MNI US OPEN - STIRS Repricing Continues

NEWS:

EU (MNI): EU Commission Rejects Call For Restrictive Fiscal Stance
The European Commission rejects advice from the independent European Fiscal Board for eurozone fiscal policy to adopt a "moderately restrictive" stance next year, a spokesperson said, defending the Commission's decision to extend the suspension EU fiscal rules until the end of the next year.

BOJ (MNI): Govt Pressures Add To Weak Yen As BOJ Eyes Change
Pressure from the government to do something about inflation is adding to the likelihood that the Bank of Japan adjusts its easy monetary policy around the autumn, with a first baby step possible at the July meeting when it could tweak its statement to remove a reference to the Covid pandemic, MNI understands.

BOJ (MNI): BOJ Must Watch Forex Moves - Amamiya
Bank of Japan Deputy Governor Masayoshi Amamiya said on Friday that the BOJ must pay great attention to developments in financial and foreign exchange markets and their impact on economy and prices. "The BOJ will maintain easy policy in order to achieve the price stability target in a stable and sustainable manner, while steadily supporting the economy," Amamiya said at the general meeting of the Shinkin Bank Association.

UK (MNI): Darker Days Ahead For UK Consumer - GfK's Staton
The UK faces a "stark new economic reality" with consumers likely to tighten their purse strings even further as conditions worsen in coming months, Joe Staton, GfK's Client Strategy Director told MNI. According to Staton, GfK's latest survey shows the mood is now darker than in the early stages of the Covid pandemic, the aftermath of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, with growing chatter "of a looming recession".

US (BBG): Banks Ace Fed Stress Tests, Pave Way for Shareholder Payouts
Wall Street’s biggest banks are set to return tens of billions of dollars to investors after all the lenders passed the Federal Reserve’s annual test of their ability to withstand market turmoil. The banks examined showed that they had enough capital to handle a cocktail of surging unemployment, collapsing real-estate prices and a plunge in stocks, the Fed said in a statement Thursday. Major firms including JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. also faced a made-up market shock that tested the resiliency of their trading operations.

CHINA (MNI): Warnings As China Interbank Liquidity Feast Bill Near Due
A liquidity feast in China's interbank market is likely unsustainable into the second half of the year if the central bank acts to curb money supply based on economic and credit indicators that are now sending a warning signals, market analysts said, as they cautioned investors to reduce leverage in short-duration debt in their portfolios. The People Bank of China may guide money market rates up, approaching their policy rates, if the economy continues to improve. As a result, investors may have to reprice the yield curve, said Qin Han, analyst at Guotai Junan Securities, suggesting it is time to prepare for any unexpected deterioration in liquidity conditions.

INDONESIA (MNI): Indonesia CenBank Sees A Window To Drive Recovery
Indonesia's central bank believes that benign domestic inflation has extended the opportunity to keep policy settings accommodative as it continues to prioritise economic recovery from the pandemic, MNI understands. Bank Indonesia on Thursday left the benchmark seven-day repurchase rate unchanged at 3.5%, where it has been since September 2020, citing the need for stability and the strengthening of the recovery

DATA:

MNI BRIEF: UK Retail Sales Fall As Consumer Retreat Starts
Falling food sales were a main driver for the fall in UK retail sales in May, the Office for National Statistics said Friday, pushing overall sales down 0.5% on the month, just slightly better than the 0.7% decline expected by City analysts. "Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living," Heather Bovill, Deputy Director for Surveys and Economic Indicators said.

Ex-Fuel, sales fell 0.7% m/m, or 5.7% y/y, also slightly better than expected.
"More workers returning to the office may have contributed to increased fuel sales this month," Bovill said, but she highlighted many retailers now reporting "consumer reluctance to spend due to affordability worries and higher prices."

MNI: GERMANY JUN IFO BUSINESS CLIMATE 92.3; MAY 93.0
JUN IFO EXPECTATIONS 85.8; MAY 86.9
JUN IFO CURRENT ASSESSMENT 99.3; MAY 99.6R

MNI: ITALY JUN CONSUMER CONFIDENCE 98.3
JUN BUSINESS CONFIDENCE 113.6

FOREX: Greenback Holds Losses as Yields Remain Under Pressure

• The greenback trades softer early Friday, with the USD Index remaining under pressure as US yields backtrack. The US 10y yield holds below the 3.10% level, with the moderation in rate expectations this week helped equities off recent lows.
• Meanwhile, Scandi currencies are inching higher, with the NOK among the best performers following yesterday's sizeable Norges Bank rate hike. Despite the NOK strength, EUR/NOK remains in a decent uptrend, with recent highs at 10.54 still well within range. Trend signals also hold bullish, with the 50-dma forming a golden cross formation at the beginning of last week.
• JPY trades moderately lower, with USD/JPY circling just below the Y135.00 level following the CPI release overnight. Japanese CPI held at 2.5% on Y/Y basis.
• The final reading of University of Michigan survey is due Friday, with markets looking to confirm the lofty inflation expectations reading that has become a key factor in Fed policymaking. Any upside or downside surprise here, while unlikely, would be carefully watched by traders. New home sales data also crosses as well as speeches from Fed's Bullard & Daly, ECB's de Cos, de Guindos and Centeno as well as BoE's Pill & Haskel.

BOND SUMMARY: A Busy Early Start

• It was a busy early start for EGBs, Bund and Rates (Euribor).
• Short end 2yr, 5yr and 3 Months took the lead, as investors reprice Rate path outlook.
• This resulted in a 167 ticks range for Bund, rallying through 148.00 and printing a 149.00 high.
• Contracts have since reversed most of their rallies, likely driven by some position covering.
• Bund is back in the red at 147.77, with a 147.33 low at the time of typing.
• Peripherals spreads are mixed, Greece is 3.9bps tighter, while Italy is 2.2bps wider against the German 10yr.
• UK Retail data, saw M/M prints 2 tenths better but downward revisions lead to lower Y/Y prints.
• April revision was largely due to the annual SA adjustments - rather than an actual big downward revision in the raw data.
• US Treasuries took their cue from the price action in Europe, and rallied with the German Bund, and have now also reversed to trade back to flat in Tnotes.
• Looking ahead, US Michigan is the final reading.
• More focus on speakers, given the latest set of data, and recession right at the forefront.
• Today includes, ECB Centeno, de Cos, Guindos, Fed Bullard, Daly, and BoE Pill, Haskel.

EQUITIES: Stocks moving higher this morning

• Japan's NIKKEI up 320.72 pts or +1.23% at 26491.97 and the TOPIX up 14.98 pts or +0.81% at 1866.72.
• China's SHANGHAI closed up 29.598 pts or +0.89% at 3349.747 and the HANG SENG ended 445.19 pts higher or +2.09% at 21719.06.
• German Dax up 86.72 pts or +0.67% at 12999.94, FTSE 100 up 75.82 pts or +1.08% at 7096.5, CAC 40 up 78.3 pts or +1.33% at 5961.63 and Euro Stoxx 50 up 39.24 pts or +1.14% at 3475.53.
• Dow Jones mini up 179 pts or +0.58% at 30851, S&P 500 mini up 25.75 pts or +0.68% at 3825.25, NASDAQ mini up 102.75 pts or +0.88% at 11838.5.

COMMODITIES: Natgas and copper move lower, oil higher

• WTI Crude up $0.87 or +0.83% at $105.15
• Natural Gas (NYM) down $0.08 or -1.22% at $6.162
• Natural Gas (ICE Dutch TTF) down $2.34 or -1.76% at $131.295
• Gold spot up $3.4 or +0.19% at $1826.61
• Copper down $4.45 or -1.19% at $370.1
• Silver up $0.02 or +0.08% at $20.9724
• Platinum up $7.42 or +0.82% at $917.82