MNI US OPEN: Focus On CPI

MNI: ITALY APR IP +1.6% M/M, +4.2% Y/Y

CHINA END-MAY M2 +11.1% Y/Y VS MEDIAN +10.2% Y/Y

FIXED INCOME: Core FI retracing; peripheral spreads widening further

Retracement from yesterday's big ECB-induced falls has been the name of the game in the morning session in core fixed income, but not the story in peripherals - with GGB and BTP spreads in particular continuing to notably move to new multi-year highs.

• In terms of events to watch later, the US CPI print is the highlight of the US session. Consensus has headline CPI inflation rising +0.7% M/M from +0.3% M/M as energy rebounds with large rises seen in both gasoline and the less heavily weighted gas component. Core inflation is seen dipping to +0.5% M/M (av 0.4%) from the surprisingly strong +0.57% M/M in April, in part as airfares slow from their record 19% M/M rise. Few categories are expected to materially accelerate but instead could maintain similar strength. As has been the case under this recent Fed guidance of 2x50bp hikes, greater focus will be on implications for the rate path further out determined by the breadth of sequential inflation and changes in the particularly sticky rent components. For our full CPI Preview including 10 sell side summaries click here.
• TY1 futures are up 0-3 today at 118-00+ with 10y UST yields down -1.3bp at 3.031% and 2y yields up 3.3bp at 2.846%.
• Bund futures are up 0.32 today at 148.12 with 10y Bund yields down -2.0bp at 1.406% and Schatz yields up 1.6bp at 0.841%.
• Gilt futures are up 0.09 today at 114.08 with 10y yields down -0.9bp at 2.313% and 2y yields up 2.5bp at 1.865%.
• BTP futures are down -0.48 today at 119.37 with 10y yields up 4.7bp at 3.643% and 2y yields up 15.0bp at 1.542%.

FOREX: JPY Firmer for Second Session as Authorities Step Up Jawboning

• USD/JPY slipped to a session low following the release of a joint statement made by the MoF, FSA and BoJ. The statement clarified that the authorities had a meeting after the sudden move in the JPY, stressing that the authorities will watch the FX moves even more carefully, and with a sense of urgency.
• The statement is just jawboning for now, but looked like a modest step-up in language/urgency. The phrasing on intervention, however, looked broadly inline with the communication on currency back in late April, when the MoF stressed that recent FX moves warrant extreme concern, and will respond appropriately on FX if needed.
• Elsewhere, EUR/USD is extending the post-ECB pullback, with the pair showing below 1.06 for the first time since mid-May. The step lower in the currency remains dislocated from the run higher in rate expectations, with year-end rate expectations hitting a contract high yesterday at 0.89%.
• Focus turns to the US CPI release, with markets expecting CPI to pick up to 0.7% on the month, although core prices are seen moderating on a M/M and Y/Y basis. Full MNI preview here: https://marketnews.com/mni-us-cpi-preview-moderati...
• Preliminary Uni of Michigan confidence also crosses, as well as Canada's May jobs report.

EQUITIES: European Stocks Continue Weakening Post-ECB

• Asian markets closed mixed: Japan's NIKKEI closed down 422.24 pts or -1.49% at 27824.29 and the TOPIX ended 25.96 pts lower or -1.32% at 1943.09. China's SHANGHAI closed up 45.88 pts or +1.42% at 3284.834 and the HANG SENG ended 62.87 pts lower or -0.29% at 21806.18.
• European stocks continue to weaken after Thursday's ECB decision, with the German Dax down 226.99 pts or -1.6% at 13972.01, FTSE 100 down 73.6 pts or -0.98% at 7402.02, CAC 40 down 86.78 pts or -1.36% at 6271.58 and Euro Stoxx 50 down 59.6 pts or -1.6% at 3665.14.
• U.S. futures are flat, with the Dow Jones mini down 33 pts or -0.1% at 32230, S&P 500 mini down 0.25 pts or -0.01% at 4016, NASDAQ mini up 21.5 pts or +0.18% at 12296.

COMMODITIES: Precious Metals Slip As USD Rebounds From Overnight Lows

• WTI Crude up $0.2 or +0.16% at $121.71
• Natural Gas up $0.03 or +0.38% at $8.997
• Gold spot down $3.28 or -0.18% at $1844.67
• Copper down $0.9 or -0.21% at $437.2
• Silver down $0.07 or -0.33% at $21.6185
• Platinum down $0.89 or -0.09% at $974.16