MNI US MARKETS ANALYSIS - Markets Gear for Retail Sales, UMich

US TSYS SUMMARY: Busy Session Ahead: Retail Sales, Earnings, Fed Speak Pre-Blackout

• More Fed speak with policy blackout starting Fri at midnight: Atlanta Fed Bostic on mon-pol, global mkt uncertainty, no text but will field Q&A at 0845ET, StL Fed Bullard eco/mon-pol outlook, no text, Q&A at 0900ET and SF Fed Daly radio interview at 1030ET.
• A lot of focus on Fed speak after Fed Gov Waller threw cold water on mkt pricing higher chance of 100Bp hike on July 27. Short end Fed Funds and Eurodollar futures gapped higher on Fed Gov Waller comments that he supports another 75-basis point increase at next FOMC, bringing the fed funds rate to 2.25% - 2.5%. StL Fed Bullard also said he favored a 75bp hike at the end of the month.
  
• Caveat: Though June CPI may have "anchored" Waller's 75bp hike expectation in a couple weeks, He would "lean toward larger, full-point" hike if "retail sales, housing data are 'materially stronger than expected' Rtrs reported.
• Stock earnings continue resume this morning: Bank of NY Mellon, Wells Fargo, Citi Group, Blackrock, State Stree and US Bancorp. On Thu: MS earnings miss (1.44 vs. 1.57 est) after JPM (2.76 vs. 2.883 est) -- both citing unprecedented volatility and deteriorating macro conditions.
• Yield curves mildly flatter after strong short end rebound late Thursday. Currently, 2-Yr yield is down 1.2bps at 3.1201%, 5-Yr is down 2.3bps at 3.0426%, 10-Yr is down 2.4bps at 2.9355%, and 30-Yr is down 1.7bps at 3.0875%.

EGB/GILT SUMMARY: Finding A Stable Footing

The selling pressure of the last two days has subsided somewhat, with European government bonds trading above yesterday's close in the short-end and belly of the curve. Stocks have similarly regained some composure, while G10 FX have made broad gains against the dollar.

• Gilts opened higher with the longer end of the curve giving back the early gains, underpinning the twist steepening move. Yields at the short-end are 4-5bp lower on the day.
• Bunds have partially reversed some of the morning's gains while still trading higher on the day. Cash yields are now 1-3bp below yesterday's close.
• Mirroring the move in gilts, the OAT curve has twist steepened with the 2s30s spread widening 6bp.
• With a fresh bout of political instability in the background, BTPs have bucked the regional trends with much of the curve selling off and yields 1-5bp higher. The very long end, however, has firmed on the day.
• The ECB's Olli Rehn said that the ECB is likely to hike 25bp next week and 50bp in September. This follows some speculation that the ECB could front-load the tightening cycle with a 50bp move in July, although there appears to be no consensus for this within the GC.
• Supply this morning came from the UK (UKTBs, GBP1.0bn).
• The European data slate was limited this morning. Focus now shifts to US retail sales and industrial production data, as well as the University of Michigan consumer confidence series.

EUROPE ISSUANCE UPDATE

Eurozone:

EU Bank stock option - suggests sold
SX7E (16th Dec) 70.00p, sold at 5.45 in 21k vs ~7.5k CAU2 at 73.90

There's decent open interest at that strike and expiry, with 216k

FOREX: China GDP Data Crimps AUD, NZD Progress

• Chinese GDP data crossed overnight, coming in well below forecast at 0.4% Y/Y vs. Exp. 1.2% as the rolling lockdowns across major cities through Q2 hampered economic performance. As a result, currency markets trade with a general risk-off feel, leading the likes of AUD and NZD lower. AUD is among the session's worst performers, lower against most others but AUD/USD has so far steered clear of any test on the week's cycle lows at $0.6682.
• Nonetheless, equity futures are more stable, with the e-mini S&P holding the bulk of the late recovery posted on Thursday. The greenback is offered, putting the USD Index off the week's best levels posted yesterday.
• The dollar moves have moderated the pressure on EUR/USD, with the rate back above the parity level that gave way earlier this week.
• Focus turns to the June US retail sales reading as well as the import/export price indices. The prelim read for University of Michigan sentiment data will be a highlight considering the Fed's focus on the inflation expectations element of the survey.
• Central bank speakers today include Fed's Bostic, Bullard & Bailey as well as ECB's Rehn.

FX OPTIONS: Expiries for Jul15 NY cut 1000ET (Source DTCC)

• EUR/USD: $0.9950(E523mln), $1.0150(E564mln), $1.0200(E1.2bln)
• GBP/USD: $1.1890-00(Gbp644mln)
• USD/JPY: Y137.50-60($590mln)
• AUD/USD: $0.6900($1.0bln), $0.7000(A$515mln), $0.7120(A$515mln)
• USD/CAD: C$1.3000($1.3bln), C$1.3100($694mln), C$1.3150($551mln), C$1.3230-50($797mln)
• USD/CNY: Cny6.6500($1.8bln), Cny6.7200($510mln)

Price Signal Summary - Bullish Candle In WTI Highlights Potential Short-Term Base

• In the equity space, S&PE-Minis remain vulnerable. Yesterday’s low of 3723.75 represents an important short-term support. A break would strengthen the bearish threat and expose 3639.00, the Jun 17 low and bear trigger. A break of 3950.00, Jun 28 high, is still required to signal potential for a stronger bullish reversal. EUROSTOXX50 futures continue to trade above 3343.00, the Jul 5 low. The trend outlook is bearish. The breach on Jul 5 of 3384.00, Jun 16 low, reinforces current conditions and confirmed a resumption of the broader downtrend. The focus is on 3321.30, 50.0% of the major 2020 - 2021 upleg. Initial resistance to watch is 3504.00, the Jul 8 high.
• In FX, EURUSD trend conditions remain bearish and the pair resumed its slide Thursday. Support at parity and 0.9973, the base of the bear channel drawn from the Feb 10 high, were breached Thursday. This strengthens the current bearish case and attention turns to 0.9944, 1.618 projection of the Jun 9 - 15 - 27 price swing. GBPUSD remains vulnerable and the pair traded to a fresh trend low again on Thursday. The focus is on 1.1673, 1.00 projection of the May 27 - Jun 14 - 16 price swing. USDJPY resumed its uptrend on Thursday. Sights are on 139.48, 1.00 projection of the Jun 16 - 22 - 23 price swing and the 140.00 psychological handle.
• On the commodity front, Gold remains in a downtrend and traded to a fresh trend low on Thursday. The break marks a resumption of the broader downtrend and opens $1690.6 next, the Aug 9 2021 low. In the Oil space, WTI futures remain in a downtrend however the recovery from yesterday’s low highlights a potential short-term base. In pattern terms, yesterday was a hammer candle formation - a potential short-term reversal signal. Gains would be considered corrective. On the downside, sub $90.56 levels would resume the downtrend. First resistance is $97.96, the Jul 13 high.
• In the FI space, a short-term bull cycle in Bund futures remains in play and the contract has traded to a fresh trend high today. The focus is on the 154.00 handle. Trend conditions in Gilts remain bullish and scope is seen for a climb to 117.48, 1.236 projection of the Jun 16 - 24 - 29 price swing. Initial firm support to watch lies at 114.08, the Jul 8 low.

EQUITIES: Strong Europe Stock Bounce, With Tech And Energy Leading

• Asian markets closed mixed: Japan's NIKKEI closed up 145.08 pts or +0.54% at 26788.47 and the TOPIX ended 0.63 pts lower or -0.03% at 1892.5. China's SHANGHAI closed down 53.683 pts or -1.64% at 3228.061 and the HANG SENG ended 453.49 pts lower or -2.19% at 20297.72.
• European equities are stronger across the board alongside a pullback in the USD, with tech and energy names leading higher: the German Dax up 206.86 pts or +1.65% at 12653.8, FTSE 100 up 82.59 pts or +1.17% at 7138.78, CAC 40 up 50.37 pts or +0.85% at 5957.96 and Euro Stoxx 50 up 39.17 pts or +1.15% at 3425.01.
• U.S. futures are a little higher, with the Dow Jones mini up 76 pts or +0.25% at 30680, S&P 500 mini up 9.75 pts or +0.26% at 3803, NASDAQ mini up 30.25 pts or +0.26% at 11827.5.

COMMODITIES: Copper Drops Further After China Growth Disappointment

• WTI Crude up $0.24 or +0.25% at $94.08
• Natural Gas up $0.04 or +0.65% at $6.826
• Gold spot down $6.09 or -0.36% at $1726.17
• Copper down $4.55 or -1.42% at $323.45
• Silver down $0.12 or -0.65% at $18.3911
• Platinum down $1.62 or -0.19% at $848.32