MNI EUROPEAN OPEN: U.S. Gasoline Tax Holiday Imminent

EXECUTIVE SUMMARY

• BARKIN: FED TO DO 'WHAT IT TAKES' ON INFLATION (RTRS)
• BIDEN TO CALL ON CONGRESS WEDNESDAY TO PASS GAS TAX HOLIDAY (BBG)
• GERMANY PREPARES TO TRIGGER SECOND STAGE OF EMERGENCY GAS PLAN (BBG)
• ITALY UNVEILS MEASURES TO BOOST GAS STORAGE AFTER DROP IN RUSSIAN FLOWS (RTRS)

Fig. 1: WTI & Brent Crude Oil Futures ($/bbl)

Source: MNI - Market News/Bloomberg

UK

BREXIT: Brexit has damaged Britain's competitiveness, will reduce productivity and leave the average worker poorer than they otherwise would have been, according to a new study. The Resolution Foundation said leaving the EU has reduced how open and competitive Britain's economy is. And it goes further to say it has also led to an increase in cost of living and the level of business investment falling. The report, in collaboration with the London School of Economics, said this was all as a result of a "depreciation-driven inflation spike" following Brexit. (Sky)

POLITICS: Correspondence exists confirming that Boris Johnson attempted in 2019 to secure a senior role for his then girlfriend, Carrie Johnson, at the Foreign Office, a source has said, amid growing calls for an inquiry. The source, who worked with Johnson at the time, said Carrie Johnson – now the prime minister’s wife – had never progressed as far as formally applying for the role. But they claimed that Johnson, then foreign secretary, had repeatedly pressed for her to be picked for the senior taxpayer-funded job, a fact reflected in internal documentation from the period that could be examined by an inquiry. (Guardian)

FISCAL/ENERGY: UK Chancellor of the Exchequer Rishi Sunak is due to meet with oil and gas producers amid discontent over the windfall tax he announced last month. The discussion, which is scheduled take place on Thursday in Aberdeen, Scotland will include senior management and chief executives of oil and gas companies that operate in the North Sea, according to people with knowledge of the meeting, who asked not to be named because the information isn’t public. (BBG)

EUROPE

GERMANY: Germany is preparing to trigger the second stage of a three-stage gas emergency gas plan, a move that may mean passing along higher prices to industry and households. The government may soon move to the “alarm” stage, according to a person familiar with the matter. The country has been at the “early warning” stage since March 30. Germany is seeking to reduce gas use to shore up inventories after Russia cut deliveries last week by about 60% through a key pipeline. Economy Minister Robert Habeck said the move by Russia was aimed at unsettling the markets. (BBG)

FRANCE: France's economy will slow more than expected this year due to the current energy price shock, while inflation will climb higher than previously expected, the central bank said on Tuesday. The euro zone's second-biggest economy was set to grow 2.3% this year, before slowing to 1.2% in 2023 and picking up to 1.7% in 2024 as the impact of the crisis subsided, the Bank of France said in its quarterly outlook. The central bank estimated that the fallout from the war in Ukraine would cost France's economy the equivalent of 2 percentage points of gross domestic product over 2022-2024. (RTRS)

ITALY: Italy's Foreign Minister Luigi Di Maio said on Tuesday he was leaving the 5-Star Movement to form a new parliamentary group backing the government of Prime Minister Mario Draghi. Di Maio's move comes after he accused 5-Star leader and former Prime Minister Giuseppe Conte of undermining government efforts to support Ukraine and weakening Rome's standing within the European Union. "Today's is a difficult decision I never imagined I would have to take ... but today me and lots of other colleagues and friends are leaving the 5-Star Movement," Di Maio, himself a former 5-Star leader, told a news conference. (RTRS)

ITALY: Italy's government on Tuesday announced initial measures to boost gas storage after energy company Eni reported a shortfall in flows from Russia for more than a week. Ecological Transition Minister Roberto Cingolani said in a statement thatRome planned to purchase coal to be ready to maximise the use of coal-fired power plants if needed to save gas. He also asked gas grid operator Snam to adopt measures to help bring gas stockpiles to around their targeted level for June. Italy gets about 40% of its imported gas from Russia and, like other European Union nations, has begun efforts to diversify its energy supply mix in the wake of Moscow's invasion of Ukraine. The Italian government plans to have the country's gas storage system filled to at least 90% of its capacity by November, in line with an EU-wide target. Italy reached a level of 55% on Tuesday and, according to a source with knowledge of the matter, aims to hit 60% by the end of this month. (RTRS)

ITALY/BTPS: Italy plans to sell up to EU4 billion ($4.22 billion) of bonds due May 30, 2024 in an auction on June 24. (BBG)

ITALY/BTPS: Italy sold 2.45 billion euros ($2.59 billion) of its latest BTP Italia inflation-linked bond due in June 2030 to retail investors on Tuesday, taking total orders to 5.87 billion euros in the first two days of its offering. The bond underperformed the May 2020 issue of a similar note, with a 5-year maturity, data by Italy's bourse showed. The past issue had raised 4.77 billion euros on the second day it was offered to retail investors, with total orders at 8.79 billion euros in the first two days of offer. (RTRS)

SWEDEN: Swedish residential property prices fell 1.6% on the month in May, according to the Nasdaq OMX Valueguard-KTH Housing Index. HOX Sweden index fell 2.0% in the 3 months through May and rose 2.9% y/y. Adjusted for seasonal effects, the index fell 1.2% m/m in May. (BBG)

U.S.

FED: The U.S. Federal Reserve has made clear it will be resolute in bringing down high inflation even though it raises the risk of a recession, Richmond Fed President Thomas Barkin said on Tuesday. "We are meeting the test we face and have made clear we will do what it takes," Barkin told a local risk management association in Richmond, Virgina. "There is of course recession risk along the way, but there's also the prospect of the economy returning closer to normal." Earlier on Tuesday at a separate event, Barkin said he saw an interest rate increase of 50 or 75 basis points at the U.S. central bank's next meeting in July as "pretty reasonable." (RTRS)

FED: Demand pressures account for just a third of the recent U.S. PCE inflation run-up, signaling price pressures may remain tied to how fast supply bottlenecks are resolved, according to a San Francisco Federal Reserve report published Tuesday. Supply-side issues account for about half of elevated prices, with demand driving another third and the remainder coming from products not clearly tied to either, according to research by economist Adam Hale Shapiro. (MNI)

ECONOMY: U.S. Treasury Secretary Janet Yellen said on Tuesday she still views two quarters of negative growth as a good rule of thumb to indicate a recession, but believes it is possible to bring down inflation while maintaining full employment. "A shorthand of two quarters of negative growth has typically worked, and so a lot of people think of it that way," Yellen told reporters during a visit to the Rosebud Sioux Tribe reservation in South Dakota when asked how she would measure a recession. "But recessions aren't all the same. (RTRS)

ECONOMY: President Joe Biden’s aides have repeatedly pointed to Americans’ robust pandemic-era savings as a cushion against inflation -- yet the money is rapidly evaporating for 26 million low-income families. From Treasury Secretary Janet Yellen to Press Secretary Karine Jean-Pierre, top administration officials are counting on cash that households built up in the Covid years to serve as a buffer against consumer prices rising at the fastest clip in four decades. “Right now, we don’t see a recession right now,” Jean-Pierre said. “We are not in a recession right now. Right now we are in a transition where we are going to go into a place of stable and steady growth and that’s going to be our focus.” (BBG)

FISCAL/INFLATION/OIL: President Joe Biden will call on Congress to enact a gasoline tax holiday, a person familiar with the plans says, as he looks to cool soaring pump prices heading into summer. Biden will make a statement Wednesday calling on Congress to enact the pause, the person said, speaking on condition of anonymity ahead of an announcement. The White House did not immediately respond to a request for comment. (BBG)

FISCAL: President Joe Biden said on Tuesday the United States has enough COVID funding to get through at least this year but it needs more money to plan for the next pandemic. "We need more money to plan for the second pandemic. There's going to be another pandemic. We have to think ahead," Biden said in remarks at the White House to mark availability of vaccines for young children. (RTRS)

OTHER

GLOBAL TRADE: Russian President Vladimir Putin is weaponizing food by blocking Ukraine grain exports and President Joe Biden is examining options on how to get the grain out, the White House said on Tuesday. "President Putin is, no kidding, weaponizing food. Let's just call it what it is, he's weaponizing food," John Kirby, a White House national security spokesperson, told reporters. (RTRS)

GLOBAL TRADE: Russia's defence ministry will hold talks with Turkey about the possible creation of a Black Sea corridor for Ukrainian grain supplies, TASS news agency reported on Tuesday, citing Kremlin spokesman Dmitry Peskov. President Vladimir Putin does not plan to take part in these talks, Peskov was quoted as saying. A Turkish military delegation will travel to Russia this week to discuss details of the possible corridor, Turkish broadcasters said earlier on Tuesday, citing sources from Turkey's presidency. (RTRS)

GLOBAL TRADE: Target CEO Brian Cornell cited inflation and "historic highs with inventory levels" as he pulled back the curtain on his major decision to aggressively markdown inventory amid "an environment many of us haven't seen before" in remarks on Tuesday. "I recognized after a few weeks of looking at our own stores, analyzing our business, looking at competition, and hearing from our team that we [had] to address this problem upfront," Cornell explained at an event held at The Economic Club of New York. "We are in an environment many of us haven't seen before," Cornell added. (Yahoo Finance)

U.S./CANADA: U.S. Treasury Secretary Janet Yellen said on Tuesday that President Joe Biden is not expected to cut U.S. tariffs on Canadian lumber as part of potential tariff relief he is considering to fight inflation. "To the best of my knowledge, they're not under consideration, at least as part of the things that the president is currently looking at," Yellen said of the anti-subsidy duties of 11.64% on most Canadian lumber imports. She made the remarks to reporters during a visit to the Rosebud Sioux Tribe reservation in South Dakota. (RTRS)

U.S./CHINA: President Joe Biden said Tuesday he plans to talk with his Chinese counterpart Xi Jinping as he considers lifting some tariffs imposed on Beijing in a bid to ease US inflation. "I plan on having a conversation with President Xi. We haven't set a time yet," Biden told reporters. Over the weekend, Biden said a call could be "soon." (AFP)

GEOPOLITICS: China’s purchases of Russian oil are “another example of growing collaboration” between the countries as the West tries to enact sanctions on Moscow, a spokesman for the US National Security Council said. “I think this is just a piece of China’s willingness to continue to go along with Russia,” NSC Spokesman John Kirby told reporters at the White House. “We have, as we said at the outset, called on China to be a responsible power here and to join the rest of the world in condemning what Russia has done in Ukraine and enforcing sanctions against Russia for it.” China snapped up a record quantity of Russian crude last month, lifting purchases to $7.47 billion -- about $1 billion more than April and double the amount of a year ago. (BBG)

BOJ: Some Bank of Japan board members said the central bank needed to clearly communicate to the public that monetary policy was aimed at fulfilling its mandate of achieving price stability, rather than to control foreign exchange rates, according to the minutes of the bank’s policy meeting in April. Excessive forex moves increase uncertainties for businesses. Yen’s depreciation has had positive impact. The effects of the yen’s slide vary among businesses and economic entities. Need to carefully explain 2% inflation goal’s significance. Members discussed the relationship between monetary policy and currencies. The BOJ’s challenge is not to curb inflation, but to overcome inflation that’s still low. Various speculations over 10-year JGB yields had risen mainly among overseas market participants. (BBG)

RBA: Bradley Jones has been promoted to assistant governor of Reserve Bank of Australia, moving from the central bank’s economic analysis department to overseeing its financial system group. Dr Jones joined the RBA in 2018 after a five-year stint at the International Monetary Fund’s monetary and capital markets department in Washington and prior to that working for Deutsche Bank in London and Hong Kong. (Australian Financial Review)

AUSTRALIA: Australia's energy market operator said on Wednesday it would lift its unprecedented suspension of the spot electricity market in stages, starting at 4 a.m. (1800 GMT) on Thursday. "The first step is that at 4 a.m. tomorrow we will allow the market to set the price again," Australian Energy Market Operator Chief Executive Daniel Westerman told reporters. He said the operator would monitor the market for at least 24 hours before making a decision to formally lift the market suspension, which began a week ago. (RTRS)

NORTH KOREA: Kim Jong Un for the first time in a year convened a top-level meeting of North Korea’s military that could set the stage for his first nuclear test since 2017, as international attention is diverted to the war in Ukraine. The North Korean leader presided over a Central Military Commission that will look at policies for the “the crucial and urgent tasks to build up national defense,” the official Korean Central News Agency reported Wednesday. It’s the first time the commission of military leaders has met at this level since June 2021 and the gathering is expected to take several days, NK News reported. (BBG)

HONG KONG: Hong Kong’s de facto central bank bought the local dollar at the fastest pace on record to defend its currency from crossing the weak end of its trading band. The Hong Kong Monetary Authority bought HK$78.1 billion ($10 billion) so far this month, including its HK$25.6 billion purchase last week, which was the largest for a single day as per Bloomberg data going back to 2003. The currency still continues to linger near the weak end of its 7.75-to-7.85 per greenback trading band. (BBG)

BRAZIL: Brazilian Economy Minister Paulo Guedes said on Tuesday that Brazil's accession to the Organization for Economic Co-operation and Development (OECD) may "take some time," but stressed that the Jair Bolsonaro government is committed to the task. Speaking at an event about the relationship between the country and the OECD, he highlighted that it is important for the organization that Brazil becomes an effective member, as it is a great democracy that preserves the environment. (RTRS)

BRAZIL: An "assertive" action by the Brazilian central bank is necessary for inflation to converge to the government's official target, the central bank's director of international affairs, Fernanda Guardado, said on Tuesday. Speaking at an event about the relationship between the country and the OECD, she said the global economy would slow in the following quarters, while Brazil would face more moderate growth. (RTRS)

BRAZIL: More government ministers and lawmakers are supporting the measures to create a 400 reais monthly allowance for self-employed truck drivers, as well as increasing the value and scope of the gas voucher, O Globosays mentioning people familiar with the matter. Measures yet to be included in the constitutional amendment bill pending in the Senate, aimed at containing the rally of fuel prices in the country. (BBG)

BRAZIL: Brazil’s government is proposing a monthly financial aid of BRL 1,000 ($195) to help truck drivers offset rising diesel costs together with the expansion of an existing cooking gas voucher for low-income families at a combined cost of 5 billion reais, according to two people with knowledge of the matter. In exchange, the executive wants lawmakers to suspend a proposal to change governance rules for state-owned companies including Petrobras, the people added, requesting anonymity because the discussion isn’t public. (BBG)

BRAZIL: Procedure for the appointment of Caio Paes de Andrade as Petrobras CEO has already received a nod at the state-owned company, reports the newspaper O Globo, citing a person with knowledge of the matter. Petrobras’s Eligibility Committee is yet to present to the firm’s board a final recommendation on the nomination, which should take place on Friday. The intention is that, once the recommendation is formally made, the board can already define, in an extraordinary meeting, the appointment of Andrade as a board member and CEO. (BBG)

RUSSIA: Biden, asked about Johnson’s remarks of a rising risk of “fatigue” over Ukraine, said he doesn’t have any such fears. “I’m not afraid,” Biden said at the White House. “But what I do think is there at some point, this is going to be a bit of a waiting game -- what the Russians can sustain and what Europe is going to be prepared to sustain.” Biden said he’d be addressing that latter issue during a meeting of NATO leaders in Spain next week. (BBG)

RUSSIA: The United States disagrees "vigorously" with the Russian position that the U.S. citizens captured in Ukraine are not covered by the Geneva Conventions, a senior State Department official said on Tuesday, adding that Washington has conveyed its stance on the issue to the Russian government. (RTRS)

RUSSIA/IRAN: Russian Foreign Minister Sergei Lavrov will pay an official visit to Iran on Wednesday, Tass news agency said on Tuesday, citing Russia's ambassador in Vienna. It did not give further details. Last month Moscow said Russia and Iran - which are both under Western sanctions and sit on some of the world's largest oil reserves - had discussed swapping supplies for oil and gas as well as setting up a logistics hub. (RTRS)

EQUITIES: The Tokyo Stock Exchange will start operation of its new electronic platform for exchange-traded funds on Feb. 1, Nikkei reports, without attribution. Platform will enable investors to ask brokerages and market makers directly for pricing and trade at the best price, improving transparency and efficiency. (BBG)

OIL: Energy Secretary Jennifer Granholm is slated to meet with oil executives on Thursday, the White House said, as the administration seeks solutions to lowering sky-high gas prices. White House press secretary Karine Jean-Pierre confirmed plans for the meeting in a briefing on Tuesday, saying it would include all seven executives that President Biden sent letters to last week urging them to boost the supply of gasoline and diesel. “Our goal is to make sure that we have a sit-down conversation where we come up with solutions, that we work with the CEOs and figure out what else that we can do to move that capacity forward,” Jean-Pierre said. Biden is not planning on sitting in on the meeting, she said. (The Hill)

OIL: The Indian government has asked state oil companies to scoop up huge volumes of cheap crude from Russia, according to industry executives, strengthening commercial ties with the country even as the West tightens sanctions on Moscow. Western countries have sought to hamper Russia’s ability to use its vast oil and gas exports to fund the war in Ukraine. The emergence of India as a major buyer of Russian oil has the potential to take the sting out of the sanctions. Other nations, including China and Turkey, have also stepped up their purchases of Russian oil, though the country’s exports remain below prewar levels. (WSJ)

CHINA

FISCAL: The issuance of local government bonds in June is expected to hit a new high this year, likely exceeding CNY1.5 trillion, the China Securities Journal reported. The incremental debt funds will support local fiscal spending in the next two months, as it is expected to leverage trillions of funds to promote infrastructure investment, the newspaper said citing Zuo Yiming, senior analyst at Pengyuan International. According to the current issuance plans, all the CNY3.65 trillion of infrastructure-backed special bonds set for this year will be basically sold by end-June as scheduled, the newspaper said. (MNI)

CORONAVIRUS: Total electricity use in Shanghai has recovered to 92.48% of year-ago level in the first three weeks of June after the financial hub reopened from a two-month lockdown due to Covid outbreak, state broadcaster CCTV reports, citing data from local branch of State Grid Corp of China. Power use of major companies in the city has recovered to 99.59% of year-ago level. (BBG)

PROPERTY: Chinese developers will meet financial institutions in late July to discuss measures to lift them out of difficulties, according to the Shanghai Securities News, citing a notice from industry group China Real Estate Association. Agenda of the meeting includes introduction of relief programs by financial institutions, consultations with companies interested in mergers and acquisitions, and transformation of developers through developing long-term leasing business, the newspaper reports. The event is to be held on July 26-27 in the eastern city of Hangzhou, the report says. (BBG)

BANKS: More Chinese rural banks will be restructured as regulators speed up risk disposal, Yicai.com reported citing analysts following a brewing banking scandal in Central China’s Henan Province. China has a total 1,651 rural banks in China, even more than the number of counties, and 122 of them were labeled as high-risk institutions by the central bank as of Q2 2021, accounting for about 29% of all high-risk institutions, the newspaper said. Rural banks in general bear a higher rate of non-performing loan ratios than other banks, with the NPL rate standing at 4% in 2020, which compared to the 2% of city commercial banks and 2.4% of rural commercial banks, Yicai said citing report by HuaAn Securities. (MNI)

CHINA MARKETS

PBOC Injects CNY10 Billion via OMOs, Liquidity Unchanged

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1% on Wednesday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information.

• The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0184% at 9:37 am local time from the close of 1.7037% on Tuesday.
• The CFETS-NEX money-market sentiment index closed at 46 on Tuesday vs 51 on Monday.

PBOC SETS YUAN CENTRAL PARITY AT 6.7109 WEDS VS 6.6851

The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.7109 on Wednesday, compared with 6.6851 set on Tuesday.

OVERNIGHT DATA

AUSTRALIA MAY WESTPAC LEADING INDEX -0.06% M/M; APR -0.15%

The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, fell from 1.09% in April to 0.58% in May. The components of the Index are indicating an important emerging theme around Australia’s growth prospects – a significant shock to consumer confidence. Declining consumer sentiment was a major contributor to the slowdown in May – the Westpac-MI CSI Consumer Expectations Index being one of the nine components. As we reported last week, the headline Westpac-MI Consumer Sentiment Index fell a further 4.5% in June, with the Consumer Expectations Index falling 4.2%. Despite this, the overall growth rate in the Leading Index is still indicating above trend growth momentum heading into the three to nine month ‘window’. Westpac concurs that the economy’s momentum will carry through the June and September quarters. Gains will centre on consumer spending which will continue to benefit from post COVID reopening and support from high household savings rate and strong balance sheets. (Westpac)

NEW ZEALAND MAY TRADE BALANCE +NZ$263MN; APR +NZ$440MN

NEW ZEALAND MAY EXPORTS NZ$6.95BN; APR NZ$6.16BN
NEW ZEALAND MAY IMPORTS NZ$6.69BN; APR NZ$5.72BN
NEW ZEALAND MAY TRADE BALANCE 12 MTH YTD -NZ$9,521MN; APR -NZ$9,287MN

NEW ZEALAND MAY CREDIT CARD SPENDING +2.2% Y/Y; APR +1.3%
NEW ZEALAND MAY CREDIT CARD SPENDING +1.8% M/M; APR +0.9%

MARKETS

UP TODAY (Times GMT/Local)

Date	GMT/Local	Impact	Flag	Country	Event
22/06/2022	0600/0700	***		UK	Consumer inflation report
22/06/2022	0600/0700	***		UK	Producer Prices
22/06/2022	0600/0800	**		SE	Unemployment
22/06/2022	0700/0900			EU	ECB de Guindos Q&A at Universidad Internacional Menendez Pelayo
22/06/2022	0735/0935			EU	ECB Elderson Speech on Climate & Q&A at Frankfurt School of Finance
22/06/2022	0830/0930	*		UK	ONS House Price Index
22/06/2022	0840/0940			UK	BOE Cunliffe Panels Point Zero Forum
22/06/2022	1100/0700	**		US	MBA Weekly Applications Index
22/06/2022	1230/0830	***		CA	CPI
22/06/2022	1255/0855	**		US	Redbook Retail Sales Index
22/06/2022	1300/0900			US	Richmond Fed President Tom Barkin
22/06/2022	1400/1600	**		EU	Consumer Confidence Indicator (p)
22/06/2022	1400/1000			US	Fed Chair Jerome Powell
22/06/2022	1440/1040			CA	BOC Deputy Rogers "fireside chat"
22/06/2022	1530/1130	**		US	US Treasury Auction Result for 2 Year Floating Rate Note
22/06/2022	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill
22/06/2022	1600/1200			US	Richmond Fed's Tom Barkin
22/06/2022	1700/1300	**		US	US Treasury Auction Result for 20 Year Bond
22/06/2022	1730/1330			US	Fed's Patrick Harker and Tom Barkin