• US and China agree to bring down reciprocal tariffs by 115ppts for 90 days, sparking immediate risk on price action; DXY, ES, Crude bid; XAU & Fixed hit.
• US President Trump said he will sign an executive order on Monday at 09:00EDT with prescription drug and pharmaceutical prices to be reduced almost immediately by 30%-80% and the US is to pay the same price as the nation that pays the lowest price anywhere in the world."
• Ukraine and European leaders said they agreed to an unconditional 30-day ceasefire on sea, land and air starting on May 12th and peace negotiations will start in that period if there is a ceasefire, while they said if Russia fails to comply, they will respond with massive sanctions and increased military aid.
• Stocks surge on US-Sino joint announcement, but pharmaceuticals hit by Trump.
• DXY and CNY surge on US-China trade; haven assets such as Bonds/JPY are in the red.
• Industrial commodities boosted by US-China updates; Spot gold slumps amid haven outflow
• Looking ahead, US Federal Budget, Speakers including BoE’s Greene, Mann, Taylor & Fed’s Kugler.

TARIFFS/TRADE

US-CHINA MONDAY BRIEFING

In one line: US and China agree to bring down reciprocal tariffs by 115ppts for 90 days, sparking immediate risk on price action; DXY, ES, Crude bid; XAU & Fixed hit

• US-CHINA JOINT STATEMENT: US to cut tariffs of Chinese goods to 30% from 145% for 90 days; China to cut tariffs on US goods to 10% from 125% for 90 days.
• US will modify the application of rate of duty on articles of China by suspending 24ppts of that rate for an initial period of 90 days.
• US will retain the remaining rate of 10% on those articles; China to retain the remaining ad valorem rate of 10% and remove modified rate.

CHINA'S STATEMENT ON U.S.

• China's Statement on US: Commerce Ministry says it is to suspend 24% of additional ad valorem tariffs for an initial period of 90 days on trade talks with the US; says it will retain the remaining additional ad valorem rate of 10% China will adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the United States since April 2. China says two sides will establish a mechanism to continue discussions about economic and trade relations. Parties commit to take the actions by May 14.
• China on trade talks with US: Parties will establish a mechanism to continue discussions about economic and trade relations.

US TREASURY SECRETARY BESSENT

• US Treasury Secretary Bessent says neither the US or China want to decouple.
• Says they have come to an agreement on a 90-day pause and substantially moved down tariff levels. Both sides on reciprocal tariffs will move down by 115ppts Very good personal interactions.
• Says there was no discussion on currency with China.
• Says the UK and Switzerland have moved to the front of the queue; EU is much slower.

USTR GREER

• USTR Greer says both sides committed to the 90-day pause period. Effective embargo was not a sustainable practice for both sides.
• Fentanyl issue remains unchanged as it stands. On a positive track, having very constructive conversations.
• Final result is very good for the US and China. Constructive path forward for a positive conversation with the Chinese.

WEEKEND UPDATES

• US President Trump said there was a very good meeting with China on Saturday and many things were discussed and much agreed to, while he stated a total reset was negotiated in a friendly but constructive manner. Trump also said great progress was made and they want to see for the good of both China and the US, an opening up of China to American business.
• USTR Greer said differences are not as great as previously thought, and Treasury Secretary Bessent said he looks forward to sharing details on Monday morning.
• Chinese Vice Premier He Lifeng said trade talks were constructive and they made substantive progress, while both sides reached an important consensus and agreed to establish a China-US trade consultation mechanism with a joint statement to be issued on May 12th. Furthermore, He said the atmosphere was candid, in-depth and constructive, and noted that the nature of relations is mutual win-win, and they are going to provide more certainty and stability in the world economy.
• Chinese Vice Commerce Minister Li Chenggang said any deal to be reached will be in China’s development interest and that they reached an important consensus with the two sides to have regular contact, while Li added that they are not in a position to release more substance on what they agreed on and declined to answer when asked about the timing of the statement but said it will be good news for the world.
• US President Trump’s administration opened a Section 232 investigation on whether imports of aircraft, engines and components are a threat to national security, while the Commerce Department is also investigating the impact of imported medium-duty and heavy-duty trucks on national security.
• White House Economic Adviser Hassett said the Chinese are ‘very, very eager’ to engage in trade talks and rebalance trade relations with the US, while he added that more trade deals could be coming as soon as this week. Furthermore, he said Commerce Secretary Lutnick briefed him about 24 deals that Lutnick and USTR Greer are working on, according to Fox News Sunday Morning Futures.

EUROPEAN TRADE

EQUITIES

• European bourses are broadly in positive territory with sentiment in Europe boosted after the US and China agreed to lower tariff levels by 115ppts each for a period of 90-days. The announcement sparked immediate upside across the equities complex, and now currently resides just off highs; DAX 40 +1.2%, Europe paring given Bessent's "EU is much slower" language.
• To recap the main points; 1) US to cut tariffs on Chinese goods to 30% (prev. 145%) for 90 days, 2) China to cut tariffs on US goods to 10% (prev. 125%) for 90 days, 3) Bessent said both sides came to an agreement, 4) there was no discussion on currency with China, while fentanyl remains an issue.
• European sectors are mostly firmer, with the risk-tone boosted after the aforementioned US-China talks. The typical cyclical sectors outperform today, with the likes of Basic Resources and Autos leading whilst Utilities is towards the foot of the pile.
• Healthcare underperforms in Europe today, with pharma names broadly in the red after US President Trump said he will sign an executive order on reducing the price of prescription drugs, by 30-80%. Roche (-3.2%), AstraZeneca (-3.5%).
• There is some underperformance in Novo Nordisk (-5.9%) after Eli Lilly’s study suggests Zepbound outperforms Novo’s Wegovy for weight loss.
• US equity futures are entirely in the green, with the complex boosted by the positive US-China trade updates. The Magnificent 7 are broadly higher in pre-market trade; Tesla (+6%), Amazon (+6%) – Chinese ADRs are also set to open higher; Alibaba (+6.8%), PDD (+7%).
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FX

• DXY is stronger after the US-China deal. Immediate upside seen on the release of the US-China joint statement following trade talks over the weekend, with the two sides agreeing to slash reciprocal tariffs by 115ppts each for a period of 90 days, marking a 30% levy on China (from 145%), and a 10% levy on the US (from 125%). DXY has spiked to a 101.81 intraday peak at the time of writing from a 100.50 base overnight, with the index eyeing its 50 DMA (101.94) ahead of 102.00. USD/CNH slumped under its 200 DMA (7.2213) to a 7.1983 trough from a 7.2400 intraday peak.
• EUR is bearing the brunt of the dollar's strength, alongside some loss of the appeal it gained during the loss of US confidence earlier this year. Furthermore, US Treasury Secretary Bessent noted that talks with the EU on trade are slow. EUR/USD slipped to a 1.1083 low from a 1.1242 peak, eyeing its 50 DMA (1.1074) to the downside.
• Traditional havens slumped amid a broader outflow from safety and into risk assets following the aforementioned constructive US-Sino updates. USD/JPY shot higher to a 148.22 peak (vs 145.71 low), with the 200 DMA seen at 149.69.
• GBP has been hit by the Dollar strength on the aforementioned US-China news, with no reaction seen to BoE's Lombardelli, who suggested it is sensible to continue the gradual pace of cutting rates, but caution remains appropriate. Several BoE speakers due today with BoE's Greene on monetary policy with a text release at 11:30 BST, BoE's Mann with a text release at 13:50 BST, and BoE's Taylor at 17:00 BST.
• Antipodeans are subdued by the surge in the Dollar, but losses are largely cushioned by the antipodeans' high-beta properties and amid optimism as China receives a 115ppts reprieve on reciprocal tariffs.
• PBoC set USD/CNY mid-point at 7.2066 vs exp. 7.2429 (Prev. 7.2095).
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FIXED INCOME

• Today’s session began with a bearish bias as APAC trade was focussed on the initial language coming out of the US-China talks and source reporting around it, remarks/reports pointed to a positive outcome.
• Thereafter, the US-China joint statement and accompanying separate press conferences saw 115ppts of reciprocal measures removed by both sides (US now 30%, China now 10%) for a 90-day period. An update which sparked immediate and continuing pressure in the fixed income space.
• Specifically, USTs down to a 110-06 trough from 110-13+ pre-release.
• Bunds reacted to the above, sending Bunds lower by over 30 ticks at/just after the joint statement. Since, it hit a 129.92 low vs 130.49 open levels. However, as the European risk tone comes off best and equity bourses/futures in the region give back much of the upside, EGBs have lifted off lows by around 15 ticks. A lifting in EGBs that has seemingly occurred as participants digest the language from US officials regarding the EU. Specifically, Bessent said that while the UK and Switzerland have moved to the front of the queue, the EU “is much slower”.
• Gilts are in-fitting with the above, gapped lower by 58 ticks as the statement coincided with the open itself. Thereafter, slipped to a 91.69 base in-fitting with broader price action. Remained in very close proximity to that low since.
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COMMODITIES

• Immediate upside in crude benchmarks on the US-China joint statement, which, in short, reduced reciprocal tariffs by 115ppts each; the US to cut tariffs on Chinese goods to 30% from 145%, and China to cut tariffs on US goods to 10% from 125%; both for 90 days.
• Precious metals hit by the surge in the Dollar alongside outflows out of safe havens on the back of the aforementioned US-China trade updates, with the yellow metal unwinding much of the risk premium that was woven in during the tit-for-tat tariff increases between the US and China earlier this year. Spot gold slipped from a USD 3,324.73/oz peak to a USD 3,215.76/oz low at the time of writing.
• Base metals are boosted by sentiment amid the aforementioned positive US-China joint statement, with not much more to add, although upside is somewhat hampered by the surge in the Dollar and relatively subdued Chinese inflation data released over the weekend. 3M LME copper resides towards the upper end of a USD 9,577.00-9,577.00/t.
• Morgan Stanley downgrades European Energy sector to Cautious from In Line.
• Saudi Aramco reported Q1 (USD) profits fell 4.6% Y/Y to 26bln, and rev. rose to 108.1bln (prev. 107.2bln Y/Y), while it stated that global trade dynamics affected energy markets in Q1 with economic uncertainty impacting oil prices.
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NOTABLE DATA RECAP

• Chinese CPI MM (Apr) 0.1% vs. Exp. 0.0% (Prev. -0.4%); YY -0.1% vs. Exp. -0.1% (Prev. -0.1%)
• Chinese PPI YY (Apr) -2.7% vs. Exp. -2.8% (Prev. -2.5%)

NOTABLE EUROPEAN HEADLINES

• BoE's Lombardelli says underlying inflation pressure for the UK have continued to fall; sensible to continue gradual pace of cutting rates "When thinking about the process of disinflation, my focus is on wages, as they are the largest component of the prices set by domestic services firms, and so a key driver of moves in underlying inflation. Wage growth is still too high to be consistent with inflation at target." "Productivity growth has been very low over the past couple of years... but that hasn’t been reflected in a substantial decline in wage growth." "caution remains appropriate. I’ll be more comfortable when I see material deceleration in the data over a longer period." Domestic inflation progress, not US tariffs, was the main factor behind the vote in May to cut by 25bps; though, US tariffs added to the reasoning.
• ECB’s Schnabel said the ECB should keep a steady hand and rates should be held close to where they are now.
• ECB's Vujcic expects inflation to slow the ECB's 2% target by year-end, according to Bloomberg.

NOTABLE US HEADLINES

• US President Trump is reportedly seeking USD 1tln in deals during his Gulf trip, according to Axios. The Qataris are also expected to announce USD 200-300bln in deals and investments, including a "huge" commercial aircraft deal with Boeing (BA) and a USD 2bln deal to purchase MQ-9 Reaper drones, according to a source.
• US President Trump posted on Truth Social “IN JUST THREE MONTHS, TRILLIONS OF DOLLARS (and therefore, record numbers of JOBS!) HAVE BEEN POURING INTO THE USA. THIS IS BECAUSE OF MY TARIFF POLICY, and our great November 5th Election WIN!”.
• US President Trump posted that his next TRUTH will be one of the most important and impactful he has ever issued and later posted that he will sign an executive order on Monday at 09:00EDT with prescription drug and pharmaceutical prices to be reduced almost immediately by 30%-80% and the US is to pay the same price as the nation that pays the lowest price anywhere in the world."
• Fed’s Cook (voter) said a less productive economy could need higher interest rates to contain inflation and that tariff policies could lower productivity, limit potential output and increase inflationary pressure, while Cook said less investment and higher costs could lower the economy’s potential output.
• Fed’s Musalem (2025 voter) said economic activity has moderated and sentiment has declined, while he added that they should not commit to rate cuts until the impact of tariffs on inflation becomes clear and rate cuts are still possible if increased inflation proves short-lived, expectations remain anchored, and the economy becomes meaningfully weaker.
• Fed’s Hammack (2026 voter) said on Friday that it is reasonable to take a wait and see approach and she would rather be slow and move in the right direction than be fast and wrong, while she said they will be ready to move on rates when there is clear and convincing evidence. Furthermore, she would like to be pre-emptive and action-oriented when possible, but noted it is hard given uncertainty over tariffs and other policies.
• US Treasury Secretary Bessent urged Congress to raise the debt limit by mid-July and expects the debt limit to be hit in August.
• Punchbowl Reports that US Clean energy tax credits from the Inflation Reduction Act are in for a massive overhaul as part of the GOP tax bill.

GEOPOLITICS

MIDDLE EAST

• "Israeli media: The army will cease fire in Gaza as of 12 noon local time [10:00 BST]", via Al Arabiya.
• Senior Palestinian official said Hamas was in talks with the US administration regarding a Gaza ceasefire and aid. It was later reported that Hamas said it will release the last US hostage in Gaza as part of efforts to reach a Gaza ceasefire and allow humanitarian aid.
• Israeli PM Netanyahu’s office said the US informed Israel of Hamas’s intention to release Edan Alexander without any compensation or conditions and the US informed Israel that the move is expected to lead to negotiations for the release of further hostages, while Israel’s policy is that negotiations will be conducted under fire with a continued commitment to achieving all war objectives. PM Netanyahu later said that Israel has not committed to any ceasefire or prisoner release with Hamas, but only to a safe corridor for release of Edan Alexander, and negotiations for the release of other hostages will continue while preparations are made to intensify fighting in Gaza.
• Israeli army carried out major bombing operations in the city of Rafah, Southern Gaza Strip, according to Al Jazeera.
• Israel’s military issued evacuation warnings to people present in three Yemeni ports of Ras Isa, Hodeidah and Salif, while the Houthi interior minister said that Israel conducted an attack on Hodeidah.
• US envoy Witkoff held direct and indirect talks with Iran in Oman and an agreement was reached to move forward with talks to continue working through technical elements, according to a senior administration official.
• The fourth round of Iran-US nuclear talks was conducted in Oman which Iran’s Foreign Minister Araqchi said were more serious compared to previous rounds and talks are moving forward, while he stated that “now both sides have a better understanding from each others’ views” but added that Tehran’s uranium enrichment program is non-negotiable.
• Iran’s Foreign Minister Araqchi said Tehran continues nuclear talks with the US in good faith and Iran will not back down from and of its rights if the US goal of talks is to deprive Iran of its nuclear rights, while he added a nuclear agreement is possible if the US aim is non-proliferation of nuclear weapons and Oman’s Foreign Minister noted that the next round of talks will take place after both sides have consulted with their respective capitals.
• PKK, Kurdish militant group, has decided to dissolve itself and conclude the armed conflict with Turkey, via Reuters citing a group-affiliated agency.

RUSSIA-UKRAINE

• Ukraine and European leaders said they agreed to an unconditional 30-day ceasefire on sea, land and air starting on May 12th and peace negotiations will start in that period if there is a ceasefire, while they said if Russia fails to comply, they will respond with massive sanctions and increased military aid.
• Ukrainian President Zelensky said it is a positive sign that the Russians have finally begun to consider ending the war and the very first step in truly ending the war is a ceasefire. It was separately reported that Zelensky said Ukraine is ready to meet and he expects Russia to confirm a ceasefire beginning May 12th. Furthermore, Zelensky said Ukraine awaits a full ceasefire starting on Monday to provide a necessary basis for diplomacy and he will meet with Russian President Putin on Thursday in Turkey, and noted that the ceasefire beginning on Monday remains on the table and that Ukraine is awaiting a response from Russia but also noted that Ukraine will be ready to respond symmetrically if Russia violates the ceasefire.
• Russian drone attack on Ukraine rail infrastructure targets civilian freight train, injures locomotive driver, according to Ukrainian Railways which added that Russia is not observing Ukraine's proposal for ceasefire.
• Ukraine’s Foreign Minister said President Zelensky and visiting European leaders had a phone call with US President Trump on Saturday, which was constructive and they discussed peace efforts.
• Russian President Putin offered Ukraine to resume direct negotiations and talks will begin on May 15th in Istanbul with no pre-conditions. It was also reported that Kremlin aide Ushakov said proposed peace talks in Turkey will take into account the situation on the ground and 2022 negotiations.
• Russian President Putin held a call with Turkish President Erdogan and they discussed in detail an initiative to resume direct Russian-Ukrainian talks in Istanbul, while Turkish President Erdogan told French President Macron in a phone call that Turkey is ready to host negotiations for a ceasefire and permanent peace between Russia and Ukraine.
• Russian Defence Ministry said Russian troops continued the special military operation after the Victory Day ceasefire ended and Ukrainian troops made five attempts to break through the border in Kursk and Belgorod regions during the ceasefire. It was also reported that Russia launched an air attack on Kyiv and that a Ukrainian missile attack injured three in the town of Rylsk in Russia’s Kursk region.
• US President Trump posted on Truth that Ukraine should agree to meet with Russian President Putin on Thursday to negotiate, while he stated that he was starting to doubt that Ukraine would make a deal with Russian President Putin.
• Polish PM Tusk said the Russian secret service was behind the fire that almost completely destroyed a Warsaw shopping centre in May 2024.

INDIA-PAKISTAN

• India’s Foreign Ministry said Pakistan’s Director General of military operations called on Saturday and it was agreed that both sides would stop firing, while Pakistan’s Foreign Minister said this is not partial and it is a full-fledged ceasefire understanding between the two countries.
• India’s Foreign Secretary said Pakistan violated the ceasefire and that Indian armed forces responded, while the official said they call on Pakistan to halt the violence and India’s armed forces have been given the instruction to deal with violations along the border.
• Pakistan’s military said dozens of its armed drones hovered over major Indian cities including Delhi and 26 military targets and facilities were hit in India during operations carried out on Saturday.
• Pakistan’s Foreign Minister Dar spoke with Chinese Foreign Minister Wang and China reaffirmed it will continue to stand by Pakistan in upholding its sovereignty and territorial integrity.
• US President Trump said he will increase trade substantially with both India and Pakistan, while he said he will work with both to see if a solution can be reached concerning Kashmir.

CRYPTO

• Bitcoin is a little firmer and briefly boosted following the US-China deal; currently just shy of USD 105k.

APAC TRADE

• APAC stocks began the week with mild gains amid hopes related to a US-China trade deal after substantive progress was said to have been made during talks in Switzerland over the weekend, but with gains capped given a lack of details announced so far and with the sides to provide a joint statement later today.
• ASX 200 was led higher by the commodity-related sectors with outperformance in energy after the recent oil rally.
• Nikkei 225 advanced at the open with the help of a weaker currency but then briefly wiped out all of the gains with pressure seen in pharmaceuticals after US President Trump announced he will sign an executive order on Monday with prescription drug and pharmaceutical prices to be reduced almost immediately by 30%-80%.
• Hang Seng and Shanghai Comp were underpinned following US-China trade talks over the weekend in which both sides noted that progress was made and they agreed to establish a China-US trade consultation mechanism, although further upside was capped given the actual lack of details and after Y/Y Chinese CPI and PPI remained in deflation.

NOTABLE ASIA-PAC HEADLINES

• Japanese PM Ishiba said the government was ready to take further measures to cushion the economic impact from higher US tariffs but suggested that a cut in Japan's consumption tax was unlikely, according to Reuters.
• China April vehicle sales +9.8% Y/Y (prev. +8.2%); Jan-April +10.8% Y/Y (prev. 10.2%)