MNI US OPEN - Biden-McCarthy Meet Kicked Into Next Week

NEWS

FED (MNI): Fed's Bowman Sees Risk of More Hikes Amid Sticky Prices

Recent economic data have not provided evidence that inflation is on a clear downward path and the Federal Reserve may need to tighten monetary policy further, Fed Governor Michelle Bowman said Friday, in a speech that warned against a knee-jerk toughening of bank capital requirements and supervision. "In my view, the most recent CPI and employment reports have not provided consistent evidence that inflation is on a downward path, and I will continue to closely monitor the incoming data as I consider the appropriate stance of monetary policy going into our June meeting," Bowman said in prepared remarks.

ECB (BBG): ECB May Need to Tighten Further After the Summer, Nagel Says

The European Central Bank may have to continue raising borrowing costs beyond the summer, according to Governing Council member Joachim Nagel. Underlying inflation, which excludes food and energy costs and is currently officials’ preferred gauge of price swings, won’t slow quickly, the Bundesbank chief said Friday in Niigata, Japan, at a Group of Seven meeting of finance and central-bank chiefs. “There’s consensus in the Governing Council that interest-rate hikes should continue,” he told a briefing.

US (MNI): Yellen - We're Working Full Time w/Congress to Raise Debt Ceiling

Speaking to Bloomberg TV, US Treasury Secretary Janet Yellen states that the Biden administration is "Working full time with Congress to raise the debt ceiling." Yellen: "If Congress fails to raise the debt ceiling we face financial and economic catastrophe." Yellen: "I will update Congress on any change in date when the Treasury will run out of money to pay government's debts." Says there is "still some uncertainty" over the precise date the US will run out of cash.

US (BBG): Biden-McCarthy Meet Delayed as Aides Make Progress on Debt Talks

President Joe Biden and House Speaker Kevin McCarthy postponed their meeting on the debt ceiling set for Friday as their aides continue negotiations toward avoiding a catastrophic US default. The delay signals that staff-level talks on energy permitting reform and government spending have yielded progress, according to people familiar with the talks. The speaker said Biden planned to meet with him and other congressional leaders next week, though neither side specified a date.

US (WaPo): US Sees Record Migration Influx as Pandemic Border Restrictions Lift

The Biden administration Thursday vowed that its border strategy would succeed over time despite a record influx of migrants across the U.S.-Mexico border as it lifts pandemic-era measures and overcrowding worsens in government facilities. Illegal border crossings have topped 10,000 per day this week, the highest levels ever, as the Title 42 border policy expired at 11:59 p.m. Thursday.

CHINA/UKRAINE (MNI): Chinese Envoy to Visit Ukraine, Russia & EU Nations from 15 May

The Chinese Foreign Ministry has confirmed that China's Special Representative of Eurasian affairs will visit Ukraine, Poland, France, Germany, and Russia from 15 May. FM spox states that the visit 'is an effort to promote peace talks'. The visit will mark the first by any Chinese official to Ukraine since the start of the Russian invasion in Feb 2022. China is viewed as one of the few nations that could act as a mediator in the war, although the peace plan presented by Beijing earlier this year was dismissed by the West as being too accommodating towards Russia.

CHINA (BBG): China’s Housing Rebound Fizzles, Adding to Economy’s Risks

China’s housing market sales is regressing after a brief recovery, underscoring the challenges the world’s second-largest economy is facing. Signs of weakness are emerging after housing sales and prices recovered briefly following a historical slump of about 18 months. High-frequency indicators in recent weeks show momentum in home purchases has fizzled. That’s despite Beijing rolling out a slew of measures to prop up the market, from lowering home loan rates to easing financing rules for developers.

CHINA (BBG): China May Cancel More US Corn in Shift to Cheaper Brazil Cargoes

Top corn importer China could cancel more purchases of the grain from the US because the country can buy more cheaply from Brazil and as some local producers of hog feed replace corn with wheat in their rations. Corn futures in Chicago have come under pressure from Chinese cancellations of 832,000 tons in the past three weeks. Increased competition from Brazil is underscored by forecasts for it to pass the US as the top exporter this year.

CHINA (BBG): PBOC Likely to Wait on More Data Before Adding to Liquidity

The People’s Bank of China is expected to skip monthly liquidity injection for the first time this year, as Beijing weighs the impact of previous monetary stimulus on the recovering economy. The central bank will probably provide 100 billion yuan ($14.4 billion) to financial institutions through a medium-term lending facility on Monday, matching the amount maturing this month, according to the median estimate of 10 analysts surveyed.

G7 (BBG): G7 Finance Chiefs to Add New Supply-Chain Proposal in Statement

Finance chiefs from the world’s rich economies are set to propose a new partnership on supply chains that’ll be open to other nations and would require countries to have minimum standards on human rights and environmental policies to join.Officials are well advanced in drafting a statement for this week’s Group of Seven meeting, with the additional details on diversifying supply-chains to be included, according to people familiar with the matter.

RBA (MNI): High-Frequency Yield Data of Little Use - RBA

Reserve Bank of Australia (RBA) researchers believe the use of high-frequency yield data has limitations when measuring the impact of monetary policy and its communication. RBA researchers Jonathan Hambur and Qazi Haque from the University of Adelaide published Friday a review that used yield data on interest rates of different maturities to quantify the effect of different Reserve communications on the market’s cash-rate expectations.

SOUTH AFRICA (MNI): US Ambassador's Explosive Interview Sends S. African Assets Tumbling

President Cyril Ramaphosa said that he has ordered an independent inquiry into allegations that South Africa provided material military support to Russia. The rand and South African government bonds tumbled to three-year lows Thursday as U.S. ambassador said in an interview he was confident that a Russian cargo ship had left the country loaded with ammunition in December. Ramaphosa insisted that he had no evidence of such an incident, while his spokesperson accused the U.S. diplomat of adopting a "counter-productive public posture."

CORPORATE (BBG): UBS’s Ermotti Says State, SNB Losses ‘Exceptionally Unlikely’

UBS Group AG Chief Executive Officer Sergio Ermotti said that the Swiss government and Central Bank are “exceptionally unlikely” to take any losses on the takeover of Credit Suisse Group AG, his strongest comments yet on state support.Ermotti reiterated earlier comments this month that the bank will “do everything” within its power to avoid a hit for taxpayers as part of the government-backed rescue of its former rival in March. He spoke at a Swiss media forum in Lucerne on Friday.

DATA

UK DATA (MNI): GDP Expands +0.1% in Q1, Despite March Services Slump

• UK MAR GDP -0.3% M/M, +0.1% 3MM, +0.5% 3M Y/Y
• UK MAR IND PROD +0.8% M/M, -2% Y/Y
• UK MAR CONSTRUCTION OUTPUT +0.2% MM, +0.7% 3M3M, +4.1% YY
• UK MAR SERVICES INDEX -0.5% M/M, +0.1% 3MM
• UK MAR TRADE BALANCE GBP -2.86BN

Wet weather likely dampened spending appetite in March, with the services sector the main contributor to the fall in GDP, posting a -0.5% m/m decline. This was driven by wholesale and retail trade, with car sales falling below pre-pandemic levels. Production saw the strongest growth since May 2021, boosted by pharmaceuticals. Despite the March slump, UK GDP rose by +0.1% q/q in Q1, in line with consensus expectations and holding pace with Q4 2022. Over the quarter, services expanded by +0.1% q/q, driven by increases in information, communication and admin support services. Construction expanded by +0.7% q/q and production by +0.1% q/q, with +0.5% q/q growth in manufacturing.

FRANCE APR HICP +0.7% M/M, +6.9% Y/Y (MNI)
FRANCE APR CPI +0.6% M/M, +5.9% Y/Y (MNI)

SPAIN APR HICP +0.5% M/M, +3.8% Y/Y (MNI)

NORWAY MAR MAINLAND GDP +0.5% M/M, AGG GDP +0.4% M/M (MNI)

FOREX: NZD Falters on Pullback in Inflation Expectations

• NZD is comfortably the poorest performer in G10 after inflation expectation data overnight came in well below forecast at 2.79% for Q2 vs. 3.30% in the first three months of the year.
• NZD was marked lower upon release, putting the pair lower for a second session and well through the 100-dma support at 0.6279. Further losses open the 50-dma initially at 0.6220 ahead of 0.6216, the 61.8% retracement for the April - May upleg.
• CHF is a furtive outperformer in early Friday trade, helping tilt USD/CHF back toward the 0.89 level, although broader ranges remain generally muted. Equity markets are higher across Europe and the US, with some modest strength noted in the benchmark EuroStoxx50 (+1.0% at typing). JPY is at the other end of the table, helping EUR/JPY moderate the early May pullback.
• Prelim University of Michigan data takes focus going forward, with markets looking for inflation expectations to havbe moderated in the May prelim read. The central bank speaker slate will also draw some focus, with BoE's Pill set to speak as well as Fed's Daly - although Daly's appearance is unlikely to result in policy-relevant comments.

BONDS: Fedspeak, European & U.S. Equity Bid & Italian Sovereign Rating Talk Dominates Pre-NY

U.S. Tsys run 2-3bp cheaper with a light steepening bias (TU/UXY steepener flow equating to DV01 ~$290K was seen in Asia-Pac/London hours). The latest uptick in e-minis will have applied some fresh weight. Comments from Fed Governor Bowman biased the space cheaper during early London hours, as she noted that the recent economic data have not provided evidence that inflation is on a clear downward path and the Federal Reserve may need to tighten monetary policy further.

• Early weakness in EGBs started to unwind, before the latest uptick in equities capped the move. Early cheapening moves looked to post-cash close dynamics, Fedspeak and perhaps some worry surrounding this evening’s potential Italian sovereign credit rating update from Fitch. Bunds have bear flattened on the day, while peripherals are flat to a couple of bp tighter to Bunds at the 10-Year point (early BTP widening has unwound)
• Gilts initially looked to broader market drivers, before slightly softer than expected, although generally in line with BoE forecast, UK GDP data may have filtered in with a bit of a delay, limiting early losses. The Gilt curve is steeper on the day.
• Looking ahead, Fedspeak from Daly & BoE speak from Pill provide the highlights of the docket, while Fed Governor Jefferson and St. Louis Fed President Bullard are due to speak late in NY hours, after markets close. Participants will also look at the latest inflation expectations within the U.S. UoM sentiment survey with interest.

Current Levels:

- TY1 futures are -0-2+ today at 115-31 with 10y UST yields up 2.0bp at 3.407% and 2y yields up 0.8bp at 3.908%.

- Bund futures are -0.16 today at 136.57 with 10y Bund yields up 1.3bp at 2.236% and Schatz yields up 2.4bp at 2.552%.

- Gilt futures are -0.12 today at 101.39 with 10y yields up 1.5bp at 3.721% and 2y yields up 1.7bp at 3.734%.

EQUITIES: E-Mini S&Ps Pare the Majority of Thursday's Losses

Eurostoxx 50 futures remain in consolidation mode. Price is trading above support at 4233.90, the 50-day EMA. The recent move down is considered corrective and the broader uptrend is intact. A continuation higher would signal scope for a test of 4363.00, the Apr 21 high and bull trigger. Clearance of this level would confirm a resumption of the uptrend. A clear break of the 50-day EMA is required to signal a top. S&P E-minis are consolidating and continue to trade above the 50-day EMA, which intersects at 4106.37. A continuation higher would refocus attention on key resistance and the bull trigger at 4206.25, the May 1 high. A breach of this level would confirm a resumption of the bull trend that started Mar 13. Key support has been defined at 4062.25, the May 4 low. A move through this support would be a bearish development.

• Japan's NIKKEI closed higher by 261.58 pts or +0.9% at 29388.3 and the TOPIX ended 13.3 pts higher or +0.64% at 2096.39.
• Elsewhere, in China the SHANGHAI closed lower by 37.189 pts or -1.12% at 3272.362 and the HANG SENG ended 116.55 pts lower or -0.59% at 19661.93.
• Across Europe, Germany's DAX trades higher by 79.98 pts or +0.51% at 15889.77, FTSE 100 higher by 32.92 pts or +0.43% at 7761.84, CAC 40 up 64.4 pts or +0.87% at 7437.07 and Euro Stoxx 50 up 25.8 pts or +0.6% at 4327.93.
• Dow Jones mini up 154 pts or +0.46% at 33488, S&P 500 mini up 17.5 pts or +0.42% at 4157.75, NASDAQ mini up 33.75 pts or +0.25% at 13477.

COMMODITIES: WTI Futures Ease Off Recent Highs

WTI futures have pulled back from recent highs. The latest recovery is considered corrective and the move higher has allowed a recent oversold trend condition to unwind. Initial resistance is at $73.93, the Apr 28 low ahead of $76.92, the Apr 28 high. On the downside, the recent print below $64.58, the Mar 20 low and a key support, reinforces a bearish theme. A clear break of it would confirm a resumption of the broader downtrend. Gold trend conditions remain bullish. The yellow metal has recently breached resistance at $2048.7, the Apr 13 high to confirm a resumption of the broader bull cycle. This maintains the bullish price sequence of higher highs and higher lows and moving average studies are in a bull-mode set-up. The focus is on $2070.4, the Mar 8 2022 high ahead of the all-time high at $2075.5. Key support is 1969.3, the Apr 19 low.

• WTI Crude down $0.22 or -0.31% at $70.64
• Natural Gas down $0.03 or -1.14% at $2.159
• Gold spot down $7.81 or -0.39% at $2009.83
• Copper up $1 or +0.27% at $372.95
• Silver down $0.26 or -1.09% at $23.9937
• Platinum up $2.84 or +0.26% at $1097.59