Markets
After the ‘positive shock’ of strong US payrolls on Friday, geopolitics in early post-weekend trade kept yields under upward pressure. An escalation in mutual military actions between Iran and Israel only illustrated the complex puzzle to reach (and maintain) a ceasefire/agreement in the regional conflict. Brent oil jumped from a Friday close near $93 p/b to test the $98 p/b area in European dealings. This caused US (and most other core yields) to easily hold the Friday rise. During the session, headlines on the Iran conflict again turned less aggressive as US president Trump called on both parties to halt the attacks. Oil retreated back to the $94 area. This also eased conditions on most other markets, but the rebound remained modest after all, probably as markets realized that any solution to regional supply chain disruptions remains very far away. In this context, there was little reason to reverse Friday’s payrolls-driven yield rise. US yields even added another 1.5 bps (2-y) to 4 bps (30-y), with the 2-y, 10-y and 30-y holding (well) north of the psychological barriers of respectively 4%, 4.5% and 5%. German yields rose between 1.4 bps (2-y) and 2.2 bps (10 & 30-y). After Friday’s sell-off, the Nasdaq ‘rebounded’ 0.86%, but this of course doesn’t erase Friday’s decline (-4.18%). Friday’s dollar rebound ran into resistance, but also here most of Friday’s gains were preserved. DXY still closed north of 100 (100.05). EUR/USD, after testing the 1.15 area closed near 1.1535. The cat-and-mouse game between Japanese authorities and the market on potential interventions keeps USD/JPY near the 160 barrier.
Most Asian equity indices are trading in green this morning, with the Kospi (+ 7.7% currently) outperforming after the sell-off end last week/yesterday. Oil eases back to $93 p/b. US yields decline marginally (-1 bp across the curve) as does the dollar (EUR/USD 1.1545). The eco calendar mostly contains ‘second tier’ data including US NFIB small business confidence, ADP weekly employment statistics and US trade data. Later in US dealings the US Treasury will start its monthly refinancing operation with a $58 bln sale of 3-y Notes. Aside from ‘headline risk’ related to the conflict in the Middle East, markets are looking forward to tomorrow’s US CPI. An upward surprise would probably reinforce Fed rate hike speculation. This also might become an additional supportive for the dollar and to some extent soften the link between the dollar and the oil price. In Hungary we keep an eye at the May inflation figures as they are important input for the National Bank of Hungary as it ponders the room for some gradual policy easing after recent improvement in domestic risk premia.
News & Views
• The NY Fed’s consumer survey had its one-year-ahead inflation gauge decrease by 0.1 ppt to 3.5% in May. Both the 3-yr and 5-yr horizons were unchanged at 3.1% and 3%. Expectations for future credit availability deteriorated, with a lower share of respondents expecting it will be easier to obtain credit in the year ahead. Perceptions of credit access compared to a year ago remained largely unchanged. When asked if they would lose their current job, 43.7% thought it probable to find a new one. That’s down 2.3 ppts, below the 12-month trailing average of 46.8% and the lowest since December 2025. The perceived probability of actually losing their job rose by 0.5 ppt to 15.1%, above the series’ 12-month trailing average of 14.4%.
Total retail sales in the UK increased by 3.7% in May, BRC data showed this morning. The biggest rise since April 2025 was much better than the 0.8% expected but came after a 3% slump in April. The BRC chief executive said that “May’s heatwave drove a surge in outdoor and summer goods. Clothing and footwear returned to growth as shoppers snapped up summer essentials like sandals and sunglasses. There was also roaring trade in fans, lighter bedding, and outdoor toys, and food sales were lifted by bank holiday barbecues.” Both food (3.9%) and non-food (3.5%) supported sales and both recovered from April. Same store sales rose by 3.4% after printing a same-sized drop the month before.
 a ceasefire/agreement in the regional conflict. Brent oil jumped from a Friday close near $93 p/b to test the $98 p/b area in European dealings.){kind=link}