MNI EUROPEAN OPEN: USD Gains Continue, NZD Falters On Survey Data

US Tsys: Futures Edge Higher Ahead Of Sintra, 2s10s Off Recent Highs

• Tsys futures have edged higher ahead of speeches at Sintra from Fed officials later today, TUU4 +0-01⅛ at 102-01⅛, while TYU4 +0-06 at 109-11+.
• Volumes are slightly above recent averages with TU 20k, FV 44k & TY 90k
• Tsys Flows: Post the US close/ prior to Asia open there was a large a large 15,988k FVU4 block trade, likely buyer at 106-05.25, while earlier there was likely block buyer of 5,839 UXY at sessions highs of 102-19.
• Cash treasury curve has seen slightly better buying through the 7-10yr part of the curve, yields are flat to 2bps lower, the 2s10s is off overnight highs of -28.679, and is now -1.357 at -31.207.
• A Trump presidency is looking likely based on currently polling (PredictIt now has odds at 59%, up 1% today), with investors believing this would lead to higher spending, tax cuts, and faster inflation. Furthermore, the US Supreme court ruled Trump has immunity from some criminal charges, which now shuts the small window for Trump to be put in front of a jury before the Election on Nov 5.
• In APAC markets, ACGB yields are 2-6bps higher, curve bear-steepening, NZGB yields 2.5bps lower to 4bps higher, curve bear-steepening. JGBs are flat to 2bps higher, better selling through the belly of the curve post the 10yr auction later
• Looking ahead, May JOLTS Job openings, Goolsbee to speak on BBG TV while Powell, Lagarde, Campos Neto Speak in Sintra

JGBS: Sell-Off Pared After 10Y Supply, BoJ Rinban Operations Tomorrow

JGB futures are holding near session lows, -16 compared to the settlement levels.

• Outside of the previously outlined Monetary Base data, there hasn't been much in the way of domestic drivers to flag.
• A Reuters survey conducted in late June/early July suggests the central bank's bond-buying program will be cut by roughly $100bn in the first year.
• This comes ahead of the BoJ's meeting with industry participants on July 9-10, where taper plans by the central bank will be discussed. The next BoJ meeting is at the end of July. See this piece from our Tokyo policy team on BoJ tapering plans.
• Cash US tsys are dealing flat to 2bps richer in today's Asia-Pac session after yesterday's bear-steepening.
• Cash JGBs are flat to 1bp cheaper across benchmarks after today’s 10-year supply. The auction saw the low price beat wider expectations. However, the cover ratio fell to 3.277x from 3.662x at June’s auction. The tail was unchanged at a relatively short length.
• The benchmark 10-year yield is 1.3bps higher at 1.074% versus the cycle high of 1.101%.
• Swaps are little changed, with rate movement bounded by +/- 1bp.
• Tomorrow, the local calendar will see Jibun Bank Composite & Services PMI data alongside BoJ Rinban Operations covering 1-5-year and 10-25-year JGBs.

AUSSIE BONDS: Slightly Richer After June RBA Minutes, Apr-37 Supply Tomorrow

ACGBs (YM -2.0 & XM -4.5) are holding cheaper, but slightly richer after the release of the June policy meeting minutes from the RBA.

• The minutes suggest that the Board will hike rates if it determines that policy is “not sufficiently restrictive to return inflation to target within a reasonable timeframe” because disinflation and closure of the output gap are slower than expected.
• At the August 6 meeting that assessment will depend on Q2 CPI on July 31 and the updated staff forecasts which will include not just the new CPI but also fiscal stimulus information. It will also “carefully review the extent of spare capacity” in this exercise.
• Cash ACGBs are 2-4bps cheaper, with the AU-US 10-year yield differential -2bps.
• Swap rates are higher, with the 3s10s curve steeper.
• Bills pricing is -1 to -2.
• RBA Dated OIS is slightly softer after the release of the RBA Minutes. Pricing is currently 6-26bps firmer across meetings than pre-CPI levels. The market gives a 25bp hike in August a 44% chance. Terminal rate expectations are also dramatically firmer at 4.49% versus 4.37% before the CPI data.
• Tomorrow, the local calendar will see Judo Bank Composite & Services PMIs, Building Approvals and Retail Sales data alongside the AOFM’s sale of A$600mn of 3.75% Apr-37 bond.

NZGBS: Twist-Steepening After Business Survey Shows An Easing In Activity & Inflation

After initially being pressured by US tsys’ overnight bear-steepening, NZGBs quickly moved away from the session’s worst levels, led by the short end. NZGB benchmarks twist-steepened, with yields closing 2bps lower to 3bps higher versus 7bps higher earlier in the session.

• The move away from session cheaps was aided by cash US tsys, which are flat to 2bps richer with a flattening bias in today's Asia-Pac session.
• Nevertheless, the key driver of today’s intra-session richening appears to have been the NZIER Survey results, which showed both activity and inflation easing.
• Westpac observed the “inflation indicators have continued to head in the direction that the RBNZ would have hoped. A net 41% of firms reported cost increases over the last three months, down from 52% last quarter and a peak of 80% at the end of 2022. There were similar falls in firms’ past and expected pricing.”
• The swaps curve has also twist-steepened, with rates 1bp lower to 3bps higher.
• RBNZ dated OIS pricing is flat to 4bps softer, with 2025 meetings leading. A cumulative 33bps of easing is priced by year-end.
• Tomorrow, the local calendar will see ANZ Commodity Price data.

FOREX: USD Gains Continue, NZD Falters Post Survey Data

The USD has spent the first part of Tuesday trade on the front foot, the BBDXY USD index firming back above 1272.0, although short of late June highs.

• Carry over USD strength from Monday's US session has been evident. US yields are lower, but losses of around 2bps are only giving up part of Monday's gain. US equity futures are lower, off 0.2-0.3%.
• NZD and AUD have faltered, although sit slightly up from session lows. NZD/USD got too fresh multi week lows of 0.6048 (last near 0.6055), around 0.30% weaker against the USD.
• Earlier NZ business sentiment data pointed to softer business conditions and easing inflation pressures. The NZ-US 2yr swap spread has rolled over modestly, back to +24.5bps, versus recent highs near +35bps. NZ OIS was also slightly weaker ahead of next week's RBNZ meeting.
• AUD/USD is back close to 0.6645, off 0.25%. The RBA minutes came and went, without shifting the sentiment needle.
• USD/JPY sits higher, last above 161.60, but hasn't been able to breach Monday intra-session highs at this stage (161.73). Verbal FX rhetoric has continued.
• Looking ahead, the Fed’s Goolsbee appears and Fed’s Powell, ECB’s Lagarde and BCB’s Campos Neto speak in Sintra. Also, the ECB’s Schnabel, de Guindos and Elderson talk. In terms of data, there are May US JOLTS job openings and preliminary June euro area CPI.

ASIA STOCKS: China & HK Equities Mixed, Property & EVs Higher On Strong Sales

Hong Kong and China equity markets are mixed today. The MSCI AC Asia Pacific Index hit its highest since late May amid a rally in Hong Kong-listed property on better-than-expected June home sales and electric vehicle maker shares also high following positive sales and deliveries data for June, with analysts predicting a short-term rally before the mid-July low season.

• Hong Kong equities are higher today, as they return from a break Monday. Property is the best performing sector after yesterday the top 100 developers returned a 36% m/m increase in sales, however it should be noted that sales are still down y/y, the Mainland Property Index is up 2.99%, while the HS Property Index is up 0.68%. In the tech space, HSTech Index is now down 0.70% underperforming the wider markets largely due to slightly softer prices in the US overnight, while the wider HSI is up 0.39%.
• China equity markets are mixed today with the CSI300 is down 0.10%, while small-cap indices the CSI 1000 down 0.70% and the CSI 2000 up 0.16% while the growth focused ChiNext is 0.70% lower, and finally after surging 5.75% yesterday the CSI 300 Real Estate Index is down 0.85%.
• The property market in China shows signs of recovery, with sales of existing residential properties in Shanghai reaching 26,374 units in June, marking a 41% increase from the previous month and the highest monthly transaction in three years. This surge follows the city's measures to lower downpayments and offer cheaper mortgages in late May. Beijing also saw a rise in existing-home sales, with nearly 15,000 units sold in June, the highest in 15 months, representing a 12% month-on-month increase and a 29% year-on-year rise. However, in the new-home market, while homebuyer visits have increased in Shanghai, actual transaction volumes have not yet picked up noticeably.
• Looking to next week, Tuesday we have Hong Kong Retail Sales, Wednesday we have Caixin China PMI composite & Services.

ASIA PAC STOCKS: Asian Equities Mixed, Global Political Concerns, Softer Tech Prices

Asian markets are trading mixed today as traders weigh the potential implications of another Trump presidency following his recent debate with Biden and the earlier announcement that he will be given immunity from some charges, PredictIt now has Trump at a 59% change of winning, up 1%. US equity futures are lower today giving back some of the gains made in the US session as tech again led the market higher. In local markets, Japanese equities initially opened lower due to concerns over a contraction in US factory activity and potential currency intervention, although we have pared loses and now trade higher for the session, South Korean & Taiwan shares are lower amid global political uncertainty.

• Japanese stocks are higher today after higher oil prices boosted resource-related shares, and expectations of a potential interest rate hike by the BoJ supported gains in bank and insurance stocks which boosted the Topix closer to record highs. However, the possibility of government intervention in the currency market limited the upside potential for Japan's exporters. The Nikkei 225 is 0.93% higher, while the Topix rose by 1.09%.
• South Korean stocks are lower today as investors weigh global economic uncertainties and the latest inflation data. Geopolitical tensions involving China and upcoming US elections have left traders cautious this morning, with the likes of Samsung selling off a touch. Banking stocks are higher after media reports said the nation will soon announce tax incentives to encourage listed companies to enhance shareholder returns, with the government announcing more around the “Corporate Value-up” tax incentives soon, according to government officials. The Kospi is 0.85% lower, while the small-cap Kosdaq is down 2.10%
• Taiwanese equities are lower this morning, as TSMC trades off. Later this week we have local CPI data which is expected to show a slightly increase from the prior month. This morning the Taiex is trading 0.73% lower.
• Australian equities are lower today after RBA minutes stated the RBA considered a rate hike but judged that keeping the rate unchanged was the stronger option although chances of future rate hikes were not ruled out. The ASX200 is down 0.38%
• Elsewhere, New Zealand equities are 0.17% lower, Thai equities are 0.50% lower, Philippine equities are 0.15% lower, Indian equities little changed, Indonesian equities are 0.15% higher, Singapore equities are up 0.50%, and Malaysian equities are up 0.10%.

OIL: Crude Slightly Higher On Geopolitical & Hurricane Concerns

Oil prices are moderately higher during APAC trading today with WTI up 0.2% to $83.56/bbl after an intraday high of $83.61 and Brent is 0.3% higher at $86.84/bbl after rising to $86.89. Crude continues to be supported by geopolitical uncertainties and the early start of the hurricane season in the Atlantic. Benchmarks broke resistance levels on Monday. The USD index is 0.1% higher.

• Prompt spreads are indicating that the oil market is tight but the demand outlook remains uncertain with a US refinery reducing output due to soft demand while China’s Caixin manufacturing PMI came in more optimistic than the official PMI. The industry-based US API inventory data is released today. Travel developments for this week’s Independence Day holiday will be monitored closely.
• Venezuelan president Maduro said today that talks with the US will resume on Wednesday after the latter reintroduced sanctions on the country’s oil and gas in April as it didn’t meet fair election criteria. Elections will be held this month.
• Later the Fed’s Goolsbee appears and Fed’s Powell, ECB’s Lagarde and BCB’s Campos Neto speak in Sintra. Also the ECB’s Schnabel, de Guindos and Elderson talk. In terms of data, there are May US JOLTS job openings and preliminary June euro area CPI.

GOLD: Buoyed By Weaker ISM, Focus On Labour Market Data

Gold is steady in the Asia-Pac session, after closing 0.2% higher at $2331.90 on Monday.

• Bullion found support from lower-than-expected ISM Manufacturing and Prices Paid data on Monday.
• The US calendar is light today ahead of US ADP private employment, ISM Services, and Weekly Claims on Wednesday, the 4th of July holiday on Thursday and June US Payrolls data on Friday.
• Traders will look to upcoming US economic data to help clarify when the Federal Reserve could pivot to monetary easing.
• Lower rates are typically positive for gold, which doesn’t pay interest.
• According to MNI’s technicals team, a clear break of the 50-day EMA, at $2,318.7, would open $2,277.4, the May 3 low. Initial firm resistance is $2,387.8, the Jun 7 high.