MNI US OPEN - China Inflation Data Fuels Rate Cut Speculation

NEWS

US (BBG): Trump Charged Over Secret Records in a First for an Ex-President

Donald Trump has been indicted over his refusal to return classified documents found at his Florida home, according to three people familiar with the matter. It will almost certainly upend the race to be the Republican nominee for president in the 2024 election and means that Trump could be facing prison time or disqualification from holding public office depending on the charges if he is convicted.

US/CHINA (MNI): China Says US No Stranger To "Spreading Rumours" After Cuba Story

Wires carrying comments from the Chinese Foreign Ministry regarding thebombshell story from the WSJ published on 8 June claiming that Beijing has reached an agreement with Cuba to place an electronic surveillance station on the island that would cover the entirety of the southeastern United States. Foreign Ministry states that "spreading rumours and slander" is a common US tactic, and that the US should stop interfering in Cuba's internal affairs.

US/UK (BBG): Sunak Leaves US With Some Deals, But Not the Big Trade Prize

UK Prime Minister Rishi Sunak leaves Washington after a two-day visit, armed with President Joe Biden’s backing for his efforts on artificial intelligence and agreements for closer economic cooperation to shore up green industries and supply chains. The two leaders agreed to start work on an accord that could ultimately give British-based manufacturers access to the massive package of US subsidies and tax breaks enshrined in Biden’s signature Inflation Reduction Act. And the UK will be designated a “domestic source” for defense contractors, opening up US investment to British companies.

FRANCE (BBG): Bank of France Sees More Evidence Inflation Is Passing Peak

Inflationary pressures are continuing to ease in France with the cooling off even spreading to the closely watched services sector, the country’s central bank said. Its monthly business survey showed the proportion of firms reporting rising prices for services in the euro area’s second largest economy dropped to around pre-Covid levels. The share who are raising their own prices in the sector also continued a decline that began at the start of this year.

FRANCE (MNI): Pension Reform Opposition Reaches End Of Line After LIOT Bill Withdrawal

Effective opposition to President Emmanuel Macron's controversial pension reforms have reached the end of the line after the centrist LIOT group withdrew its bill in the National Assembly after the legislation was stripped of its core measure that would have reversed the increase in the pension age from 62 to 64. Speaker of the National Assembly Yaël Braun-Pivet, who hails from Macron's centrist Renaissance Party, ruled on 7 June that the provision was unconstitutional as it placed an unreasonable burden on public finances.

CHINA (MNI): PBOC Rate Cut Expectations Build After Deposit Cuts

Greater-than-expected economic headwinds are putting pressure on the People’s Bank of China to ease policy, with its recent guidance for banks to lower interest on deposits indicating a likelihood of a cut to its medium-term lending facility rate as soon as next week, policy advisors and analysts told MNI. A cut to the MLF and also to the seven-day repo rate would help stabilise growth, said Zhu He, senior fellow at China Finance 40 Forum, speaking after May export data added to disappointing performances by investment and consumption indicators.

CHINA (BBG): China’s Central Bank Governor Reiterates Stable Policy Stance

China’s central bank will keep monetary policy targeted and ensure credit growth is stable, Governor Yi Gang said, keeping the policy stance largely unchanged despite rising calls for more stimulus. Speaking to businesses and banks in Shanghai, Yi said he has confidence the official growth target of around 5% can be achieved this year. Inflation is expected to gradually rebound in the second half of the year, he added.

JAPAN (BBG): BOJ Is Said to See Little Need to Tweak Yield Control Now

Bank of Japan officials see little need to adjust its yield curve control program at a policy meeting next week given improvement in the functioning of the bond market and the smooth shape of the yield curve, according to people familiar with the matter. The officials also recognize that inflation is running stronger than they expected, a factor that raises the chance of the BOJ upgrading its inflation forecast in a quarterly economic outlook report in July, according to the people.

JAPAN (MNI): BOJ May Delay Timing of CPI Fall Below 2%

The Bank of Japan board may consider delaying the timing of their expectation that the core consumer index will fall below 2% from about the middle of this fiscal year to toward the end following stronger price moves, MNI understands. Policymakers may also change their forecasts on the strength of the fall, with expectations it could be smaller and core CPI may not fall much below 2%.

JAPAN (MNI): Signs of Stronger Consumer Price Index - BOJ's Ueda

Bank of Japan Governor Kazuo Ueda said on Friday there are signs the consumer price index is stronger than expected. Ueda told lawmakers that there are uncertainties over the outlook for prices, but he pointed out stronger corporate price-setting activity and high wage hikes this year. He added policymakers will carefully watch various data to examine price moves ahead of the July meeting when the board members review their medium-term economic growth and price views.

AUSTRALIA (MNI): House Price Strength Thwarts RBA Models

The recent strength of the Australian housing market has unexpectedly reduced the drag on household consumption factored into Reserve Bank of Australia models, catching the RBA off-guard and potentially raising the chance rates could move higher if strong house-price growth persists, MNI understands.

TURKEY (BBG): Erdogan Names Ex-Goldman Banker as Turkey Central Bank Head

Turkish President Recep Tayyip Erdogan named former US-based banking executive Hafize Gaye Erkan as his new monetary chief, a move that may mark the end of ultra-low interest rates and constant government interventions to prop up the lira. The announcement, made just after 1:00 am local time on Friday, completes a makeover of Erdogan’s top economic team after he was re-elected last month to extend his two decades in power.

UKRAINE (BBG): Ukraine’s New Tanks See Action as Counteroffensive Underway

Ukraine’s new NATO-standard tanks and fighting vehicles are appearing in battlefield images as military analysts said Kyiv’s long-awaited counteroffensive is underway. German-made Leopard tanks and US Bradley Fighting Vehicles pushing toward the town of Tokmak, in Ukraine’s occupied south, showed up in photographs posted by Russian military bloggers that seem genuine, according to Osint Defender, an online open-source intelligence group that said it geolocated the images and checked for any signs they’d been manipulated.

DATA

NORWAY (MNI): CPI Re-Accelerates in May

• NORWAY MAY CPI +0.5% M/M (FCST +0.3%); APR +1.1% M/M
• NORWAY MAY CPI +6.7% Y/Y (FCST +6.3%); APR +6.4% Y/Y
• NORWAY MAY UNDERLYING CPI +6.7% Y/Y (FCST +6.3%); APR +6.3% Y/Y

Norwegian CPI saw a third consecutive uptick in May, with both headline and core jumping to +6.7% y/y, up 0.3pp and 0.4pp respectively. Prices accelerated by +0.5% m/m (+0.7% for underlying). A renewed surge in food prices and to a lesser extent clothing and apparel drove the bulk of the upside surprise in May. Prices rose across most categories on the month, led by a jump in food (+2.3% m/m), clothing (+2.1%) and restaurants/hotels (+0.9%).

ITALY DATA (MNI): Italy Industrial Production Downturn Intensifies in April

• ITALY APR IP -1.9% M/M, -7.2% Y/Y

Industrial production in Italy declined by 1.9% m/m in April, the fourth consecutive monthly fall and a significant deterioration on the 0.6 m/m decline recorded in March. Compared to April 2022, the decline was 7.2%. The manufacture of wood and paper products, electricity & gas, chemical products and metals were key contributors to this worsening trend, as all these sub-sectors recorded a year-on-year decline exceeding 10%. The weak numbers follow muted April industrial production figures in Germany (up 0.3% m/m, compared to expectations of a 0.6% rise) and stronger than expected figures in France (up 0.8% m/m).

CHINA DATA (MNI): China May CPI Higher, PPI Dips

• CHINA MAY CPI +0.2% Y/Y VS MEDIAN +0.2%; APR +0.1% Y/Y: NBS
• CHINA MAY CPI -0.2% M/M VS -0.1% M/M APR
• CHINA MAY PPI -4.6% Y/Y VS MEDIAN -4.4%; APR -3.6% Y/Y: NBS
• CHINA MAY PPI -0.9% M/M VS -0.5% M/M APR

China's Consumer Price Index gained 0.2% y/y in May, matching consensus and up from April’s 0.1% y/y print, data from the National Bureau of Statistics showed on Friday. Food costs increased 1.0% y/y in May, up from April's 0.4% y/y and contributing 0.34pp to CPI growth. Pork prices, the main CPI driver, declined 3.2% y/y, compared to a 4.0% rise in April. The producer price index declined 4.6% y/y from April's 3.6% y/y drop, according to the NBS. The reading missed the market consensus of a 4.4% y/y decline.

FOREX: NOK on Top as Markets Rush to Price in Tighter Policy

• Unexpected stickiness of core inflation has propped up the NOK to top the G10 table in early Friday trade. CPI-ATE went against forecast, rising to 6.7% vs. Exp. 6.3% on accelerating food price inflation. The subsequent NOK rally accompanied a tightening of rate expectations via NOK FRAs, which are now pricing the tightest monetary policy in Norway of this cycle so far.
  
• The NOK rally has tipped EUR/NOK through the 50-dma support for the first time since Q4 last year, which could represent a meaningful momentum shift for the currency over the medium-term. Focus turns to the June 22nd rate decision and MPR, where an upward revision for rate path expectations now looks inevitable.
  
• JPY sits at the other end of the G10 table, helping USD/JPY rally back above 139.50 having endured losses across Thursday trade. The moves follow a Bloomberg report citing sources that the BoJ see little requirement for a tweak in yield curve control at this juncture.
• The Canadian jobs report takes focus going forward, with markets looking for net change in employment of 21.3k, and an uptick in the unemployment rate to 5.1%. The Fed remain in their pre-meeting media blackout, meaning speeches from ECB's de Cos and Centeno will be watched by markets.

BONDS: Off Their Lows Before the US Joins

• Although Bund and EGBs ticked lower, surprisingly taking their cues from the Norway CPI beat on the cash open, futures contract still trade in the green, with the support noted in Bund back up at 133.45 holding this morning, printed a 133.51 low.
• Peripheral spreads are all tighter, but the focus stays on the continued tightening in the Greek/Bund spread, by another 1.8bps, now eyeing the 120.00bps support.
• Volumes overall are below averages, with Real Money likely on the sidelines.
• UK Gilt futures is outperforming its European counterparts, translating in a 2.6bps tighter spread, but well within the June ranges.
• Still, further tightening in the Gilt/Bund spread will target the June low at 178.96bps, now trading at 179.7bps at the time of typing.
• US Treasuries underperforms and have pared some of yesterday's gains, but are still trading within Yesterday's range, as investors turns their attention to the Fed next week.
• Looking ahead, there's no US data scheduled for the session, while Speakers only includes ECB de Cos and Centeno, but unlikely to hear anything new from these members.

EQUITIES: E-Mini S&Ps Remain Close to Recent Highs

Eurostoxx 50 futures are consolidating and price remains above 4216.00, the May 31 low and a key support. For now, the recent move higher appears to be a correction. The recent breach of support at 4252.00, the May 25 low, highlights a potential bearish threat. The contract has also pierced support at 4233.00, the May 4 low and a key short-term level. Resistance to watch is 4362.00, May 29 high. Clearance of this level would be bullish. S&P E-minis continue to trade inside the recent range. The trend outlook remains bullish and the recent break of resistance at 4244.00, the Feb 2 high, reinforces current conditions. This confirmed a resumption of the uptrend that started in October 2022. The focus is on 4327.50 next, the Aug 16 2022 high (cont). The 50-day EMA, at 4165.06 remains a key support. A break is required to signal a reversal.

• Japan's NIKKEI closed higher by 623.9 pts or +1.97% at 32265.17 and the TOPIX ended 32.82 pts higher or +1.5% at 2224.32.
• Elsewhere, in China the SHANGHAI closed higher by 17.821 pts or +0.55% at 3231.406 and the HANG SENG ended 90.77 pts higher or +0.47% at 19424.96.
• Across Europe, Germany's DAX trades lower by 29.77 pts or -0.19% at 15963.3, FTSE 100 lower by 6.62 pts or -0.09% at 7598.89, CAC 40 down 8.03 pts or -0.11% at 7218.03 and Euro Stoxx 50 down 4.23 pts or -0.1% at 4294.95.
• Dow Jones mini down 86 pts or -0.25% at 33759, S&P 500 mini down 7.5 pts or -0.17% at 4286.5, NASDAQ mini down 8.25 pts or -0.06% at 14478.75.

COMMODITIES: Gold Holds Onto Thursday Gains Though Remains in Technical Bear Cycle

WTI futures continue to trade below key short-term resistance at $75.06, the Jun 5 high. The pullback from this level reinforces a bearish theme. A continuation lower would signal scope for weakness towards $67.03, the May 31 low and key support at $63.90, the May 4 low. Moving average studies remain in a bear mode position highlighting a downtrend. On the upside, a break of resistance at $75.06 is required to highlight a potential bullish theme. The bear cycle in Gold remains intact. The yellow metal traded lower Wednesday and once again pierced trendline support drawn from Nov 3 2022. The trendline intersects at $1955.7. A clear breach of this line would reinforce bearish conditions and open $1903.5, 61.8% of the Feb 28 - May 4 bull cycle. Initial firm resistance is $1985.3, the May 24 high. Clearance of this level would signal a short-term reversal.

• WTI Crude down $0.16 or -0.22% at $71
• Natural Gas down $0.02 or -0.98% at $2.319
• Gold spot down $3.02 or -0.15% at $1964.99
• Copper up $0.95 or +0.25% at $381.8
• Silver up $0.13 or +0.52% at $24.4144
• Platinum down $0.45 or -0.04% at $1021.26