MNI US Open: Durable Goods And Jobless Claims In Focus

EXECUTIVE SUMMARY:

• ITALIAN BUSINESS AND CONSUMER SENTIMENT UP IN MAY
• RIKSBANK HAS STARTED CAUTIOUSLY APPROACHING EXIT: SKINGSLEY
• CHINA SAID TO EASE OFFSHORE FUNDING LIMIT FOR FOREIGN BANKS
• BANK OF JAPAN SEES BANKS' DOLLAR FUNDING STAYING STABLE

Fig. 1: Rising Usage Of Fed Overnight Reverse Repos

Source: NY Fed, MNI

NEWS:

RIKSBANK (BBG): Riksbank's asset purchases that are declining quarter by quarter is evidence that the central bank has already started taking cautious steps toward the exit even as inflation pressure is still "too low," First Deputy Governor Cecilia Skingsley says at online seminar arranged by Dagens Industri. Says "it's a hard trade-off" between short-term support measures that support the recovery and unwinding measures to avoid increasing vulnerabilities and stability risks.

CHINA (BBG): China's central bank raised the limit on how much smaller lenders and foreign banks operating in the country can borrow offshore, a move that will ease a funding shortfall and give a push to expansion plans for firms such as HSBC Holdings Plc.Their ability to borrow outside of China was expanded this week after the People's Bank of China raised the leverage ratio for such funding to 2 from 0.8 for institutions with capital of less than 100 billion yuan ($15.6 billion), said people familiar with the decision, who asked not to be identified as the matter is private. Qualified banks will be given a 10 billion yuan initial quota, said the people.

B.O.J. (MNI): Bank of Japan officials see just a slight risk that the huge fiscal spending by the U.S. government will make it more difficult for commercial banks there to raise dollar funds unless demand for the greenback spikes due to unstable financial markets, MNI understands. For full article contact sales@marketnews.com

B.O.J. (MNI): The balance of ETF (exchange-traded fund) held by the Bank of Japan rose to JPY35.9 trillion at the end of March from JPY29.7 trillion a year earlier, the central bank said Thursday, with unrealized profits at a record high JPY15.44 trillion, up sharply up from JPY308.1 billion.

E.U. (BBG): German Foreign Minister Heiko Maas says EU won't be satisfied with "small sanctions steps" and will target "economic structures and payments traffic" in Belarus and make sure they have a substantial effect. "We will monitor what impact this has in Belarus, whether Lukashenko backs down in any way": Maas to reporters before talks with EU counterparts in Lisbon. "If that's not the case then it's to be expected that this is just the beginning of an extensive and lengthy spiral of sanctions"

E.U.: Following the approval of the 'Own Resources' decision of the EU's Recovery and Resilience Fund by the National Assembly of Hungary and the Romanian Senate yesterday, there are only two member states yet to approve the plan that would allow for the disbursement of EUR750bn for COVID-19 relief: Austria and Poland. On 25 May, Paola Tamma at Politico tweeted the following: "Recovery fund update: Netherlands senate adopts Own Resources Decision w 45 yays, 23 nays. Romania & Hungary vote on it tomorrow (RO needs 2/3 majority=support of opposition PSD); Austria & Poland upper chambers vote on it Thursday. If they all pass it, Commission can start borrowing € in June=1mo ahead of sked"

FRANCE (BBG): French Finance Minister Bruno Le Maire says the budget deficit will be more than 9% of economic output in 2021 as the government plans another 15 billion euros ($18.3 billion) of spending to avoid a cliff-edge in support for businesses"We will have a deficit above 9% because we are only gradually withdrawing aid. If we have strong growth that will allow us to quickly reduce the deficit in coming years," Le Maire says on France Inter radio.

GERMANY: Prospects of the economy reopening and vaccinations gaining momentum are having a positive effect on the labour market, the Munich-based Ifo institute said Thursday. German firms plan to increase their staff levels further, the Ifo Employment barometer suggested, as it rose to 100.2 in May, its highest level since June 2019. Companies hiring intentions rose steadily in the manufacturing sector over the last year, while the electrical and electronics industries have a particularly high need for new staff. Service sector employee needs increased sharply with logistic firms and IT service providers leading the way. In trade, companies were more optimistic towards hiring new staff, due to the planned easing of restrictions.

BANK OF KOREA: The Bank of Korea held the base rate at the historical low of 0.5% citing uncertainties around covid and modest price pressures from demand even as it raised its growth and inflation forecasts for the year. While the domestic recovery is expected to strengthen and inflation would remain high for some time, the board will maintain its accommodative stance as "there are underlying uncertainties surrounding the path of COVID-19 and inflationary pressures on the demand side are forecast to be modest," the bank said in its statement following the decision.

DATA:

LOOK AHEAD: