Written Commentary
Modest schedule of data and events; digesting preliminary Samsung Q2 results, Japan wages and Household Spending, German Production; US and Canada Trade, BoE Financial Stability Report and FPC minutes; focus on tense NATO meeting and LePen appeal verdict.
- Japan: strong m/m rise in Household Spending, solid wage growth continue to make case for further BoJ rate hikes.
- Germany: auto and energy output bounce paces better than expected. Industrial Production, underlying trend still weak.
Q2 The Ghost In The Machine – Out Now
EVENTS PREVIEW
Once again, the schedule of macro data and events is rather meagre, with South Korea’s Samsung Q23 trading update showing a 19-fold increased in profits failing to assuage mounting AI related doubts, Japan’s Wages and Household Spending and German Industrial Production to digest ahead of US and Canadian Trade. The focus for the day will be the start of the two day NATO Summit in Ankara, and the extent to which much can be achieved given very strained relations between the US and European member countries over Greenland, burden sharing on the US military presence in Europe, Ukraine and indeed the refusal of European nations to join the conflict with Iran. It remains to be seen whether Türkiye’s leaders can paper over the cracks.
The BoE publishes its latest Financial Stability Report and quarterly FPC minutes, while the EIA publishes the first of the triumvirate of monthly Oil Market Reports, against the backdrop of low crude inventories, a resumption of Strait of Hormuz flows, though still way below pre-February 28 levels, and strong demand for US energy exports due to the Persian Gulf conflict; Shell will also publish its Q2 trading update. Last but not least, the French Court of Appeals will rule on Marine LePen’s appeal against her 5-year ban on running for the presidency, which will determine whether she or Bardella stands as the National Rally’s candidate in next year’s election.
Japan’s wages data showed a slightly larger than expected deceleration, but this was wholly due to workday effects, with fewer May working days in 2026 than 2025 due to Golden Week effects, but the underlying trend still very much supportive of further BoJ rate hikes. Perhaps more notable was the much stronger than expected 3.7% m/m rise in Household Spending, which still left the y/y rate down -0.4% (a fifth consecutive y/y fall), but that was wholly due to enormous adverse base effects.
By contrast, the better than expected 0.9% m/m increase in German Industrial Production was paced by a sharp 3.7% m/m recovery in Auto Output and a more modest 0.8% m/m rise in Energy output, but follows a downwardly revised 0.2% m/m rise in April after four consecutive falls. One can attribute some of the prior weakness with the energy price shock, but much of this weakness is due to a fundamental restructuring of Germany’s manufacturing sector, much of it due to demand destruction. There will be some offset as manufacturing shifts to servicing increased defence spending, but a renaissance for Germany’s once much vaunted industrial sector still looks to be a distant prospect.
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