MNI US OPEN - Eurozone GDP, Core Inflation On The High Side

NEWS

MNI FED PREVIEW - MAY 2024: Disinflation Delayed, Not Yet Denied - Updated With Analyst Outlook

Persistently high inflation readings to start the year have shaken the FOMC’s confidence in initiating rate cuts, but the April 30-May 1 meeting is too soon for them to reconsider their easing bias. Though Chair Powell could confirm that a June cut is a doubtful prospect unless major surprises emerge, he is likely to affirm that the FOMC currently sees a higher-for-longer policy as appropriate and sufficient to quell inflation. In other words, rate hikes are not at all the Committee’s base case – though the degree to which Powell plays down this possibility will be key to the market’s takeaway from the meeting.

US/MIDDLE EAST (NYT): Biden Speaks to Leaders of Egypt, Qatar to Press for Hamas’s Agreement on Cease-fire

President Biden spoke on Monday with the leaders of Egypt and Qatar as he sought to increase pressure on Hamas to accept a deal that would result in a temporary cease-fire in the war in Gaza and the release of some of the hostages held there. According to a statement from the office of President Abdel Fattah el-Sisi of Egypt, he and Mr. Biden discussed the negotiations and Egypt’s efforts to broker a cease-fire. They also reiterated their support for a two-state solution, discussed the importance of containing the conflict to the region and emphasized their opposition to a military escalation in the city of Rafah in southern Gaza, which Israel seems poised to invade.

US (BBG): Biden Eyes Russian Uranium Import Ban to Unlock Billions

The Biden administration is considering banning imports of enriched Russian uranium using executive authority as congressional efforts to block the Kremlin’s shipments of the reactor fuel stall, people familiar with the matter said. Officials from the White House National Security Council, the Department of Energy and other corners of the administration have been in talks on limiting Russian uranium imports, including a ban similar to legislation that easily passed the House last year, the people said.

BOJ (MNI): BOJ's Trend Inflation Estimate Rises Across Models

The Bank of Japan analysed that trend inflation estimates have gradually increased in all models, according to the full text of the BOJ April Outlook Report released Tuesday. “The results need to be interpreted with some caution since they largely depend on the assumptions made in the models and as the results may be revised when new data become available,” the BOJ said. The report also noted a variety of perspectives is necessary, including anecdotal information from firms.

CHINA (MNI): China Politburo Flags Policy Support; 3rd Plenum in July

MNI (Singapore) China will continue its expansionary fiscal and monetary policy to cope with weak domestic demand and uncertain external environment, according to a statement of the Politburo meeting of the Central Committee of the Communist Party of China on April 30.Monetary-policy tools, such as interest rates and the reserve requirement ratio, will be used at a flexible pace to reduce overall social financing costs, while fiscal authorities will launch ultra-long special treasuries soon and accelerate the issuance of special local-government bonds, maintaining a necessary strength of fiscal expenditure, the meeting said.

CHINA (MNI): China to Keep Tackling Risks in Real Estate, Debts

MNI (Beijing) China will focus on ensuring the delivery of unfinished housing projects and work on policies to digest existing housing and upgrade new homes to better cater to market demand, the state-run Xinhua New Agency reported following a politburo meeting on Tuesday. Authorities will adhere to city-specific housing policies and consolidate the responsibilities of local governments, developers and financial institutions to safeguard housing delivery, the meeting said.

SOUTH KOREA (MNI): S&P Affirms South Korea at AA; Outlook Stable

The key snippets from S&P's rating update can be found below: "We expect Korea's economic growth to increase to 2.2%, from 1.4% in 2023. Over the next three years, real GDP growth should be sustained at levels close to or above 2% annually." "This relatively strong performance, for a high-income economy, should allow the government to shrink its general government deficit from about 1% of GDP in 2024."

CORPORATE (BBG): Tesla Plans More Job Cuts as Two Senior Executives Leave: Report

Elon Musk is planning hundreds more job cuts across Tesla Inc. as two more senior executives leave the company, according to the Information. Rebecca Tinucci, senior director of the Supercharger group, and Daniel Ho, head of new products, will no longer work at Tesla from Tuesday, according to the report, which cited an internal company memo. In the email, Musk said he would dismiss everyone working for the executives, with a few employees set to be reassigned, including roughly 500 people from Tinucci’s group, the report said.

COMMODITIES (BBG): Iron Ore Storms to Best Month Since 2022 on Outlook for China

Iron ore headed for the biggest monthly gain since late 2022 as Chinese data suggested the economy was gaining traction, and Beijing teased fresh moves to try and resolve the nation’s long-standing property crisis. The steelmaking ingredient traded below $117 a ton in Singapore on Tuesday, but is up by about 16% in April. Chinese factory activity expanded for a second straight month, according to figures released Tuesday, bolstering hopes that an economic rebound is gathering momentum.

DATA

EUROZONE DATA (MNI): Services Inflation Breaks Lower, Core Slightly Higher Than Expected

• EUROZONE APR FLASH HICP +2.4% Y/Y
• EUROZONE Q1 PRELIM FLASH GDP +0.4% Y/Y
• EUROZONE Q1 FLASH GDP +0.3% Q/Q

Eurozone April flash headline printed in line with consensus while core inflation came in a touch above on a rounded basis, in line with MNI's tracking based on the national data released earlier today and yesterday. Headline HICP was 2.4% Y/Y (vs 2.3/2.4% cons; 2.4% prior) and 0.6% M/M (vs 0.6% cons; 0.8% prior). On an unrounded basis, headline was 2.38% Y/Y and 0.59% M/M. Core HICP came in a touch higher than expected at 2.7% Y/Y (vs 2.6% cons; 2.9% prior). This is a marginally bigger surprise than the headline number. On an unrounded basis, core was 2.67% Y/Y and 0.71% M/M. Looking at the individual categories, services inflation finally broke lower in April, coming in at 3.7% Y/Y after 5 consecutive prints at 4.0%.

FRANCE DATA (MNI): France Flash CPI In-Line, Whilst HICP Touch Higher

• FRANCE APR CPI +0.5% M/M, +2.2% Y/Y
• FRANCE APR HICP +0.6% M/M, +2.4% Y/Y
• FRANCE Q1 FLASH GDP +0.2% Q/Q, +1.1% Y/Y
• FRANCE MAR CONSUMER SPENDING +0.4% M/M, +0.5% Y/Y
• FRANCE MAR CONSUMER MANUF SPENDING +0.6% M/M, +0.7% Y/Y

The latest set of national April flash inflation prints from France saw CPI figures come in line with consensus, whilst HICP came in slightly higher than expected. HICP came in at +2.4% Y/Y (vs +2.2% consensus, +2.4% prior) and +0.6% M/M (vs +0.5% M/M consensus, +0.2% M/M prior). CPI came in at +2.2% Y/Y (vs +2.2% Y/Y, +2.3% Y/Y prior) and +0.5% M/M (vs +0.5% M/M consensus, +0.2% M/M prior). The stall in headline compared to March was primarily driven by Services which rose +1.0% M/M (vs +0.0% M/M prior), although on a Y/Y basis it is estimated to have slowed down from +3.2% Y/Y in March to +3.0% Y/Y in April. Note that services make up 51.6% of the national CPI index.

GERMANY APR UE RATE (SA) 5.9% (FCST 5.9%); MAR 5.9% (MNI)
GERMANY APR UE NET CHANGE (SA) +10K; MAR +6K (MNI)
GERMANY APR UE TOTAL (SA) 2.732MN; MAR 2.722MN (MNI)
GERMANY APR JOB VACANCIES (SA) -9K; MAR -7K (MNI)

SPAIN Q1 FLASH GDP +0.7% Q/Q, +2.4% Y/Y (MNI)

ITALY APR FLASH HICP +0.6% M/M, +1% Y/Y (MNI)
ITALY Q1 FLASH GDP +0.3% Q/Q, +0.6% Y/Y (MNI)

UK APR BRC SHOP PRICES -0.3% M/M, +0.8% Y/Y (MNI)
UK FEB M4 MONEY SUPPLY +0.7% M/M, +0.5% Y/Y (MNI)
UK BOE FEB MORTGAGE APPROVALS 61,325 (MNI)

SWISS KOF APR ECONOMIC BAROMETER 101.8 (MNI)

JAPAN DATA (MNI): Japanese Industrial Output Rises in March

• JAPAN MARCH RETAIL SALES +1.2% Y/Y; FEB +4.7%
• JAPAN MARCH RETAIL SALES -1.2% M/M; FEB +1.7%
• JAPAN MARCH INDUSTRIAL OUTPUT +3.8% M/M; FEB -0.6%
• JAPAN MARCH JOBLESS RATE AT 2.6% VS FEB 2.6%
• JAPAN METI FORECAST INDEX: APRIL OUTPUT +4.1% M/M, MAY +4.4%

Industrial output rose 3.8% m/m in March for the first rise in three months following February's 0.6% fall, driven by a rise in automobile and electronics production, data released by the Ministry of Economy, Trade and Industry showed on Tuesday. Production of motor vehicles rose 9.6% m/m in March for the first rise in two months following a 8.1% drop in February and production of electronic parts and devices rose 9.2% in March following the prior month's 0.2% gain.

CHINA DATA (MNI): China April Manufacturing PMI Moderates to 50.4

• CHINA APR MANUFACTURING PMI 50.4 VS 50.8 IN MAR

MNI (Beijing) China's manufacturing Purchasing Managers' Index moderated by 0.4 points to 50.4 in April, expanding above the breakeven 50 level for the second month, driven by improved external demand and rapid expansion in high-end manufacturing amid policy push, data from the National Bureau of Statistics showed Tuesday.

CHINA DATA (MNI): Caixin Apr Manufacturing PMI Hits Over One-Year High

• CHINA APR CAIXIN MANUFACTURING PMI 51.4 VS 51.1 IN MAR

MNI (Beijing) China's Caixin manufacturing PMI registered 51.4 in April, up 0.3 points from March, staying in the expansionary zone above the breakeven 50 mark for a sixth month and hitting the highest level since March 2023, as both external and domestic demand improved, the financial publisher said on Tuesday. Both production and new orders sub-indices continued upward trends, rising to the highest levels since June 2023 and March 2023 respectively in the expansion range.

AUSTRALIA DATA (MNI): Aussie Retail Sales Fall 0.4% M/M in March

• AUSTRALIA MAR RETAIL SALES -0.4% M/M

Australian retail sales fell 0.4% m/m in March, more than the market’s expected 0.2% drop, following February’s 0.2% rise, data from the Australian Bureau of Statistics showed Tuesday. “Underlying retail turnover has been flat for the past six months and was up only 0.8% compared to March 2023," noted Ben Dorber, head of retail statistics at the ABS. "Outside of the pandemic period and introduction of the GST, this is the weakest growth on record when comparing turnover to the same time in the previous year."

FOREX: Antipodean FX Relinquish Monday Gains, US Data Awaited

• EURUSD has had a brief bout of strength to session highs following the broadly in line Eurozone CPI data. The pair printed up to 1.0727, however, momentum has been subdued as we break above a narrow overnight range.
• Solid gains for the USD index overnight have been eroded in early European trade, although the DXY remains 0.15% in the green as we approach the NY crossover.
• USDJPY has climbed, but has yet to reclaim the 157.00 level. We were last near 156.90, around 0.35% weaker in yen terms. The market is testing the waters post yesterday's strong rebound amid intervention speculation. Earlier comments from Chief FX Diplomat Kanda reiterated the authorities are ready to deal with FX at any time of the day. Mixed Japan data outcomes didn't shift FX sentiment.
• Weaker-than-expected data overnight has weighed on both the Australian dollar and Kiwi, placing a temporary halt to the bullish developing sentiment for AUDUSD. However, the current bullish phase for the pair remains intact despite today’s pullback. Furthermore, signs of expedited easing and bond issuance in the latest Politburo report should be AUD supportive at the margin.
• Overall, resistance at 0.6528, the 50-day EMA, has been breached and the clear break highlights a stronger reversal that signals scope for a climb towards 0.6644, the Apr 9 high. Initial support comes in at 0.6441.
• Later US Q1 ECI, February house prices, April MNI Chicago PMI and consumer confidence all print ahead of Wednesday’s Fed decision and Friday’s employment report. Canadian GDP for February is also scheduled on Tuesday.

EGBS: Weaker Following Firmer-Than-Expected Core Inflation and GDP

Core/semi-core EGBs briefly reached new intraday lows after the Eurozone April flash core inflation printed above consensus at 2.7% Y/Y (vs 2.6% prior).

• This morning’s weakness was initiated following the higher-than-expected French flash inflation data, with stronger-than-expected Q1 GDP prints from the four largest EZ economies also pressuring the space.
• Those GDP figures helped Eurozone-wide GDP print above consensus at 0.3% Q/Q (vs 0.1% cons).
• Bunds are -29 at 130.56, but remain comfortably within yesterday’s range. The technical trend cycle remains bearish.
• 10-year periphery spreads to Bunds are a touch wider, with the hawkish inflation data reaction seemingly outweighing the positive growth readings.
• We now await the ECB’s seasonally adjusted inflation data, to gauge core inflation momentum in April. However, general consensus is today’s data should still not stand in the way of the widely expected June ECB cut.

GILTS: A Little Softer, Outperforming Bunds

The slightly firmer-than-expected Eurozone core CPI release and presence of the July-29 gilt auction apply some pressure in recent trade, although gilts still outperform Bunds across the curve.

• Futures remain comfortably within yesterday’s range, last -20 at 96.29 (96.24-96.50 range).
• The contract’s bearish technical backdrop remains intact. The recent recovery has not threatened initial resistance levels, while moving average studies have crossed into bear mode.
• Initial meaningful support is seen at the April 25 low (95.36), some distance from prevailing levels.
• Cash gilt yields are ~1bp higher across the curve on the day.
• Note that the upsizing of the gilt auction (coinciding with the launch of a new line) skews the cover ratio lower when looking at comparables, while the tail was wider than that seen at the previous 5-Year offering (as we suggested ahead of the auction).
• SONIA futures generally track gilts lower, last +0.5 to -3.5 through the blues.
• BoE-dated OIS shows ~43bp of ’24 cuts vs. ~46bp early today.
• The BoE will publish its quarterly APF report at 12:00 London.

EQUITIES: Short-Term Trend in E-Mini S&P Bearish, Latest Recovery Appears Corrective

Eurostoxx 50 futures are holding on to their recent gains from 4762.00, the Apr 19 low. The contract has breached the 20-day EMA and resistance at 4990.00, the Apr 15 high. This continues to highlight a potentially stronger reversal and the end of the correction between Apr 2 - 19. An extension higher would expose the bull trigger at 5079.00, the Apr 2 high. Key support lies at 4762.00. Initial support to watch is 4877.40, the 50-day EMA. The S/T trend condition in S&P E-Minis remains bearish and the latest recovery appears to be a correction. The contract has recently traded through the 50-day EMA, signalling scope for a continuation lower. A resumption of the bear leg would open 4907.57, a Fibonacci retracement. Firm resistance at 5139.03, the 20-day EMA, has been pierced, a clear break would instead signal a reversal and expose key resistance at 5333.50, the Apr 1 high.

• Japan's NIKKEI closed higher by 470.9 pts or +1.24% at 38405.66 and the TOPIX ended 56.69 pts higher or +2.11% at 2743.17.
• Elsewhere, in China the SHANGHAI closed lower by 8.219 pts or -0.26% at 3104.824 and the HANG SENG ended 16.12 pts higher or +0.09% at 17763.03.
• Across Europe, Germany's DAX trades lower by 64.61 pts or -0.36% at 18051.91, FTSE 100 higher by 28.6 pts or +0.35% at 8175.14, CAC 40 down 13.95 pts or -0.17% at 8048.88 and Euro Stoxx 50 down 16.18 pts or -0.32% at 4963.69.
• Dow Jones mini down 29 pts or -0.08% at 38530, S&P 500 mini down 5.75 pts or -0.11% at 5141.25, NASDAQ mini down 13.5 pts or -0.08% at 17890.5.

COMMODITIES: WTI Futures Still Trading Above Key Support at $81.20

WTI futures are trading lower but for now remain above key short-term support at $81.20, the 50-day EMA. The recent move down between Apr 12 - 22, highlights a corrective phase and a clear break of the 50-day average would signal scope for a deeper retracement towards $76.07, the Mar 11 low. On the upside, key resistance and the bull trigger has been defined at $86.97, the Apr 12 high. A breach of this level would resume the uptrend. Gold remains in consolidation mode and is trading closer to its recent lows. The precious metal is testing the 20-day EMA and this highlights the start of a possible corrective cycle. A continuation lower would signal scope for an extension towards $2237.6, the 50-day EMA. Note that a short-term bear cycle would allow a significant overbought condition to unwind. Key resistance and the bull trigger is at $2431.5, the recent Apr 12 high.

• WTI Crude up $0.11 or +0.13% at $82.74
• Natural Gas up $0.06 or +2.71% at $2.084
• Gold spot down $22.24 or -0.95% at $2313.08
• Copper down $3.9 or -0.83% at $463.25
• Silver down $0.52 or -1.91% at $26.6245
• Platinum down $10.54 or -1.11% at $941.91