MNI ASIA OPEN - Biden Commits to Boosting Nuclear

NEWS

US (MNI): Cleveland Fed Names Ex-Goldman's Hammack As President
The Federal Reserve Bank of Cleveland on Wednesday named former Goldman Sachs executive Beth Hammack to be its next president and CEO after Loretta Mester's retirement. Hammack is set to begin work on Aug. 21 and is a voting member of the FOMC this year, the bank said.

US (MNI): Biden Admin To Boost Domestic Nuclear Power Sector
The White House is set to announce today new measures to support the development of new nuclear power plants in the United States. Reuters reports: "The suite of actions, which weren't previously reported, are aimed at helping the nuclear power industry combat rising security costs and competition from cheaper plants powered by natural gas, wind and solar."

FED (MNI): Fed Contacts Report Modest Price Growth-Beige Book
The U.S. economy and labor market continued growing at a slight to modest pace in recent weeks while prices increased at a modest pace, according to the Federal Reserve's May Beige Book report published Wednesday. "National economic activity continued to expand from early April to mid-May; however, conditions varied across industries and Districts. Most Districts reported slight or modest growth, while two noted no change in activity," the report said, noting retail spending was flat to up slightly, reflecting lower discretionary spending and heightened price sensitivity among consumers. "Employment rose at a slight pace overall" while "wage growth remained mostly moderate."

FED (MNI): Fed’s Next Move Could Still Be A Hike-Posen
The Federal Reserve is likely to face persistent enough inflation over the next year that it will have to consider raising interest rates further in 2025, particularly as fiscal policy will probably remain supportive of growth, former Bank of England Monetary Policy Committee member Adam Posen told MNI.

ECB (MNI): Last Mile Likely Bumpy After June Cut - ECB's Kazaks
The European Central Bank is heading to cut rates by 25 basis points at its meeting in June, reversing the “insurance hike” of September 2023, but while the eurozone may achieve a soft landing it is too early to declare victory over inflation and there is no assured subsequent rate path, ECB Governing Council member and Bank of Latvia Governor Martins Kazaks told an MNI Connect event in his opening presentation.

EU (MNI): EU Deal To Limit Deposit Guarantee Role In Bank Failure
The European Union’s Belgian presidency has brokered a compromise among member states in negotiations on the Crisis Management and Deposit Insurance regulation, in a first step to reopening long-stalled talks on strengthening the EU's Banking Union, officials close to talks told MNI.

MIDEAST (MNI): Houthis Claim To Have Launched Attack On Mediterranean Shipping
Spokesperson for the Houthi rebels in Yemen Gen. Yahya Sare'e has claimed in a statement that the Iran-backed group has launched its latest 'fourth-round' of military operations, targeting six ships that it says "violated the decision to ban access to the ports of occupied Palestine". Of these ships, three were in the Red Sea, two in the Arabian Sea and one supposedly in the Mediterranean.

SOUTH AFRICA (MNI): South African Voters Head to Polling Stations in Highly Consequential Election
Polling stations in South Africa will stay open until 20:00BST/21:00SAST but the results may not be announced until the weekend. Support for the ruling African National Congress (ANC) edged higher into the election day, with the closely watched daily tracker ran by the Social Research Foundation (SRF) estimating it at 42.2% on May 27, assuming a turnout rate of 66% (as was the case in the 2019 election). If the support for the ANC falls below 50%, the party will need to find a coalition partner for the first time in South Africa's post-Apartheid history.

BRAZIL (MNI): Govt Announces $2.9B In Subsidised Finance For Business Following Floods
Brazil's government has announced a 15 billion reais ($2.9 billion) line of subsidized financing for businesses, including large companies, affected by floods in the Rio Grande do Sul state. Companies will need to maintain jobs to keep benefits, Finance Secretary Dario Durigan said. In addition, President Lula said the Government is working on anticipated plan to avoid climate disasters in the future.

DATA

GERMAN DATA: HICP Slightly Higher Than Expected; Services Accelerates
The German national flash May HICP print came slightly higher than consensus at +2.8% Y/Y (vs 2.7% cons; 2.4% prior) and +0.2% M/M (vs 0.2% cons; 0.6% prior).

• Headline, core and the major sub-components of national CPI inflation all came in closely in line with MNI's tracking estimates based on the state-level data.
• National flash CPI was 2.4% Y/Y (vs 2.4% cons; 2.2% prior) and +0.1% M/M (vs 0.2% cons; 0.5% prior). Core CPI (excl. food and energy) remained at 3.0% Y/Y.
• Of the major sub-components, services CPI is the most closely watched and it accelerated to 3.9% Y/Y (vs 3.4% prior), while goods CPI inflation decreased to 1.0% Y/Y (vs 1.2% prior).

US TSYS: Poorly Received 7y Auction Clears Way for Further Steepening

• The 7y note auction extended a string of weak sales this week, as the 7y tailed by 1.3bps (awarded at 4.650% vs. WI of 4.637%). The bid-to-cover of 2.43 was also soft, and marked the lowest outright demand in a year. In response to the soft sale, the 7y yield extended pre-auction deadline gains, touching 4.6537%, dragging the 10y higher with it to 4.6357% - the highest level since early May.
• Treasuries traded heavy after the poorly received auction, extending the pullback from 109-31+, the May 16 high and a key short-term resistance. Note that support at 108-15, the May 14 low, has been cleared. The break undermines the recent bullish theme and instead signals scope for a deeper retracement.
• Fed rate pricing was little changed across the session, with the bulk of the price action taking place in the longer-end of the curve. ~13bps for September and a cumulative 32bps of cuts priced into year-end.
• Fed's Beige Book detailed 'modest' price growth across the survey period, but markets proved unresponsive ahead of key PCE data due Thursday and Friday, which markets expect to be a key input for June Fed decision.

FOREX: Greenback Strength Extending Amid Higher Yields & Softer Equities

• The continued upward pressure on US treasury yields and weakness for major equity indices continue to underpin the greenback bid on Wednesday. With risk sentiment notably dented, emerging market currencies notably first felt the pinch, with greenback strength steadily filtering through to the G10 complex.
•  The Euro and the Yen have weakened in line with the DXY adjustment, with USDJPY notably pushing to fresh post-intervention highs. Pressure here is keeping the spot JPY trade-weighted index on course for a test of the YTD lows - just ~1% below the current price. This leaves 158.21 as the next resistance, marking the 76.4% retracement for the intervention leg off the 160.17 multi-year high.
• In similar vein, EURUSD trades on the heavy side although continues to respect the 1.08-1.09 range that has been well established across the second half of May.
• AUD, NZD and CAD are also weakening in G10. Underperformance for the AUD comes following the stronger-than-expected CPI data overnight and short-term positioning dynamics may be modestly exacerbating the move to the lowest levels of the week. Price action is narrowing the gap to support which lies at 0.6584, the 50-day EMA.
• The Swedish Krona is the weakest in G10, dipping near 1% against the dollar and fully erasing the prior day’s strong gains.
• Swiss GDP and Spanish CPI will highlight Thursday’s European session before the second reading of US Q1 GDP crosses. Additionally, weekly jobless claims and April pending home sales for the US will be monitored.

EQUITIES: Futures in Consolidation Mode, As Bullish Trends Correct

Eurostoxx 50 futures are in consolidation mode. The recent trend condition  remains bullish and the recent pullback appears to be a correction. The contract has recently cleared a key hurdle at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend. The uptrend in S&P E-Minis remains intact and the most recent pullback appears to be a correction. The contract also traded to a fresh cycle high on May 23, reinforcing a bullish theme. Recent gains have also resulted in a break of 5333.50, Apr 1 high.

• Japan's NIKKEI closed lower by 298.5 pts or -0.77% at 38556.87 and the TOPIX ended 26.88 pts lower or -0.97% at 2741.62.
• Elsewhere, in China the SHANGHAI closed higher by 1.446 pts or +0.05% at 3111.018 and the HANG SENG ended 344.15 pts lower or -1.83% at 18477.01.
• Across Europe, Germany's DAX trades lower by 204.58 pts or -1.1% at 18473.29, FTSE 100 lower by 71.11 pts or -0.86% at 8183.07, CAC 40 down 122.77 pts or -1.52% at 7935.03 and Euro Stoxx 50 down 67.15 pts or -1.33% at 4963.2.
• Dow Jones mini down 367 pts or -0.94% at 38580, S&P 500 mini down 29 pts or -0.54% at 5295.75, NASDAQ mini down 89.75 pts or -0.47% at 18851.5.
   

COMMODITIES: WTI Crude Falls On Dollar Strength

• WTI is headed for the US close trading lower and having erased most of yesterday's gains. Downward pressure comes from a stronger USD driven by higher treasury yields and fears of ‘higher-for-longer’ US interest rates.
• WTI Jul 24 is down 0.7% at $79.3/bbl.
• Henry Hub is on track for its lowest close since May 15, with expectations of slightly cooler weather, higher production, and healthy US storage levels adding downside pressure.
• US Natgas Jun 24 is down 5.1% at $2.46/mmbtu.
• Meanwhile, spot gold is down by 0.9% to $2,341/oz, as the precious metal consolidates after hitting an all-time high of $2,450 last week.
• The medium-term trend structure remains bullish and a resumption of gains would open $2452.5 next, a Fibonacci projection. The 50-day EMA, at $2305.8, represents a key support.
• In contrast, silver has edged up by 0.1% today to $32.1/oz, within sight of last week’s 11-year high at $32.5.
• As noted, a break of this level would open $33.887 next, a Fibonacci projection.
• Copper is down by 1.3% at $479/lb.
• Following recent swings in the copper price, analysts note that with physical markets still tight, further squeezes are possible.