MNI US OPEN - Biden Unveils Subsidies to Combat Cheap Solar Imports

NEWS

US (BLS): Early release of CPI and Real Earnings data on May 15, 2024
In advance of [yesterday's] CPI and Real Earnings releases, BLS inadvertently loaded a subset of files to the website approximately 30 minutes prior to the release. BLS has alerted the Office of Management and Budget and DOL's Office of the Inspector General of the incident. BLS takes its data security seriously and is conducting a full investigation into its procedures and controls to ensure the incident is not repeated.

US (BBG): Biden Seeks to Bolster Solar Manufacturers With Tax, Trade Moves
The Biden administration is initiating a suite of policies that it says will help foster a deeper domestic supply chain for solar panels, following pleas from US manufacturers confronting a surge of tariff-free imports. The measures, announced on Thursday, include expanded tariffs, tax policy guidance that could heighten demand for some US-made solar equipment and promises of heightened vigilance for signs of unfair trade.

US (FT): Ray Dalio Warns of Danger of US Debt on Treasury Market
Bridgewater Associates founder Ray Dalio warns that US government’s rising debt levels could hit Treasury bonds, in an interview with the Financial Times. Dalio says investors should move some of their money to foreign markets, and is concerned about the softening demand to meet supply, particularly from international buyers worried about the US debt picture and possible sanctions.

ECB (BBG): ECB Warns of Stability Risks From Global Elections, Geopolitics
Geopolitical tensions and a raft of elections around the world are heightening the risk that investors will be jolted by negative surprises and endanger financial stability, the European Central Bank warned. Markets have so far taken a relaxed view on such threats, leaving them exposed to sudden shifts in sentiment in the event of shocks, the central bank said in its bi-annual Financial Stability Review, published Thursday.

CHINA-RUSSIA (MNI): Putin Claims Russia-China Relationship 'Stabilising' For World
In a high-profile two-day visit to China, Putin has claimed that the 'no-limits partnership' between the two countries is a stabilising factor in the world. Putin: “Our cooperation in world affairs today is one of the main stabilising factors in the international arena...Together, we uphold the principles of justice and a democratic world order that reflects multipolar realities and is based on international law.” Xi said the two countries make "due contributions" to global stability.

SLOVAKIA (BBG): Shooting of Premier Inflames Political Divisions in Slovakia
The attempted assassination by a 71-year-old pensioner and poet has left the country in shock. It also quickly turned the spotlight on the inflammatory politics that have become so prevalent in Europe since the coronavirus pandemic and turbocharged by Russia’s war on Ukraine. As the premier was being transported to surgery, his allies moved to blame the opposition and the “liberal” media for having blood on their hands. Andrej Danko, leader of the Slovak National Party that governs in coalition with Fico, vowed “to start a political war.”

JAPAN (MNI): Japan Govt Aide: Private Consumption To Recover In Q2
The Japanese economy and private consumption will likely recover in or after the second quarter as temporary factors weighed them down over Q1, a senior official at the Cabinet Office said on Thursday, pointing to the suspension of automobile production and shipments in addition to the Hokuriku region earthquake. "Private consumption is also weighed down by high prices,” the official told reporters.

CHINA (BBG): China to Discuss Property Aid With Banks, Regulators on Friday
China’s government plans to hold a meeting with key officials on Friday morning to discuss the property market, including a proposal to clear excess housing inventory, according to people with knowledge of the matter. Senior officials from the housing ministry, financial regulators, local governments and state banks will attend the State Council meeting by video conference, the people said, asking not to be identified because the matter is private.

CHINA (BBG): China Needs to Relax Its Grip on Yuan, Former Officials Say
China should relax its control over the yuan as the current focus on keeping the currency stable has limited the scope for possible monetary stimulus, two former officials said this week. The authorities need to introduce a broader range of foreign-exchange policy tools, said Guan Tao, global chief economist at BOCI Securities, suggesting the current controls are too rigid. Former People’s Bank of China official Guo Kai also advocated allowing the yuan to trade in a wider range.

CHINA (MNI): PBOC Can Use QE Strategically If Necessary - Yu
The People’s Bank of China should increase its purchase of treasury bonds to support an expansionary fiscal stance, as the country struggles with insufficient demand which makes monetary easing measures grow less effective, a former PBOC advisor told MNI in an interview. “Chinese-style quantitative easing” – large-scale Chinese government-bond issuance coordinated with central bank secondary market bond trading – will help stimulate infrastructure investment should the property market continue to decline, and consumption and net exports remain less supportive of the economy meeting Beijing’s 5% GDP growth target, said Yu Yongding, former member of the PBOC’s monetary policy committee.

CHINA (MNI): China Shipbuilding Growth Sustainable After Jump
China’s long-term trade prospects, increased international competitiveness, and push into liquified natural gas vessels will help drive further sustainable growth in the country’s shipbuilding industry following a 95.4% y/y production increase over January and February and 31.3% y/y expansion to the total order book, an expert told MNI.

CORPORATE (BBG): Merck Offers Longest Euro Corporate Bond Deal Since 2021
Merck & Co. Inc is offering Europe’s longest-dated corporate bond in the common currency since 2021, in what could soon become a rare chance for investors to get their hands on healthy yields before central banks finally begin cutting rates. The New Jersey-based healthcare firm is selling 30-year securities denominated in euros as part of a four-tranche deal on Thursday, according to a person with knowledge of the sale, who asked not to be identified as the information is private.

DATA

MNI: NORWAY MAR MAINLAND GDP -0.2% M/M, AGG GDP +0.6% M/M

AUSTRALIA: Aussie Unemployment Rises To 4.1% In April
The Australian unemployment rate rose 4.1% in April, up from the prior month’s revised 3.9% and 20 basis points higher than expected, while employment grew by 30,900, stronger than the market’s 23,000 forecast, data from the Australian Bureau of Statistics showed Thursday. The Reserve Bank of Australia expects unemployment to reach 4.0% by the June quarter. "The increases in both employment and unemployment in April saw the participation rate up by 0.1 percentage point to 66.7% in April,” said Bjorn Jarvis, head of labour statistics at the ABS. “It has been relatively high, above 66.5%, since March 2023.”

JAPAN: Japan Q1 GDP Posts First Contraction In Two Quarters
Japan's economy in Q1 posted its first contraction in two quarters following weak private consumption and capital investment, preliminary GDP data released by the Cabinet Office Thursday showed. Q1 GDP fell 0.5% q/q, or an annualised 2.0%, more than the expected 1.2% drop, following a revised +0.0% q/q, or an annualised revised 0.0% for Q4 2023.Bank of Japan officials had expected the economy to have fallen in Q1 due to weak production and consumption driven by the suspension of automobiles and high prices. They predict the economy will gradually recover in or after Q2 as automakers resume production and wage-hike hopes buoy households.

FOREX: Further Relief for JPY Keeps EUR/JPY Off Highs

• AUD trades poorly, slipping slightly against most others in G10 on the back of the jobs data out overnight, showing the unemployment rate unexpectedly ticking higher to 4.1% vs. Exp. 3.9%. AUD/USD faded off a new cycle high of 0.6714 to trade just underwater ahead of the NY crossover. $0.6622 marks the next downside level at yesterday's low, but short-term trend conditions remain pointed higher for now.
• JPY trades firmer, outpacing broader G10 as the gyrations in the front-end of the US yield curve on Wednesday continue to favour a further recovery in JPY. USD/JPY's solid bounce off post-intervention lows had put markets on cautious footing for further measures from the Japanese authorities. For now, however, yield dynamics are relieving some of this pressure, allowing for a broad bounce in the JPY currency.
• Scandi currencies are softer after outperforming on the back of firmer risk sentiment this week. EUR/NOK has recovered off a new multi-week low, but remains below the 50-dma of 11.6551.
• Focus for the remainder of Thursday trade turns to the US weekly jobless claims release, at which markets expect initial claims at +220k, a modest dip from +231k from the prior week. Fedspeak picks up across US hours, with appearances scheduled from Fed's Barr, Barkin, Harker, Mester and Bostic.

GILTS: Off Highs, Greene Speech Nears

Gilt futures hold to a narrow 25-tick range thus far, last showing -5 at 98.53.

• Technically, the contract traded higher Wednesday, confirming the end to the recent pause in the bull cycle that appeared to be a bull flag formation. The breach of resistance at the May 10 high (98.29), confirms the flag and highlights a resumption of the recovery that started Apr 25. This signal scope for a climb towards 99.19, a Fibonacci retracement. Initial firm support has been defined at the May 14 low (97.23).
• Cash gilt yields are little changed across the curve, operating within 1bp of yesterday’s closing levels.
• SONIA futures are flat to 1.0bp softer on the day, with the early uptick unwound.
• BoE-dated OIS drifts back to pricing less than 60bp of cuts through year end, with June meeting pricing showing a little over 50/50 odds of a cut come the end of the MPC’s net meeting.
• Moves in wider core global FI have dominated thus far, with a lack of UK-specific headline flow seen.
• Participants await comments from BoE MPC member Greene (12:00 London).
• We see the event as the most important round of this week’s BoE communique, with Greene being one of the more hawkish voices on the MPC.

EGBS: Little Changed As Futures Move Off Highs

Core/semi-core EGBs have faded from sessions highs, though the bulk of yesterday’s US-data inspired gains have held.

• Bunds are -7 ticks at 131.64. Yesterday’s breach of the 50-day EMA exposes the next key resistance at 132.89 (38.2% retracement of the Dec 27 - Apr 25 bear cycle).
  
• Regional news/data flow has been limited today, while supply from Spain and France was generally well digested.
• The ECB’s Financial Stability Review highlighted geopolitical tensions and global elections as risks to the outlook, though this was not a market mover.
• The German cash curve has lightly bear flattened, following on from yesterday’s bull flattening dynamic.
• 10-year periphery spreads to Bunds are generally little changed.
• Today’s ECB speakers will likely stick to recent rhetoric, with little commitment for the path of rates beyond the ~90% discounted June cut.

EQUITIES: EuroStoxx Breaches Key Resistance

S&P E-Minis traded higher yesterday and the contract remains firm today as it extends the bull cycle from Apr 19. Yesterday’s gains resulted in a break of key resistance at 5333.50, the Apr 1 high. Eurostoxx 50 futures continue to appreciate. The contract has breached key resistance at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend and maintain the bullish sequence of higher highs and higher lows.

• Japan's NIKKEI closed higher by 534.53 pts or +1.39% at 38920.26 and the TOPIX ended 6.66 pts higher or +0.24% at 2737.54.
• Elsewhere, in China the SHANGHAI closed higher by 2.499 pts or +0.08% at 3122.401 and the HANG SENG ended 289.88 pts higher or +1.52% at 19360.37.
• Across Europe, Germany's DAX trades lower by 9.29 pts or -0.05% at 18858.98, FTSE 100 lower by 29.11 pts or -0.34% at 8416.72, CAC 40 down 28.36 pts or -0.34% at 8211.63 and Euro Stoxx 50 down 10.8 pts or -0.21% at 5090.1.
• Dow Jones mini up 32 pts or +0.08% at 40071, S&P 500 mini up 3 pts or +0.06% at 5336.5, NASDAQ mini up 22.75 pts or +0.12% at 18716.75.

COMMODITIES: M/T Trend Still Bullish for Gold

The medium-term trend structure in Gold remains bullish and this is reinforced by moving average studies that are in a bull-mode position. Near-term, a continued push higher would refocus attention on $2431.50, the Apr 12 high and bull trigger. A bearish theme in WTI futures remains intact and the contract continues to trade closer to its recent lows. Price has recently breached the 50-day EMA, strengthening a short-term bearish set-up that highlights potential for a deeper correction.

• WTI Crude up $0.26 or +0.33% at $78.88
• Natural Gas down $0.01 or -0.37% at $2.408
• Gold spot up $1.14 or +0.05% at $2388.83
• Copper up $2.05 or +0.42% at $494.3
• Silver down $0.08 or -0.27% at $29.6182
• Platinum down $0.48 or -0.04% at $1069.14