier. OMX -0.08% to 3122, EURSEK +0.474% to 10.7684, 10y Swedish GB +1.5bp to 2.777%.

Sweden’s retail trade volume was unchanged m/m in April, with total sales flat on a seasonally adjusted, calendar-adjusted basis. Beneath the headline figure, retail sales of durable goods fell 2.1% m/m, while sales of consumables excluding the state-owned alcohol retailer increased by 2.2%. Looking at broader trends, retail volumes rose 0.4% in the February-April period compared with the preceding three months, supported by gains in both durable goods and consumables. Y/y growth remained solid, with retail trade volume up 4.7% y/y in calendar-adjusted terms. Durable goods sales rose by 5.5% and consumables by 3.7%. In value terms, turnover measured at current prices rose 1.5% from a year earlier, reflecting continued volume growth but relatively subdued price-driven revenue gains, particularly in consumable goods, where turnover declined by 2.5% y/y.

Swedish employment data for March showed continued labor market expansion, with the number of ongoing employments rising 0.6% y/y to 5.33 million. Employment relationships lasting more than six months increased by 0.9% to 4.28 million, while shorter-term employments of six months or less declined by 0.8% to 1.05 million, indicating that growth was concentrated in more stable jobs. Total hours worked climbed 2.7% from a year earlier to 680 million, while gross pay rose 4.7% to SEK 205bn. The sickness absence rate was 2.1%, down 0.2 percentage points from a year earlier, with rates of 2.4% for women and 1.8% for men. Employment inflows were broadly unchanged, while terminated employments increased by 2.7% y/y. During Q1, there were a total of 143,600 job openings on the Swedish labor market, 7,500 fewer than in Q1 2025.

Sweden’s financial market data for April showed mortgage borrowing continuing to expand while borrowing costs increased further. The average floating mortgage rate for new household loan agreements rose to 2.88%, up from 2.74% in March, while fixed mortgage rates with terms of up to five years increased to 3.29%. The sharpest rise was for mortgages with maturities of one to two years, where rates climbed to 3.27%. Despite higher borrowing costs, the annual growth rate of housing loans remained broadly unchanged at 5.4%, accounting for the vast majority of household lending. Total lending by monetary financial institutions to households grew 5.0% y/y, while lending to non-financial corporations increased by 5.4%. Household deposits continued to rise, reaching SEK 2.94tn, while demand deposits represented around three-quarters of total deposits.

Norway’s retail trade volume increased by 0.3% m/m in April on a seasonally adjusted basis, following declines in the previous two months. Despite the modest rebound, retail sales volumes over the February-April period were still 0.8% lower than in the preceding three-month period, indicating underlying weakness in consumer spending. The main positive contribution came from broad-based retail stores, including grocery retailers, where sales volumes rose 1.7% after a similar decline in March. Retailers specializing in household goods and department stores also supported growth, while electronics retailers recorded gains. However, specialty retail stores overall weighed on performance, particularly shops selling footwear and leather goods. Broader wholesale and retail trade, including motor vehicle sales, fell 2.6% in April, reflecting a sharp 10% decline in vehicle sales and a 2.2% drop in wholesale trade activity. OSE -0.04% to 2015, EURNOK +0.039% to 10.7836, 10y NGB +0.1bp to 4.367%.

Norway’s unemployment rate remained unchanged at 2.1% of the labor force in May on a seasonally adjusted basis, with 62,137 people registered as fully unemployed, essentially unchanged from April. Including partially unemployed individuals and participants in labor market programs, there were around 95,000 registered jobseekers, equivalent to 3.1% of the labor force. Despite stable unemployment, labor demand strengthened markedly, with 49,000 vacancies advertised during May, corresponding to about 2,300 vacancies per working day and 33% more than a year earlier, the highest level since April 2022. Unemployment was highest in Oslo at 2.6% and lowest in Troms at 1.3%. By occupation, unemployment was highest in tourism and transport-related jobs, while academic professions and health, nursing and social care recorded the lowest unemployment rates at 0.8% of the labor force.

Polish flash CPI inflation for May came in at 3.1% y/y, easing slightly from 3.2% in April. On a m/m basis, consumer prices fell 0.3%, indicating a modest decline in price pressures vs. April. Food and non-alcoholic beverage prices were up just 0.5% from a year earlier and down 1.0% m/m, helping to contain headline inflation. Energy-related categories remained the main source of inflation, with electricity, gas and other fuels rising 5.0% y/y, while fuels and lubricants for personal transport equipment increased by 12.3% y/y despite a slight m/m dip. The inflation rate remained above the National Bank of Poland’s 2.5% target but continued to show a broadly stable pattern, following readings of 3.0% in March and 3.2% in April. WIG +0.66% to 137122, EURPLN +0.069% to 4.2298, 10y PGB -12.1bp to 5.652%.

Hungary’s industrial producer prices climbed 0.3% y/y in April, slowing sharply from previous months, while falling 1.3% from March. Domestic output prices rose 2.2% y/y, supported by a 3.3% increase in manufacturing prices, although energy industry prices declined by 0.9%. Non-domestic output prices fell 0.5% from a year earlier, reflecting weaker manufacturing export prices despite energy-related producer prices remaining more than 20% higher. On a m/m basis, domestic producer prices were unchanged while non-domestic prices fell 1.9%. For January-April as a whole, industrial producer prices were 1.1% lower y/y, with domestic prices up 0.6% but export-oriented producer prices down 1.4%, highlighting continued disinflationary pressure from external markets. Budapest SI +0.64% to 132292, EURHUF +0.119% to 354.84, 10y HGB 0bp to 5.42%.

Hungary’s external trade in goods recorded a surplus of €104mn in April, down €1.0bn from a year earlier. Export volumes fell 4.9% y/y while import volumes increased by 10.0%, reflecting stronger domestic demand and weaker external sales. Exports were particularly weighed down by machinery and transport equipment and manufactured goods, while imports of machinery and transport equipment surged 23%. In value terms, exports reached €13.2bn and imports €13.1bn. Compared with March, however, seasonally adjusted export volumes rose 3.4% and imports increased by 1.1%. For the January-April period, export volumes declined by 5.0% while imports grew 8.3%, reducing the trade surplus to €2.7bn from €4.6bn a year earlier.

Czech GDP increased by 0.8% q/q and 2.2% y/y in Q1, confirming the country’s continued economic expansion. Growth was driven primarily by household consumption, gross fixed capital formation and changes in inventories, while the contribution from net exports was negative. On the expenditure side, household consumption rose 0.1% q/q and 2.5% y/y, while gross fixed capital formation was up 1.1% q/q and 5.6% y/y. Exports and imports both expanded q/q, rising 2.8% and 2.1%, respectively. On the production side, growth was supported by trade, transport, accommodation and food services, financial activities, professional services, construction and real estate, while industry weighed on overall performance. Employment increased by 0.4% q/q and 1.1% y/y, while total hours worked rose 3.0% y/y. The GDP deflator rose 2.9% y/y, indicating moderate domestic price pressures. Prague SE +0.34% to 2530, EURCZK +0.025% to 24.285, 10y CZGB +1.5bp to 4.854%.

Japan’s Tokyo CPI inflation for May showed further moderation in price pressures. The headline consumer price index for the capital rose 1.4% y/y, easing slightly from 1.5% in April, while the core measure excluding fresh food increased by 1.3% y/y, down from 1.5%. Core-core inflation, which excludes both fresh food and energy, slowed to 1.6% from 1.9%, indicating softer underlying inflation momentum. On a m/m basis, headline and core prices both rose 0.3%. Food prices remained a key source of inflation, with prices excluding fresh food up 4.1% y/y, although this was slower than April’s 4.6%. Energy prices continued to decline, falling 3.7% y/y, while a sharp drop in water charges and childcare fees also weighed on inflation. Housing rents, communications, transport and recreation services continued to provide moderate upward pressure. Nikkei +2.53% to 66330, USDJPY +0.151% to 159.23, 10y JGB -3.3bp to 2.668%.

Japan’s labor force survey for April showed employment at 68.6 million, up 640,000 y/y, in a third consecutive monthly increase. Employees rose by 680,000 y/y to 62.19 million, continuing a 50-month growth streak. Regular employees increased by 260,000 y/y to 37.35 million (30 months of growth), while non-regular employees rose by 460,000 y/y after two months of decline. Employment rates improved by 0.7 points y/y to 62.6%, with the 15-64 age group at 80.4%. The unemployment count increased by 50,000 y/y to 1.93 million, but the seasonally adjusted unemployment rate fell 0.2 points m/m to 2.5%. The non-labor force population declined by 830,000 y/y to 38.96 million. The job-to-applicant ratio was unchanged at 1.18, and the labor participation force rose to a new high of 64.4%.

Japan’s commercial sales totaled ¥55.64tn, up 5.4% y/y (3.5% m/m seasonally adjusted). Wholesale sales rose 6.5% y/y to ¥42.42tn (4.1% m/m), led by machinery (+11.5%), other wholesale (+9.9%) and agricultural products (+7.9%). Large-scale wholesale sales increased by 9.6% y/y, driven by minerals (+70.6%) and non-ferrous metals (+58.3%). Retail sales grew 1.3% m/m, 2.1% y/y to ¥13.22tn (vs. 1.0% m/m, 1.4% y/y in March), with automotive retail up 15.4% y/y. Department store and supermarket sales rose 2.4% y/y (or 2.0% seasonally adjusted y/y), with department stores up 4.5% and supermarkets 1.7%. Convenience store sales increased by 0.8% y/y in April.

Japanese industrial production rose by 0.8% m/m, 2.3% y/y in April vs. -0.4% m/m, 2.4% y/y in March. Shipments increased by 1.5% m/m, while inventories and the inventory ratio declined by 0.2% and 0.7% m/m, respectively. Key contributors to production growth included general-purpose machinery, electrical machinery and other manufacturing, while motor vehicles and chemicals sectors declined. Shipments gains were led by electronic parts and devices, electrical machinery and general-purpose machinery. Forecasts suggest production will rise 5.1% m/m in May but fall 0.4% in June, driven by production machinery and transport equipment.

New Zealand May ANZ-Roy Morgan Consumer Confidence index rose modestly, up 6 points to 86.5, though this is still 21 points below its January peak. The is the first positive m/m increase after straight three months of declines since February. The net proportion of households viewing now as a good time to buy major items improved by 5 points to -20. Inflation expectations for two years ahead eased from 6.6% to 5.3%, while house price expectations declined to 2.6%. Regional confidence varied, with Wellington significantly more pessimistic. The slight lift in confidence aligns with a small drop in petrol prices, but overall sentiment remains weak amid economic uncertainty and inflation concerns, suggesting cautious RBNZ monetary policy ahead. NZX 50 +0.29% to 13245, NZDUSD +1.258% to 0.5959, 10y NZGB -10.3bp to 4.513%.

China’s private fund industry reached a record ¥23.46tn ($3.46tn) in assets under management in April, up from ¥20.22tn a year earlier. The sector, including private equity, venture capital and private securities funds, benefited from renewed market confidence and tech investment surges. Q1 investment activity rose 24.7% y/y to ¥234.4bn, driven by AI start-ups raising over ¥110bn (+185% y/y). Private securities fund filings more than doubled to ¥254.1bn in the first four months of the year. Hong Kong’s IPO market also rebounded, raising $34.7bn in 2025, up 210% y/y. CSI 300 -0.45% to 4892, USDCNY +0.091% to 6.7696, 10y CGB -1.4bp to 1.71%.

China’s State Council has issued an urban renewal plan for 2026-30, targeting significant progress in urban development by 2030. The plan aims to shift to a new urban development paradigm, enhancing quality of life in cities. It focuses on six key tasks: fostering new urban growth drivers, creating high-quality living spaces, promoting green and low-carbon transitions, building safer and resilient cities, advancing urban culture and improving governance. Emphasis is placed on better use of underutilized land, implementing full life-cycle housing safety management, constructing or renovating quality homes and upgrading municipal infrastructure.

South Korean industrial production showed mixed trends in April. The Index of All Industry Production fell 0.6% m/m but rose 2.4% y/y. Manufacturing production declined by 0.8% m/m yet increased by 1.6% y/y, while manufacturing shipments dropped by 3.6% m/m and 1.3% y/y. Capacity utilization decreased by 1.6% m/m but edged up 0.2% y/y, with average utilization at 73.7%, down 1.2 points m/m. Retail sales fell 3.6% m/m but grew 1.6% y/y. Equipment investment decreased by 3.6% m/m but rose 8.1% y/y. Construction orders surged 39.3% y/y despite a 5.5% y/y decline in construction completions. Composite business indices showed modest m/m gains. The cyclical component, which forecasts business cycle turning points, rose by 0.6 points m/m, 4.41% y/y, suggesting further upward momentum in GDP growth. Note that Bank of Korea upwardly revised its 2026 forecast this week to 2.6% from 2.0%. KOSPI +3.55% to 8476, USDKRW -0.896% to 1507.7, 10y KTB +3.8bp to 4.145%.

Singapore’s non-resident deposits dropped to SG$650.6bn in April from SG$659.1bn in March. Demand deposits rose slightly to SG$206.5bn (from S$205.1bn), while fixed deposits fell to SG$358.0bn (from S$367.2bn). Savings and other deposits edged down to SG$86.1bn (from SG$86.9bn). The M1, M2 and M3 broad money supply measures all increased y/y, up 9.2%, 5.5% and 5.5%, respectively. Total loans and advances rose to SG$908.4bn, with business loans at SG$551.3bn and consumer loans at SG$357.1bn, reflecting ongoing credit growth. STI +0.93% to 5035, USDSGD +0.22% to 1.2772, 10y SGB -1.4bp to 2.057%.

Philippine imports came in at $13.17bn in April (+22.4% y/y vs. March: 17.0%), with exports at $7.21bn (+6.3% y/y vs. March: 20.8%). The trade deficit widened to -$5.97bn (March: -$5.02bn), the highest since August 2022. Key export commodities included electronic products ($3.44bn, 1.2% y/y) and manufactured goods ($5.37bn, -4.0% y/y). The U.S. was the top export destination ($1.30bn, 18% of total exports), followed by China (12.9% of total exports) and Japan (12.69% of total exports). Imports were led by electronic products and mineral fuels, mainly sourced from China ($3.92bn). PSEi -1.56% to 5769, USDPHP +0.077% to 61.583, 10y PHGB -9bp to 7.303%.

The Philippines’ Producer Price Index (PPI) for manufacturing rose by 2.4% y/y in April, down from 2.6% in March and 0.2% in April 2025. The slowdown was mainly driven by the manufacture of coke and refined petroleum products, which grew 5.3% y/y vs. 8.2% in March, contributing 62.7% to the deceleration. Other contributors included slower growth in computer, electronic and optical products (4.3% vs. 4.9%) and basic metals (3.8% vs. 4.9%). The manufacture of food products saw accelerated PPI growth of 1.4% y/y, led by processing and preserving of fish and seafood.

Taiwan’s seasonally adjusted real GDP grew by 14.55% y/y and 6.94% q/q in Q1, revised up from earlier estimates of 13.69% y/y. Exports surged 35.76% y/y, driven by AI-related demand, while imports rose 26.34%. Private consumption increased 4.74%, supported by spending on communication, entertainment, transport and tourism. Gross capital formation expanded by 5.92%, led by investment in machinery, intellectual property and transport equipment. Manufacturing grew by 26.18%, wholesale/retail by 14.71%, transportation by 3.41% and financial services by 15.31%. For 2026, GDP is projected to grow 9.64%, boosted by AI-driven export growth (19.93%), private consumption (3.60%) and investment (6.43%). CPI is expected to rise 1.93%, with the fuel price impact moderating. TAIEX +2.51% to 44733, USDTWD +0.141% to 31.384, 10y TGB +4.1bp to 1.66%.

Taiwan’s central bank has released its 20th Financial Stability Report. It highlighted that Taiwan’s financial markets and institutions remain stable, with strong bank profitability and sound asset quality, though some sectors face higher risks. The report highlights steady global economic growth in 2025 with easing inflation, while Taiwan’s economy achieved its highest growth in 15 years and declining inflation. However, geopolitical tensions and U.S. trade policy changes pose risks, potentially slowing global growth and increasing inflation pressures in 2026. The central bank is maintaining its policy rates and flexible exchange rate policy, pledging timely measures to safeguard financial stability amid ongoing uncertainties.

Thailand’s external trade, measured in USD, deteriorated sharply in April as import growth far outstripped exports. Merchandise exports excluding gold increased by 1.3% m/m, supported by stronger shipments of electronics, machinery and equipment, and automotive products, which includes computer parts, electrical transformers, passenger vehicles and auto parts. Merchandise imports excluding gold surged 16.5% m/m, driven by higher crude oil imports, increased purchases of electronic components from Taiwan, electric vehicles from China and capital goods such as computers. The merchandise trade balance widened from a deficit of $0.1bn in March to a deficit of $6.8bn in April, contributing to a current account deficit of $7.6bn against a surplus of $0.6bn in March. Export values rose 23.3% y/y in April, while import values increased by 43.9%, leaving a YTD trade deficit of $7.1bn. SET +0.41% to 1575, USDTHB -0.315% to 32.592, 10y TGN +1.7bp to 2.333%.