MNI EUROPEAN OPEN: China Inflation Weaker Than Expected, Factory Price Fall Steepest in 7yrs

EXECUTIVE SUMMARY

• CHINA-US SHOULD SET GREEN WHITELIST - MA - MNI
• CHINA’S FACTORY GATE PRICES FALL AT FASTEST PACE IN 7 YEARS - RTRS
• YELLEN’s CHINA TRIP OFFERS ECONOMIC GUARDRAILS - BBG
• NZ OCR LIKELY TO HOLD AT 5.5% AFTER MAY STEER - MNI RBNZ WATCH
• UK JOBS MARKET COOLS AGAIN, PAY GROWTH WEAKEST SINCE APRIL 2021; REC - RTRS

Fig. 1: China CPI and PPI Trending Lower

Source: MNI - Market News/Bloomberg

U.K.

WAGES: Pay pressures in Britain's labour market cooled further in June, according to a survey of recruiters published on Monday that could help ease some of the Bank of England's (BoE) concerns about inflation pressure. (RTRS)

ECONOMY: British companies were the most upbeat about their trading prospects in 10 months in June and their hiring plans increased again but rising interest rates could prompt consumers to rein in spending, according to a survey published on Sunday. (RTRS)

JOBS: The number of job candidates in the UK rose at the fastest pace in 2 1/2 years and wage pressures eased, according to a survey that suggests the red-hot labor market is cooling. The poll of recruiters by KPMG and the Recruitment and Employment Confederation found firms scaling back hiring and increasing redundancies in June due to jitters about the economic outlook, while cost-of-living pressures motivated people to find work. (BBG)

BOE: Bank of England Governor Andrew Bailey rejected the need for an inflation target higher than 2%, warning that changing the goal could damage the bank’s credibility and “unpick expectations.” He told a conference in Aix-en-Provence in France that the BOE can be flexible about timing but that it’s “absolutely critical that that flexibility isn’t confused with people thinking we are not pursing 2% any more.” (BBG)

EUROPE

UKRAINE: Ukrainian troops pressed on with their campaign to recapture Russian-held areas in the southeast on Sunday as President Volodymyr Zelenskiy said in broadcast comments that his country's forces had "taken the initiative" after an earlier slowdown. Russian accounts said heavy fighting gripped areas outside the eastern city of Bakhmut, captured by Russian mercenary Wagner forces in May after months of battles. Chechen leader Ramzan Kadyrov said one of his units was deployed in the area. (RTRS)

UKRAINE: U.S. President Joe Biden arrived in Britain on Sunday, starting a three-nation trip that will be dominated by a NATO summit in Lithuania aimed at showing solidarity with Ukraine in its fight against Russia while not yet accepting Kyiv as a member of the alliance. (RTRS)

SWEDEN: U.S. President Joe Biden expressed a desire to see Sweden join NATO "as soon as possible" in a phone call with Turkish President Tayyip Erdogan in which they discussed Sweden's bid to become a member of the Western alliance, the White House said on Sunday. (RTRS)

ECB: The European Central Bank is nearly finished raising interest rates, but will then keep them at a “high plateau” to ensure they fully impact the economy, Governing Council member Francois Villeroy de Galhau said. The ECB’s record cycle of tightening will bring inflation toward its target of 2% by 2025, the Bank of France governor said. Price growth in France has already passed its peak, slowing to 5.3% from above 7% earlier this year, he added. (BBG)

ECB: European Central Bank Governing Council member Mario Centeno said he’s confident inflation has peaked and is quickly receding, and suggested underlying price growth will follow with a lag. Interviewed on Bloomberg Television in the French city of Aix-en-Provence on Sunday, the Bank of Portugal governor suggested that colleagues shouldn’t doubt that their monetary policy is working. (BBG)

U.S.

US/CHINA: Treasury Secretary Janet Yellen’s two-day engagement with top officials in Beijing offered a way for the US and China to contain damage in their economies from the two nations’ intensifying rivalry. While on the military side, there’s been no resumption of bilateral communication — amid risky encounters between the two sides’ air and maritime forces — Yellen’s high-profile visit suggested hope for guardrails in economic competition. (BBG)

ECONOMY: Treasury Secretary Janet Yellen wouldn’t rule out the threat of a US recession, saying it’s “appropriate and normal” for growth to moderate and that inflation remains too high. The risk of recession is “not completely off the table,” Yellen said in an interview with CBS’s Face the Nation broadcast Sunday. Monthly job growth is slowing as expected after holding at a “high level,” she said from Beijing after meeting with Chinese leaders. (BBG)

OTHER

NZ: The Reserve Bank of New Zealand is set to keep its Official Cash Rate on hold at 5.5% at its July 12 meeting, as inflation and the country’s economy continues to slow. The RBNZ has hiked rates continuously since August 2022, however, the May Monetary Policy Statement noted the OCR had likely peaked when it last decided to increase rates 25bp on 24 May and the economic landscape has only helped solidify that view since. (MNI)

NZ: A majority of nine members of the RBNZ Shadow Board recommend no change in the Official Cash Rate at the July 12 decision given slowing demand, the NZ Institute of Economic Research says in statement. One member recommends a 25 bps increase to 5.75%. (BBG)

AUSTRALIA: Australia’s Trade Minister Don Farrell is traveling to Brussels for talks with European Union counterparts aimed at reaching a free trade accord. Senator Farrell will engage in advance discussions on an agreement and meet the European Commissioner for Trade, Valdis Dombrovskis, as well as the EU Commissioner for Agriculture, Janusz Wojciechowski, according to a statement from the Australian government. (BBG)

HONG KONG: Hong Kong shares of Alibaba Group opened 5.5% higher on Monday after China fined its affiliate, Ant Group, $984 million for violating laws and regulations, fuelling hopes that a years-long regulatory crackdown on the fintech has ended. (RTRS)

CHINA

INFLATION: China's factory-gate prices fell at the fastest pace in over seven-and-a-half years in June, while consumer inflation was at its slowest since 2021, adding to the case for policymakers to use more stimulus to revive sluggish demand. Momentum in China's post-pandemic economic recovery has slowed from a brisk pickup seen in the first quarter amid faltering manufacturing and lacklustre consumer confidence. (RTRS)

INFLATION: Beijing (MNI) - China's Consumer Price Index decelerated at a faster pace than expected, registering 0.0% y/y in June, compared with the 0.2% market consensus and down from May’s 0.2% print, data from the National Bureau of Statistics showed Monday.Food costs increased 2.3% y/y in June, up from May’s 1.0% print, with the prices of vegetables, fruits and poultry mainly rising. Pork prices, the main CPI driver, declined further by 7.2% y/y, compared to a 3.2% fall in May. Service prices increased 0.7% y/y, down from the 0.9% in May, the NBS said. On a monthly basis, CPI fell 0.2% m/m compared to May’s 0.2% decline. (MNI)

POLICY: China’s consumer inflation rate was flat in June while factory-gate prices fell further, fueling concerns about deflation risks and adding to speculation about potential economic stimulus. The consumer price index was unchanged last month from a year earlier — the weakest rate since prices fell in February 2021, according to data released by the National Bureau of Statistics on Monday. (BBG)

US/CHINA: （MNI）Beijing - China and the U.S should introduce a “whitelist” mechanism to protect green investment from sanctions and promote climate collaboration, Ma Jun, former chief economist at the People’s Bank of China, told MNI in an interview. Ma, current president at the Beijing-based Institute of Finance and Sustainability and chairman at the Green Finance Committee of the China Society for Finance and Banking, suggested the two countries take concrete steps to work together on climate, including the creation of a “whitelist” that includes climate-positive activities for bilateral investment, trade and technology cooperation. (MNI)

ECONOMY: China’s economy is on track to achieve its 5% economic growth target despite headwinds in H2, according to the latest Yicai Chief Economist Survey. The participants on average estimated GDP grew 6.97% in Q2 y/y, with CPI for June forecast at 0.18% and PPI down 4.89% y/y. The headline index fell to 50.21 in June, down from 50.27 in May, the fourth consecutive monthly decline, but still above the 50 mark which indicates expansion. The economists said the People’s Bank of China will likely not cut the LPR in July and the yuan will appreciate to CNY6.97 against the U.S. dollar by year's end. (Yicai)

ECONOMY: MNI (Beijing) - China’s small- and medium-sized enterprises reported a slight business sentiment improvement in June, as measures to promote recovery continue to take effect, a leading industry body said Monday.China's SME development index reached 89.1 in June up from May’s 88.9, ending three consecutive months of decline, but remained below the 100 mark which indicates prosperity, according to the China Association of Small and Medium-Sized enterprises. The association said the industrial and construction sectors showed positive trends, offset by declines in the service industry. (MNI)

US/CHINA: China expects the U.S. will take practical actions to stabilise relations after U.S. Treasury Secretary Janet Yellen’s visit to Beijing last week, according to state-owned television network CCTV News in a commentary. The U.S. should remove the tariffs imposed on China as soon as possible, relax export controls and lift sanctions on Chinese companies to create conditions for companies of both countries to expand trade and investment cooperation. Though Yellen said the visit was “direct and productive," CCTV noted Yellen still talked about “national security” and the formulation of “fair” economic rules. This shows differences over improving economic and trade cooperation between the two countries still exists and the U.S. has more to do, CCTV said. (CCTV News)

MARKETS: More than a dozen major mutual fund companies in China cut fees in roughly 1,500 fund products on Monday as regulators started reforming fee practices in the $3.7 trillion industry in an effort to reduce costs to investors. (RTRS)

CHINA MARKETS

PBOC Drains Net CNY3 Bln Via OMOs Monday

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Flag	Country	Event
10/07/2023	0600/0800	*		NO	CPI Norway
10/07/2023	-	***		CN	Money Supply
10/07/2023	-	***		CN	New Loans
10/07/2023	-	***		CN	Social Financing
10/07/2023	1230/0830	*		CA	Building Permits
10/07/2023	1400/1000	**		US	Wholesale Trade
10/07/2023	1400/1000			US	Fed Vice Chair Michael Barr
10/07/2023	1500/1100	**		US	NY Fed survey of consumer expectations
10/07/2023	1500/1100			US	Cleveland Fed's Loretta Mester
10/07/2023	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
10/07/2023	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
10/07/2023	1600/1200			US	Atlanta Fed's Raphael Bostic
10/07/2023	1900/1500	*		US	Consumer Credit
10/07/2023	1900/2000			UK	BOE Bailey Speech at Financial & Professional Services Dinner