Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- SPAIN FACES POLITICAL UNCERTAINTY AFTER RIGHT FAILS TO WIN PREDICTED MAJORITY - RTRS
- UK JOB VACANCIES RISE FOR FIFTH MONTH, ADDING TO PRESSURE TO PAY - BBG
- ITALY MAY PROPOSE CIPOLLONE TO REPLACE PANETTA ON ECB BOARD - FT
- JAPAN’S TOP CURRENCY DIPLOMAT: INFLATION, WAGE GAINS OVERSHOOTING EXPECTATIONS - RTRS
- CHINA NEEDS MORE MEASURES IN 2H TO BOOST DEMAND - ECONOMIC DAILY
Fig. 1: China's CSI 300 Real Estate Index & Hang Seng Property Index
Source: MNI - Market News/Bloomberg
U.K.
JOBS: UK job vacancies rose for a fifth month, boosting salaries and signaling tightness in the labor market that’s likely to fan inflation, data from the search engine Adzuna showed. The jobs search site listed 1.06 million vacancies across the UK in June, up 0.78% from the month before but 12% lower than a year ago. It said advertised salaries rose 3.6% from a year ago to £37,807, and the number of days to fill open positions fell to a record low. (BBG)
EUROPE
SPAIN: Spaniards were greeted by political gridlock on Monday after the right failed to clinch a predicted decisive victory and no clear winner emerged in the country's general election. The results from Sunday's vote left neither the left nor right bloc with an easy path to form a government. A Catalan leader on the run from Spanish justice became an unlikely potential kingmaker, said Ignacio Jurado, a professor in political science at the Carlos III University in Madrid. (RTRS)
SPAIN: Prime Minister Pedro Sanchez engineered a late swing during the final days of the Spanish election campaign to deny his right-wing opponents a majority in parliament. While the center-right People’s Party won the most seats, the right-wing bloc has only 170 in total and needed 176 to oust the 51-year-old Socialist. With a wider range of potential partners, Sanchez could potentially muster 172 votes. (BBG)
RUSSIA: Two Ukraine-launched drones attacked Moscow early on Monday, but were intercepted and destroyed, Russia's defence ministry said. State news agencies reported that drone fragments were found 2 kilometres (1.2 miles) away from the ministry's buildings. Calling it a "terrorist attack," the defence ministry said on its Telegram messaging app that there were no casualties in the attack. (RTRS)
ECB: Italy may propose Piero Cipollone as its candidate to join the European Central Bank’s Executive Board to replace Fabio Panetta, the Financial Times reported. Cipollone, a senior official at the Bank of Italy, is the government’s favored candidate, the paper said, citing three people familiar with the matter. He hasn’t been formally nominated by the Italian finance minister and other eurozone members could put forward their own candidates, the FT said. (BBG)
U.S.
FED: Rising hopes of a soft landing for the US economy likely hinge on the Federal Reserve’s willingness to tolerate inflation markedly higher than it would prefer. After taking a break from tightening credit last month, Fed Chairman Jerome Powell and his colleagues look locked in to raising interest rates by a quarter percentage point this week. The aim: To slow the economy enough to reduce inflation to its 2% target over time, without crashing the US into a recession — a proverbial soft landing. (BBG)
OTHER
JAPAN: Japan's top currency diplomat Masato Kanda said on Monday recent inflation and wage rises were overshooting expectations, suggesting companies were changing practices that had been based on the assumption prices won't rise much. The central bank is likely to revise up its inflation forecasts at its two-day policy meeting ending on Friday, Kanda told reporters, adding that he was not in a position to comment on specific monetary policy. (RTRS)
JAPAN/CHINA/SOUTH KOREA: Central bankers of China, Japan, and South Korea exchanged views on recent economic and financial developments at a meeting held in Yokohama on Sunday, according to statements from the three organizations. (BBG)
JAPAN: Approval for Japanese Prime Minister Fumio Kishida’s cabinet slipped 6 ppts to 35% in a poll taken by Yomiuri on July 21-23. Disapproval rises 8 ppts to 52%. Asked whether Kishida showed leadership in dealing with trouble over the nation’s “My Number” card, 80% said they didn’t think he did, while 12% said they thought he did. (Yomiuri)
THAILAND: Hundreds of pro-deomcracy protesters in Thailand gathered on Sunday in a show of support for Pita Limjaroenrat, the leader of the Move Forward party, after conservative opponents thwarted his latest attempt to become prime minister. (RTRS)
AUSTRALIA: Australian Industry Minister Ed Husic will visit Indonesia and Singapore this week to strengthen economic cooperation and accelerate collaboration in critical sectors including green technology, his office said. (BBG)
NEW ZEALAND: New Zealand Justice Minister Kiri Allan has resigned her portfolios after being charged by police over a late-night car crash, adding to Prime Minister Chris Hipkins’ challenges less than three months out from a general election. (BBG)
CHINA
RRR: The People’s Bank of China may cut the reserve requirement ratio in Q3 to offset the maturity of medium-term lending facilities and maintain reasonable medium to long-term liquidity, said Lian Ping, chief economist and dean at Zhixin Investment Research Institute. In H2, the PBOC may moderately lower the interest rate of structural monetary tools such as relending to support agriculture and small businesses, said Lian. The possibility of a small rate cut in Q4 cannot be ruled out after the U.S. Federal Reserve finishes its rate-hike process, said Lian. (China Securities Journal)
RATES: The average interest rate of first and second house mortgages in 100 key cities was 3.9% and 4.81% in July, falling 45bp and 25bp from the same period last year, according to data by Beike Research Institute. With the rate of new mortgages continuing to fall, the rate of outstanding mortgages may also be lowered following the central bank’s call. Any plan to lower the rate should be customised by commercial banks and authorities should adopt certain incentive measures to hedge the negative impact of reduced interest income of commercial banks. (21st Century Business Herald)
RATES: A branch of Changzhou Jiangnan Rural Commercial Bank in the eastern province of Jiangsu is allowing customers to convert existing mortgages to loans granted jointly by the commercial bank and housing provident fund, thereby lowering their mortgage cost, China Business News reports, citing an unidentified manager from the lender. (BBG)
POLICY: China should take more measures in the second half of this year to expand domestic demand, Economic Daily, a newspaper affiliated with the State Council, wrote in a front page commentary. (BBG)
MARKETS: Chinese regulators met with global investors on Friday, according to people familiar with the matter, stepping up the government’s bid to boost market confidence as the country’s economic recovery loses steam. (BBG)
PROPERTY: China ramped up support for property construction by calling for the renovation of “urban villages” in big cities in its latest move to boost the economy. (BBG)
INVESTMENT: China's state planner on Monday unveiled measures that seek to promote, encourage and spur private investment in some infrastructure sectors and said it will strengthen financing support for private projects. The latest announcement comes as China last week pledged to improve the private sector, releasing guidelines by the Communist Party and the cabinet as authorities vowed to make it "bigger, better and stronger" amid a flagging post-pandemic economic recovery. (RTRS)
CHINA MARKETS
PBOC Net Drains CNY19 Bln Via OMOs Monday
The People's Bank of China (PBOC) conducted CNY14 billion via 7-day reverse repos on Monday with the rates at 1.90%. The operation has led to a net drain of CNY19 billion after offsetting the maturity of CNY33 billion reverse repo today, according to Wind Information.
- The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.9000% at 09:23 am local time from the close of 1.8116% on Friday.
- The CFETS-NEX money-market sentiment index closed at 50 on Friday, compared with the close of 45 on Thursday.
PBOC Yuan Parity At 7.1451 Monday Vs 7.1456 Friday. .
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1451 on Monday, compared with 7.1456 set on Friday. The fixing was estimated at 7.1749 by BBG survey today.
OVERNIGHT DATA
NEW ZEALAND JUNE IMPORTS NZD6.30bn; PRIOR NZD6.91bn
NEW ZEALAND JUNE EXPORTS NZD6.31bn; PRIOR NZD6.91bn
NEW ZEALAND JUNE TRADE BALANCE NZDpm; PRIOR NZD52mn
NEW ZEALAND JUNE TRADE BALANCE 12MTH YTD -NZD15.98bn; PRIOR -NZD17.1bn
AUSTRALIA JULY JUDO BANK MANUFACTURING PMI 49.6; PRIOR 48.2
AUSTRALIA JULY JUDO BANK SERVICES PMI 48.0; PRIOR 50.3
AUSTRALIA JULY JUDO BANK COMPOSITE PMI 48.3; PRIOR 50.1
JAPAN JULY JIBUN BANK MANUFACTURING PMI 49.4; PRIOR 49.8
JAPAN JULY JIBUN BANK SERVICES PMI 53.9; PRIOR 54.0
JAPAN JULY JIBUN BANK COMPOSITE PMI 52.1; PRIOR 52.1
MARKETS
US TSYS: Narrow Ranges In Asia
TYU3 deals at 112-05, -0-02+, a 0-05 range has been observed on volume of ~43k.
- Cash tsys sit ~1bp cheaper across the major benchmarks.
- Tsys have observed narrow ranges in Asia with little follow through on moves.
- During today's Asian session little meaningful macro newsflow has crossed.
- With Wednesday's FOMC rate decision in view, FOMC dated OIS remain stable. A 25bp hike is priced into the meeting with a terminal rate of 5.40% seen in November. There is are ~60bps of cuts seen by June 2024.
- On the wires today we have S&P Global Mfg and Services PMI, the latest 2-Year Supply is also due.
JGBS: Futures Richer But Gains Pared During The Tokyo Session, 10Y Zone Underperforms
In the Tokyo afternoon session, JGB futures are stronger at 148.16, +38 compared to settlement levels, but well off the post-Tokyo high (148.74) ahead of the weekend.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Jibun Bank PMI data.
- The Japan breakeven inflation rate for the 10-year CPI-linked bonds rose 3 basis points to 1.168% on Monday from the previous business day, according to Bloomberg. The measure is headed for the biggest increase in two weeks. Breakevens have risen 32bp since the start of the year. (See link)
- Cash JGBs are richer across the curve apart from the 10-year zone, which is dealing 1.5bp cheaper. The outperformer on the curve has been the 20-year zone, which is 1.8bp richer. The 40-year zone is 1.3bp richer at 1.485% ahead of tomorrow’s supply.
- The swap curve has bear steepened with rates flat to 3.5bp higher. Swap spreads are wider across the curve.
- Later today sees Department Store Sales data. Tomorrow the local calendar sees no data releases. The week’s highlight will be the BoJ policy meeting on Friday.
- Globally, the calendar later today sees the release of S&P Global PMIs (Jul) along with the Chicago Fed Activity Index (Jun).
- Tomorrow the MoF plans to sell Y700mn of 40-year JGBs.
AUSSIE BONDS: Richer, Narrow Range, Q2 CPI On Wednesday
ACGBs (YM +2.0 & XM +2.0) are slightly richer after trading in a narrow range in the Sydney session. There hasn’t been much local data other than the preliminary Judo Bank PMI data.
- US tsys are holding marginally cheaper in today’s Asia-Pac session with ranges narrow.
- Cash ACGBs are 2bp richer with the AU-US 10-year yield differential -3bp at +15bp.
- The 3s10s swap curve has bull steepened with rates flat to -2bp.
- The bills strip has bull steepened with pricing flat to +3.
- RBA-dated OIS pricing 1-2bp softer across meetings. A 60% chance of a 25bp hike is priced for August.
- (AFR) Economists are urging Jim Chalmers to give the Reserve Bank more voting power on the new monetary policy board, warning the central bank may lose control of interest rates to outsiders under the proposed model. (See link)
- Tomorrow the local calendar sees no data releases ahead of Q2 CPI on Wednesday. Bloomberg consensus expects headline CPI to print +1.0% q/q (5.5% y/y) versus +1.4% q/q (5.6% y/y) in Q1. Power rebates are holding down inflation while goods prices continue to rise. Trimmed Mean CPI is forecast to print +1.1% q/q (6.0% y/y) from +1.2% (6.6% y/y) in Q1, +1.7% in Q4 and +1.9% in Q3.
NZGBS: Subdued Session, Closed Richer, Global PMI Data Due
NZGBs closed on a positive note with key benchmarks 3-4bp richer after trading in a narrow range in the local session.
- June’s trade surplus narrowed to NZ$9mn from a revised NZ$52mn in May. Exports to China declined 20.4% m/m (-7.2% y/y) while exports to Australia rose +8.3% m/m (+30.3% y/y).
- Swap rates are 5-6bp lower with the 2s10s curve flatter.
- RBNZ dated OIS flat to 3bp softer across meetings. Terminal OCR expectations sit at 5.69%, just off the highest level since early July.
- RBNZ published monthly credit card spending data for June. Total spending in NZ in June rose 1.9% m/m and gained 5% y/y, after seasonal adjustment. Spending on overseas-issued cards used in NZ was NZ$423m, falling for the third consecutive month. Overseas billings on NZ-issued cards was NZ$632m, the highest value recorded in a month since August 2019.
- Tomorrow the local calendar is scheduled to release no data. The next key release is ANZ Consumer Confidence (Jul) on Friday.
- Globally, the calendar today sees the release of S&P Global PMIs (Jul) along with the Chicago Fed Activity Index (Jun).
FOREX: Yen Firmer In Asia
The Yen is firmer in Asia today, there was no headline catalyst for the move with pre BOJ positioning perhaps sparking a mild bid in JPY. Elsewhere in G-10 moves have been limited with little follow through.
- USD/JPY is ~0.2% lower and last prints at ¥141.40/50. Support comes in at ¥137.25, low from July 14 and resistance is at ¥141.96 Friday's high.
- AUD is a touch firmer, AUD/USD erased early losses and sits ~0.1% firmer last printing at $0.6730/35. The pair sits a touch above the 50-Day EMA ($0.6719), resistance comes in at $0.69.
- Kiwi is little changed, NZD/USD prints at $0.6170/75 little changed from opening levels.
- Elsewhere in G-10, SEK erased early losses of ~0.3% to sit little changed. EUR and GBP are marginally firmer.
- Cross asset wise; BBDXY is a touch lower and US Tsy Yields are ~1bp firmer across the major benchmarks. E-minis are flat and the Hang Seng is down ~1.5%.
- Today's docket is headlined by preliminary Services and Manufacturing PMI's from Europe and the US.
EQUITIES: Weaker China Property Developers Weigh On the HSI, More Positive Moves Elsewhere
Regional equities are mixed to start the week. HK and China markets are again a soft point but there are positive signs elsewhere. US equity futures have traded tight ranges so far and sit close to flat. Eminis were last around 4564, down a touch, while Nasdaq futures were ear15547.
- Hong Kong's HSI has been the main regional drag. The index sits down 1.40% at the break. Property related names have been hit, with a sub-index gauge for the sector down nearly 2.90%. Country Garden has fallen after J.P. Morgan cut the company to UW, owing to liquidity concerns for private sector developers. The company also doesn't see last week's urban development announcement as shifting the property sector narrative.
- Mainland indices are mixed. The CSI down 0.25% at the break, while the Shanghai Composite is slightly higher. China's State Planner announced released measures to boost private sector investment today (see this link for more details).
- The Kospi has outperformed up 0.40% at this stage, although is away from earlier highs. Posco has surged on better earnings and positive investor sentiment around the electric-battery vehicle outlook. The Taiex is close to flat, despite a rebound in the SOX during Friday US trade.
- In Japan major indices are higher, with the Topic near +0.85%, while the Nikkei 225 is close to +1.35% firmer. Late last week, news wires reported the BoJ was likely to hold steady this week in terms of YCC. Bank names have underperformed somewhat, but sectors linked to a weaker yen (such as autos) and the electrical appliance sector have rallied.
- In SEA trends are mostly positive except for Singapore shares. Gains elsewhere are under 0.50% at this stage.
OIL: Crude Down Slightly But Holds Onto Most Of Friday’s Gains
Oil is trading off its intraday lows but is still down around 0.1% on Friday’s close, as Fed jitters have limited upside. WTI is around $76.98/bbl close to the intraday high of $77.05 but off the low at $76.56. Brent is $80.97 just beneath the high of $81.04 which followed a low of $80.51. The USD index is off its low to be flat.
- WTI has faced round-number resistance at $77 as the break above was very brief. $76.60 has provided support. Brent hasn’t been able to sustain moves above $81 but $80.50 has provided a floor today. It is holding above its 200-day MA.
- The widely expected 25bp Fed hike following Wednesday’s meeting should already be priced into the oil market, but the accompanying comments could drive some volatility in prices. A hawkish tone could push prices sharply lower, as the crude market fears a US recession.
- Later the US preliminary S&P Global PMIs for July and the June Chicago Fed index print. There are also European preliminary July PMIs.
GOLD: Second Consecutive Decline On Friday Ahead Of Major Central Bank Meetings This Week
Gold is slightly weaker (-0.1%) in the Asia-Pac session as the world's major central banks gear up for a crucial week. The Fed is scheduled to meet on Wednesday, followed by the ECB on Thursday, and the BoJ on Friday. Investors are confident that both the Fed and ECB will implement further tightening measures, with 24bp of hikes already factored in for each of them. With respect to the BoJ, Bloomberg and Reuters have cited sources in reporting that the board were leaning toward no change in approach in the coming policy meeting, countering recent speculation that a policy switch would be imminent.
- Gold closed lower (-0.4%) at $1961.9 on Friday for its second consecutive day after another step higher in the USD index.
- However, bullion didn't trouble support at $1934.4 (20-day EMA) whilst resistance remains at the early Thursday high of $1987.5.
- Money managers are turning more bullish on gold, having increased net-long positions to a 10-week high. (See link)
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 24/07/2023 | 0700/0900 | ** |  | ES | PPI |
| 24/07/2023 | 0715/0915 | ** |  | FR | S&P Global Services PMI (p) |
| 24/07/2023 | 0715/0915 | ** | | FR | S&P Global Manufacturing PMI (p) |
| 24/07/2023 | 0730/0930 | ** |  | DE | S&P Global Services PMI (p) |
| 24/07/2023 | 0730/0930 | ** | | DE | S&P Global Manufacturing PMI (p) |
| 24/07/2023 | 0800/1000 | ** |  | EU | S&P Global Services PMI (p) |
| 24/07/2023 | 0800/1000 | ** | | EU | S&P Global Manufacturing PMI (p) |
| 24/07/2023 | 0800/1000 | ** | | EU | S&P Global Composite PMI (p) |
| 24/07/2023 | 0830/0930 | *** |  | UK | S&P Global Manufacturing PMI flash |
| 24/07/2023 | 0830/0930 | *** | | UK | S&P Global Services PMI flash |
| 24/07/2023 | 0830/0930 | *** | | UK | S&P Global Composite PMI flash |
| 24/07/2023 | 1345/0945 | *** |  | US | IHS Markit Manufacturing Index (flash) |
| 24/07/2023 | 1345/0945 | *** | | US | S&P Global Services Index (flash) |
| 24/07/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 24/07/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 13 Week Bill |
| 24/07/2023 | 1700/1300 | * | | US | US Treasury Auction Result for 2 Year Note |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.