MNI US OPEN - Eurozone Q1 GDP Downgraded in Final Release

NEWS

US (BBG): Biden Vetoes Bill to Repeal Student-Debt Cancellation Plan

President Joe Biden vetoed a bill designed to kill the administration’s sweeping student-debt relief plan on Wednesday. The legislation, initiated by congressional Republicans, would have thwarted the president’s executive action to cancel billions of dollars in student debt and eliminate the government’s restructured repayment program. The bill passed with support from a small contingent of Democrats earlier this month, undermining support for the policy within the president’s own party.

US (WaPo): Pence Unleashes Sharp Attacks on Trump as He Launches White House Bid

Mike Pence on Wednesday launched his run for president, making his most sweeping case yet against Donald Trump's fitness for office and beginning an extraordinary campaign against his former boss more than two years after the insurrection at the U.S. Capitol upended their relationship. In his kickoff speech, the former vice president hit Trump on several fronts, including the Jan. 6, 2021, attack on the Capitol and Trump's attempts to overturn his 2020 election loss.

US (BBG): McCarthy Sends Lawmakers Home, Cites Hard-Liner Blockade ‘Chaos’

House Speaker Kevin McCarthy called off votes for the remainder of the week and sent lawmakers home as a revolt by Republican hard-liners halted business in the chamber for a second day. The blockade by a band of 11 ultra-conservatives heightened tensions among Republicans following the speaker’s backing of a compromise with the White House to avert a US debt default. It also showcased their capacity to grind the chamber to a halt even if holding off, for now, on a push for McCarthy’s ouster.

FRANCE (MNI): Opposition in Final Roll of the Dice to Stop Pension Reforms

The French National Assembly is currently debating a bill put forward by the centrist opposition LIOT group that seeks to repeal the pension reforms passed by President Emmanuel Macron's gov't in the spring. The legislation is seen as a last-gasp effort to halt the increase in the pension age from 62 to 64. Broad expectations are that the bill will not pass, with only LIOT, the far-left NUPES alliance, and the far-right Rassembelement National of Marine Le Pen offering backing.

CHINA (MNI): PBOC to Keep Yuan Stable - Deputy Gov. Pan

The People Bank of China can keep the yuan stable with sufficient policy tools and expects the U.S dollar to lose momentum in future, said Deputy Governor Pan Gongsheng Thursday during the Lujiazui Forum in Shanghai. Conditions for a steady yuan remain thanks to economic fundamentals based on China’s upward trend and an possible U.S. recession, which will be supportive. USD will weaken as Federal Reserve’s interest-rate cycle ends, he said.

CHINA (MNI): PBOC to Provide Cheap Funding for Green Growth

The People’s Bank of China will continue to provide low-cost funds to support carbon-emission reduction and green-energy expansion to meet transition targets, said Governor Yi Gang Thursday during the Lujiazui Forum in Shanghai The PBOC launched two special monetary policy tool incentives that targeted carbon-emission reduction and clean-coal technology, which totaled over CNY400 billion at the end of April.

CHINA (MNI): China Plans Export Policy Support - NFRA Head

Authorities will improve access to credit and insurance services to help exporters stabilise orders, said Li Yunze, head of the National Financial Regulatory Administration. Li, speaking at the Lu Jia Zui Forum on Thursday, said China’s economy was still recovering but had shown strong resilience. Looking forward, the NFRA will take proactive measures to prevent financial risks and China should remain vigilant following the recent international banking crisis, Li said.

RBI (MNI): RBI's Das Stresses RBI Action is a Pause, Not Pivot

The RBI delivered a widely expected unchanged rate decision, with Governor Das stressing that the RBI’s actions are a pause in policy, not a pivot - with their aim remaining to align inflation to 4%. Das admits that inflation is not slowing as fast as growth is nearing the RBI's aims, and wants inflation to align with 4% on a durable basis.

PHILIPPINES (MNI): BSP to Cut RRR by 250bps, But Stresses No Change in MonPol

The Philippine central bank cuts the reserve requirement ratio for universal, commercial and big banks by 250bps to 9.50%.In accompanying comments, the BSP add that the RRR cut does not constitute any shift in the BSP's monpol settings or stance. They add that they continue to prioritize bringing inflation back toward a target-consistent path. Local currency markets closed - but muted response in outright forward prices - 1m NDF trades mid-range at 56.2193 at typing.

RUSSIA (BBG): Russia’s Elite Growing Increasingly Pessimistic Over War in Ukraine

Bloomberg report that a mood of deepening gloom is gripping Russia’s elite about prospects for President Putin’s war in Ukraine, with even the most optimistic seeing a “frozen” conflict as the best available outcome now for the Kremlin. Many within the political and business elite are tired of the war and want it to stop, though they doubt Putin will halt the fighting, according to people familiar with the situation.

UKRAINE (NYT): Ukraine’s Forces Make Minor Gains Near Bakhmut, but the Front Lines Hardly Shift

Ukrainian officials said on Wednesday that their troops had made advances near the city of Bakhmut, while Russian officials claimed that they had thwarted Ukrainian attacks elsewhere in eastern Ukraine. There has been no major change on the war’s front line despite a recent uptick in fighting that some American officials see as a harbinger of Kyiv’s long-anticipated counteroffensive.

CORPORATE (BBG): Fears of More Rate Hikes Spur $8 Billion Bout of Asia Issuance

Asian corporates raised $8 billion from bond sales in the first seven days of June, the strongest start to a month since March as markets rethink the outlook for further US rate hikes. The large majority of issuance came from banks, particularly from Australia, as concerns about a crisis for the financial sector recede. Tighter premiums have provided a window for borrowers especially as recent central-bank meetings have fueled concerns that rate increases aren’t over yet.

CORPORATE (BBG): Amazon Gets EU Court Boost in Fight Over €250 Million Tax Bill

Amazon.com Inc. won a boost in its fight with antitrust regulators over a €250 million ($268 million) bill amid a European Union crackdown on allegedly unfair tax breaks for multinational companies. The European Commission “erred in deciding that Luxembourg had granted unauthorized state aid to Amazon in the form of tax advantages,” Advocate General Juliane Kokott of the EU Court of Justice said in a non-binding opinion on Thursday. A final ruling will come in the next few months.

DATA

EUROZONE DATA (MNI): EZ Q1 GDP Downgraded to -0.1% Q/Q

• EUROZONE Q1 FINAL GDP -0.1% Q/Q (FCST 0.0% / FLASH +0.1%); Q4 -0.1% Q/Q
• EUROZONE Q1 FINAL GDP +1.0% Y/Y (FCST +1.2% / FLASH +1.3%); Q4 +1.8% Y/Y

Eurozone Q1 GDP was revised downwards to -0.1% q/q from +0.1% q/q initially in today's final release. This is now lower than the +0.1% q/q initially forecasted by the March ECB macroeconomic projections. The Bloomberg consensus was looking for a flat reading, however -0.1% was on the table. Q1 GDP was 0.3pp below flash estimates, at +1.0% y/y. The negative Q/Q euro-area reading will have largely been downgraded due to the surprise downward revision of German final Q1 GDP to -0.3% q/q, from 0.0% estimated in the flash. Ireland also saw a marked downgrade, to -4.6% q/q from -2.7% q/q.

JAPAN DATA (MNI): Japan Q1 GDP Revised Higher On Stronger Capex

• JAPAN Q1 ANNUALIZED GDP REV +2.7%; PRELIM +1.6%; MEDIAN +1.8%
• JAPAN Q1 GDP REV +0.7% Q/Q; PRELIM +0.4%; MEDIAN +0.5%
• JAPAN Q1 CAPEX REV +1.4% Q/Q; PRELIM +0.9%; MEDIAN +1.3%

Japan's economy grew 0.7% q/q or 2.7% annualised in Q1, a faster pace than expectations as capital investment revised up from initial estimates, according to second preliminary data released by the Cabinet Office Thursday. The first preliminary estimates had Q1 GDP at 0.4% q/q and 1.6% annualised. In the revised data, capital investment rose 1.4% q/q, revised up from 0.9% in the preliminary release. The positive contribution from capital investments was unrevised at 0.2pp.

JAPAN DATA (MNI): Japan May Outlook Index Falls, Sentiment Gains

Japan's sentiment index's posted its fourth straight rise in May to a seasonally adjusted 55 from April's 54.6, while the the two-three month outlook index fell 1.3 points to 54.4, its first drop in six months, according to the the Cabinet Office's Economy Watchers' report published Thursday.

AUSTRALIA DATA (MNI): Commodities Weigh On Exports, But Trade Remains Solid

• AUSTRALIA APR TRADE BALANCE A$+11158 (MNI)

The April trade surplus narrowed more than expected to $11.16bn from a downwardly-revised $14.82bn driven by weaker exports but still rising imports. It remains elevated and within the range seen since 2021. The series is nominal and so was impacted by declining commodity prices. Exports fell 5% m/m after rising 4.1% due to weaker metals ores and minerals. While goods exports were down 7% m/m after +4.4%, services rose 7.8% (Mar +2.4%) with tourism up 13.4%.

FOREX: Greenback Fade Tilts Major Pairs Toward Weds Highs

• The softer USD outlook from the off has helped support most major pairs early Thursday, with EUR/USD building a base above the 1.07 handle and NZD/USD showing back above the 0.6050 that failed to support prices yesterday.
• For now, the moves are somewhat shallow are markets tread water ahead of US data releases later Thursday and continue to digest the surprisingly hawkish turnouts from the Australian and Canadian rate decisions earlier in the week.
• USDJPY sits just above session lows at the NY crossover, as markets continue to partially pullback the gains posted Wednesday. For now, spot holds within this week's traded range (139.03/140.45), with sizeable option interest at the Y140.00 level potentially limiting losses at this stage.
• USD/CNH broke through 7.1500 late yesterday, and progressed further to touch another fresh YtD high of 7.1557 overnight. CNH has managed to regain some poise since, however bulls remain in control, even though the cross remains technically overbought. Initial resistance comes in at the top of the trend channel (7.1679).
• Weekly jobless claims data provides the highlight of the NY docket today. It is also worth noting that post-meeting comments from BoC Deputy Governor Beaudry will probably get more attention than usual, after the Bank caught most off guard yesterday.
• The observance of the Corpus Christi holiday may limit liquidity a little today, with some participants across Germany, Spain, Portugal, Austria & others set to take a holiday.

BONDS: Short-End Yields Retrace as BoC Hike Implications Digested

Treasury, Bund and Gilt futures are weaker but have recovered slightly after hitting fresh June lows in early European trade Thursday. The major curves are twist steepening, after some bear flattening seen earlier on.

• Short end yields have pulled back from multi-week/month highs as markets continue to digest the implications of Wednesday's surprise hike from the BoC which triggered selling across the global rates complex. (For this reason, an appearance by BoC Deputy Gov Beaudry later today will garner more attention than would usually be the case).
• Rest-of-cycle rate hike expectations have pulled back slightly on the day (led by the BoE, -5bp after Wed's +7bp).
• Downwardly-revised GDP data showed the eurozone was in technical recession in Q4-Q1, but there was no reaction as this had been telegraphed by earlier national (mainly German) readings.
• US jobless claims are the scheduled highlight for the remainder of the session, with few speakers of note, and much of Europe on holiday.
• A much quieter session for issuance this morning saw merely an Irish 10-30Y auction. There will be attention later in the session on Treasury's announcements for next week's auctions, including a new 6-week cash management bill.

Latest levels:

• Sep US 10Y futures (TY) down 4/32 at 113-03 (L: 112-30 / H: 113-7.5)
• Sep Bund futures (RX) down 21 ticks at 133.28 (L: 132.97 / H: 133.5)
• Sep Gilt futures (G) down 50 ticks at 95.7 (L: 95.61 / H: 95.94)
• Italy / German 10-Yr spread 2.6bps tighter at 180.1bps

EQUITIES: E-Mini S&Ps Conditions Still Bullish Following Recent Break of Bull Trigger

Eurostoxx 50 futures continue to trade above 4216.00, the May 31 low and a key support. For now, the recent move higher appears to be a correction. Price action last week reinforced a bearish theme - support at 4252.00, the May 25 low, has been breached. 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, a break would be a bullish development. S&P E-minis are in a consolidation mode but the trend condition is bullish following recent gains. Resistance at 4244.00, Feb 2 high and a bull trigger, has recently been cleared. The break reinforces bullish conditions and confirms 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 4155.00 remains a key support. A break is required to signal a reversal.

• Japan's NIKKEI closed lower by 272.47 pts or -0.85% at 31641.27 and the TOPIX ended 14.8 pts lower or -0.67% at 2191.5.
• Elsewhere, in China the SHANGHAI closed higher by 15.826 pts or +0.49% at 3213.585 and the HANG SENG ended 47.18 pts higher or +0.25% at 19299.18.
• Across Europe, Germany's DAX trades higher by 30.79 pts or +0.19% at 15991.17, FTSE 100 lower by 10.53 pts or -0.14% at 7614.46, CAC 40 up 18.67 pts or +0.26% at 7221.6 and Euro Stoxx 50 up 5.26 pts or +0.12% at 4297.21.
• Dow Jones mini up 14 pts or +0.04% at 33722, S&P 500 mini up 1.75 pts or +0.04% at 4276.25, NASDAQ mini down 4.5 pts or -0.03% at 14327.

COMMODITIES: Gold Trades Below Trendline Support at $1953.5

WTI futures traded higher Monday, piercing resistance at $74.73, the May 24 high. However, the contract failed to hold on to its gains. A clear break of $74.73 would strengthen a bullish condition and signal scope for an extension higher. This would open $76.74, the Apr 28 high. For bears, a stronger reversal would instead highlight a top and expose key support at $63.90, the May 4 low. First support to watch is $70.00, the Jun 2 low. The bear cycle in Gold remains intact. The yellow metal traded lower yesterday and has once again pierced trendline support drawn from Nov 3 2022. The trendline intersects at $1953.5. 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 $0.14 or -0.19% at $72.36
• Natural Gas down $0.01 or -0.43% at $2.32
• Gold spot up $7.86 or +0.41% at $1947.79
• Copper up $0.05 or +0.01% at $375.9
• Silver up $0.3 or +1.26% at $23.7055
• Platinum up $1.27 or +0.12% at $1022.1