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Headline industrial production held steady in April, driven by utilities production, while manufacturing production declined 0.4% due to decreased production of vehicles and nondurable goods.

Source: Bloomberg

The 0.4% decrease in manufacturing production (followed an upwardly revised 0.4% gain a month earlier) was the first decline since October 2024 and worse than the expected 0.3% decline...

Source: Bloomberg

However, as the chart above shows, despite the decline, upward revisions raised production by 1.2% YoY - the biggest rise since Oct 2022 (tariff-front-running?).

Output at utilities increased, while mining and energy extraction dropped.

The decrease in April factory output reflected declining production of motor vehicles, computers and apparel.

The Fed’s report showed capacity utilization at factories, a measure of potential output being used, fell to 76.8%.

Does April's decline mean we reached peak tariff-front-running? And will that drag down 'hard' data?

Authored by Jonathan Turley,

Today, the United States Supreme Court will hear three consolidated cases in Trump v. CASA on the growing use of national or universal injunctions. This is a matter submitted on the “shadow docket” and the underlying cases concern the controversy over “birthright citizenship.” However, the merits of those claims are not at issue. Instead, the Trump Administration has made a “modest request” for the Court to limit the scope of lower-court injunctions to their immediate districts and parties, challenging the right of such courts to bind an Administration across the nation.

The case is the consolidation of three matters: Trump v. CASA out of  Maryland; Trump v. Washington out of Washington State, and Trump v. New Jersey, out of Massachusetts. These cases also present standing issues since the Administration challenges the argument that there is a cognizable “injury” to individuals who may travel to the states bringing the actions.

However, the main question is the scope of injunctions.

As I have previously written, district court judges have issued a record number of injunctions in the first 100 days of the Trump Administration. 

Under President George W. Bush, there were only six such injunctions, which increased to 12 under Obama. 

However, when Trump came to office, he faced 64 such orders in his first term.

When Biden and the Democrats returned to office, it fell back to 14. 

That was not due to more modest measures. 

Biden did precisely what Trump did in seeking to negate virtually all of his predecessors’ orders and then seek sweeping new legal reforms. He was repeatedly found to have violated the Constitution, but there was no torrent of preliminary injunctions at the start of his term.

Yet, when Trump returned to office, the number of national injunctions soared again in the first 100 days and surpassed the number for the entirety of Biden’s term.

This is a rare argument. 

First, it is a shadow docket filing that usually results in summary decisions without oral argument. Moreover, this matter came after what is commonly viewed as the final day for oral arguments. The Court granted a rare late oral argument, reflecting that multiple justices view this matter sufficiently serious to warrant a break from standard operating procedures.

Rather than arguing a “question presented” on birthright citizenship, the Administration is solely looking for limits on the district courts as appeals continue on the “important constitutional questions” raised by birthright citizenship.

The Administration argues that the Constitution does not give judges the power to issue universal injunctions and that courts are limited to addressing the cases before them in a given district. The Administration acknowledges that class actions can create the basis for universal injunctions, offering a moderate resolution to the Court. In such cases, if the parties can meet the standard for a national class, they can seek a national or universal injunction.

In today’s arguments (which I will be covering for Fox and on X), we can expect to hear from justices who have previously been critical of universal injunctions, including Justice Clarence Thomas, who, in his concurring opinion in Trump v. Hawaii, called them “legally and historically dubious.”

Likewise, Justices Gorsuch and Alito have criticized such injunctions. In a prior dissent to an emergency filing in Department of State v. AIDS Vaccine Advocacy Coalition, Alito was joined by Thomas, Gorsuch, and Kavanaugh in stating that the government “has a strong argument that the District Court’s order violates the principle that a federal court may not issue an equitable remedy that is ‘more burdensome than necessary to’ redress the plaintiff’s injuries.”

Many of us will be watching three members the most closely: Chief Justice John Roberts and Associate Justices Elena Kagan and Amy Coney Barrett. Roberts is the ultimate institutionalist, and we should see in his argument how he views the impact of such injunctions on the court system as a whole. He is very protective of the courts’ inherent authority but may also have misgivings about the scope of these orders.

During the Biden Administration, Justice Kagan has previously criticized universal injunctions. In an interview at Northwestern University Law School, Kagan flagged the “forum shopping” by litigants in filing cases before favorable courts:

“You look at something like that and you think, that can’t be right. In the Trump years, people used to go to the Northern District of California, and in the Biden years, they go to Texas. It just can’t be right that one district judge can stop a nationwide policy in its tracks and leave it stopped for the years that it takes to go through the normal process.”

Justice Barrett previously joined with Kavanaugh in stating that the power of district courts to enter a universal injunction “is an important question that could warrant our review in the future.”

The argument today will start at 10 am and I will be doing a running review of the arguments on X.

U.S. Solicitor General D. John Sauer will argue the government’s case.

Jeremy Feigenbaum, New Jersey’s solicitor general, will argue for the state and local governments and  Kelsi Corkran, the Supreme Court director at Georgetown’s Institute for Constitutional Advocacy and Protection, will argue for the private individuals and groups.

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University where he teaches a course on the Supreme Court and the Constitution.

Update(10:30ET): With President Trump and his envoy having arrived in the United Arab Emirates (UAE) for the last leg of the president's Gulf tour, new details of behind the scenes US-Iran negotiations have come to light on Thursday.

In a huge first, the Trump White House has sent Iran a written proposal toward forging a new nuclear deal. White House envoy Steve Witkoff has led several rounds of talks, and Axios has revealed that the communication was issued to Tehran last Sunday.

"Iranian Foreign Minister Abbas Araghchi took the proposal back to Tehran for consultations with Supreme Leader Ali Khamenei, President Masoud Pezeshkian and other top officials," writes Axios.

Via Associated Press

It was the Iranian side which initiated the swap of written proposals first, as the talks which have been on since April went from 'indirect' to more 'direct':

• During the third round of talks in late April, Araghchi gave Witkoff an updated document with Iranian ideas for a nuclear deal. This time, Witkoff took the document.
• A U.S. team of experts studied it and sent the Iranians a list of questions and requests for clarification. The Iranians replied and added questions of their own, two sources said.
• Meanwhile, Witkoff and his team prepared a U.S. proposal laying out the Trump administration's parameters for an Iranian civilian nuclear program and requirements for monitoring and verification, the sources said.

It appears that thus far both sides have received the other's written proposals positively, and that's what was driving President Trump's "olive branch" comments on Tuesday. He had stressed while speaking in Saudi Arabia that "this is not an offer that will last forever. The time is right now for them to choose."

President Trump followed up on Thursday by saying from Qatar,  "We're in very serious negotiations with Iran for long-term peace," according to AFP.

He said, "We're getting close to maybe doing a deal without having to do this... there (are) two steps to doing this, there is a very, very nice step and there is the violent step, but I don't want to do it the second."

Trump's comments followed an NBC News interview with Ali Shamkhani, a top political, military and nuclear adviser to Iranian Supreme Leader Ayatollah Ali Khamenei, who said Tehran is prepared to sign a nuclear deal—provided key conditions are met—in exchange for the lifting of U.S. economic sanctions. 

Trump reposted the NBC article indicating Iran is ready to reach a deal (though the details of that deal suggest it would look essentially identical to the JCPOA). pic.twitter.com/LPDLzqu0nd

— Gregory Brew (@gbrew24) May 15, 2025

NBC News pointed out that Shamkhani's comments "appear to be the clearest public statement yet on Iran's expectations and willingness to reach a deal from the supreme leader's inner circle." 

And the fact that written proposals have already been exchanged is yet further confirmation of this positive trend towards peace. Trump has emphasized that Iran can never have a nuclear bomb, but Tehran itself has long said it's not pursuing a nuke, and that its program is only for peaceful domestic energy purposes.

* * *

Brent crude prices fell on Thursday as geopolitical risk premiums eased following President Trump's comments during his Gulf tour, where he signaled that the U.S. is nearing a nuclear deal with Iran. Unlike earlier headlines on AI, defense, and aviation deals with Saudi Arabia and Qatar, Trump's comments suggested a potential breakthrough in U.S.-Iran nuclear talks.

"We're in very serious negotiations with Iran for long-term peace," Trump told reporters in a press pool that AFP News first reported. 

Speaking in Doha, Qatar, during his Middle East trip, the president said, "We're getting close to maybe doing a deal without having to do this... there (are) two steps to doing this, there is a very, very nice step and there is the violent step, but I don't want to do it the second way."

An Iranian source told Reuters that negotiations with Trump administration officials still needed to bridge some gaps before a final deal could be reached. 

Trump's comments followed an NBC News interview with Ali Shamkhani, a top political, military and nuclear adviser to Iranian Supreme Leader Ayatollah Ali Khamenei, who said Tehran is prepared to sign a nuclear deal—provided key conditions are met—in exchange for the lifting of U.S. economic sanctions. 

With Trump Touring Gulf, Iran Offers Huge Nuclear Concession https://t.co/NQ4259UIsE

— zerohedge (@zerohedge) May 14, 2025

Trump confirms reports that Iran have “sort of agreed to the terms” that they cannot have nuclear capabilities!

Trump confirms he is currently in “very serious negotiations with Iran, for long-term peace”!

Trump also highlights how “many people” want war with Iran, but that he… pic.twitter.com/rVSkScNRIN

— Clandestine (@WarClandestine) May 15, 2025

NBC News pointed out that Shamkhani's comments "appear to be the clearest public statement yet on Iran's expectations and willingness to reach a deal from the supreme leader's inner circle." 

Trump has offered "an olive branch" to Tehran after a multi-month maximum-pressure campaign, including economic sanctions and deploying long-range stealth bombers to America's "unsinkable aircraft carrier" - located in the Indian Ocean - ready to be deployed at a moment's notice.

However, last week, ahead of Trump's Gulf tour, we spotted at least one of these stealth bombers returning to the U.S. We suggested this may have been an act of goodwill ahead of talks by the U.S. or possibly just a routine flight.  

On Thursday, Brent crude futures fell 3% to $60 a barrel on expectations that a U.S.-Iran nuclear deal would ease sanctions and increase crude oil on international markets.

"The overnight development of a possible nuclear deal is the sole reason for the morning's weakness. If an agreement is reached, Iran agrees to halt enriching weapon grade uranium and the deal is effectively enforced, which is hard to believe, then the Persian Gulf country's crude oil exports can rise by as much as 1 [million barrels per day]," PVM analyst Tamas Varga told CNBC in an emailed statement. 

"It sounds price negative, but its impact will possibly be mitigated by OPEC+ rolling back on its plan to release barrels back to the market faster than originally planned," he added.

Goldman trader Rich Privorotsky commented on the development: 

Staying with geopolitics there are some rather positive stories emanating out of Iran. "Iran is ready to sign a nuclear deal with certain conditions with President Donald Trump in exchange for lifting economic sanctions, a top adviser to Iran's supreme leader told NBC News on Wednesday." Unclear if the U.S. will agree to the terms but they seem fairly broad: "He said Iran would commit to never making nuclear weapons, getting rid of its stockpiles of highly enriched uranium which can be weaponized, agree to only enrich uranium to the lower levels needed for civilian use, and allow international inspectors to supervise the process, in exchange for the immediate lifting of all economic sanctions on Iran." (NBC news) If confirmed I think oil could eventually end up heading back to the recent lows and I would continue to express any cyclical concerns in this space.

Here's the latest commentary from UBS traders:

Oil Equity Resilience Amid Oil Price Drop Oil prices are down, mainly because of a potential deal with Iran. That could mean up to 500kb/d increased supply coming to market very quickly. Oil equities, however, are already underweight for generalists and specialists have already de-grossed, following the OPEC+ surprises so far this year - hence oil equities are proving to be relatively resilient even though the oil price is down.

If Trump secures a nuclear deal with Tehran, it would cap off a week of landmark agreements with Gulf nations—collectively worth trillions—and add to an already bullish news cycle for the president. Also, this would mean continued easing of geopolitical risk premiums in the region, in other words, lower energy prices for Trump to pursue his 'America First' agenda.

Following the cooler than expected CPI, US Producer Prices plunged in April, down 0.5% MoM (vs +0.2% MoM exp) - the biggest drop since April 2020 (but we note that last month's 0.4% MoM decline was revised up to unchanged). The headline print was dragged down to +2.4% YoY (the lowest since Sept 2024)...

Source: Bloomberg

Under the hood, Prices for final demand services moved down 0.7 percent in April, the largest decline since the index began in December 2009.

Source: Bloomberg

Core Producer Prices plunged by the most on record (back to 2010)...

Source: Bloomberg

PPI Final Demand Services

Prices for final demand services moved down 0.7 percent in April, the largest decline since the index began in December 2009. Over two-thirds of the broad-based decrease can be traced to margins for final demand trade services, which dropped 1.6 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services fell 0.3 percent and 0.4 percent, respectively.

• Product detail: Over 40 percent of the April decline in the index for final demand services is attributable to margins for machinery and vehicle wholesaling, which dropped 6.1 percent. The indexes for portfolio management, food and alcohol wholesaling, system software publishing, traveler accommodation services, and airline passenger services also fell. Conversely, prices for outpatient care (partial) advanced 0.3 percent. The indexes for furniture retailing and for inpatient care also moved up. (See table 2.)

PPI Final demand goods

Prices for final demand goods were unchanged in April following a 0.9-percent decrease in March. In April, the index for final demand goods less foods and energy increased 0.4 percent. In contrast, prices for final demand foods and for final demand energy declined 1.0 percent and 0.4 percent, respectively.

• Product detail: Among final demand goods in April, the index for general purpose machinery and equipment advanced 1.1 percent. Prices for residential electric power, fresh and dry vegetables, non-electronic cigarettes, and utility natural gas also moved up. Conversely, the index for chicken eggs dropped 39.4 percent. Prices for gasoline, gas fuels, diesel fuel, and primary basic organic chemicals also fell.

Margin pressure remains on American corporations...

Source: Bloomberg

It would appear that despite all the FUD, companies are soaking up any tariff price increases and NOT passing them on to customers.

Finally, energy prices are set to drag CPI and PPI even lower in the next month or so...

Source: Bloomberg

Goldman has lowered its PCE expectations: 

Based on the details in the PPI and CPI reports, we estimate that the core PCE price index rose 0.11% in April (vs. our expectation of 0.19% prior to today's PPI report), corresponding to a year-over-year rate of +2.46%.

Additionally, we expect that the headline PCE price index increased 0.10% in April, or increased 2.18% from a year earlier.

But, but, but... the PhDs said tariffs were inflationary!!

A team of Russian negotiators are in Istanbul on Thursday for the first direct peace talks with Ukraine in more than three years, with Russia's Foreign Ministry officials saying that the delegation is "ready for serious work".

President Putin, who as expected is not there in person, tapped his aide and former culture minister Vladimir Medinsky to lead the talks, which many Western analysts have claimed is an 'insult' given it's not someone more senior. Medinsky, it should be remembered, oversaw the failed 2022 peace talks with Kiev in the weeks after the February invasion.

Alongside Medinsky are Deputy Foreign Minister Mikhail Galuzin, Deputy Defense Minister Alexander Fomin and Igor Kostyukov, the head of Russia’s military intelligence agency (GRU).

Supporting these main negotiators are group of advisers, including senior officials from the Foreign and Defense Ministries, along with Putin aides. The Kremlin confirmed the identities of its negotiating team by releasing footage of Putin meeting with the negotiation group late Wednesday.

On Wednesday evening, Russian President Vladimir Putin held a meeting to discuss arrangements for talks with Ukraine, due to take place today in Istanbul, Kremlin Spokesman Dmitry Peskov told reporters:https://t.co/hRmXK7daoA

Video: Kremlin. ru pic.twitter.com/1e7DHMlFgv

— TASS (@tassagency_en) May 15, 2025

Other top officials were seen present in the send-off meeting in Russia, among them Defense Minister Andrei Belousov, Russia’s chief of the General Staff Valery Gerasimov, Security Council Secretary Sergei Shoigu and Federal Security Service (FSB) Director Alexander Bortnikov - which perhaps underscores that Moscow is indeed taking the Istanbul talks very seriously.

But many are calling this a 'slap in the face' and insult to Trump who has strongly backed direct talks, and who even urged Putin to be there in person. 

Trump has warned that he is "always considering" additional sanctions against Russia if he believes Moscow is blocking or snubbing the peace process.

Putin sending the same people to Istanbul who, back in 2022, demanded Ukraine's surrender on his behalf is a slap in the face to the Trump administration’s efforts to end this war. The message is clear: fuck off — I have my own objectives, and they haven’t changed since 2022,… https://t.co/8Sj3mprJXe

— Sławomir Dębski (@SlawomirDebski) May 14, 2025

As for Ukraine's President Zelensky, he's has for the past week been making a big show of how he's willing to be in Istanbul, and Putin is not. He's been repeatedly goading Putin to be there, saying that if he's not - it proves Moscow is not interested in the peace process. 

However, this has clearly been a performative effort more geared to show President Trump that Kiev is 'willing' - likely in hopes that Washington gives Zelensky stronger backing, and of course a steady supply of weapons and intelligence. To some degree, Zelensky's bellicose rhetoric may itself have sabotaged talks before they had even begun.

But Zelensky has shown up in Turkey, somewhat surprisingly. "I am here" - he has emphasized (in once again a bit of messaging primarily aimed at the White House). He's meeting with Erdogan, but apparently this is separate, and happening in Ankara. 

Zelensky to Putin from Ankara:

"I am here." pic.twitter.com/67RjF4QFqb

— Clash Report (@clashreport) May 15, 2025

The Wall Street Journal's take is as follows:

"Ignoring Ukrainian President Volodymyr Zelensky’s call to meet for direct high-level talks in Turkey, Russian leader Vladimir Putin dispatched to Istanbul a team of junior officials, making it uncertain that negotiations between the warring nations would occur at all."

But Russia analyst and author of Forged In War: A Military History of Russia From its Beginnings To Today, Mark Geleotti, has a very different take, featured below [emphasis ZH]:

It’s easy (and not wholly untrue) to slam Vladimir Medinsky, leading the Russian delegation to Istanbul as a nobody, but perversely, although I think it monstrously unlikely anything meaningful will come from the talks, the composition of the delegation is encouraging.

Putin was never likely to attend, not least as he wasn’t going to allow it to look as if he had been manipulated and dared by Zelensky. Besides, sometimes it can help break a logjam (think Reagan/Gorbachev), but leaders usually turn up to seal the deal at the end of the process, after experts have done all the hard preparatory work away from the cameras.

Do we honestly think two men who so plainly loathe each other and who have been shamelessly posturing for Trump's benefit were going to reach some kind of meeting of minds? Possible, but unlikely.

Medinsky led the talks in 2022 that failed to reach a usable deal (we can discount the myth that Zelensky was about to agree to Russia's demands until Boris Johnson nixed it) so this is meant to signal continuity in process and demands.

Medinsky's very lack of personal authority isn’t a snub, so much as a sign that Putin wants to manage any process by remote control. He's a human drone, which at least means any positions he advances/agrees already have VVP's ok

The rest of the delegation likewise isn't showy (though the presence of military intel chief Kostyukov is interesting as they were key in POW swaps) but likewise meant to signal a willingness to do serious work. (Although this doesn’t necessarily mean make necessary compromises).

Of course, with no hint that Russia is about to relax its implausible and unfair demands, this may all be for show. It probably is, alas. But talking is always good as there is a *chance*, however minuscule, that talks can lead somewhere.

So although Medinsky is a shallow ideologist, and sending him is in a way a snub, a means for Putin to try and reject Zelensky's challenge while not looking wholly uncooperative in Trump's eyes.

…whereas before I was 99% pessimistic about the talks, now I’m only 98% so. That is as much room for optimism as there is, these days.

US equity futures are lower as investors take profits on Thursday and tech stocks fell as investors worried about an economic slowdown after Steve Cohen warned the chance of a recession is 45% and today’s retail sales numbers are expected to be a miss. As of 8:00am ET, S&P futures are down 0.4%, rebounding from session lows after Walmart reported solid earnings; Nasdaq futures dropped 0.5% with Nvidia, Palantir and Tesla falling about 2% in early trading.  On Wednesday, the S&P failed at 5,900 for the second consecutive day. The silver lining according to JPM is that yesterday, NVDA turned positive on the year, joining META and MSFT; if the remaining members follow suit, there is another ~10% upside to the index assuming positive members are flat. YTD, AMZN is -4.2%, GOOG -12.6%, TSLA -13.9%, and AAPL -15.2%. In trade news, China removed curbs on rare earth exports to the US. Trump says India is willing to drop is tariffs on US goods. Brent sank below $64, down more than 3% after President Donald Trump said the US is getting closer to a deal on Iran’s nuclear program, fueling concern that additional oil supply may pressure the market. Bond yields and the USD are lower. Today’s macro data focus is on Retail Sales which are expected to remain unchanged in April (versus 1.5% prior); PPI, Jobless Claims, Philly Fed and Empire Manufacturing numbers are due at 8:30 am in New York, while Industrial Production prints at 9:15am. Also, traders are looking ahead to a speech by Federal Reserve Chair Jerome Powell.

In premarket trading, UnitedHealth shares sank after the WSJ reported it’s under criminal investigation for possible Medicare fraud. Walmart delivered another quarter of solid sales and earnings growth, and cautioned that tariffs and increasing economic turbulence means even the world’s largest retailer can’t hold off on price increases forever. Shares gained 2.4% premarket. Magnificent Seven stocks are lower as risk appetite falters (Tesla -1.8%, Apple -1%, Meta Platforms -1%, Amazon -0.8%, Alphabet -0.7%, Nvidia -0.6%, Microsoft -0.5%). Here are some other notable premarket movers:

• Alibaba ADRs (BABA) decline 5.6% after reporting revenue that missed estimates, dragged by a slowing international e-commerce arm and its Cainiao logistics business that’s under restructuring.
• Boot Barn (BOOT) rises 13% after the retailer of western wear gave a forecast for 1Q same-store sales growth that surpassed Wall Street estimates, despite an expected hit from tariffs.
• Cisco Systems (CSCO) rises 3.3% after the company gave a solid forecast for revenue in the current quarter, a sign the largest seller of networking gear is benefiting from demand for systems using AI technology.
• CoreWeave (CRWV) shares fall 6.6% after the cloud-computing provider’s quarterly profit forecast missed estimates due to some spending being brought forward.
• Crowdstrike Holdings (CRWD) shares are down 2.4% in premarket trading, after Mizuho Securities downgraded the software company to neutral from outperform.
• DXC Technology (DXC) shares are down 14% after the company reported forecast adjusted earnings per share for the first quarter and 2026 full-year guidance that missed the average analyst estimate.
• Dlocal (DLO) shares gain 21% after the financial technology company beat earnings expectations and unveiled plans for a special dividend.
• Foot Locker (FL) is up 84% with Dick’s Sporting Goods to buy it in a cash or stock deal implying an equity value of about $2.4 billion and an enterprise value of about $2.5 billion.
• JetBlue (JBLU) falls 1.6% after Raymond James downgraded the airline company to market perform from outperform, citing a more balanced risk-reward amid an improvement in sentiment.
• Luminar (LAZR) drops 13% after the automotive technology company’s CEO Austin Russell resigned as CEO, overshadowing better-than-expected first-quarter sales.
• NetEase ADRs (NTES) are up 6.7% after the China-based video-game company reported first-quarter results that beat expectations.
• New Fortress Energy (NFE) shares slump 38% after the energy infrastructure firm saw adj. Ebitda plunge in the first quarter, with analysts flagging that the sale of its Jamaican assets will dent cash flow.

There’s also some big company news to digest. Trump wants Apple to stop moving iPhone production to India, while Starbucks is said to be considering options to revamp its China business, including a possible stake sale.

Economic forecasters this week have said that while the Trump administration’s temporary trade deal with China has reduced the risk of a recession, the overall economy is likely to slow. “There’s definitely more clarity than a few weeks ago,” Dubravko Lakos-Bujas, chief of global markets strategy at JPMorgan Chase & Co., said in a Bloomberg Television interview. “Some of the uncertainty around trade, tariffs, policy started to get reined in.”

“The market is globally priced for perfection,” said Michael Nizard, head of multi-asset at Edmond de Rothschild Asset Management. “The retail sales figures should reveal that consumer is already depressed in terms of business confidence.”  

Meanwhile, billionaire Steve Cohen, speaking at the Sohn Investment Conference on Wednesday, put the chances of a US recession at about 45%. Cohen, the founder of hedge fund Point72 Asset Management, said he doesn’t expect the Federal Reserve to cut rates right away, because “they are going to be worried about inflation from tariffs.” He said he expects US economic growth next year to slow to 1.5% or less, “which is OK but not phenomenal.”

Looking at today's macro data, Retail sales are expected to rise by a tepid 0.1% in April (versus 1.5% prior) according to Bloomberg economists, while a survey of economists is pointing to flat month-on-month sales. PPI and Empire Manufacturing numbers are due at 8:30 am in New York. Traders were looking ahead to a speech by Federal Reserve Chair Jerome Powell, as well as data on manufacturing and retail sales, for the next readout on US growth and inflation. Economists are expecting no growth in retail sales in April as consumers cut back on some purchases. 

European stocks retreat for a second day. Energy stocks lead declines, driven by a fall in oil prices following a report that Iran is willing to forgo nuclear weapons in a deal with the US, while utilities and food and beverage stocks outperform. Among individual stocks, insurance firm Allianz drops after disappointing results. Stoxx 600 falls 0.2% to 542.88 with 327 members down, 263 up, and 10 little changed. Here are the biggest European movers:

• KBC shares rise as much as 2.6% after the Belgian lender reported earnings that analysts said were roughly in line with expectations, and saw a boost from increased insurance revenues.
• Engie shares gain as much as 2.2% after the utility produced what analysts said were strong results that should provide further comfort around full-year guidance and the dividend.
• Serco shares rise as much as 6.9% after the outsourcing-services company announced the award of three contracts with a combined value of more than £1b to provide maritime services for the Royal Navy.
• Watches of Switzerland shares rise as much as 6.7% after the watch seller’s update showed no deterioration in trends in either the UK or US, providing some relief to investors.
• Energy stocks are the worst-performing sector as oil falls following a report that Iran is willing to forgo nuclear weapons in a deal with the US in exchange for sanctions relief.
• Allianz shares fall as much as 3.9% after the German insurer reported earnings that analysts called disappointing.
• 3i shares drop as much as 8.1% following the private equity firm’s full-year results, with net asset value per share coming in marginally below analyst expectations.
• Deutsche Telekom shares decline as much as 1.2% after the telecom operator reported mixed trends in its home market Germany.
• Thyssenkrupp shares fall as much as 14% after the German firm reported what Morgan Stanley called a substantial miss. Analysts see challenges reaching full-year guidance.
• Orsted shares drop as much as 4.7%, to the lowest since December 2016, after Berenberg analysts cut their rating on the stock to hold from buy.
• Siemens shares fall as much as 4.4% after the German industrial group reported a solid set of second-quarter earnings, with analysts noting continued improvement for the key Digital Industries division.
• CVC Capital shares fall as much as 3.2%, with analyst saying that the buyout firm’s fee paying AUM for the first quarter disappointed as some funds reached the end of their fee-paying periods.

Earlier in the session, Asian stocks slipped, poised to snap a four-day win streak, as the rally fueled in part by reduced fear over US tariffs fizzled. The MSCI Asia Pacific Index fell as much as 0.5%, with Toyota, and Sony among the biggest drags, as a stronger yen weighed on Japanese equities. Key gauges fell more than 1% each in Thailand and the Philippines. Tencent dipped despite upbeat earnings, weighing on key Hong Kong gauges, as investors await Alibaba’s results later Thursday. The market had been looking for major Chinese tech reports to provide the next catalyst. Despite the muted response to the US-China trade truce, some market watchers are turning more positive on Chinese stocks. Strategists at Goldman Sachs have raised their Chinese stocks index targets. Morgan Stanley said MSCI China’s onshore stocks saw “meaningful improvement” in the first quarter results over the previous three months, marking the first in-line outcome after 14 quarters of misses.

In FX, the Bloomberg Dollar Spot Index declines 0.3%.  The pound adds 0.2% with little reaction seen after UK GDP in the first quarter topped estimates as the period precedes a sharp rise in US tariffs.

In rates, treasuries are slightly richer across the curve with gains led by front end and belly, unwinding a portion of Wednesday’s selloff when Fed-policy pricing saw a hawkish shift. US yields are 2bp-3bp lower across maturities led by 5-year sector with 10-year near 4.51%. European government bonds also gain: bunds and gilts outperform, supporting Treasuries, following wave of European data including UK GDP and industrial production and French CPI. Slide in oil futures also supports Treasuries. US session includes April retail sales data and remarks by Fed Chair Powell on the central bank’s monetary policy framework review (text release expected at 8:40am New York time).

In commodities, WTI crude oil futures have pared a 4.2% drop to about 3.7%, extending losses for a second day after US President Trump said an agreement to curb Iran’s nuclear program is closer. Spot gold falls $11 to around $3,167/oz having pared an earlier fall.

US economic data calendar includes May Empire manufacturing, April retail sales, PPI, weekly jobless claims, May Philadelphia Fed business outlook (8:30am), April industrial production (9:15am), March business inventories, May NAHB housing market index (10am). Fed speaker slate includes Powell (8:40am) and Barr (2:05pm)

Market Snapshot

• S&P 500 mini -0.4%
• Nasdaq 100 mini -0.6%
• Russell 2000 mini -0.2%
• Stoxx Europe 600 -0.2%
• DAX -0.3%
• CAC 40 -0.2%
• 10-year Treasury yield -3 basis points at 4.5%
• VIX +0.6 points at 19.2
• Bloomberg Dollar Index -0.3% at 1229.3
• euro +0.3% at $1.1208
• WTI crude -4.1% at $60.55/barrel

Top Overnight News

• U.S. President Donald Trump said on Thursday that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had "sort of" agreed to the terms. The agreement would see the country foreswear highly enriched uranium in exchange for an easing of economic sanctions. RTRS
• U.S. President Donald Trump said on Thursday that India had offered a trade deal that proposed "no tariffs" for American goods, while expressing his dissatisfaction with Apple's  plans to invest in India. New Delhi is seeking to clinch a trade deal with the U.S. within the 90-day pause announced by Trump on April 9 on tariff hikes for major trading partners. RTRS
• US officials seeking to negotiate trade deals around the world are not working to include currency policy pledges in the agreements, according to a person familiar with the matter. Foreign-exchange markets are on edge over concerns President Donald Trump’s administration is seeking a weaker greenback and might use trade bargaining to achieve that goal. BBG
• Trump asked Apple’s Tim Cook to stop plans to move iPhone output to India. The president said Apple will increase production in the US as a result of their discussion. BBG
• US authorities are preparing to announce one of the biggest cuts in banks’ capital requirements for more than a decade, marking the latest sign of deregulation agenda for the Trump administration. FT
• Trump says the US will upgrade the F-35 to an F-55; will do an F-22 super, an upgrade on the F-22.
• UnitedHealth shares dropped premarket after the WSJ reported it’s under criminal investigation for possible Medicare fraud. The company said it hasn’t been notified by the DOJ. BBG
• Japan's top trade negotiator, Ryosei Akazawa, could travel to Washington as soon as next week for a third round of trade talks with the U.S., two sources with knowledge of the plans told Reuters on Thursday. RTRS
• Ignoring Ukrainian President Volodymyr Zelensky’s call to meet for direct high-level talks in Turkey, Russian leader Vladimir Putin dispatched to Istanbul a team of junior officials, making it uncertain that negotiations between the warring nations would occur at all. WSJ
• Oil demand growth to slow according to the latest IEA report – “Global oil demand growth is projected to slow from 990 kb/d in 1Q25 to 650 kb/d for the remainder of the year as economic headwinds and record EV sales curb use.” IEA

Tariffs/Trade

• EU Trade Commissioner Sefcovic says the US and EU have agreed to intensify trade talk contacts.
• WTO chief warned that US bilateral tariff deals could put trade principles at risk and said global trade was in a crisis despite the recent de-escalation of the US-China tariff war, according to FT.
• US Treasury secretary Bessent says they can accomplish "a lot" over the next 90 days; will have a series of negotiations to prevent escalation with China again.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were predominantly lower following the mixed handover from Wall St, where the major indices were somewhat choppy and small caps underperformed as yields edged higher. ASX 200 traded indecisively but eventually eked mild gains in the aftermath of the stronger-than-expected jobs data from Australia. Nikkei 225 underperformed following recent currency strength and as earnings results remained in the spotlight in Japan. Hang Seng and Shanghai Comp were lacklustre amid little in the way of fresh catalysts to spur momentum, while Tencent shares traded indecisively post-earnings and Alibaba results are scheduled for release today.

Top Asian News

• Chinese President Xi hopes the Danish Chamber of Commerce in China and member companies will continue to role as a bridge between China and Denmark and between China and Europe, according to Xinhua.
• PBoC Governor Pan said China welcomes more outstanding Latin American market players to issue Panda bonds in China and share market development opportunities, while he added that China and Latin America should promote financial cooperation in a wider range of fields and a deeper level.

Subdued sentiment across Europe after the predominantly lower APAC handover, and following the mixed handover from Wall St, where the major indices were somewhat choppy and small caps underperformed as yields edged higher. Newsflow this morning has been light but earnings picked up, whilst current focus remains on geopolitical ongoings with US President Trump in the Middle East, consolatory language from Iran, and a likely no-show from Russia President Putin in Russia-Ukraine peace talks in Turkey. Sectors are mostly a defensive bias and in line with the cautious mood across the markets.

Top European News

• Plans for a reset of UK-EU relations hit trouble due to fishing rights and youth mobility as EU member states demanded further concessions from the UK, according to the FT.

FX

• DXY subdued and contained within Wednesday's confines amid a lack of fresh catalysts overnight, n a 100.58-101.05 range at the time of writing, within yesterday's 100.27-101.14 parameter.
• EUR ekes mild gains and trades on either side of the 1.1200 level after recent fluctuations, and with ECB speakers scheduled later, although data and speakers today are not likely to shift the dial much.
• GBP is slightly firmer following better-than-expected UK GDP data; GBP/USD resides within yesterday's 1.3250-1.3360 range.
• USD/JPY retreated overnight as the underperformance in Japanese stocks spurred some haven flows into the yen.
• Antipodeans are subdued in-fitting with the broader risk tone; mild support was seen in AUD/USD following the stronger-than-expected employment data from Australia.
• PBoC set USD/CNY mid-point at 7.1963 vs exp. 7.2217 (Prev. 7.1956).

Fixed Income

• Another contained start for fixed income with USTs marginally in the green while peers across the pond resided slightly in the red in the early morning.
• USTs at a 109-26 peak with gains of a handful of ticks. While firmer, the benchmark remains markedly shy of peaks from the last three sessions at 110-09+, 110-15 and 110-19+ respectively.
• Bunds find themselves attempting to make a footing above the break-even mark at the top-end of a 129.13 to 129.47 band.
• Gilts gapped higher by 17 ticks, before then slipping to a shortlived 91.02 low given the readacross from EGBs at the time. Currently, at the mid-point of a 91.02-22 band.
• UK sells (via tender) GBP 2.0bln 0.125% 2028 Gilt: b/c 3.52x, average yield 3.768% & tail 0.7bps

Commodities

• WTI and Brent are suffering losses of USD 2/bbl, with commentary surrounding Iran applying steady pressure overnight and through the morning so far. US President Trump said the US is getting close to a deal with Iran, and they are in serious peace negotiations, adding that Iran has "sort of" agreed to the terms of a deal. This constructive commentary surrounding the nation pushed benchmarks to fresh session lows, adding to overnight losses. Losses overnight also stemmed from geopolitics, following a report that Iran is ready to sign an agreement with certain conditions in exchange for the lifting of sanctions and would commit to never making nuclear weapons and getting rid of its stockpiles of highly enriched uranium. The aforementioned lows for WTI and Brent are currently USD 60.65 and 63.63/bbl.
• Spot Gold is extending on recent losses with demand subdued as it sits below the USD 3,200/oz mark. The trend seen for most of this week remains intact, with the metal continuing to be hit by higher yields, particularly on the short end.
• Copper Futures are lower by a percent, mostly owing to a downbeat risk sentiment in APAC hours. It currently trades towards session lows of USD 9,467/t, after being modestly pressured around the time of Trump commentary.
• IEA lifts 2025 average oil demand growth forecast by 20k BPD to 740k BPD on upward revision to GDP growth forecast and lower oil prices; sees global oil demand growth dropping to 650k BPD for remainder of 2025, from 990k BPD in Q1. “Increased trade uncertainty is expected to weigh on the world economy and by extension oil demand,”. IEA sees oil inventories rising by around 720k BPD in 2025 as global supply rises expected to considerably outpace demand growth. IEA hikes 2025 global supply growth forecast to 1.6mln BPD, up by 380k BPD from previous month's report on higher Saudi production outlook. IEA raises 2026 average oil demand growth forecast to 760k BPD (prev forecast 690k BPD).

Geopolitics: Ukraine

• Russian President Putin was not on a list of negotiators the Kremlin published for talks with Ukraine in Istanbul on Thursday
• Russian Kremlin spokesperson Peskov says no chance Russian President Putin will take part in Turkey talks, according to Ria.
• US President Trump says he will go to the Russia-Ukraine talks if appropriate.

Geopolitics: Middle East

• Qatar's PM said Israeli attacks in Gaza this week send a signal that they are not interested in negotiating a ceasefire, while he added that a US humanitarian plan for Gaza is not necessary and the UN should be allowed to deliver aid, according to CNN.
• Gaza Humanitarian Foundation announced it will launch operations in the Gaza Strip before the end of the month and stated that Israel has agreed to expand the number of distribution sites to serve the entire population of Gaza.
• US President Trump said Qatar is working with the US on negotiating an Iran deal and he wants to see Iran thrive.
• Iranian President Pezeshkian said Iran will not bow to any bullying from US President Trump who he suggested thinks that he can come to the region, chant slogans, and scare them.
• Iran is ready to sign an agreement with certain conditions in exchange for the lifting of sanctions and would commit to never making nuclear weapons, as well as getting rid of its stockpiles of highly enriched uranium, according to a top advisor to the Supreme Leader cited by NBC News.- US President Trump says the US getting close to doing a deal with Iran; in serious negotiations to achieve peace; don't want to take a second step and threaten Iran. Want to end Iran in an intelligent way, not destructive

Geopolitics: Other

• China's Hainan Maritime Safety Administration warned of military training taking place in an area of the South China Sea from May 15th to 16th and prohibited entry, while it noted there were some drills near Vietnam and China's Hainan.
• Russia sent a fighter jet to "check the situation" as Estonia was attempting to detain a Russian shadow fleet tanker, according to the Estonian Foreign Minister; jet violated NATO territory for "around a minute".

US Event Calendar

• 8:30 am: May Empire Manufacturing, est. -8, prior -8.1
• 8:30 am: Apr Retail Sales Advance MoM, est. 0%, prior 1.4%, revised 1.45%
• 8:30 am: Apr Retail Sales Ex Auto and Gas, est. 0.3%, prior 0.8%, revised 0.86%
• 8:30 am: Apr Retail Sales Ex Auto MoM, est. 0.3%, prior 0.5%, revised 0.56%
• 8:30 am: Apr PPI Final Demand MoM, est. 0.2%, prior -0.4%
• 8:30 am: Apr PPI Ex Food and Energy MoM, est. 0.3%, prior -0.1%
• 8:30 am: Apr PPI Final Demand YoY, est. 2.5%, prior 2.7%
• 8:30 am: Apr PPI Ex Food and Energy YoY, est. 3.1%, prior 3.3%
• 8:30 am: May 10 Initial Jobless Claims, est. 227.5k, prior 228k
• 8:30 am: May 3 Continuing Claims, est. 1890k, prior 1879k
• 8:30 am: May Philadelphia Fed Business Outlook, est. -11, prior -26.4
• 9:15 am: Apr Industrial Production MoM, est. 0.1%, prior -0.3%
• 9:15 am: Apr Capacity Utilization, est. 77.8%, prior 77.8%
• 10:00 am: Mar Business Inventories, est. 0.2%, prior 0.2%
• 10:00 am: May NAHB Housing Market Index, est. 40, prior 40

Central bank speakers

• 5:00 am: 2nd Thomas Laubach Research Conference
• 8:40 am: Fed’s Powell Speaks on Framework Review
• 2:05 pm: Fed’s Barr Gives Opening Remarks

DB's Jim Reid concludes the overnight wrap

The strong recent equity rally showed some signs of exhaustion over the past 24 hours, even though gains for the tech mega caps helped the S&P 500 (+0.10%) extend its gains since the closing low on April 7 to +18.26%. On the other hand, Treasuries came under renewed pressure with the 10yr yield (+7.1bps) closing above 4.5% for the first time since February as investors continued to price out Fed rate cuts and increased their focus on the US fiscal outlook. The moves added to the mixed performance across US asset classes since early April, with the S&P 500 now +3.91% above the pre-Liberation Day levels but 10yr Treasuries (+40bps) and the dollar index (-2.67%) having lost considerable ground.

Trump’s Middle East tour continued to generate headlines yesterday, but their market impact was narrower in comparison to Tuesday’s rally. One notable beneficiary was Nvidia (+4.16%), which moved back into the green YTD after the oil giant Saudi Aramco signed agreements of as much as $90bn with a slew of US companies, including with Nvidia on AI infrastructure. That helped the Magnificent 7 rise +1.75% on the day, while the NASDAQ was +0.72% higher. Elsewhere, more than $243bn of deals were announced during Trump’s visit to Qatar, with the White House saying this would lay the groundwork for a bigger $1.2trn economic pledge. This included a $96bn deal to buy up to 210 Boeing aircraft. Boeing’s shares closed +0.64% on the day, having been +3% intra-day after Trump announced the deal. The president is in the UAE today, so expect more announcements.

Outside of tech the equity mood was actually pretty weak, as the equal-weighted version of the S&P 500 (-0.62%) and the small-cap Russell 2000 (-0.88%) posted visible declines. This weaker performance was also visible in Europe as the STOXX 600 (-0.24%) ended its four-day winning streak, with the DAX (-0.47%) and CAC (-0.47%) leading the decline. Among the reasons for a stalling of the equity rally was a relative absence of trade headlines, although Bloomberg reported that India’s trade minister is set to visit the US this week to discuss tariffs.

With the recent surge driven by US-China trade discussions waning, Asian equity markets are also losing momentum this morning. Across the region, the Nikkei (-0.98%) is the biggest laggard, with the KOSPI (-0.43%) also in the red. In China, the CSI (-0.58%) and the Shanghai Composite (-0.42%) and Hang Seng (-0.25%) are moderately lower. The S&P/ASX 200 (+0.27%) is an exception in the region, trading higher. In the US, S&P 500 futures are -0.18% lower while those on the NASDAQ are near flat.

Yesterday’s more notable market milestones came for Treasuries, with 2yr (+5.1bps to 4.05%) and 10yr (+7.1bps to 4.54%) yields both closing at their highest levels since February. And the 30yr yield rose +6.7bps to 4.97%, its highest close since January and within touching distance of the 5% level it briefly breached on the evening of April 8, the night before Trump announced a 90 day delay to the reciprocal tariffs. So we are now reaching yield levels that previously seemed to trigger sensitivity from the US administration, though the recent moves are much more orderly than they were in early April.

The bond sell-off came amid an ongoing reversal in Fed rate cut expectations, with fed funds futures moving to price less than two cuts by year-end for the first time since February (-3.9bps to 49bps). That came as Fed speakers struck a measured tone, with San Francisco Fed President Daly saying that “the word of the day is patience” while Chicago Fed President Goolsbee said that a “solid hard data economy is still there” beneath the recent noise.

Meanwhile on the US fiscal side, the Republicans’ planned economic package continued to take shape, with the House Ways and Means Committee advancing the proposed tax portion that included an extension of 2017 tax cuts, eliminating taxes on tips and overtime pay and creating some new tax deductions, although some key issues such as the state and local tax deduction remain unresolved. The total of those planned tax cuts are well above the spending cuts that have been approved by other House Committees, so as things stands it looks improbable that the eventual package will deliver any meaningful reduction of the elevated US fiscal deficit.

The above rates moves come ahead of a slew of US data today, including the April PPI, where after Tuesday’s April CPI miss, we’ll be monitoring the categories that feed through into core PCE, while also watching for any evidence of tariff pass through into producer prices. Meanwhile, the April retail sales print will be watched for possible signs of pull-forward demand in response to tariffs, with April industrial production also due. Recall that while US sentiment surveys have seen a sharp weakening over the past few months, hard data have so far held up quite well.

The other notable market story yesterday were moves in the US dollar. The dollar index fell by as much as -0.72% intra-day following reporting that US and South Korea officials had discussed exchange rate policies at a meeting in early May. However, it recovered back to little changed (+0.04%) by the close following a Bloomberg report that US officials were not seeking currency pledges as part of ongoing trade negotiations. Still, there were notable gains against the dollar for the East Asian currencies, including the South Korean won (+0.88%) and Japanese yen (+0.50%). The won and yen are another +0.60% and +0.47% higher this morning. At a minimum, there is a sense that these countries may become more reticent to push back against their currencies appreciating than they have been in the past.

Turning back to Trump’s visit in the Middle East, yesterday the president said that Iran must “permanently and verifiably cease” its pursuit of nuclear weapons if it wanted to strike a deal with the US, while NBC reported that Iran is ready to sign an agreement with certain conditions. Brent crude was down -0.81% to $66.09/bbl on the back of ameliorating tensions, while gold fell -2.25% to $3,177/oz, leaving the precious metal on course for its biggest weekly decline since November.

Geopolitics will stay in focus today with Russia-Ukraine talks expected in Istanbul. The nature of any talks remains uncertain, with Ukraine’s President Zelensky calling for an in-person meeting with Russia’s Putin, but Moscow last night announcing a delegation headed by Vladimir Medinsky, a former Minister of Culture who led Russia’s talks with Ukraine back in 2022. Should the talks deliver little, a key question will be whether the US might join in announcing new sanctions against Russia which have been advocated by European leaders.

In terms of the day ahead, in the US we have the April PPI report, retail sales, industrial production, May Philadelphia Fed business outlook, Empire manufacturing index, initial jobless claims and more. We’ll also see the UK release its Q1 GDP numbers, with our UK economist expecting growth to have jumped in Q1 before reversing in Q2 (see preview here). Other data releases include March trade balances in Italy and the Eurozone. Central bank speakers include Fed’s Barkin, ECB’s Lane and BoE’s Lombardelli. The European Commission is also set to release their Spring Economic Forecasts.

Foot Locker shares erupted in premarket trading Thursday after The Wall Street Journal reported that Dick's Sporting Goods has agreed to acquire the struggling sneaker retailer for $2.4 billion, offering $24 per share in cash or stock—a nearly 90% premium to Foot Locker's pre-announcement price. Shareholders will have the option to receive either cash or 0.1168 shares of Dick's common stock for each Foot Locker share they own.

Dick's is the nation's largest sports retailing chain and operates Golf Galaxy stores across the US. The acquisition of the sneaker chain would allow Dick's to expand globally in 26 countries.

Number of Foot Locker stores worldwide as of financial year 2023, by store type (via Statista)

WSJ noted, "Dick's said it expects to operate Foot Locker as a stand-alone business unit within its portfolio and maintain the Foot Locker brands."

The move also parallels broader retail consolidation, following Skechers' recent $9.4 billion sale to 3G Capital, a private equity firm with a history in the consumer-goods sector, earlier this month. 

News of the acquisition comes as both Dick's and Foot Locker have been pressured by tariff-related retail headwinds, particularly in the sneaker space. 

Foot Locker shares plunged 41% this year due to weak sales forecasts and pressure from Nike's pricing changes but surged 84% in premarket trading in New York to around $23.70.

Foot Locker's float is 14.6% short - or about 13.6 million shares. Rough day ahead of the bears. 

Shares of Dick's in premarket is down 9%. On the year, shares are down 8.4% (as of Wednesday's close). The deal is the largest ever for the sporting goods retailer and aligns with Lauren Hobart's strategy to grow consumer engagement. 

Here's the first take from Wall Street analysts (courtesy of Bloomberg):

Bloomberg Intelligence analyst Lindsay Dutch

• Foot Locker is in the midst of a challenging turnaround, and may need a buyout from Dick's Sporting Goods

• "For Dick's, the potential $2 billion deal might strengthen its leading position in the $140 billion market at a discounted multiple of 0.3x price to sales, yet also increases reliance on Nike's assortment"

Morgan Stanley analyst Simeon Gutman

• "Greater scale and EPS accretion are potential positives, offset by a premium for a struggling chain"

• The initial reaction to the stocks may be tentative as sources of value creation not as obvious 

Truist Securities analyst Joseph Civello

• A  potential deal can create value for Dick's over the long term

• "FL's business has been under meaningful pressure over the past few years and we think a potential turnaround would likely be a long/ bumpy process"

Jefferies analyst Corey Tarlowe

• A deal makes sense given Dick's and Foot Locker's category overlap and Foot Locker's "recent diversification efforts"

• At $24/share it's a potentially positive offer for the Foot Locker stock

. . . 

Via City AM,

• A recent trade deal between the UK and the US has led to the removal of tariffs on American bioethanol, which British farmers fear will undermine their domestic market.

• Concerns exist among beef farmers that the deal will result in increased American beef imports, leading to unfair competition and impacting their livelihoods.

• The trade agreement has sparked widespread scepticism among British farmers regarding the government’s commitment to protecting their interests and the future of the agricultural sector.

Ministers and commentators heralded the UK’s trade deal with the United States as a political coup that will save thousands of jobs at British automakers. But changes to beef and bioethanol trade rules have left an already bruised agricultural sector fearing the worst, writes Ali Lyon.

When he’s not slavishly editing clips for the hundreds of thousands of people that subscribe to his Youtube channel, Olly Harrison has the not insignificant job of running 1,500 acres of farmland.

But as his impressively regular feed of videos illustrates, tending to that land – and trying to eke out a semblance of profit from it – has become a difficult, bordering on impossible task, as headwind after headwind hit his arable holding near Liverpool.

“It’s been rubbish,” he tells City AM, still dealing with the aftermath of what was England’s driest April on record. 

“We’ve had extremes of weather, which has been very wet or – like now – very dry.”

Added to recent years’ inhospitable climes, are the input costs for producing the wheat his family has grown for five generations. They have, he says, remained at the elevated prices sparked by Russia’s invasion of Ukraine. At the same time, the price he is able to secure for his end product has fallen by as much as 40 per cent since those 2022 supply-constraint-induced highs.

But it is another, more recent, external shock that has Harrison especially worried. One that, while niche and esoteric, could kibosh the safety net he and his fellow British arable farmers have traditionally fallen back on when the wholesale wheat price drops too low.

Bioethanol: The little-known safety net of arable farmers

“The bioethanol market in the UK – for wheat – is quite big,” Harrison says.

“It’s basically the floor in the market.”

Opening up the UK and US’s agricultural markets to more trade was a key football in the frenzied negotiations that helped the Starmer administration become the first country in the world to secure a trade deal with America since 2 April’s ‘Liberation Day’.

And to spur the States’ capricious President into bringing down painful tariffs on Britain’s export industries like automakers and plane parts, the government agreed to lower its own levies on a selection of American agriculture products; namely beef and the fuel.

The beef tariffs were reduced only on imports that subscribed to the UK’s world-leading food standards, leading some in the farming community to breathe a partial sigh of relief. But the bioethanol concessions – which saw the UK’s 19 per cent tariff abolished completely – contained no such caveats to protect our sizeable domestic industry. That decision has already sparked warnings from key figures involved in domestic bioethanol production that their sector could be facing extinction.

“Bioethanol, for me, is the watch area,” Tom Bradshaw, president of the National Farmers’ Union (NFU) tells City AM.

“I have been speaking to the bioethanol manufacturing sector… and we think [these changes] probably make it unviable.”

The prognosis from Bradshaw – whose assiduous campaigning around the recent inheritance tax reforms has already made him a regular thorn in the government’s side – was echoed by the UK’s two largest bioethanol producers over the weekend.

The chief executive of London-listed AB Foods’ sugar division, Paul Kenward, and Grand Pearson, the chairman of Ensus, both warned in a joint intervention their “strategically essential sector” was under an “existential threat”.

All of which has left Harrison worried about what it will do to demand for his product. “If they can now bring it [ethanol] in from the States – using wheat that’s grown a lot cheaper than we can because they get a lot more support off their government, using technologies that we can’t, from farms that have got scale that we haven’t – then that’s seriously undermining a sector that’s already on its knees,” he says.

A hollowed out bioethanol sector also poses the risk of some unsavoury knock-on effects for livestock farmers, the very area of agriculture that the government sought to protect during its negotiations.

Because just as Unilever sources its ingredients for Marmite from breweries – and the byproducts produced in the fermenting process – bioethanol producers sell one of their own high-protein outputs as feed for cows.

As Bradshaw summarises: “If they’re not making bioethanol, we won’t get that animal feed.”

Yet more farmer beef

The feed supply issue is just one of several fears that Joe Seels, a Yorkshire-based beef farmer, has for his livelihood as the dust settles on the trade deal.

The NFU’s Bradshaw went to lengths to praise the government for maintaining standards in the face of US pressure. But for Seels, who documented his attendance at the string of protests in London around the changes to inheritance tax on his own Youtube channel, the deal represents yet another example of British agriculture being the fall industry to fix problems elsewhere in the economy.

His primary concern is that there will now be a glut of beef supply in the UK, without the same opportunities to export to the US. Because while the deal ostensibly brings down barriers to trade both ways – both countries agreed to accept 13,000 metric tonnes of beef imports each other each year tariff free – Seels can’t imagine a world in which American food producers buy British.

“I’m really sceptical that it will open up new export avenues,” he says. 

“Being American is eating American beef, they won’t accept ours which will be at a premium to [the hormone-aided beef] in their market.”

While the challenging trade environment in the US will persist, British farmers, he adds, will now face stiff competition from the low-cost American beef that will now be available at home.

Consumers and supermarkets are likely to continue to prefer domestically produced beef. Despite other large beef producing nations having access to the UK market, shoppers overwhelmingly prefer meat produced domestically or in Ireland. Senior figures in retail believe that the ubiquity and salience of farm labelling – from the ‘red tractor’ signifier of food standards to the regular sight of union-jack adorned packaging – mean shoppers are unlikely to find American meat in supermarket aisles.

Where Seels and Bradshaw imagine the influx of American beef will be felt, however, is catering and hospitality, where choice is constricted and labelling is less prominent.

“They [the US] have got less red tape, fewer planning restrictions, and their farming operations are just on a huge scale, which all leads to being able to create a product that’s much cheaper,” says Seels.

“We won’t see that on shelves,” he adds, “but where this beef might have a market is food services.”

Ministers have been at pains to trumpet the deal’s positive impact on livestock farmers, many of whom have long feared the spectre of chlorinated chicken and hormone beef being a concession in wider UK-US trade talks. But years of feeling let down by successive governments, mean farmers remain fearful of what the future holds.

“I have no faith whatsoever that the government will protect our interests in future negotiations,” says Harrison. 

"They’re just giving us another kick every time, and not realising how vulnerable the farming sector is.”

That scepticism is shared by Seels, who like Harrison is also a popular farming video blogger and has previous in using his channels to vent at political decision making.

“This government has said things to us in the past that it wasn’t going to do then it’s turned around and changed its mind,” he says.

If it does so again, ministers can expect the vitriolic response comprising more than just a few fiercely worded Youtube videos.