MNI US OPEN - Aussie Employment Change Surges Ahead of Expectations

NEWS

US/CHINA (NYT): China’s Xi Rebuffs Kerry’s Call for Faster Climate Action

John Kerry, President Biden’s climate envoy, emerges from talks in Beijing without a new agreement. But just talking is progress, he said. Chinese leaders rebuffed attempts by John Kerry, President Biden’s climate envoy, to persuade them to commit to tougher climate action during three days of talks in Beijing, a response that suggested that tensions between the countries are making it difficult to work together on a crisis that threatens the planet.

ECB (BBG): ECB Made Major Stress Test Adjustment After Banks Took Rosy View

The European Central Bank made one of its most forceful interventions to date in its stress tests for banks, after lenders took what it viewed as an unrealistic approach to assessing risks to their balance sheet. Banks, which are being asked in the tests to calculate the impact of specific economic scenarios, initially estimated their total capital ratio would decline by about 3.5 percentage points in a worst case, according to people familiar with the matter. The ECB subsequently adjusted the figure, leading to an impact of about 5 percentage points in the final results, the people said.

EU (MNI): Russian Attacks on Odesa Will Cause World Shortage of Grain - Borrell

EU top diplomat, Josep Borrell, delivering doorstep comments ahead of an EU Foreign Ministers' meeting, has told reporters that a third night of Russian bombardment of Odesa, is going to create "a huge food crisis in the world," adding that if Russia has decided to, not only withdraw from the Black Sea grain initiative, "but destroy [Ukrainian grain], there will be a shortage of grain in the world." Borrell says, "We'll discuss how to continue supporting Ukraine in the long-run," including "security commitments and guarantees," which means "increasing the resources of the European Peace Facility."

UK (BBG): UK Counters Biden Subsidies With £500 Million for Jaguar

Britain’s car industry has been on the decline for some time, with production falling to a 66-year low last year and rival governments pledging vast amounts of public funds to the development of electric vehicles. On Wednesday, there was a response. Prime Minister Rishi Sunak flew to Warwickshire to hail a new range of electric Jaguar Land Rover vehicles that will be backed by a £4 billion ($5.2 billion) battery factory to be built further south in Somerset. While neither the UK government nor Tata Group — JLR’s parent company — said how much public money was being put into the battery plant, the support package is likely to exceed more than £500 million, according to two people familiar with the situation.

CHINA (MNI): China’s July Loan Prime Rate Unchanged

MNI (Beijing) China's Loan Prime Rate remained unchanged on Thursday, according to a People's Bank of China statement, in line with market expectation following the PBOC's decision to keep a key policy rate steady on July 17. The one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 18 banks, was left at 3.55% and the five-year plus maturity was held at 4.2%. The bank offered a net CNY3 billion through one-year MLF this month with the rate unchanged at 2.65%.

CHINA (MNI): PBOC Eases Rules on Capital Inflow to Curb Weak CNY

MNI (Beijing) The People's Bank of China has relaxed rules to allow firms to borrow more overseas, enabling more capital inflows at a time when the yuan faces pressure against the U.S. dollar. The central bank raised the so-called macro-prudential parameter for companies and banks’ cross-border financing to 1.5 from 1.25, in order to “increase their source of funding and optimise the structure of their balance sheet”, the central bank said in a statement on Thursday. The bank raise the parameter last October to 1.25 from 1 when the currency plunged to a fresh low against USD.

CHINA (BBG): China Mulls Mortgage Easing to Spur Homebuying in Big Cities

Chinese authorities are considering easing home buying restrictions in the nation’s biggest cities, potentially removing a hurdle that has curbed demand in Beijing and Shanghai for years, according to people familiar with the matter. Regulators are weighing scrapping rules that disqualify people who’ve ever had a mortgage - even if fully repaid - from being considered a first-time homebuyer in major cities, said the people, asking not to be identified discussing a private matter.

JAPAN (MNI): Chances Rising BOJ Ups 2025 Inflation View In Oct

The chances are rising that the Bank of Japan will revise its median core inflation forecast for fiscal 2025 closer to its 2% target during its October meeting, which would prompt speculation of a move away from its overall easy policy stance in the following months, MNI understands. While the Board is likely to leave its inflation forecast for fiscal 2025 little changed from April’s 1.6% at its next meeting on July 27-28, the outlook for wage hikes next year and for the U.S. economy should be clearer by October.

JAPAN DATA (MNI): Japan Corp. Loan Demand Falls - BOJ Survey

Demand for financing by Japanese businesses via banks fell from three months ago, indicating the fund-raising environment remained accommodative, a survey on bank lending practices released by the Bank of Japan showed on Thursday. The index for corporate fund demand -- calculated by subtracting the number of banks reporting a decline in lending from the number of those reporting an increase – fell to +4 in July from +7 in April.

SOUTH KOREA (MNI): S. Korea H2 Export Outlook Hit by Slowing China

South Korean exports will ease their slide in the second half of the year, but semiconductor sales to China will continue to contract sharply as the world’s second-largest economy slows, the chief researcher at the Korea International Trade Association told MNI. While South Korea’s overall export performance should improve in H2, declining by only 3% y/y compared to a 12.4% fall from January to June, weak semiconductor exports to China will continue to weigh, said Jisang Hong in a interview.

THAILAND (BBG): Thai Brace for Protests, Tussle for PM Job as Pita Blocked

Thailand is set for more political upheaval after Pita Limjaroenrat was barred by parliament from running for prime minister Wednesday, angering his supporters and opening the door for his coalition partners to seek the top job. Thailand’s parliament will convene on July 27 to vote again on the country’s new prime minister.

TURKEY (BBG): Turkey Gets $51 Billion Pledge of Economic Support From UAE

The United Arab Emirates pledged to ramp up support for Turkey’s embattled economy, with the two countries agreeing provisional deals they say could be worth more than $50 billion. Turkish President Recep Tayyip Erdogan and UAE counterpart Mohammed bin Zayed oversaw the signing of several memoranda of understanding in Abu Dhabi on Wednesday. The agreements include wealth fund ADQ possibly buying as many as $8.5 billion of bonds from Turkey to fund reconstruction efforts following devastating earthquakes in February.

COMMODITIES (BBG): Wheat Extends Surge as Russia Threatens Ships Headed to Ukraine

Wheat kept rising — following the biggest daily surge in a decade on Wednesday — as Russian threats against ships sailing to Ukrainian ports escalated a conflict over grain exports from the Black Sea region. Futures in Chicago rose 1% after advancing almost 9% at one point in the previous session, the biggest increase since 2012. Russia’s Ministry of Defense warned that all vessels in the Black Sea heading to Ukrainian ports would be considered potential carriers of military cargo starting Thursday.

DATA

EUROSTAT REVISES 1Q EURO-AREA GDP STATISTICS TO 0% FROM -0.1% (BBG)

GERMANY JUNE PPI -0.3% M/M, +0.1% Y/Y (MNI)

FRANCE JUL MANUF SENTIMENT AT 100 (MNI)

JAPAN DATA (MNI): Japan June Exports Rise, But Autos Slow

• JAPAN POSTS JPY43 BLN TRADE SURPLUS IN JUNE
• JAPAN JUNE EXPORTS +1.5% Y/Y; MAY +0.6%
• JAPAN JUNE IMPORTS -12.9% Y/Y; MAY -9.8%

June exports accelerated in June 1.5% y/y in the wake of solid demand for capital goods used for capital investment overseas, however, automobile sales slowed, data released by the Ministry of Finance showed on Thursday. The rise was the 28th straight gain following a 0.6% boost in May. Imports fell 12.9% y/y for the third straight drop following the 9.8% drop in May, the data showed. While bank officials expect the slowing U.S. economy to weigh on Japan’s exports and production, they predict both will remain more or less unchanged. The Bank of Japan's real export index, calculated using Ministry of Finance trade data, rose 2.7% q/q inQ2, the first rise in three quarters following Q1's 3.4% drop, data released by the BOJ showed on Thursday.

AUSTRALIA DATA (MNI): Aussie Unemployment Holds Firm at 3.5%

• AUSTRALIA JUN UNEMPLOYMENT RATE +3.5%
• AUSTRALIA JUN LABOR PARTICIPATION RATE +66.8%
• AUSTRALIA JUN F-T EMPLOYED PERSONS CHANGE 39.3K
• AUSTRALIA JUN EMPLOYED PERSONS CHANGE 32.6K

Australia’s unemployment rate held steady at 3.5% in June, while the underemployment rate remained at 6.4%, according to figures released by the Australian Bureau of Statistics Thursday. The Reserve Bank of Australia will monitor the strength of the Australian labour market closely, which currently sits 1 pp above its 4.5% Non-Accelerating Inflation Rate of Unemployment estimate and 2025 target.

AUSTRALIA DATA (MNI): Q2 NAB Survey Shows Slowing Activity, Wages Major Concern

Actual and expected business conditions eased further in Q2 to 9.4 and 14.3 respectively but are still above average. Actual confidence deteriorated to -6.7 but expected confidence improved to -3.3 from -4.1, both recorded the third straight negative. The share of firms expecting wage pressures to increase over the next 6 months rose to 83% from 74%. The survey is signalling slowing activity but that labour/wage pressures continue.

FOREX: AUD on Top as Employment Change Surges Ahead of Expectations, U/E Rate Drops

• AUD trades firmly, outperforming all others in G10 following the solid June jobs report. Australia added 32.6k jobs across the month, doubling market expectations. This helped pressure the unemployment down to 3.5%, which also saw the previous outturn revised lower. AUD/NZD erased yesterday's losses in response, rallying to test yesterday's highs at 1.0885 and returning above the 100- and 50-dmas.
• The USD Index remains weak and has staged only a lacklustre bounce off the July lows despite receiving some underlying support from the front-end of the US yield curve. US 2y yields have added close to 20bps off the post-CPI lows, hitting new recovery highs ahead of the NY crossover today.
• GBP is softer for a second session, extending the reaction to the lower-than-expected UK inflation release posted yesterday morning. EUR/GBP is yet to challenge yesterday's highs of 0.8701, which looks like firm resistance ahead of the 100- and 200-dmas of 0.8704 and 0.8730.
• Lastly. USD/CNH showed a little more than 600 pips below its Wednesday high in Asia-Pac hours, as the redback benefitted from a much stronger-than-expected lean in the USD/CNY mid-point fixing (resulting in a 680-pip mid-point/BBG survey differential, the widest spread seen since last year’s yuan tumult). The PBoC also tweaked limits to allow companies to borrow more overseas, opening the door to the potential for an uptick in capital inflows, providing further support to the yuan.
• Highlights of the session ahead include weekly US jobless claims data as well as existing home sales for June. Advance Eurozone consumer confidence data is also set to cross, however no central bank speakers are due.

EGBs: Most Curves Twist Flatten On The Day

Bund futures are still below settlement as of typing, albeit off of worst levels, last -15 or so. Still, bears have failed to capitalise on the break of yesterday’s low in the contract, at least in the immediate term, with that impulse fading. Wider German cash trade sees 3bp of cheapening to 1bp of richening as the curve twist flattens, with the short end remaining under pressure as ECB-dated OIS nudges higher and the Euribor strip holds the early cheapening move.

• Wider core/semi-core EGB curves also twist flatten, with the same holding true on the bulk of the peripheral curves, with long ends off session cheaps in the main.
• Most of the Spanish & French supply is now in the rear-view (with only inflation-linked paper from France left to be sold).
• The details of the Spanish supply were mixed, with close to the full amount on offer sold with stop prices topping the pre-auction mids. However, the volume of bids was a bit disappointing.
• On the French side, demand was deemed average.
• Core & semi-core spreads vs 10-Year bunds are essentially unchanged on the day, as are peripherals.

GILTS: Off Session Cheaps, Curve Twist Flattens

Gilt futures have recovered from session lows after failing to force a meaningful break of yesterday’s London afternoon/evening lows during a broader round of core global FI weakness. That leaves the contract -10 or so on the day, while wider cash Gilts run 1.5bp cheaper to 2.5bp richer as the curve twist flattens, pivoting at the 5-Year point.

• Local headline flow has been limited thus far, leaving wider, flow-driven moves in core global FI markets to lead the space.
• SONIA futures are flat to -2.5 through the blues, while BoE-dated OIS is little changed to a touch firmer on the day, leaving 50/50 odds of a 50bp hike priced for next month’s meeting, while terminal BoE pricing sits around 5.90% in policy rate terms.
• While the local data docket is non-existent, the UK will see three by-elections conducted today, with well-documented headwinds for the ruling Conservative Party noted.

EQUITIES: E-Mini S&P RSI Tips into Overbought Territory

Eurostoxx 50 futures traded higher last week. The rally resulted in a move above the 50-day EMA at 4335.00 and price is through 4371.00, the Jul 6 high. Clearance of this latter level highlights a potentially stronger bull cycle and attention is on key resistance and the bull trigger at 4447.00, the Jul 3 high. Key support and the bear trigger has been defined at 4220.00, the Jul 7 low. Initial support is at the 50-day EMA. The rally accelerated in E-Mini S&P further still Wednesday, with prices surging through the top-end of the bull channel drawn off the March 13th low at 4608.50. This marks another positive shift for S/T momentum and clears the way for a test of the March 29th 2022 high at 4631.00 and - ultimately - all time highs. Nonetheless, the RSI has now tipped into overbought territory, signalling a slowing of the uptrend could dominate to alleviate the condition over the coming few sessions. Any corrective pullback would initially target the 20-day EMA at 4482.32 for support.

• Japan's NIKKEI closed lower by 405.51 pts or -1.23% at 32490.52 and the TOPIX ended 18.07 pts lower or -0.79% at 2260.9.
• Elsewhere, in China the SHANGHAI closed lower by 29.314 pts or -0.92% at 3169.522 and the HANG SENG ended 24.29 pts lower or -0.13% at 18928.02.
• Across Europe, Germany's DAX trades higher by 59.54 pts or +0.37% at 16163.45, FTSE 100 higher by 53.74 pts or +0.71% at 7645.85, CAC 40 up 29.42 pts or +0.4% at 7361.89 and Euro Stoxx 50 up 4.01 pts or +0.09% at 4364.53.
• Dow Jones mini up 49 pts or +0.14% at 35300, S&P 500 mini down 6 pts or -0.13% at 4590.5, NASDAQ mini down 125.5 pts or -0.79% at 15834.25.

COMMODITIES: Gold Prints Fresh Cycle High Early Thursday

WTI Futures prices bounced off the Monday lows and added to gains Wednesday, although amid-session bounce wasn't sustained, putting markets flat into the close. The current bull cycle remains intact for now after the recent breach of $72.72,the Jun 21 high. Last Wednesday's move higher resulted in a break of key resistance at $75.70, the Jun 5 high as well as the 200-dma. This strengthens current bullish conditions and paves the way for a climb towards $78.03, a Fibonacci retracement point. Key short-term support has been defined at $66.96, the Jun 12 low. Initial support is at $72.31, the 20-day EMA. Gold shows at a new cycle high early Thursday, adding to recent gains and topping key resistance at 1985.3, the May 24 high. A close above here could presage a stronger reversal higher. Strength follows the break of the 50-day EMA at 1948.3. The break signalled scope for a continuation of the current corrective cycle. This opens $1968.00, the Jun 16 high. Key support and the bear is at $1893.1, the Jun 29 low.

• WTI Crude up $0.05 or +0.07% at $75.66
• Natural Gas up $0.05 or +2% at $2.652
• Gold spot up $4.78 or +0.24% at $1983.49
• Copper up $6.45 or +1.69% at $387.3
• Silver up $0.07 or +0.27% at $25.2638
• Platinum down $0.43 or -0.04% at $977.21