MNI US OPEN - Canada CPI Eyed for June Rate Cut Clues

NEWS

US EQUITIES (BBG): JPMorgan’s Kolanovic Is Last Prominent Bear as Mike Wilson Folds
There’s just one big bear left in Wall Street’s forest of stock market opinions after Morgan Stanley’s Mike Wilson capitulated on Monday while JPMorgan Chase & Co.’s Marko Kolanovic held firm in his gloomy outlook on equities.

CANADA (MNI): MNI Canada CPI Preview: Consensus For Core Could Still See June Rate Cut Odds Build
Market participants coming back from Victoria Day will have the final CPI report before the Jun 5 BoC decision to contend with. It’s being billed as the last major release before the decision although we are still to receive GDP and labour productivity for Q1, the latter on the day of the BoC meeting itself.

EU (FT): Ursula von der Leyen backs EU budget links to economic reforms
Ursula von der Leyen has suggested making access to EU subsidies conditional on national economic reforms as a potential way to improve the bloc’s sluggish competitiveness against global rivals.

CHINA (BBG): PBOC-Backed Paper Urges to Boost Consumer, Rein in Credit Supply
China needs to shift macroeconomic policy priority to boosting consumer demand from increasing credit supply as households’ fixed deposits pile up, according to a front-page report in PBOC-backed newspaper Financial News Tuesday.

CHINA (BBG): China Needs Homebuyer Protection to Bolster Property, Yicai Says
China needs further measures to protect homebuyers’ rights before its latest property support policies will truly boost transactions in the market, according to a Yicai commentary.

CHINA (BBG): China Mortgage Rates Have Room to Fall Further, Report Says
China’s mortgage rates can fall further even as banks kept the benchmark five-year loan prime rate unchanged, the Shanghai Securities News reported.

CHINA (MNI): China Manufacturing Shows Positive Trend - NDRC
Authorities in China see the manufacturing sector continuing its upward recovery, Li Chao, spokesperson for the National Development and Reform Commission told reporters on Tuesday.

BOJ (MNI): BOJ Board Weighs Pace, Scale Of JGB Reductions
Bank of Japan board members are closely watching how the market reacts to lower Japanese government bond buying directed by the operations department to determine the future pace and scale of further board-driven reductions, MNI understands.

JAPAN (BBG): Japan’s Suzuki Says Wage Hikes to Help End Deflationary Mindset
Japan’s Minister of Finance Shunichi Suzuki says large wage increases agreed this spring during annual negotiations between unions and companies will help dispel the deflationary mindset in Japan.

RBA (MNI): RBA Board Concerned Staff Forecasts Too Optimistic
The Reserve Bank of Australia will need to alter its forecasts for inflation and employment should its key assumptions on consumption growth, labour market capacity or price rise prove overly optimistic, according to the recently published minutes from the May meeting.

RBNZ (MNI): MNI RBNZ Preview - May 2024: Policy To Stay Restrictive
The RBNZ meets on May 22 and will also release updated staff forecasts and hold a press conference. It is unanimously expected to leave rates at 5.5% as it is yet to be confident that inflation will sustainably return to target.

RUSSIA (BBG): Germany Warms to US Plan to Tap Frozen Russian Assets for Ukraine Funds
In an about face, German officials are ready to support a US plan to leverage the future revenue generated from frozen Russian assets — mostly stranded in Europe — to back $50 billion in aid to Ukraine, according to people familiar with the discussions.

ISRAEL (Times Of Israel): Israel moves to more limited Rafah assault plan, US will not object
Washington Post analyst David Ignatius reports that Israel has decided to shelve plans for a major offensive in the Gaza Strip’s southern city of Rafah, and will act in a more limited manner, after discussions with the US on the matter.

IRAN (BBG): Iran to Hold Presidential Elections June 28 After Raisi’s Death
Iran will hold presidential elections on June 28, the semi-official Tasnim news agency reported, following the death of Ebrahim Raisi in a helicopter crash over the weekend.

HUNGARY (MNI): MNI NBH Preview - May 2024: New Phase of Policy Continues
The National Bank of Hungary is expected to cut the base rate by 50bps to 7.25%. A stronger Forint and a more stable geo-political backdrop should provide comfort for the NBH board to maintain the new slower pace of easing, established in April.

INDONESIA: MNI Bank Indonesia Preview – May 2024: Stronger IDR, BI On Hold
Bank Indonesia (BI) unexpectedly hiked rates 25bp at its April meeting to defend the rupiah and thus pre-emptively reduce the inflationary impact of the weak currency. The move had little impact though and the central bank had to intervene in the market at the start of May

DATA

GERMAN DATA: Producer Prices Deflate Quicker on Lower Energy / Investment Goods

• German April producer prices came in slightly softer than expected at -3.3% Y/Y (vs -3.1% cons; -2.9% prior) and +0.2% M/M (vs +0.3% cons; +0.2% prior).
• Looking at the individual categories, energy moved further into in deflationary territory at -8.2% Y/Y (vs -7.0% prior) after three consecutive prints that had seen the category becoming less deflationary.
• Elsewhere, the durable, non-durable, and consumption goods categories all saw their respective yearly rates unchanged, coming in at +1.0% Y/Y, +0.3%, and +0.4%, respectively.
• Inflation in investment goods (the main category with the highest yearly rate for a while) decelerated in April and printed at +2.4% Y/Y (vs +2.8% prior).
• Intermediate goods was the only category with firmer inflationary pressures vs March on a yearly comparison at -3.1% (vs -3.7% prior).

FOREX: Canada CPI Eyed as Markets Test June Cut Theory

• Currency markets sit broadly inline with the Monday close, as markets await broader cues from the Canadian and UK inflation releases set for the coming few days. 
• Canadian inflation is seen rising 0.5% on the month and 2.7% Y/Y, however more attention may be paid to the trimmed and median inflation metrics as markets look to gauge the timing of a first rate cut from the Bank of Canada - with market focus on a potential June cut. USD/CAD trades either side of the 50-dma of 1.3638, and any break lower and unwind of the dovish rate pricing will eye a May low at 1.3590.
• Scandi currencies are creeping higher amid quieter markets, and despite a mixed outlook for commodities and equities. USD/NOK sits on support at 10.6478/10.6537, and a recovery in Brent crude prices could see this pair break lower.
• Outside of the Canadian numbers, UK CBI trends data and appearances from Fed's Barkin, Waller, Williams, Bostic and Barr are due, as well as an appearance from BoE Governor Bailey, who delivers a lecture to the LSE.  

EGBS: Firmer With Strong EZ Labour Costs Having Little Impact

Core/semi-core EGBs are slightly firmer this morning, with Bunds trading close to yesterday’s highs of 130.84.

• Today’s corporate and sovereign supply burden has seemingly been offset by the near-1% pullback in oil prices.
• The preliminary estimate of the Eurozone Q1 labour cost index was 4.9% Y/Y, well above the 3.4% seen in Q4.
• While there was no material reaction in Bunds to the release, the data could set the tone for Thursday’s ECB negotiated wages release and the compensation per employee data in next month’s full Q1 national accounts.
• On the sovereign supply front, France has mandated banks to launch a new 20-year OATei benchmark, in line with MNI’s expectations.
• Bunds are +27 ticks at 130.79, having traded in a tight 34 tick range today with volumes once again below average.
• The German and French cash curves have bull flattened, while 10-year periphery spreads to Bunds are a touch wider with European equities off yesterday’s highs.
• With a limited regional calendar for the remainder of today, focus will be on this afternoon’s Fed speak and Canadian CPI.

GILTS: A Little Firmer On The Day, 20s Well Received

The latest round of 20-Year gilt supply extended the run of solid primary demand for that tenor (see previous bullets for deeper details).

• That provided some fresh demand for gilts on the whole, albeit with the space operating within contained ranges.
• Cash yields are 2-3bp lower on the day.
• Futures register fresh session highs post-auction, although the contact deals in a narrow 30-tick range, last +23 at 97.81.
• Key support (97.23) was not threatened during yesterday’s weakness, leaving the bullish technical backdrop intact. Meaningful resistance doesn’t come in until the May 16 high (98.76).
• SONIA futures are -0.5 to +2.5.
• BoE-dated OIS is inline with early Tuesday levels, 12bp of cuts are priced through June, with ~53bp of easing showing through year end.
• Lower tier UK CBI trends data is due a little later on but won’t be a market mover.
• We are also due to hear from BoE Governor Bailey (18:00 London), as he gives a lecture at the LSE entitled “The importance of central bank reserves”.
• This may not give us too much guidance on monetary policy, but we will be watching closely for any potential discussion of the future path of QT (click for our UK Deep Dive on that matter).

EQUITIES: Uptrend in S&P Remains Intact

The uptrend in S&P E-Minis remains intact and the contract is holding on to its latest gains. Recent gains have resulted in a break of a key resistance at 5333.50, Apr 1 high. This confirms a resumption of the primary uptrend and signals scope for a climb to 5372.73. A bullish theme in Eurostoxx 50 futures remains intact despite the latest pullback. Last week’s gains resulted in a break of key resistance at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend and maintain the price sequence of higher highs and higher lows.

• Japan's NIKKEI closed lower by 122.75 pts or -0.31% at 38946.93 and the TOPIX ended 8.32 pts lower or -0.3% at 2759.72.
• Elsewhere, in China the SHANGHAI closed lower by 13.179 pts or -0.42% at 3157.966 and the HANG SENG ended 415.6 pts lower or -2.12% at 19220.62.
• Across Europe, Germany's DAX trades lower by 89.3 pts or -0.48% at 18680.86, FTSE 100 lower by 37.17 pts or -0.44% at 8386.58, CAC 40 down 67.36 pts or -0.82% at 8128.43 and Euro Stoxx 50 down 32.61 pts or -0.64% at 5041.76.
• Dow Jones mini down 0 pts or 0% at 39944, S&P 500 mini down 0 pts or 0% at 5334.5, NASDAQ mini down 21.5 pts or -0.11% at 18741.25.
   

COMMODITIES: M/T Trend Structure in Gold Remains Bullish

The medium-term trend structure in Gold is unchanged and remains bullish. Yesterday’s initial gains resulted in a print above resistance at $2431.5, the Apr 12 high and bull trigger. Despite the latest move higher, a bearish theme in WTI futures remains intact and short-term gains are considered corrective. Price has recently traded below the 50-day EMA, strengthening a bearish set-up that highlights potential for a deeper correction.

• WTI Crude down $0.64  or -0.8% at $79.16
• Natural Gas up $0.01  or +0.4% at $2.763
• Gold spot down $6.35  or -0.26% at $2417.95
• Copper down $1.3  or -0.26% at $506.05
• Silver down $0.15  or -0.49% at $31.657
• Platinum down $12.29  or -1.17% at $1039.82