MNI US OPEN - Biden Re-Election Odds Tumble Following Presidential Debate

NEWS

MNI POLITICAL RISK ANALYSIS: Debate Sounds Alarm Bells For Biden

The odds of US President Joe Biden retaining the presidency in November cratered after a weak debate performance against former president Donald Trump. It was a worst-case-scenario performance in a debate intended to reset concerns over his age and reframe the election as a referendum on the presumptive nominees. Biden has sunk to around a 17% implied probability of winning the election, and betting markets see around a 40% implied probability he will drop out of the race before Election Day. It is too early to gauge voter sentiment with quantitative data, but the prevailing view is that Trump exceeded expectations and Biden failed to achieve his relatively modest goals. Trump delivered a controlled performance and the debate rules, which were presumed beneficial to Biden, worked in Trump’s favour by reducing combative exchanges.

ISRAEL/MIDDLE EAST (BBG): Israel and Hezbollah Lurch Closer to Full-Blown War in Lebanon

North Israel is a series of ghost towns — abandoned houses and scorched forests from Hezbollah missiles. Parts of south Lebanon have been hit so hard by Israeli bombs that they’ve been reduced to rubble. Tens of thousands of residents have been driven from homes on both sides. A steady, if ugly, tit-for-tat between Israel and Hezbollah since the October outbreak of the Gaza war has been shifting into something more alarming. Record numbers of Hezbollah projectiles — some 900 — have hit Israel this month and its chief says he’s overwhelmed by volunteers ready to fight Israel “without any rules, restraints or ceiling.”

FRANCE (MNI): Latest Elabe Poll - RN Could Win Majority at Upper End of Seat Proj. Range

Ahead of the 30 June legislative election first round the latest opinion poll from outlet Elabe shows the right-wing nationalist Rassemblement National (RN) with the potential to win an outright majority in the National Assembly. This is based on Elable's seat projections, in turn based on its latest opinion poll. The poll has RN on 36% (no change from its previous release), the left-wing New Popular Front (NFP) alliance and the misc. left on 27.5% (up 0.5%), the centrist Ensemble bloc supportive of President Emmanuel Macron on 20% (no change), and the conservative Les Republicains (LR) and misc. centre-right on 9% (down 1%).

EU (MNI): EU Leaders Back Von Der Leyen for 2nd EC Term

EU leaders agreed to give Ursula von der Leyen a second term as head of the EU Commission in talks Thursday. The leaders also agreed to name Estonian Prime Minister Kaja Kallas to the role of High Representative for External Relations, subject to von der Leyen's approval, and Portugal's Antonio Costa to take over from Charles Michel as president of the European Council when he steps down in November. Italian government sources told MNI earlier this week that Italy's Prime Minister Georgia Meloni had dropped her opposition to von der Leyen's reappointment, clearing the way for her to continue. Meloni abstained in the final vote on von der Leyen.

SNB (BBG): SNB Held Off on Interventions in First Quarter Amid Franc Slump

The Swiss National Bank largely refrained from interventions to influence the franc in the first quarter as it depreciated against the dollar and the euro. Switzerland’s central bank bought currencies worth just 281 million francs ($313 million) from January to March, after sales of 22.7 billion francs the previous quarter, it said on Friday.

CHINA (MNI): PBoC Wary Of Market Expectations Surrounding Further Yuan Weakness

MNI (London) Post-PBoC MPC meeting communique provides no real change in tone on the monetary policy front, although the Bank deploys a slightly firmer round of rhetoric when it comes to fighting CNY weakness. The Bank vowed to stabilise CNY FX expectations, with greater focus on the counter-cyclical adjustment factor. The Bank also highlighted the need to use comprehensive policies on this front.

BOJ (MNI): JGB Purchase Plan Unchanged for July, Meaningful Decision Due at Next MPM

The BoJ leaves its plans for both the quantity and frequency of its JGB purchases unchanged for July, matching wider expectations. No reaction in JGB futures, nor JPY FX trade. A reminder that there will be a decision on JGB purchases at the Bank's July meeting, which doesn't conclude until the 31st of this month. The BoJ is considering its options for bond purchases after that meeting, with widespread expectations for a meaningful reduction now noted. Recent source reports have pointed to surveys of market participants being conducted following the recent meeting between the Bank and market players.

JAPAN (BBG): Japan’s Topix Index Reaches Highest Intraday Level Since 1990

Japan’s Topix index reached the highest level since 1990 on Friday before trimming some of its gains, with the equity benchmark finding support from efforts to improve shareholder returns and financial stocks that benefit from higher interest rates. The nation’s broadest equities gauge climbed as much as 1% to 2,821.86 but pared its advance to end the day 0.6% higher and short of its March 22 closing level. That leaves it just 2.6% away from the all-time record set in December 1989. The Nikkei 225 Stock Average of blue-chip companies, which reached an all-time peak earlier this year, also ended Friday up 0.6%.

BANXICO (MNI): Banxico Holds Rates at 11%, One Dissent for Cut

Mexico's central bank maintained its overnight interbank interest rate at 11% Thursday for the second consecutive meeting, with Deputy Governor Omar Mejía dissenting in favor of a 25 basis point rate cut. "Looking ahead, the board foresees that the inflationary environment may allow for discussing reference rate adjustments," said the statement. The Mexican peso had depreciated, policymakers said, but more recently, domestic financial markets have displayed "better behavior."

INDIA (BBG): India Set for More Global Attention as Bond Inclusion Begins

India is set to lure billions of dollars more inflows when JPMorgan Chase & Co. adds the nation’s government bonds to its emerging markets index on Friday, opening up a $1.3 trillion market to a broader range of investors. Global funds have already poured close to $11 billion into index-eligible bonds since JPMorgan’s announcement in September. The US bank expects $20 billion to $25 billion to come in over the next 10 months, raising foreign ownership to 4.4% from 2.5% currently.

DATA

EUROZONE DATA (MNI): EZ Inflation Expectations Dip in May - ECB Survey

• ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 2.8%
• ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.3%

Eurozone inflation expectations for the coming year edged lower in May, slipping to a near three-year low at 2.8% from 2.9% in April, the ECB's Consumer Expectations Survey showed. They are now at their lowest level since September 2021. Median expectations for inflation three years ahead also edged down, to 2.3% from 2.4% in April. Inflation expectations at the one-year and three-year horizons remained below the perceived past inflation rate -- which slipped to 4.9% from 5.0% in April.

GERMANY JUN UE RATE (SA) 6.0% (FCST 5.9%); MAY 5.9% (MNI)
GERMANY JUN UE TOTAL (SA) 2.781 MN; MAY 2.763 MN (MNI)
GERMANY JUN UE NET CHANGE (SA) +19K; MAY +25K (MNI)
GERMANY JUN JOB VACANCIES (SA) -11K; MAY -6K (MNI)

GERMANY EXPORT PRICE INDEX +0.2 % Y/Y, 0.0% M/M (MNI)
GERMANY IMPORT PRICE INDEX -0.4 % Y/Y, 0.0% M/M (MNI)

FRANCE DATA (MNI): France Flash HICP In-Line

• FRANCE JUN HICP +0.1% M/M, +2.5% Y/Y
• FRANCE JUN CPI +0.1% M/M, +2.1% Y/Y

INSEE has issued a correction for the June CPI M/M value (all other values are unchanged). The latest set of June flash inflation prints from France saw HICP and CPI M/M in line with consensus while CPI Y/Y came in a tenth below consensus. HICP came in at +2.5% Y/Y (vs 2.5% consensus, +2.6% prior) and 0.1% M/M (vs +0.1% consensus, +0.1% prior). Services CPI remained sticky at a 2.8% Y/Y. Note that services make up 51.6% of the national CPI index. Meanwhile, Energy softened to 4.8% Y/Y (vs 5.7% prior), on a monthly basis Energy deflated 0.9% (vs -1.2% in the prior month) and the Non-Fresh food component was 0.3ppt lower than last month at 0.6% Y/Y.

FRANCE MAY PPI -1.4% M/M, -6.7% Y/Y (MNI)
FRANCE MAY CONSUMER SPENDING +1.5% M/M, +0.9% Y/Y (MNI)
FRANCE MAY CONSUMER MANUF SPENDING +0.8% M/M, +0.6% Y/Y (MNI)

SPAIN DATA (MNI): Fuel and Food Prices Drive June Inflation Lower

• SPAIN JUN FLASH HICP +0.3% M/M, +3.5% Y/Y
• SPAIN JUN FLASH CPI +0.3% M/M, +3.4% Y/Y
• SPAIN JUN FLASH CORE CPI +3% Y/Y

Spanish preliminary June HICP came in as expected on the yearly rate at 3.5%Y/Y (vs 3.5% cons; 3.8% prior) and the sequential reading at 0.3% M/M (+0.3%cons; 0.2% prior). The national CPI came in also in line with expectations at3.4% Y/Y (vs 3.4% cons; 3.6% prior) and 0.3% M/M (0.3% cons and prior). Core CPI came in slightly above expectations, and at the same rate as in May, at +3.0% Y/Y (vs 2.9% cons; 3.0% prior). This comes after May's print was the first acceleration after 8 consecutive downticks.

ITALY DATA (MNI): Broad-based Deceleration in June Core Metrics

• ITALY JUN FLASH HICP +0.2% M/M, +0.9% % Y/Y; MAY +0.8% Y/Y
• ITALY JUN FLASH CORE HICP +2.1% Y/Y VS MAY +2.2% Y/Y
• ITALY JUN FLASH 'NIC' CPI +0.1% M/M, +0.8%Y/Y; MAY +0.8% Y/Y

As with France and Spain earlier today, Italian flash June HICP printed in line with consensus. Headline HICP was 0.9% Y/Y (vs 0.8% prior) and 0.2% M/M (vs 0.2% prior). Core HICP (ex-energy, food, alcohol and tobacco) moderated to 2.1% Y/Y (from 2.2% prior), with both non-energy industrial goods and services HICP seeing disinflation. Services HICP, which showed signs of stickiness in the French and Spanish prints, ticked a tenth lower to 3.1% Y/Y (vs 3.2 % prior). The breakdown of services components available from the CPI data (not HICP) show a broad-based deceleration all components other than housing.

ITALY JUN FLASH HICP +0.2% M/M, +0.9% % Y/Y; MAY +0.8% Y/Y (MNI)

SWISS KOF JUN ECONOMIC BAROMETER 102.7 (MNI)

JAPAN DATA (MNI): June Tokyo Core CPI Rises 2.1% vs. May 1.9%

The Tokyo core inflation rate accelerated to 2.1% year-on-year in June, from May’s 1.9%, marking the first acceleration and first reading above 2.0% in four months, data from the Ministry of Internal Affairs and Communications showed on Friday. June’s rise was driven by energy prices (+0.38 pp vs. 0.29 pp), but was within Bank of Japan forecasts that expected the inflation rate to increase as the impact of pass-through cost increases continues.

JAPAN DATA (MNI): May Factory Output Hits First Rise in 2 Months

• JAPAN MAY INDUSTRIAL OUTPUT +2.8% M/M; APRIL -0.9%
• JAPAN METI FORECAST INDEX: JUNE OUTPUT -4.8% M/M, JULY +3.6%

Japan's industrial production rose 2.8% m/m in May, the first rise in two months following -0.9% in April, as more car firms resumed production, data released by the Ministry of Economy, Trade and Industry showed on Friday. The production of vehicles rose 18.1% m/m in May, versus -0.6% in April. Bank of Japan officials expected higher auto output, but remained vigilant given some continued instances of production suspension. METI projected industrial production would drop 4.8% in June m/m, revised from -5.6% forecast last month, before rising 3.6% in July.

JAPAN MAY JOBLESS RATE UNCHANGED FROM APRIL AT 2.6% (MNI)

FOREX: Presidential Debate Underpins Dollar as Biden's Odds Nosedive

• The Presidential debate dominates headlines and markets early Friday, with implied odds of Biden winning re-election shooting lower after a shaky appearance that political commentators have noted could undermine confidence in the incumbent. The additional dose of uncertainty helped underpin a rise in the US curve and the greenback through the European morning, although the worst of the move has moderated into the NY crossover. 
• Over 50% of the Eurozone CPI basket will have reported their prelim inflation numbers by today's close, and the releases so far keep CPI on track to hit around 2.5% at next week's read - enough to keep the ECB from considering a further rate cut until September.
• Elsewhere, CNH got a late bid in Asia-Pac trade on the back of PBOC headlines pledging to reinforce the monetary transmission mechanism and stabilise the exchange rate. While no new policy pledges were forthcoming, a recommitment to the counter-cyclical adjustment will support expectations that one-way USD/CNY moves will not be tolerated going forward, despite the recent rally. 
• US data and policy expectations are the highlight Friday, with US PCE numbers for May providing the latest insight into the inflation outlook. This is followed by MNI Chicago PMI later in the session, which is expected to tick higher from the post-COVID low of 35.4 printed last month. Fed speak also picks up after a quiet few days, with Barkin, Daly and Bowman all on the schedule.

EGBS: OATs Widen Further as Political Uncertainty Persists Ahead of Election

Uncertainty ahead of this weekend’s French legislative election pushes OATs wider vs. EGBs, also providing pressure for wider FI markets.

• OAT futures -29 at 123.11, initial support at 122.88 (equivalent to the ‘24 high in cash yields at 3.327%).
• Today’s move has seen the 10-year OAT/Bund spread trade close to 85bps, following the first close above 80bp since 2012.
• 10-year peripheral spreads to Bunds have widened alongside OATs, with the BTP/Bund spread hovering around 160bps for the first time since January.
• German cash yields are 1-2bps higher today, while the French and Italian curves have seen a more pronounced bear steepening.
• The French, Spanish and Italian flash June HICP prints were all in line with consensus, thus were not market movers.
• ECB inflation expectations softened a touch, printing in line with/a little below consensus.
• Broader macro focus now turns to the US PCE report for May, with month-end flows also eyed (broader EGB month-end extensions are seen as average to slightly sub-par in size terms).

GILTS: Lower as OATs Struggle Ahead of Elections, Month-end Flow & U.S. PCE Eyed

Gilt futures are lower alongside EGBs.

• Uncertainty surrounding the French political situation dominates ahead of Sunday’s first round of lower house elections, applying some modest spill over pressure to gilts.
• Futures last -21 at 97.79, just off session lows of 97.75.
• Yesterday’s low (97.63) presents initial support, while Wednesday’s high (98.54) presents initial resistance.
• Cash gilt yields are 0.5-2.5bp higher, with a steepening bias on the curve.
• BoE-dated OIS shows ~14bp of cuts for the August MPC and ~42bp of cumulative easing through year end, with contracts 0.5-2.5bp firmer on the day through mid ’25 meetings.
• Focus now moves to U.S. PCE data after French, Spanish & Italian flash HICP data matched wider expectations.
• Modest revisions higher in the final Q1 GDP readings also did little for markets.
• Elsewhere, sizeable gilt month-end index duration extension flows (based on projections) could play a part as well.

Source: MNI - Market News/Bloomberg. 2025 meeting dates are estimated.

EQUITIES: Trend Condition in E-Mini S&P Unchanged and Signals Remain Bullish

The trend condition in Eurostoxx 50 futures remains bullish. The recovery from the Jun 14 low appears to be an early reversal signal highlighting the end of the May 16 - Jun 14 correction. Attention is on 5039.84, a Fibonacci retracement. Clearance of this level would be a positive development. For bears, a reversal lower would signal a resumption of the bearish corrective cycle. This would open 4846.00, the Apr 19 low and a key support. The trend condition in S&P E-Minis is unchanged and signals remain bullish with price trading closer to its recent highs. Resistance at 5430.75, the May 23 high and bull trigger, has recently been cleared. This confirmed a resumption of the uptrend. Note that moving average studies are in a bull-mode position, highlighting positive sentiment. Sights are on 5594.66, a Fibonacci projection. Support to watch is 5480.29, the 20-day EMA.

• Japan's NIKKEI closed higher by 241.54 pts or +0.61% at 39583.08 and the TOPIX ended 15.93 pts higher or +0.57% at 2809.63.
• Elsewhere, in China the SHANGHAI closed higher by 21.551 pts or +0.73% at 2967.403 and the HANG SENG ended 2.14 pts higher or +0.01% at 17718.61.
• Across Europe, Germany's DAX trades higher by 75.96 pts or +0.42% at 18286.46, FTSE 100 higher by 33.41 pts or +0.41% at 8213.16, CAC 40 down 30.66 pts or -0.41% at 7500.67 and Euro Stoxx 50 up 6.7 pts or +0.14% at 4909.54.
• Dow Jones mini up 16 pts or +0.04% at 39566, S&P 500 mini up 17 pts or +0.31% at 5563, NASDAQ mini up 75.5 pts or +0.38% at 20115.

Time: 09:50 BST

COMMODITIES: WTI Futures Trade Higher Again, Above Key Resistance Levels

A bull cycle in WTI futures remains in play and the contract is trading higher today. 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 pierced. A clear break would open $85.24, the Apr 12 high and a bull trigger. Initial firm support to watch is $78.76, the 50-day EMA. A break would be seen as a potential reversal signal. A bear threat in Gold remains present and the yellow metal continues to trade closer to its recent lows. The sell-off on Jun 7 reinforced a short-term bearish theme. Price has pierced the 50-day EMA, at 2318.1. 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 $0.67 or +0.82% at $82.39
• Natural Gas up $0.03 or +1.23% at $2.718
• Gold spot up $1.4 or +0.06% at $2328.91
• Copper up $3.6 or +0.83% at $438.35
• Silver up $0.29 or +1.01% at $29.256
• Platinum up $14.33 or +1.45% at $1004.39

Time: 09:50 BST