MNI US OPEN: Further Support For A July ECB Hike

MNI BRIEF: UK April Inflation Hits 9% As Energy Costs Soar

UK inflation hit an annual rate of 9.0% in April, jumping two full percentage points from the 7.0% pace recorded in March, according to data released by the Office for National Statistics on Wednesday. Electricity and gas prices provided the biggest upward contribution to CPI, after the rise in the energy price cap took effect in April. Electricity prices added 0.67 percentage points to the change in CPI, while gas prices added 0.86 percentage points.

The surge in prices takes UK inflation above the prevailing measure in other developed countries. Eurozone inflation hit an annual rate of 7.5% last month, while U.S. inflation rose to 8.3%. It leaves CPI well above the Bank of England's 2% price target, although it comes in largely in line with their recent April forecast.

RPI surged to 11.1% last month, from 9.0% in March, the highest since January 1982. RPIX jumped to an annual rate of 11.2% from 9.1% the previous month.

MNI BRIEF: UK April PPI Hits Record High

UK factory gate prices surged by a record margin in April, suggesting even further rises to consumer inflation are likely in the months to come. Output PPI rose by 2.3% between March and April, the biggest rise on record, taking the annual rate to 14.0% from 11.9% in March. That’s the highest year-on-year rate since 2005.

Input prices jumped by 18.6, matching the downwardly-revised pace recorded in March (originally reported as +19.4%), the highest rate since records began in 1985. However, the input PPI rose by 1.1% between March and April, down from a 4.6% gain in March, the first monthly slowdown since December.

EUROZONE: Inflation Steady at 7.4% in April

EUROZONE APRIL FINAL CPI +0.6% M/M; +7.4%r Y/Y (MAR 7.4%)

APRIL Y/Y CPI REVISED DOWN 0.1PP

EUROZONE APRIL FINAL CORE CPI +3.5% Y/Y; +1.0%r M/M

• The April inflation print for the Euro area saw a 0.1pp downwards revision to 7.4% y/y, leaving it unchanged from the euro-high March rate.
• Core inflation rose by 3.5% y/y in April, a 0.5pp uptick on March. The monthly rate alone saw 1.0% acceleration.
• The highest rates of inflation were seen in Estonia (19.1% y/y), Lithuania (16.6% y/y) and Czechia (13.2% y/y).
• Energy continued to be the key upside driver of prices, contributing 3.70pp to the annualised rate, followed by services (+1.38pp), food etc (+1.35pp) and industrial goods (+1.02pp).
• This follows the European Commission’s Spring forecasts yesterday which pointed to inflation averaging 6.1% for 2022.
• This confirmation underlines the shift in ECB rhetoric seen over the past month, with markets now pricing a 25bp hike in July.

FIXED INCOME: Divergence between UK and Germany

There has been some divergence in core fixed income markets this morning.

• Gilts are the outperformers following a one tenth miss to CPI. This followed six consecutive prints of above-consensus inflation. Gilts have been retracing some of the sharp selloff they saw yesterday following the stronger than expected labour market print. The SONIA strip is also up by around 6 ticks with a steepening in the Whites.
• The German curve has underperformed as ECB's Rehn said that recent economic data releases have been "near" the "adverse" scenario in the ECB's March staff projections. Euribor Whites are down up to 5.5 ticks on the day with 10-year Bunds unch but Schatz yields up 4.3bp.
• Treasuries are a little higher on the day, splitting the difference between gilts and Bunds.
• US housing data and Canadian CPI are the highlights on the calendar with Fed's Harker also due to speak.

FOREX: Most of the action has been in the Pound this morning

• Mostly a steady start for FX, with the USD in the green across G10s, besides versus the Yen, down a small 0.13%.
• Crosses trades well with past ranges, but the notable move so far today, has been in the Pound, following the small CPI miss, by 1 tenth for the MoM and YoY reading.
• The British Pound collapsed and Cable trades in a 129 pips range, but 10 pips off the low at the time of typing.
• EURGBP broke through initial 0.8475 resistance, but failed to break above 0.8500, printed 0.84943 high.
• The EUR also got a small boost after ECB Rehn (leaning Dove): "First rate hike likely to be in the Summer, necessary to move quickly from negative rates".
• But the moves are still limited, given the underpinned USD.
• Looking ahead, nothing in terms of market moving data for the afternoon.
• Fed Harker is the only speaker scheduled for the session.

EQUITIES: Energy Stocks Push Higher

• Asian markets closed mixed: Japan's NIKKEI closed up 251.45 pts or +0.94% at 26911.2 and the TOPIX ended 17.98 pts higher or +0.96% at 1884.69. China's SHANGHAI closed down 7.72 pts or -0.25% at 3085.977 and the HANG SENG ended 41.76 pts higher or +0.2% at 20644.28.
• European stocks are slightly lower (though European energy indices are hitting multi-year highs), with the German Dax down 2.37 pts or -0.02% at 14172.12, FTSE 100 down 4.38 pts or -0.06% at 7511.49, CAC 40 down 15.05 pts or -0.23% at 6410.31 and Euro Stoxx 50 down 6.31 pts or -0.17% at 3732.4.
• U.S. futures are retracing, with the Dow Jones mini down 66 pts or -0.2% at 32516, S&P 500 mini down 13.25 pts or -0.32% at 4071.5, NASDAQ mini down 73.5 pts or -0.59% at 12486.25.

COMMODITIES: Crude Edges Higher, Precious Metals Flat

• WTI Crude up $1.88 or +1.67% at $114.27
• Natural Gas down $0.06 or -0.66% at $8.257
• Gold spot up $0.88 or +0.05% at $1815.59
• Copper down $3 or -0.71% at $420.2
• Silver up $0 or +0.01% at $21.6269
• Platinum up $6.81 or +0.71% at $962.05