MNI ASIA OPEN: ICJ Demands Halt To Rafah Offensive
EXECUTIVE SUMMARY
- Paper Suggests Stickier Prices Amplify Fed's 'Last Mile' Problem
- Fed’s Waller Says Large Deficits Could Push Up R-Star
- No Invitation For Ukraine To Join NATO Expected At Leaders Summit
- Chinese Exports Jeopardise EU Industry--Le Maire
- China Fear Grips G-7 With Draft Raising Alarm at ‘Harmful’ Trade (BBG)
- ICJ Demands Halt To Rafah Offensive, But Little Chance Of Implementation
NEWS
FED (MNI): MNI: Stickier Prices Amplify Fed's 'Last Mile' Problem -Paper
New research on the tradeoffs between unemployment and inflation by academic and Federal Reserve economists finds the "last mile" of bringing inflation down to 2% much costlier than the road traveled thus far, co-author Virgiliu Midrigan told MNI.
FED (MNI): Fed’s Waller Says Large Deficits Could Push Up R-Star
Rising U.S. government deficits could contribute to a higher neutral rate of interest in the future, Federal Reserve Governor Chris Waller said Friday in remarks that did not directly address the currently outlook for monetary policy or the economy.
US (MNI): MNI POLITICAL RISK - US Elections Weekly - 24 May
A new weekly MNI Political Risk newsletter will run through the 2024 US general election with updates on the presidential election race, the race for control of the Senate and House of Representatives, and political trends that could impact the election. The 2024 presidential election is set to be one of closest in modern US history. The electorate is faced with two divisive candidates who have struggled to motivate enthusiasm amongst their core bases. Incumbent President Joe Biden is labouring under concerns over his age and mental acuity, backlash to inflation, and fissures within his 2020 progressive alliance over policy in the Middle East.
GLOBAL (MNI): EU's Gentiloni Calls For G7 Coordination On China
EU Economy Commissioner Paolo Gentiloni and Italian Finance minister Giancarlo Giorgetti called on G7 countries to better coordinate their responses to what they see as China’s industrial over-capacity in the wake of the latest U.S. tariffs. Giorgetti called for a balance between “security with free trade in this new phase of globalisation,” while Gentiloni said “we need a united response”.
GLOBAL (MNI): Chinese Exports Jeopardise EU Industry--Le Maire
China’s increased industrial capacity to export goods to other parts of the world in the wake of the latest U.S. tariffs “jeopardises Europe’s efforts for reindustrialisation”, especially in the green industry, French Finance Minister Bruno Le Maire told journalists on Friday.
GLOBAL (MNI): G7 Ministers Near Deal On Russian Assets-Gentiloni
G7 finance ministers are likely to reach “agreement in principle” over the use of frozen Russian assets to aid Ukraine but this would need to be approved by G7 leaders in Puglia in mid-June, the EU’s Economy Commissioner Paolo Gentiloni told journalists on Friday.
ISRAEL (MNI): ICJ Demands Halt To Rafah Offensive, But Little Chance Of Implementation
The International Court of Justice (ICJ) has ruled that Israel must immediately halt its ground operation in the southern Gazan city of Rafah, citing 'immediate risk' to the Palestinian people there. The BBC reports that Judge Nawaf Salam, "said the current situation there entailed further risks of irreparable harm to the rights of people in Gaza. He said the situation had changed since the ICJ made its previous orders and conditions had been met for new emergency measures in the case."
NATO (MNI): No Invitation For Ukraine To Join NATO Expected At Leaders Summit
US Assistant Secretary of State for European and Eurasian Affairs James O'Brien told reporters that the US does anticipate an invitation will be extended to Ukraine to join the NATO alliance at the NATO Leaders Summit in Washington D.C. in July, according to Reuters.
CANADA (MNI): Canada Retails Jump In April After Weak First Quarter
Canadian retail sales rose 0.7% in April for the largest increase since last September, breaking a three-month decline, the federal statistics office said Friday. While Statistics Canada's April advance figure didn't come with an industry breakdown, March's 0.2% fall was broad-based, with seven of nine sub-sectors declining.
UK (MNI): First Post-Election Call Polling Shows Labour Retaining Wide Lead
In the first two opinion polls carried out either on the day PM Rishi Sunak announced a 4 July general election or afterwards, the main opposition centre-left Labour party has retained its sizeable lead that continues to indicate that it will win a majority in the House of Commons.
G7 (BBG): China Fear Grips G-7 With Draft Raising Alarm at ‘Harmful’ Trade
(Bloomberg) -- China’s outsized role in world trade is alarming global finance chiefs, who are poised to forge a united front in Italy priming their nations to challenge “harmful practices.” A draft communique formulated at the Group of Seven meeting in the lakeside resort of Stresa introduces much stronger common language than the club adopted just one year ago when it met in Niigata in Japan and last month in Washington.
DATA
US DATA: U.Mich Inflation Expectations Latest Climb Mostly Revised Away, Sentiment Still Slides
- U.Mich inflation expectations gave back more of their preliminary rise in May than expected, leaving only a 0.1pp rise in the 1Y from April and the 5-10Y unchanged at 3.0% for well within its mostly held 2.9-3.1% range seen in recent years.
- U.Mich 1Y inflation: 3.3% (3.4 cons, 3.5 prelim) in May after 3.2% in April
- 5-10Y inflation: 3.0% (3.1 cons, 3.1 prelim) in May after 3.0% in April
- The trimming of inflation expectations helped at least partly limit what had been a particularly heavy decline in consumer sentiment in May, at 69.1 rather than 67.4 in the preliminary reading.
- That’s still a significant rolling over in confidence since the 77.2 in April and the recent peak of 79.4 in March though.
US DATA: Durable Goods Revisions Offset April Beat
- Core durable goods orders were stronger than expected in preliminary April data at 0.3% M/M (cons 0.1) but with downward revisions heavily offsetting with -0.1% in March (initial 0.1%).
- There’s a similar story in core shipments data, beating with 0.4% M/M (cons 0.1) but after a downward revised -0.3% (initial 0.0%).
- Shipments have languished recently, at exactly 0.0% annualized on a 3M/3M basis vs 0.3% three months prior, but orders suggest some strength ahead with a 1.4% annualized increase.
- There continues to be a disconnect with surveys: the ISM manufacturing survey falling heavily into implied contractionary territory in 2H23 only partly weighed on durable goods activity (at least in nominal terms) but equally the former's recent recovery hasn’t had much impact on latest orders.
- USDCAD was little changed shortly after mixed Canadian retail sales and US durable goods (beat in April but with offsetting downward revisions).
- Retail sales were close to expectations in March at -0.2% M/M (cons -0.1, advance 0.0) but ex autos disappointed (-0.6% after -0.2%) as did core sales (-0.6% after +0.1%).
- Overall volumes offered a similar picture to those trimmed metrics, falling -0.4% M/M. It followed some mixed revisions (upward in Feb, downward in Jan), with the 3m/3M trend rate easing to 1.1% annualized for its softest since Oct.
- However, helping to largely offset the March gloom, the April advance estimate is indicated at a 0.7% M/M increase, which if realized would be the strongest nominal increase since September.
- Further, and in a separate release, manufacturing sales were also indicated to bounce a reasonable 1.2% after the -2.1% in March.
- The releases did little to change BoC pricing at circa 16bps of cuts for next month's decision, as broadly seen since Tuesday's CPI.
US TSYS: 2s10s Most Inverted Since December At Early Close Ahead Of Memorial Day
- Cash Tsys close early with the curve twist flatter ahead of their full closure for Memorial Day on Monday.
- Cash yields range from 1.1bp higher (2s) to 1.3bp lower (20s), with the front end having unwound a large part of the intraday rally on the downward revision for U.Mich inflation expectations, aided by a recovery in crude oil futures, but with the longer end seeing a greater paring of earlier losses.
- 2s10s at -47.9bps (-2.3bps) has pushed through fleeting lows seen Apr 10 for its lowest since late December.
- 10Y yields met firm resistance at 4.50%, last seen May 14, and are now back at 4.465%.
- The high for yields came with TYM4 touching 108-16 as it stopped just short of a key support at 108-15 (May 14 low). It has since lifted to 108-23+ for similar levels to before the US session.
- Fed Funds implied rates have extended the post-PMIs jump higher in what’s been a thin data week, with 20bp of cumulative cuts for Nov (25bp prior to PMIs) and 34bps for Dec (38bps prior).
2s10s most inverted since DecemberSource: Bloomberg
FOREX: Broad Based USD Weakness Approaching The Week’s Close
- The USD index sits 0.35% lower on the session as a rebound in equity indices helped bolster risk sentiment in global markets. As such, the likes of EUR, GBP, AUD, NZD and CAD are all on the front foot to finish the week. Relative underperformance has been seen for the low yielding Swiss Franc and Japanese Yen.
- Friday’s price action for GBPUSD has affirmed the underlying bullish trend condition and short-term pullbacks are now considered corrective at these levels. Spot has extended the recent breach of 1.2634 and again opened 1.2754, 76.4% of the Mar 8 - Apr 22 bear leg. This level was pierced Wednesday, but a clear break would expose 1.2803, the Mar 21 high.
- Participants also remain aware of the 0.8500 handle in EURGBP marking an important support over the past 18 months. The cross has failed to close below 0.8500 since August 2022, with several tests over the past year being well respected. Note that the exact key support and bear trigger lies at 0.8493, and a sustained breach of this point would be required to enhance bearish momentum for the cross.
- EURUSD’s recovery today leaves the pair just moderately in the red on the week. The corrective move lower in EURUSD continues to ease and appears to be a flag formation - a bullish continuation pattern that reinforces the uptrend. Sights are on 1.0933 next, a Fibonacci retracement. Initial firm support to watch lies at 1.0789, the 50-day EMA.
- Potential comments from BOJ Governor Ueda and German IFO data highlight Monday’s calendar. Elsewhere next week, the focus will be on Australian and Eurozone inflation data as well as the second release of US Q1 GDP.
US STOCKS: S&P 500 E-Mini Trims Yesterday's Decline Away From Fresh Record Highs
- The S&P 500 e-mini has seen some mild late downward pressure, following the largest sell program of the day with 839 names per the NYSE’s TICK index ahead of the long weekend rather than any obvious headlines.
- It still sits +0.6% after what had been particularly steady trade in recent hours ever since an uplift around 1100ET on a large buy program built on a positive move as US yields fell with surprise downward revisions to U.Mich consumer inflation expectations.
- The 1396 names, along with the heavy 1520 at the cash open, are the largest buy programs since the cash open on May 15 after a dovish reaction to US CPI.
- Currently at 5315.75, ESM4 remains firmly within yesterday’s range, which included a fresh cycle high at 5368.25 after which lies resistance at 5372.73 (Fibo projection of Apr 19 – 29 – May 2 price swing).
- E-minis: S&P 500 +0.6%, Nasdaq 100 +0.9%, Dow Jones unch and Russell 2000 +0.8%
- In cash markets, SPX gains are driven by communication services (+1.2%), utilities (+1.0%) and IT (+0.9%), whilst losses are limited to health care (-0.3%) and energy (-0.1%) despite 1% gains for WTI.
- Major names are again large contributors, with Meta (+2.3%), Apple (+1.8%), Nvidia (+1.5%, continuing to gain after favorable earnings) and Alphabet (+0.9%) all up strongly.
COMMODITIES: Gold Set For Biggest Weekly Decline Since December
- WTI has rebounded today but remains around 2.7% lower on the week. Expectations of an OPEC+ output cut extension are weighing against potential Fed rate cut delays and sluggish demand.
- WTI Jul 24 is up 1.3% on Friday at $77.9/bbl.
- For WTI futures, scope is seen for a move to $75.64, the Mar 11 low. Key resistance and the bull trigger is at $86.16, the Apr 12 high.
- Henry Hub has fallen to its lowest level since May 17 as front month readjusts following a sustained rise throughout May.
- US Natgas Jun 24 is down 3.8% at $2.56/mmbtu.
- Spot gold has edged up by 0.3% to $2,336/oz on Friday, leaving the yellow metal 3.3% lower on the week, which would be the largest weekly decline since December.
- The trend structure for gold remains bullish and the move lower appears to be a correction - for now.
- On the upside, attention is still on $2,452.5, a Fibonacci projection. The 50-day EMA, at $2,298.5, represents a key support.
- Meanwhile, copper is down by 0.7% today, bringing total losses this week to 5.7%, after the red metal hit a record high on Monday.
- Analysts at Macquarie say that increased demand for copper globally is being offset by slower demand growth in China. In their view, the recent rally appears overdone and the risk of a sharp correction is very high.
Date | GMT/Local | Impact | Flag | Country | Event |
27/05/2024 | 0800/1000 | *** | ![]() | DE | IFO Business Climate Index |
27/05/2024 | 1200/1400 | ![]() | EU | ECB's Lane speech on Inflation in the Eurozone at IIEA | |
27/05/2024 | 1300/1500 | ** | ![]() | BE | BNB Business Sentiment |
28/05/2024 | 2301/0001 | * | ![]() | UK | BRC Monthly Shop Price Index |
28/05/2024 | 0130/1130 | ** | ![]() | AU | Retail Trade |
28/05/2024 | 0455/0055 | ![]() | US | Cleveland Fed's Loretta Mester | |
28/05/2024 | 0455/0655 | ![]() | EU | ECB's Schnabel in panel discussion at BOJ-IMES conference | |
28/05/2024 | 0800/1000 | ** | ![]() | EU | ECB Consumer Expectations Survey |
28/05/2024 | 1000/1100 | ** | ![]() | UK | CBI Distributive Trades |
28/05/2024 | 1230/0830 | * | ![]() | CA | Industrial Product and Raw Material Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | S&P Case-Shiller Home Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Home Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Home Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Quarterly Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Quarterly Price Index |
28/05/2024 | 1355/0955 | ![]() | US | Minneapolis Fed's Neel Kashkari | |
28/05/2024 | 1400/1000 | *** | ![]() | US | Conference Board Consumer Confidence |
28/05/2024 | 1400/1000 | * | ![]() | US | US Treasury Auction Result for 26 Week Bill |
28/05/2024 | 1400/1000 | * | ![]() | US | US Treasury Auction Result for 13 Week Bill |
28/05/2024 | 1430/1030 | ** | ![]() | US | Dallas Fed manufacturing survey |
28/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for 2 Year Note |
28/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for Cash Management Bill |
28/05/2024 | 1700/1800 | ![]() | UK | BOE's Haskel Speech on UK inflation | |
28/05/2024 | 1700/1300 | * | ![]() | US | US Treasury Auction Result for 5 Year Note |
28/05/2024 | 1705/1305 | ![]() | US | Fed Governor Lisa Cook |