MNI ASIA OPEN - Israel Submits New Hostage Exchange Proposal

NEWS

FED (MNI): Bowman Favors Scrapping Fed's SEP Forecasts
Fed Governor Michelle Bowman said Tuesday she would prefer that the Federal Reserve ditch its quarterly Summary of Economic Projections and instead have officials communicate individually." On communications, I’m not a fan of the SEP. So I would prefer that we got rid of it altogether frankly, and that if individuals wanted to speak about their views, they could do that in the intermeeting period. There is no lack of speakers during each intermediate period," she said in Q&A at a conference at the Bank of Japan, according to a transcript.

US (BBG): Trump Gag Order Bid Denied Over False FBI Theory in Florida Case
The federal judge overseeing Donald Trump’s classified documents case denied a request by Special Counsel Jack Smith to impose a gag order on the former president to protect law enforcement officers.US District Judge Aileen Cannon in Florida said in a ruling Tuesday that Smith failed to give Trump’s legal team enough time to discuss the request before it was filed.

FED (BBG): Fed’s Kashkari Says Interest-Rate Hikes Not Entirely Ruled Out
Federal Reserve Bank of Minneapolis President Neel Kashkari said the US central bank’s policy stance is restrictive, but policymakers haven’t entirely ruled out additional interest-rate increases.“I don’t think anybody has totally taken rate increases off the table,” Kashkari said Tuesday at an event in London. “I think the odds of us raising rates are quite low, but I don’t want to take anything off the table.”

ISRAEL (MNI): Israel Submits New Hostage Exchange Proposal
Barak Ravid at Axios reporting that Israel has submitted to Qatar, Egypt, and the US, "an official, written, and updated proposal regarding the Gaza hostage deal."Ravid notes: "The written proposal was detailed and expanded on the general principles that the director of Mossad, David Barnea, gave to the Prime Minister of Qatar during a meeting in Paris last Friday," and "includes a willingness to be flexible regarding the number of live hostages that will be released in the first and humanitarian phase of the deal, as well as a willingness to discuss Hamas's demand for "sustainable calm" in the Gaza Strip."

MNI Eurozone Inflation Preview – May 2024
After nine consecutive months of disinflation, Eurozone core HICP is expected to remain steady at 2.7% Y/Y in May. Meanwhile, headline inflation is expected to rise a tenth to 2.5% Y/Y. The May flash inflation round provides one the of the last key data inputs before the ECB’s June meeting, where a 25bp cut is virtually unanimously expected. With a June cut all but confirmed, May’s inflation figures will help inform the broader question of “what next?” for the ECB.

UK (MNI): Shadow CX Appears To Rule Out Emergency Budget If Labour Win Election
In her first major speech of the election campaign, Shadow Chancellor of the Exchequer Rachel Reeves has appeared to rule out the holding of an emergency summer budget in the event that the centre-left Labour party wins the general election on 4 July. Says that “The [independent Office for Budgetary Responsibility] OBR requires 10 weeks’ notice to provide an independent forecast ahead of a budget, and I've been really clear that I would not deliver a fiscal event without an OBR forecast”.

US/RUSSIA (MNI): Putin Warns U.S. Against Authorising Ukrainian Strikes Inside Russia
Wires carrying comments from Russian President Vladimir Putin issuing a warning to the US against authorising Ukrainian strikes on targets within the Russian Federation. Putin: "We had warned them not to make strikes on Belgorod... escalation could lead to serious consequences." Putin asks, "do they want a global conflict?" Putin: "West should understand what it is playing with... this is serious, we are closely watching it."

US/RUSSIA (MNI): NSA Singh: US Looking At Actions To Target Russia's 'Shadow Fleet'
Wires carrying comments from White House Deputy National Security Adviser For International Economics, Daleep Singh, on a range on issues related to Russia sanctions. Singh, a primary achitect of G7 sanctions on Russia, recently returned to the position, which reports to both the National Security Council and the National Economic Council, following a period in the private sector - likely reflecting White House concerns that Russia has navigated sanctions without major economic fallout.

NETHERLANDS (MNI): Coalition Confirms Fmr Intel Chief Dick Schoof To Become New PM
The parties set to form the Netherlands' next gov't have confirmed that former head of the Dutch intelligence service and anti-terrorism agency Dick Schoof is set to become the country's next prime minister. Rumours of Schoof's appointment had circulated in local press this morning. Telegraaf reports that Schoof was formerly a member of the centre-left Labour party (PvdA), but left the party in 2019.

SOUTH AFRICA (MNI): Polling Shows ANC Just Above Crucial 42% Level As Election Looms
The latest daily tracking poll from SRF shows the governing African National Congress (ANC) would still be well short of the level of support required to maintain its majority in the National Assembly if the results were reflected in tomorrow's general election.

DATA

US DATA: Conference Board Consumer Confidence Bounces But Labor Differential Soft

• The Conference Board consumer survey saw a surprise bounce in overall confidence in May, to 102.0 (cons 96.0) from an upward revised 97.5 (initial 97.0).
• It contradicts the recent decline in U.Mich consumer sentiment although confidence remains below March levels.
• Both the present situation (from 140.6 to 143.1) and expectations (from 68.8 to 74.6) indices drove the monthly increase, with expectations also including a solid upward revision.
• “Consumers cited prices, especially for food and groceries, as having the greatest impact on their view of the U.S. economy.” Average 12-mth inflation expectations ticked up from 5.3% to 5.4%.
• However, the labor differential was weak on balance, lifting to 24.0 in May but only after what was a downward revised 22.9 (initial 25.3).
• These two monthly readings are back below the 24.7 averaged in Q4 having bounced to 30.4 in 1Q24. They are below the 33.15 averaged through 2019 and at similar levels to 1H18 – see chart.
• The perception of jobs plentiful is also of note here, falling from 38.4% to 37.5% for its lowest since Apr’21.

MNI: US Q1 FHFA HPI Q/Q SA +1.1% V +6.6% Q1 2023, HPI SA +0.1% V +1.2% FEB; +6.7% Y/Y

MNI: CANADA APR INDUSTRIAL PRICES +1.5% MOM; EX-ENERGY +1.4%
CANADA APR RAW MATERIALS PRICES +5.5% MOM; EX-ENERGY +5.3%

[See the Asia Markets Analysis e-mail for further detail]

US TSYS: Sizeable Bear Steepening Amidst Consumer Confidence Beat and Heavy Supply

• Treasuries have seen a sizeable bear steepening today, driven by stronger than expected Conference Board consumer confidence (despite a weak labor differential) and then more notably sizeable tails for double 2Y and 5Y auctions with their particularly low bid-to-cover metrics (lowest since Nov’21 and Feb’21 respectively).
• Kashkari (non-voter) earlier saying he doesn’t think anyone has taken rate increases off the table, albeit with him seeing quite low odds of a hike, had little immediate impact. Similarly, WTI gains of 3.2% have done little to stop the steepening on the day.
• Cash yields sit between +2.4bp (2s) and +8.6bps (30s) on the day, with 2s10s at -43bps for a firm lift from Friday’s YtD low of -48.3bps.
• 10Y yields have easily cleared 4.50% and hold around 4.54% for now, at highs since the May 3 payrolls report.
• 2Y yields meanwhile at 4.972% have already cleared pre-payrolls levels but could see more resistance to hit 5% having last briefly breached that handle on Apr 30 for one day before the FOMC May 1 announcement.
• TYM4 cleared a key support at 108-15 (May 14 low) with the 5Y auction before hitting a low of 108-08. Next support is seen at 108-06 (May 3 low) after which lies 108-06 (May 2 low).
• Fed Funds implied rates have lifted to show just 19bp of cumulative cuts priced for Nov and 32bp for Dec.
• Tomorrow sees the Beige Book but greater focus is likely on continued supply with $44bn of 7Y supply on the docket after a combined $139bn over 2Y and 5Y notes today.
• Data focus lies on second estimates of Q1 national accounts Thu before the April PCE report on Fri.

FOREX: USD Bounces On Hot US Consumer Confidence And Post-Auction Yield Climb

• Stronger-than-expected US consumer confidence provided the greenback with a temporary boost on Tuesday before receiving a second wind from higher US Treasury yields after tails at two- and five-year auctions in a holiday-shortened week.
• The DXY at 104.63 has reversed earlier losses, which saw it notable pierce the 200-dma support of 104.41 earlier in the session, although it’s yet to recoup Monday’s decline in Memorial Day thinned trade.
• SEK has outperformed its G10 peers, rising around 0.45% against the dollar, whilst the JPY is bottom of the pack against the sharply higher yield backdrop, with USDJPY hitting 157.16 to step close to resistance at 157.20 (May 23 high).
• With Eurozone inflation data highlighting the calendar over the next 48 hours, EURUSD traded solidly around the 1.0875 mark but has since dipped to sub-1.0860. The current trend condition is bullish following a bear channel breakout on May 15 - price cleared the top of a channel drawn from the Dec 28 high. Sights are on 1.0933 next, a Fibonacci retracement.
• USDCNH traded firmer again in early London hours, extending recent outperformance and putting the pair to new monthly highs at 7.2642. Today's price action narrows the gap with next major resistance into 7.2739.
• SEK extends recent outperformance to press EUR/SEK below the 200-dma of 11.4988 – and looks set to close below this average for the first time since early April.
• Australian April CPI will be a focus for the APAC docket on Wednesday after the RBA revised up its Q2 forecast for both headline and core to 3.8% and cited upside risks to inflation. Last week’s move lower in AUDUSD appears to have been a correction and a bullish cycle that started Apr 19 still remains in play. The pair has recently breached a key short-term hurdle at 0.6668, the Mar 8 high, strengthening a bullish theme and a resumption of gains would open 0.6751, a Fibonacci retracement. On the downside, support to watch lies at 0.6581, the 50-day EMA.

US STOCKS: Equities Under Pressure From Yields But Declines Limited By Nvidia and Energy Surge

• ESM4 has lifted slightly off an earlier low of 5296.75 but at 5307.25 remains under pressure after the strong push higher in Treasury yields.
• Some notably large sell program have helped the downward pressure, including 1634 names per the NYSE’s TICK index for its largest since Apr 15.
• 10Y yields are currently +7.3bps from Friday’s close at ~4.54% for highs since payrolls on May 3, with real yields +5.5bps.
• ESM4 remains easily above support at 5259.02 (20-day EMA) whilst resistance is seen at cycle highs of 5368.25 (May 23 high).
• E-minis: S&P 500 (-0.2%), Nasdaq 100 (unch), Dow Jones (-0.8%) and Russell 2000 (-0.5%).
• SPX movers: IT (+1.1%, dominated by Nvidia +6.9%) and energy (+1.0%, aided by 3.1% for WTI from Friday’s close). Most other sectors are in the red, most notably health care (-1.5%), industrials (-1.3%), financials (-1.3%) and consumer staples (-1.1%).
• Those Nvidia gains extend last week’s post-earnings gains with a boost by Elon Musk’s artificial intelligence startup, xAI, raising $5.2bn in an equity offering with a remaining $2bn to be sold, and looking to construct a supercomputer connecting groups of Nvidia’s H100 GPUs.

COMMODITIES: WTI Crude Rises, Silver Approaches 11-Year High

• Oil markets are headed for US close trading higher, driven by expectations that OPEC+ will rollover voluntary cuts and keep a lid on supply.
• WTI Jul 24 is up 1.4% at $79.7/bbl.
• WTI futures are trading inside a range. A bearish theme remains intact and the sideways move is seen as a pause in the downtrend.
• Scope is seen for a move to $75.64, the Mar 11 low. Initial resistance to watch is at $80.11, the May 20 high. Key resistance and the bull trigger is at $86.16, the Apr 12 high.
• Henry Hub is headed for US close with robust gains on the day. Two-month high LNG feedgas export flows and a likely rise in upcoming cooling demand across the US will be supportive.
• US Natgas Jun 24 is up 2.1% at $2.58/mmbtu.
• Spot gold has edged up by 0.1% to $2,353/oz Tuesday.
• The trend structure remains bullish and the move down from last week’s highs appears to be a correction. A resumption of gains would open $2452.5 next, a Fibonacci projection. The 50-day EMA, at $2,304.0, represents a key support.
• Silver is outperforming and is up by 0.6% at $31.8/oz, bringing the precious metal close to last week’s 11-year high of $32.5.
• A break of this level would open $33.887 next, a Fibonacci projection.