EXECUTIVE SUMMARY:
- BIDEN PLUMMETS IN LEAKED DEMOCRATIC POLLING MEMO, PUCK SAYS
- LE PEN SEEKS MAJORITY AS RIVAL GROUPS TEAM UP TO STOP HER
- FOMC COMMENTARY EYED IN JUNE MEETING MINUTES
- BORIS JOHNSON MAKES SURPRISE LATE MOVE TO AVERT TORY WIPEOUT
MNI (LONDON) - Figure 1: Eurozone PPI remains in deflation for twelfth consecutive month
NEWS
MNI FOMC Minutes Preview: June 2024
FOMC commentary in the last three weeks has reinforced the main theme from the June meeting: despite the more encouraging inflation data of late, policymakers are not in a rush to cut rates. In that regard, the key aspect to watch in the minutes to the June FOMC meeting (out Wednesday July 3 at 1400ET) is the Committee's take on the latest data and the degree to which such readings provide "confidence" for cutting rates.
US (BBG): Biden Plummets in Leaked Democratic Polling Memo, Puck Says
President Joe Biden’s favorability numbers plummeted after his debate performance last week in “the largest single-week drop” in nearly three years, according to a leaked memo from a pollster that was published Tuesday by the news site Puck. “Underpinning the decline is an increase in already-high concerns about the President’s age, and a growing split among Democrats about what should happen with his candidacy,” says the memo from Open Labs, the research arm of Future Forward, a leading Democratic super political action committee.
US (NYT): Biden’s Lapses Are Said to Be Increasingly Common and Worrisome
People who have spent time with President Biden over the last few months or so said the lapses appear to have grown more frequent, more pronounced and, after Thursday’s debate, more worrisome. In the weeks and months before President Biden’s politically devastating performance on the debate stage in Atlanta, several current and former officials and others who encountered him behind closed doors noticed that he increasingly appeared confused or listless, or would lose the thread of conversations.
US (BBG): Trump’s Immunity Ruling Sets Up ‘Mini Trial’ Before Election
The US Supreme Court’s ruling that presidents have some immunity from criminal charges over official conduct sets up a high-stakes “mini trial” later this summer over Donald Trump’s attempt to overturn the 2020 election.The timing of such a hearing will be consequential, with Trump’s campaign to return to the White House reaching a fever pitch and his rematch against President Joe Biden in the background. It will likely be the only chance for voters to see the government’s best evidence before they go to the polls.
FRANCE (BBG): Le Pen Seeks Majority as Rival Groups Team Up to Stop Her
Marine Le Pen’s National Rally is scrambling to get an absolute majority in the final round of France’s legislative election Sunday as rival parties are maneuvering to keep the far-right party out of power. President Emmanuel Macron’s centrist group and the broad, left-wing New Popular Front alliance have pulled their candidates out of 215 runoffs with more than two candidates to avoid splitting the vote against the far right, according to a count by Le Monde newspaper.
UK (BBG): Boris Johnson Makes Surprise Late Move to Avert Tory Wipeout
Boris Johnson unexpectedly dropped in on the UK election campaign, urging Conservative voters to deny Labour a landslide victory in a last throw of the dice by Rishi Sunak’s Tories to try to prevent huge losses that are expected in Thursday’s vote. “We cannot just sit back as a Labour government prepares to use a sledgehammer majority to destroy so much of what we have achieved,” the former premier said in an unscheduled speech in central London on Tuesday night, his first public appearance of the election campaign.
UK (BBG): London’s Sky-High Home Rents Finally Growing Slower Than Wages
London’s home rental crisis showed early signs of easing after a surge in available properties led to the joint-smallest increase in advertised rents across Britain. The online property portal Rightmove said rents in the capital rose 4% from a year ago in May. The average remained at eye-watering level of £2,652 ($3,355) a month.It matched the slowest year-on-year growth among the UK regions with only Wales seeing a similarly small rise. It also was slower than the pace of wage increases, a sign that a brutal cost-of-living squeeze is easing.
TURKEY (BBG): Turkey’s Inflation Cools Much Faster Than Expected in Turnaround
Turkish inflation eased for the first time in eight months, a faster-than-estimated slowdown from a peak reached in May that puts consumer prices on course for a steep deceleration during the summer months. Data on Wednesday showed headline inflation slipped to 71.6% in June, from 75.5% the previous month. Monthly price growth, the central bank’s preferred gauge, came in at 1.6%.“The disinflation process has begun,” Treasury and Finance Minister Mehmet Simsek said on X.
DATA
EUROZONE JUNE FINAL SERVICES PMI 52.8 (FLASH: 52.6); MAY 53.2 (MNI)
GERMANY JUNE FINAL SERVICES PMI 53.1 (FLASH: 53.5); MAY 54.2 (MNI)
FRANCE JUNE FINAL SERVICES PMI 49.6 (FLASH: 48.8); MAY 49.3 (MNI)
UK JUNE FINAL SERVICES PMI 52.1 (FLASH: 51.2); MAY 52.9 (MNI)
EUROZONE DATA (MNI): PPI a Tenth Softer than Exp; Further NEIG HICP Disinflation to Come?
Eurozone PPI for May remained in deflation for the twelfth successive month, although the energy component saw another increase in the Y/Y rate for the third consecutive month (entirely driven by base effects). This pushed the Y/Y PPI figure up to -4.2% Y/Y, although a tenth below consensus (vs -5.7% prior). On a monthly basis PPI also fell a tenth more than consensus had expected, down 0.2% (vs -0.1% consensus, -1.0% prior). The energy component remained in deflation at -11.4% Y/Y, the highest since April 2023, although as noted above this was driven by base effects as on a monthly basis it saw its seventh consecutive fall at -1.1% M/M.
ITALY DATA (MNI): Inflation Eases as Services Remain Expansionary
- ITALY JUNE SERVICES PMI 53.7 (FCST: 53.8); MAY: 54.2
The Italian June services PMI was broadly in line with consensus at 53.7 (vs 53.8 cons, 54.2 prior), printing in expansionary territory for the sixth consecutive month. The inflation-specific commentary in the report was somewhat similar to Spain: Overall inflation pressures softened slightly, but increased wage costs were being passed on to output charges where possible.
SPAIN DATA (MNI): Wage Pressures Remain Prevalent
- SPAIN JUNE SERVICES PMI 56.8 (FCST: 56.4); MAY: 56.9
The Spanish June services PMI was stronger than expected at 56.8 (vs 56.4 cons,56.9 prior). This is now the tenth consecutive month that the services indexhas printed in expansionary territory. In contrast to the Spanish manufacturing PMI, services firms passed onincreased input costs (which were largely wage-driven) to consumers, keeping output charge inflation elevated.
JAPAN DATA (MNI): BOJ Q1 Output Gap Hits 16th Negative Reading in Row
Japan's output gap was estimated at -0.66% in Q1, the 16th straight negative reading following -0.03% in Q4 of 2023, indicating upward pressure on prices is slowing with a time lag, BOJ data showed on Wednesday. The BOJ's estimate of the output gap, based on capital and labour stock, is smaller than the Cabinet Office's latest estimate of -1.1% in Q1 (vs. -0.4% in Q4), which is based on revised Q1 GDP data which showed a 0.7% fall q/q, or an annualized rate of -2.9%.
FOREX: JPY Weakness Pervades, Despite Mixed USD Performance
- JPY weakness again pervades across G10 currencies, with USD/JPY touching a new high overnight at 161.94, and AUD/JPY's winning streak extending to 108.21. JPY weakness comes as the equity rally resumes. The strong finish on Wall Street yesterday has fed into positive European performance, with the still-fading odds of a right-wing majority also helping contribute to better risk sentiment today.
- The USD is mixed, paring a small part of the gains posted across the first two sessions of this week. The USD Index remains within reach of 106.130 resistance, but a small gap is opening to start off Q3 and the month of July.
- NOK is the best performing currency in the region, firmer on the back of a better crude price and stronger local equities. This has allowed EUR/NOK to roll off the 11.5051 recovery high and snap the eight-session winning streak posted off the June low. Potentially significant is the formation of a death cross (50-dma moving below 200-dma) this week, the first since January this year.
- US weekly jobless claims data is set to cross later today - brought forward by one day from the usual schedule due to market closures around the July 4th holidays this week. ISM services data is set to follow, at which markets expect a moderation in the headline to 52.6 from 53.8. ECB's Lane, Knot and Lagarde are set to make further appearances at the ECB's Sintra conference, while the FOMC minutes are set for release after the European close.
EGBS: 10-year Supply Weighs On Bund Futures
Bund futures are -6 at 130.32, lagging OAT and BTP counterparts.
- The impending launch of the new 10-year benchmark has weighed on Bund futures this morning, while OATs and BTPs have found support from latest political developments in France.
- Over 200 candidates from centrist/left-wing parties have withdrawn from second round elections in France, in order to limit right-wing gains.
- The Eurozone June services/composite PMIs saw small upward revisions, while PPI was a little below consensus – neither were major market movers.
- The German cash curve has twist flattened, with 2-year yields ~4bps higher and 30-year yields around 1bp lower at typing.
- 10-year peripheral spreads to Bunds have tightened this morning, though the 10-year German benchmark roll has overstated these moves somewhat.
- We don’t expect today’s remaining ECB speakers to add much new to the near-term policy debate, with broader focus on this afternoon’s round of US macro data.
GILTS: Off Early Session Highs
Gilts have faded from early London highs.
- Futures last +17 at 97.07. Yesterday’s high (97.23) was not tested.
- Bulls need to retake the 20-day EMA (97.72) to negate some of the recent bearish pressure. Initial support is located at the July 1 low (96.57).
- Set up for the impending Bund supply factors into wider core global FI trade, as does the latest reduction in French political risk premium, capping the initial rally.
- A mark higher in the final domestic services PMI data failed to impact.
- Cash gilt yields are 1bp higher to 2.5bp lower across the curve, sticking within ranges seen since mid-March.
- 2s10s moves away from this week’s ’24 high, while 5s30s moves away from multi-month highs.
- BoE-dated OIS is little changed on the day, showing 13.5bp of cuts for August and ~42bp of easing through year end.
- SONIA futures -2.5 to +2.5.
- The UK calendar is limited for the remainder of the day, leaving focus on wider macro matters e.g. the ECB’s Sintra forum and U.S. data.
EQUITIES: E-Mini S&P Holds Onto Tuesday's Gains, Conditions Bullish
Eurostoxx 50 futures are in consolidation mode. The trend condition remains bullish and the recovery from the Jun 14 low appears to be an early reversal of the May 16 - Jun 14 correction. Attention is on 5039.84, a Fibonacci retracement. Clearance of this level would be a positive development. A reversal lower would instead signal a resumption of the bearish corrective cycle that started May 16 and open 4846.00, Apr 19 low and a key support. The trend condition in S&P E-Minis is unchanged and signals remain bullish. Resistance at 5430.75, the May 23 high and bull trigger, has recently been cleared. This break confirmed a resumption of the primary uptrend. Note that the recent pause in the trend still appears to be flag formation - a bullish continuation signal that reinforces current conditions. Sights are on 5594.66, a Fibonacci projection. Support to watch is 5496.53, the 20-day EMA.
- Japan's NIKKEI closed higher by 506.07 pts or +1.26% at 40580.76 and the TOPIX ended 15.56 pts higher or +0.54% at 2872.18.
- Elsewhere, in China the SHANGHAI closed lower by 14.636 pts or -0.49% at 2982.375 and the HANG SENG ended 209.43 pts higher or +1.18% at 17978.57.
- Across Europe, Germany's DAX trades higher by 87.69 pts or +0.48% at 18250.23, FTSE 100 higher by 29.62 pts or +0.36% at 8151.25, CAC 40 up 57.67 pts or +0.77% at 7596.18 and Euro Stoxx 50 up 36.36 pts or +0.74% at 4942.86.
- Dow Jones mini up 22 pts or +0.06% at 39710, S&P 500 mini down 1 pts or -0.02% at 5567.75, NASDAQ mini up 3.25 pts or +0.02% at 20258.5.
Time: 09:45 BST
COMMODITIES: Short-Term Bearish Theme in Gold Remains in Play
A bull cycle in WTI futures remains in play and the contract traded higher Tuesday, before giving back some gains. The recent breach of $80.11, the May 29 high and a key resistance, strengthened a bullish theme. Note too that $82.24, 76.4% of the Apr 12 - Jun 4 bear leg, has been cleared. This opens $85.27, the Apr 12 high and a bull trigger. Initial firm support to watch is $79.19, the 50-day EMA. Gold is unchanged and is trading in consolidation mode. A bear threat remains present and the sell-off on Jun 7 reinforced a short-term bearish theme. Price has pierced the 50-day EMA, at 2319.3. A clear break of this EMA would confirm a resumption of the reversal from May 20 and open $2277.4, the May 3 low. Clearance of this price point would also strengthen a bearish theme. Initial firm resistance is $2387.8, the Jun 7 high.
- WTI Crude up $0.23 or +0.28% at $83.03
- Natural Gas up $0.01 or +0.53% at $2.448
- Gold spot up $15.17 or +0.65% at $2345.47
- Copper up $9.35 or +2.12% at $451.2
- Silver up $0.61 or +2.05% at $30.1419
- Platinum up $2.71 or +0.27% at $1002.47
Time: 09:45 BST
| Date | GMT/Local | Impact | Country | Event |
| 03/07/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 03/07/2024 | 1100/0700 | US | New York Fed's John Williams | |
| 03/07/2024 | 1230/0830 | ** | US | Trade Balance |
| 03/07/2024 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 03/07/2024 | 1230/0830 | *** | US | Jobless Claims |
| 03/07/2024 | 1330/1530 |  EU | ECB's Lagarde closing remarks at ECB Forum | |
| 03/07/2024 | 1400/1000 | *** | US | ISM Non-Manufacturing Index |
| 03/07/2024 | 1400/1000 | ** | US | Factory New Orders |
| 03/07/2024 | 1400/1000 | ** | US | US Bill 04 Week Treasury Auction Result |
| 03/07/2024 | 1400/1000 | * | US | US Bill 08 Week Treasury Auction Result |
| 03/07/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 03/07/2024 | 1600/1200 | ** | US | Natural Gas Stocks |
| 03/07/2024 | 1800/1400 | *** | US | FOMC Minutes |
| 04/07/2024 | 0130/1130 | ** |  AU | Trade Balance |
| 04/07/2024 | 0545/0745 | ** |  CH | Unemployment |
| 04/07/2024 | 0600/0800 | ** |  DE | Manufacturing Orders |
| 04/07/2024 | 0630/0830 | *** | CH | CPI |
| 04/07/2024 | 0730/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 04/07/2024 | 0830/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 04/07/2024 | 0830/0930 | GB | Decision Making Panel Data | |
| 04/07/2024 | 0900/1100 | EU | ECB's Lane Lecture at University of Naples | |
| 04/07/2024 | - | GB | General Election | |
| 04/07/2024 | 1415/1615 | EU | ECB's Cipollone speech at 15th edition of National Statistics conference |