MNI US OPEN: Italy Political Uncertainty Adds To Risk-Off Tone

EUROZONE: European Commission Sees 2023 EA Inflation Averaging +4.0%

• The European Commission's Summer 2022 economic forecast projects EU economic growth at 2.7% in 2022 and 1.5% in 2023. Euro area growth is anticipated to be marginally softer at 2.6% in 2022 and 1.4% in 2023. The 2023 forecasts are substantial 0.8pp and 0.9pp cuts from the Spring report.
• Average inflation is forecasted to peak at 7.6% in the eurozone (8.3% for the EU) in 2022, easing to 4.0% (EA) and 4.6% (EU) in 2023.
• After reaching a historic high of +8.6% y/y in June and averaging at 7.1% y/y over the first six months of the year, the updated euro area forecast of a 7.6% average allows room for higher inflation in upcoming months, tapering into the end of the year.
• The report highlighted the jump in energy and food prices due to the Ukraine war, as well as slowing US growth and China's lockdowns as the key risks to growth.
• GDP expectations were revised down 0.1pp to flatline in the eurozone and contract by -0.1% q/q in the EU for Q2 2022. The tourism sector should remain robust this year. As such the growth forecast remains at 2.7% for 2022.
• Gas supply and the continued risk of pandemic resurgence cannot be ruled out. The only silver lining appears to be recent falls in commodity prices including oil, which may see inflationary pressures ease, whilst the record low unemployment could see household consumption remain robust.

MNI: SWEDEN JUN CPIF +8.5% Y/Y

FIXED INCOME: Continuing to adjust to US CPI

There have been big moves in core fixed income markets as market's continue to adjust to yesterday's US CPI print - with the bigger moves due to repricing of CB expectations in the UK and Europe. 2-year gilt and Schatz yields are both over 15bp higher on the day, while 2-year UST yields are only 4bp higher. Curves have bear flattened.

• At the time of writing, we have seen gilt/Schatz yields easily surpass yesterday's highs while 2-uyear UST yields are close to their post-CPI peak.
• In terms of other events today, we have an Italian confidence vote underway, with results expected around 11:00BST / 6:00ET. We also have the next round of the race to be next UK PM, with results expected around 17:00BST / 12:00ET with the bottom of the 6 candidates eliminated.
• In terms of data today we also receive US PPI and weekly claims data.
• TY1 futures are down -0-12 today at 118-17+ with 10y UST yields up 2.8bp at 2.963% and 2y yields up 4.2bp at 3.200%.
• Bund futures are down -1.27 today at 151.35 with 10y Bund yields up 10.1bp at 1.242% and Schatz yields up 15.4bp at 0.592%.
• Gilt futures are down -0.61 today at 115.32 with 10y yields up 6.0bp at 2.118% and 2y yields up 15.5bp at 1.939%.

FOREX: USD/JPY Uptrend Accelerates as Greenback Resumes March Higher

• USD/JPY has broken to fresh cycle highs early Thursday, with the price action not only breaking through yesterday's high, but accelerating the rally to open next resistance at 139.48 (the 1.00 proj of the Jun 16 - 22 - 23) ahead of the psychological 140.00 level.
• The resumption of risk-off trade in global equity markets has fueled appetite for the greenback, particularly in light of Wednesday's CPI release which has made the prospect of a 100bps hike from the Fed a tangible option going forward. Both Mester and Bostic have spoken since the inflation release, with each member issuing concern over hot CPI and stating that all options - including a 100bps rate move - are on the table.
• This puts the greenback above all others in G10 ahead of the NY crossover, putting the USD Index at new multi-decade highs.
• Outside of the USD and JPY, CAD and NZD also trade poorly despite the Bank of Canada's larger than expected rate hike yesterday. Commodity-tied currencies are trading soft inline with base metals and energy products, as broader concerns about a global recession swirl further as we head through the first few weeks of H2.
• Focus turns to US PPI data later today, to confirm whether pipeline inflation is as hot as the price pressures facing the consumer. Weekly jobless claims are also on the docket alongside a speech from Fed's Waller.

EQUITIES: Rising Yields Weigh On Stocks

• Asian markets closed mixed: Japan's NIKKEI closed up 164.62 pts or +0.62% at 26643.39 and the TOPIX ended 4.28 pts higher or +0.23% at 1893.13. China's SHANGHAI closed down 2.548 pts or -0.08% at 3281.744 and the HANG SENG ended 46.74 pts lower or -0.22% at 20751.21.
• European stocks are weaker, with losses focused in the Real Estate and Energy sectors: German Dax down 97.17 pts or -0.76% at 12653.8, FTSE 100 down 56.67 pts or -0.79% at 7138.78, CAC 40 down 62.79 pts or -1.05% at 5957.96 and Euro Stoxx 50 down 37.45 pts or -1.08% at 3425.01.
• U.S. futures are weaker, with the Dow Jones mini down 344 pts or -1.12% at 30414, S&P 500 mini down 46.5 pts or -1.22% at 3758, NASDAQ mini down 134.5 pts or -1.14% at 11627.75.

COMMODITIES: Crude Prices Continue To Drop

• WTI Crude down $2.65 or -2.75% at $95.34
• Natural Gas down $0.06 or -0.88% at $6.673
• Gold spot down $19.73 or -1.14% at $1726.17
• Copper down $6 or -1.81% at $332.05
• Silver down $0.31 or -1.59% at $19.2481
• Platinum down $21.63 or -2.52% at $863.36