The Morning Edge: EU Scrambles to Prepare for Trade Talks as Trump's Tariff Truce Holds

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Global Sentiment: Risk-on
Factors:  US Consumer Confidence Index, US-EU Trade Negotiations

TODAY’S WATCHLIST
 - US FOMC meeting minutes
 - India April industrial production data
 - OPEC meeting

THE BIG STORY
European Union officials are quietly surveying major companies about their US investment plans, seeking leverage ahead of critical trade negotiations after President Trump temporarily shelved threatened 50% tariffs on EU goods. The intelligence-gathering operation comes as Trump signalled cautious optimism about the EU's sudden willingness to negotiate, while maintaining his hardline stance: "I hope they will...open up," he declared, leaving the tariff threat simmering despite calling his weekend conversation with EU Commission President Ursula von der Leyen "very nice."

The EU's secretive corporate outreach highlights Brussels' effort to identify economic weaknesses before talks begin, despite businesses' concerns about Trump's unpredictable trade policy. With 25% auto tariffs and market access demands in play, the reprieve seems tactical, setting up high-stakes negotiations that could hurt European companies if talks fail. The next few weeks will reveal whether diplomacy can succeed where threats have not, determining if this fragile détente can become a lasting compromise.

DATA
US consumer confidence rebounded in May after five months of declines, as a truce in the Washington-Beijing trade war lifted sentiment. The Conference Board’s index rose by 12.3 points to 98.0, exceeding expectations for 87.0. About half of the survey responses came after May 12, when the White House announced a temporary reduction in Chinese import tariffs to 30% from 145%. The data signals potential resilience in consumer spending despite ongoing policy uncertainty.

WHAT HAPPENED OVERNIGHT
US stocks surged on Tuesday, lifted by a broad rally after President Trump's tariff reprieve and an unexpected rise in consumer confidence. All three major US indexes gained, with the tech-heavy Nasdaq leading as AI-focused momentum stocks like the "magnificent seven" drove gains. Airlines and mega-cap growth names outperformed, while semiconductor stocks also rose ahead of Nvidia's results. Analysts expect Nvidia’s earnings to jump 43.5% year-on-year, with revenue up 66.2%. PDD Holdings plunged 13.6% after a 47% drop in March quarter profit and a revenue miss. 

Long-dated US Treasury yields fell, with the 30-year yield biggest one-day drop since late April, mirroring a sharp price rally in longer-term Japanese debt. The 30-year yield slipped 8 basis points to 4.9572%, though it remains just below 5%, near its highest since October 2023. The 10-year yield dipped 7.6 basis points to 4.432%, while the two-year yield declined 2.1 basis points to 3.964%.

The US dollar strengthened broadly on Tuesday, gaining against the yen, euro, and Swiss franc after Japanese authorities announced a cut in bond issuance and US consumer confidence improved. The dollar climbed 1.09% to 144.39 yen, advanced 0.82% to 0.82745 Swiss franc, and rose 0.51% against the euro to $1.132725. The dollar index gained 0.66% to 99.608. 

Brent crude oil prices slipped as markets weighed progress in US-Iran nuclear talks and the possibility of OPEC+ raising production at an upcoming meeting. Brent crude futures settled 1% lower at $64.09 a barrel, while US West Texas Intermediate fell 1.04% to $60.89.

Day’s Ledger

Economic Data:

• ECB Consumer Inflation Expectations
• India April IIP
• US Retail Sales
• US API Weekly Statistical Bulletin

Corporate Actions:

• Jan-Mar earnings: 3M India, Bata India, Birlasoft, Cohance Lifesciences, Cummins India, Deepak Nitrite, Elgi Equipments, Finolex Cables, Granules India, IRCTC, JSW Holdings, MMTC, Natco Pharma, Nuvama Wealth Management, Steel Authority of India, Welspun Corp.
• ACS Tech to consider issue of warrants
• GHV Infra to consider raising of funds
• National Highways Infra Trust to consider raising of fund
• Oriental Carbon to consider voluntary delisting of shares
• Som Datt to consider rights issue
• Zodiac Clothing to consider raising of fund

Policy Events:

• Fed Williams Speech
• Fed Kashkari Speech
• US Federal Reserve will release the minutes of the May 6-7 monetary policy meeting.

TICKERS

• Bharat Dynamics’ net profit falls despite strong revenue growth
• British American Tobacco considers partial sale of ITC stake
• Bosch March quarter profit slips 2% to ₹5.54 bln despite higher revenue
• Coal India’s subsidiary CMPDI files draft red herring prospectus to sell 10% stake
• Dalmia Bharat and subsidiaries move SC vs Madras HC order on tax reassessment
• Delhi HC sets aside ₹770 million arbitral award against Bharat Forge and BF Infrastructure
• EID Parry's March quarter net profit jumps 30%, full-year profit dips 2.4%
• Info Edge approves ₹3 billion investment in subsidiary Startup Internet
• LIC’s net profit jumps 38% in March quarter on lower employee costs
• Minda Corp’s March quarter net profit falls 26.5% despite 9% revenue rise
• RattanIndia Ent consol net loss widens YoY to ₹3.56 billion in Jan-Mar
• RCF reports 26% fall in quarterly net profit
• Sagility India promoter to exercise oversubscription option, offer size rises to 15% stake
• Sonata Software teams up with Qualtrics to boost customer experience solutions
• Triveni Engineering posts 14% rise in March quarter profit on higher revenue

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