Risk sentiment hit on US/Iran conflict resumption fears, DXY bid, Antipodeans and Sterling lag - Newsquawk EU Market Open

• US President Trump said it's just a question of time regarding Iran, but added that he is not going to be much more patient with Iran.
• US President Trump said he made fantastic trade deals with China, and it was an incredible visit, while they've settled a lot of different problems, and the relationship is a very strong one.
• Crude futures gradually edged higher amid risks of geopolitical escalation when US President Trump returns from his Beijing trip.
• APAC stocks were mostly subdued; European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 1.3%.
• UK's Manchester Mayor Andy Burnham will be requesting to stand in the Makerfield by-election after MP Josh Simons stepped down.
• Looking ahead, highlights include Italian HICP Final (Apr), Canadian Wholesale Sales (Mar), US Industrial Production (Apr), Comments from Fed's Barr, Credit Ratings Updates including Fitch on Germany, S&P on Italy, Morningstar DBRS on Portugal and the UK, Scope Ratings on Poland.

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IRAN CONFLICT

• US President Trump said it's just a question of time regarding Iran, while he also stated that current Iranian leaders are more reasonable and Iran has a lot of inner turmoil, but added that he is not going to be much more patient with Iran, according to a Fox News Interview. Trump also stated that Iran's enriched uranium could be entombed, but would rather get it, as well as stated that they have their eyes on Iran's enriched uranium and could bomb it again, but he would rather get it. Trump separately commented that he discussed Iran with Chinese President Xi, and they feel very similar about how they want to end the Iran war.
• China's Foreign Ministry said US President Trump and Chinese President Xi reached a series of new consensuses, while it added that the war should not continue and that China is to contribute to Middle East peace. It also said a comprehensive and lasting ceasefire should be reached as soon as possible, and urged solving the Iranian nuclear issue through dialogue.
• Washington informed Tel Aviv of the possibility that President Trump could order strikes inside Iran, according to Al Hadath.
• US State Department said Israel and Lebanese officials had a full day of productive and positive talks. However, a separate report stated that the atmosphere surrounding the third round of Lebanese-Israeli negotiations is not encouraging and there are no indications of any serious breakthrough in the negotiations between Lebanon and Israel.
• US House narrowly rejected the Iran war powers resolution with a 212-212 tie vote.
• Iranian Foreign Minister Araghchi said at the BRICS meeting that the US empire is in decline and Iran will never bow to pressure, according to Press TV.
• Iranian Parliamentary Speaker Ghalibaf warned that US efforts at sustaining military escalation near the Strait of Hormuz could trigger a fresh global financial crisis at a time when US national debt already stands at a whopping USD 39tln.
• Iran's Ambassador to Belarus criticised the US negotiation stance and said US President Trump's excessive ambitions hinder US-Iran talks, according to TASS.
• Former IRGC commander Jafari said "If the enemy does not accept Iran's preconditions, there will be no negotiations." Jafari added that if the war starts again, they will strike harder blows at the enemy than ever before.
• Qatar's Foreign Ministry told Al Arabiya it had shot down several Iranian drones near its airspace, while it stressed the need to open the Strait of Hormuz in its contacts with the Islamic Republic.
• Israeli army detected rocket launches from Lebanon towards Israeli territory, while Israeli artillery shelling was reported on the town of Nabatieh al-Fawqa in southern Lebanon.
• Saudi Arabia reportedly conducted secretive strikes on Iran after Tehran attacked Saudi energy facilities and civilian infrastructure in March, according to WSJ citing US and Gulf officials familiar with the attacks. Saudi air force reportedly carried out strikes on Iranian drone and missile launch sites, as well as struck targets in Iraq linked to Iranian-backed militias, according to sources cited by WSJ.

US-CHINA

• US President Trump said they have gotten along well with Chinese President Xi and have a very good relationship with China, while he added Xi is a tremendous and strong leader, and that he would like to see US companies do more business in China. Trump said he spoke to Xi strongly about trade and intellectual property, as well as noted that China will open the country in stages and that it would be good for US companies. Furthermore, Trump said China is going to be buying a lot of farm products, as well as stated that he asked China about using Visa (V), and maybe the China Visa ban will come off.
• US President Trump said he made fantastic trade deals with China and it was an incredible visit, while they've settled a lot of different problems and the relationship is a very strong one, with a lot of good coming from the trip. Trump added that they will have further discussions and Xi's visit will be reciprocal.
• US President Trump said Chinese President Xi had agreed to buy 200 Boeing (BA) aircraft and reiterated that Xi wanted an agreement on Iran, while refusing to provide military equipment to Tehran. Trump added that Xi wanted to continue buying Iranian oil and opposed Iran charging Hormuz tolls. Trump further stated that “Boeing wanted 150, they’ve got 200 big ones”.
• US President Trump posted that Chinese President Xi congratulated him on so many tremendous successes in such a short period of time, while Trump added that the US was in decline two years ago, but is now the hottest nation.
• USTR Greer said they had a lot of successes in rebalancing trade with China and expect to see an agreement for double-digit billions of dollars of agricultural sales to China coming out of the summit. Greer said China is fulfilling its promises on soybean purchases and that China knows there is going to be a certain level of US tariffs on Chinese goods. Furthermore, he cannot commit to a given rate of tariff on Chinese goods and will release findings of trade investigations in weeks, while he stated purchases of NVIDIA H200 chips will be a sovereign decision by China, and that chip export controls were not a major topic in the meeting.

US TRADE

EQUITIES

• US stocks continued to rally, with tech leading the gains once again, as NVIDIA was boosted after the US and China announced the company would be allowed to resume chip sales to China, sending shares more than 4% higher. Cisco (CSCO) also surged following earnings and a restructuring announcement, while Cerebras (CBRS) nearly doubled from its IPO price, reinforcing ongoing optimism surrounding AI demand.
• Focus remained on the US/China summit, which appeared constructive overall as agreements involving NVIDIA and Boeing (BA) were announced, although China's reported 200 Boeing jet order fell short of the previously touted 500 aircraft figure, while Treasury Secretary Bessent commented that “soybeans are all taken care of”, weighing on soybean futures.
• SPX +0.76% at 7,501, NDX +0.73% at 29,580, DJI +0.75% at 50,063, RUT +0.67% at 2,863.
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NOTABLE HEADLINES

• Fed's Barr (voter) said smaller Fed balance sheets would likely increase Fed interventions and that reducing liquidity rules to shrink the Fed balance sheet is not a good idea. Barr stated that lowering the liquidity requirement would simply increase stability risks, and if anything, the liquidity requirement should go up, not down. Furthermore, he said they are not in a recession, but there's been little job creation, while he hasn't decided on what to do at the June FOMC meeting.
• Fed's Williams (voter) said Fed independence delivers better economic outcomes, and it is not time to worry about Fed independence, with staff focused on the mission. Williams said the context matters for inflation given its persistence above target, while he is not surprised to see near-term inflation expectations rise and is seeing pretty stable longer-term inflation expectations. Williams noted there is a lot of uncertainty around energy price outlook and that the job market is not "hot" but also not slowing dramatically, while he added that monetary policy is mildly restrictive and he doesn't see any reason to hike or cut rates right now.
• Fed’s Hammack (2026 voter) said central bank independence remained critical to effective monetary policymaking.
• Fed’s Miran submitted his resignation from the Federal Reserve Board, effective on or shortly before Kevin Warsh’s swearing-in as Chair.

APAC TRADE

EQUITIES

• APAC stocks were mostly subdued after failing to sustain the early momentum that was spurred by the gains on Wall Street, where tech outperformed, and sentiment was underpinned amid constructive headlines from the Trump-Xi summit, while the souring of risk sentiment coincided with higher oil prices and yields amid risk that the geopolitical situation in Iran could escalate when US President Trump returns from Beijing.
• ASX 200 lacked direction as strength in tech and financials was offset by losses in mining, materials, resources and utilities.
• Nikkei 225 swung between gains and losses but ultimately continued its pullback from the recent peak amid oil-related headwinds and after hot PPI data further supported the case for a rate hike at next month's BoJ meeting.
• Hang Seng and Shanghai Comp were mixed despite the recent constructive headlines from the Trump-Xi summit, while the leaders are meeting again today in a restricted working lunch session prior to US President Trump's return to the US. Furthermore, sentiment was not helped by recent disappointing lending and aggregate financing data from China for April, which showed a surprise contraction in loans.
• US equity futures pulled back as risk sentiment soured overnight amid higher oil prices and yields, as well as Trump's comments on Iran.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 1.3% after the cash market closed with gains of 1.3% on Thursday.

FX

• DXY mildly strengthened as risk sentiment waned overnight alongside higher oil prices and yields, while there were several comments from US President Trump in a Fox News interview in which he stated that he is not going to be much more patient on Iran and suggested they could bomb it again, but he would rather get it regarding Iran's enriched uranium.
• EUR/USD languished beneath the 1.1700 handle after recent declines and with little fresh catalysts from the bloc.
• GBP/USD remained subdued after underperforming yesterday despite better-than-expected GDP data, with the pound weighed on by UK political turmoil surrounding PM Starmer after potential leadership challenger, Streeting, resigned from his post as Health Secretary, while Manchester Mayor Burnham will be requesting to stand in the Makerfield by-election after MP Josh Simons confirmed he is to step down.
• USD/JPY gradually extended its footing at the 158.00 territory amid a firmer buck and higher oil prices, but with upside capped after an acceleration in Japanese PPI data.
• Antipodeans resumed the prior day's retreat amid headwinds from the decline in metal prices and as risk sentiment waned.
• PBoC set USD/CNY mid-point at 6.8415 vs exp. 6.7976 (prev. 6.8401)

FIXED INCOME

• 10yr UST futures were pressured and printed a fresh contract low, with selling exacerbated as prices breached through Wednesday's trough and as oil prices steadily climbed.
• Bund futures resumed the prior day's intraday pullback and returned to sub-125.00 territory.
• 10yr JGB futures followed suit to the downside in global peers, with demand also not helped by firmer-than-expected Japanese PPI data, which showed the fastest pace of increase since late 2022.

COMMODITIES

• Crude futures gradually edged higher amid risks of geopolitical escalation when US President Trump returns from his Beijing trip, as a report noted that Washington informed Tel Aviv of the possibility that Trump could order strikes inside Iran, while Israeli officials were said to remain on high alert this weekend in case Trump decided to resume the war. Furthermore, Trump said in an interview on Fox News that it's just a question of time regarding Iran and that he is not going to be much more patient on Iran.
• Spot gold retreated amid higher yields and a firmer buck, while the downside also coincided with firm losses in silver, which briefly breached below the USD 81/oz level.
• Copper futures declined as the overnight risk sentiment deteriorated, despite the recent constructive headlines from the Trump-Xi summit.

CRYPTO

• Bitcoin traded indecisively and on both sides of the USD 81,000 level.

NOTABLE ASIA-PAC HEADLINES

• Japan's Minister for Economy, Trade and Industry Akazawa said they can tap FY26 budget reserves if the Middle East impact lasts. However, it was also reported that Japanese Finance Minister Katayama said they are not in a situation where an extra budget is needed, while she stated they have JPY 1tln in reserve funds in the FY26 budget, but added there's no immediate need for an extra budget.

DATA RECAP

• Japanese PPI MM (Apr) 2.3% vs Exp. 0.7% (Prev. 0.8%, Rev. 1.0%)
• Japanese PPI YY (Apr) 4.9% vs. Exp. 3.0% (Prev. 2.6%, Rev. 2.9%)

GEOPOLITICS

OTHER

• US Secretary of State Rubio said China's preference is probably to get Taiwan willingly and that there will be some agricultural purchases from China, while Rubio hoped to get a positive response from China regarding the case of Jimmy Lai and others.
• US Pentagon cancelled the planned deployment of 4,000 troops to Poland.
• CIA Director delivered a message from US President Trump that the US is prepared to engage on economic and security issues if Cuba makes fundamental changes, according to a CIA official.

EU/UK

NOTABLE HEADLINES

• UK's Manchester Mayor Andy Burnham will be requesting to stand in the Makerfield by-election after MP Josh Simons stepped down. It was separately reported that PM Starmer will not seek to block Andy Burnham from becoming Labour candidate in Makerfield, paving his way for a return to Parliament and a leadership bid, according to The Guardian.