EXECUTIVE SUMMARY
- FED’S DALY SAYS CONFIDENCE ON INFLATION GROWING, NOT THERE YET
- VP CANDIDATE VANCE COULD PROVIDE TRUMP WITH CRUCIAL 'RUST BELT' BOOST
- JAPAN LIKELY SPENT $13.5 BILLION ON YEN INTERVENTION ON FRIDAY
- PBOC CASH INJECTION SPIKES AMID TAX PAYMENTS, RATE FOCUS
MNI (LONDON) - Figure 1: PBOC injects most amount of cash into banking system via OMOs since January
Source: MNI/Bloomberg
NEWS
MNI CANADA CPI PREVIEW - JULY 2024: July Cut 80% Priced But Still in the Balance
Canada CPI released today at 0830ET. Consensus sees headline easing two tenths to 2.7% Y/Y in June, in a close call with 2.8%. The BoC’s preferred core measures are seen slowing 0.1pps to 2.75% Y/Y after May surprised higher following four softer prints through January to April. Limited analyst estimates imply a three-month core rate still around the 2% target mid-point. Softer US factors and a further push higher in the Canadian unemployment rate have seen markets price 20bp of cuts for next week’s BoC meeting, in what would be back-to-back cuts.
MNI ECB PREVIEW - JULY 2024: July Hold, September Cut
With no material developments on the data front since June and various GC members playing up the importance of quarterly projection meetings, the ECB will keep policy rates unchanged this week. Although the ECB has previously shown that its data dependence and meeting-by-meeting approach has a degree of inbuilt flexibility (as was the case when steering markets to expect the June cut), there is no need to pre-commit to a September cut at this juncture. Given the stickiness of domestic inflationary pressures – namely service prices – we continue to caution that a ‘one-and-done’ is a small, but still significant, risk for 2024.
FED (BBG): Fed’s Daly Says Confidence on Inflation Growing, Not There Yet
Federal Reserve Bank of San Francisco President Mary Daly said inflation is coming down in a way that bolsters confidence it’s on its way to 2%. “Inflation is coming down and it’s doing so in a way that confidence is growing that we’re getting nearer a sustainable pace of getting inflation back down to 2%,” Daly said Monday at an event in Utah. While the economy is slowing and policymakers should pay attention to labor market risks now as well as inflation, “we have a lot more information to get before we can make any real determination,” the San Francisco Fed chief said.
US (BBG): Trump Makes Grand Entrance With Bandaged Ear After Shooting
Donald Trump made his first public appearance since getting shot in an assassination attempt, with a white bandage covering his right ear as Republicans gathered to nominate him as their presidential candidate for the third time. The former president entered Fiserv Forum in Milwaukee on Monday to a standing ovation that lasted several minutes, during the Republican National Committee’s convention. Trump didn’t speak, but the through-line of his populist doctrine was evident, from tapping Vance to the spate of speakers - which ranged from business executives to the head of the influential Teamsters union. They made the case for Trump’s approach with pledges to renew expiring tax cuts, slash regulations and hit other countries - both allies and adversaries - with tariffs.
US (BBG): VP Candidate Vance Could Provide Trump With Crucial 'Rust Belt' Boost
Former President Donald Trump's announcement on 15 July that freshman US Senator from Ohio JD Vance would be his vice presidential running mate on the Republican ticket in November could prove crucial in determining the outcome of the election. Vance, an author-turned-venture capitalist who grew up in poverty in post-industrial Ohio, was at the time of Trump's election in 2016 a vocal critic. He called Trump 'reprehensible', but has completed a full 180-degree turn to being one of the former president's most vociferous backers. He won Ohio's US Senate seat vacated by Republican Rob Portman in 2022 thanks to the backing of Trump and the 'MAGA movement'.
US (BBG): Biden Urges National Rent Control for Corporate Landlords
President Joe Biden is calling on Congress to pass a form of national rent control for some 20 million apartment units nationwide, a dramatic federal intervention in the housing market on behalf of current tenants. The proposal would give large landlords a choice: Either they agree to cap rent hikes at no more than 5% per year, or they forfeit federal tax breaks coveted by rental property owners. The plan is an effort to respond to Americans' frustrations about high housing costs, which have hurt Biden's standing among voters.
US (BBG): Elon Musk to Give $45 Million a Month to Pro-Trump Super PAC
Elon Musk is pledging to pour $45 million a month into a pro-Donald Trump political group, a move that would flood the Republican nominee’s reelection effort with cash through the November election. Musk’s planned cash infusion could help build Trump’s fundraising advantage over President Joe Biden, who has suffered from a donor revolt in recent weeks, with some calling for him to step aside for a new nominee. The billionaire entrepreneur endorsed Trump in a post on X after the former president was wounded while addressing a rally in Butler, Pennsylvania, on Saturday evening.
JAPAN (BBG): Japan Likely Spent $13.5 Billion on Yen Intervention on Friday
Japan likely stepped into the currency market for a second straight day on Friday, a Bloomberg analysis of the central bank’s current account indicates. Tokyo’s latest market entry was likely around ¥2.14 trillion ($13.5 billion), based on a comparison of Bank of Japan current account data and money broker forecasts. The suspected second intervention, if confirmed, would be a fresh example of the government conducting a follow-up move after a larger-scale operation to keep traders on alert. Bloomberg analysis of the central bank’s current account and money broker estimates earlier indicated that a two-punch operation occurred in late April and early May.
FRANCE (MNI): NFP Struggles on PM Name as Macron Prepares to Accept Gov't Resignation
President Emmanuel Macron is set to convene a meeting of the Council of Ministers at 1130CET (0530ET, 1030BST) where he could accept the resignation of PM Gabriel Attal and his gov't. It would not see an immediate replacement, but Attal and his cabinet would remain in place in a caretaker position until at least the conclusion of the games of the XXXIII Olympiad on 11 August. Le Monde: "There is no legal text that specifically defines what a resigning government can or cannot do, and its ministers have in principle much more limited power than a fully-fledged government. However, they remain temporarily in office to ensure the continuity of the State, its services..."
UK/CHINA (BBG): China Poses Deadly Threat to UK, Starmer Defense Adviser Warns
China poses a “deadly” threat to the UK, the former NATO secretary-general appointed by Prime Minister Keir Starmer to lead a strategic review of Britain’s defense posture said. “We’re confronted by a deadly quartet of nations increasingly working together,” George Robertson told journalists as he launched the review, remarks confirmed by the Ministry of Defence. He named Russia, China, Iran and North Korea as posing lethal threats to the UK.
CHINA (BBG): PBOC Cash Injection Spikes Amid Tax Payments, Rate Focus
China’s central bank injected the most amount of cash to its banking system since January via its daily operations, to keep liquidity plentiful as tax payments mount and the country’s leaders meet to set the economic agenda. The People’s Bank of China injected a net 674 billion yuan ($93 billion) via reverse repurchase operations on Tuesday. The operation was aimed at offsetting the impact of tax season and keeping banking liquidity reasonably ample, it said.
CHINA (MNI): China Likely to Ease Local Fiscal Pressure by Reforms
MNI (Beijing) China looks set to increase the share of taxes raised by local governments and reduce their responsibilities for spending, advisors told MNI, with some pointing to consumption tax as a focus of fiscal and tax reforms likely to be announced at the Communist Party’s Third Plenum this week. Local governments’ reliance on land sales has been laid bare by the property slump of the past three years, with revenues sliding to CNY5.8 trillion last year from a 2021 peak of CNY8.7 trillion.
CHINA (BBG): Hong Kong Employees at China Financial Firms Face Pay Clawbacks
Some of China’s largest state-backed financial firms are asking employees in Hong Kong to return a portion of their pay, extending President Xi Jinping’s “common prosperity” campaign to the offshore business hub. Some Hong Kong-based executives and even former employees at China Everbright Group and China Huarong International Holdings Ltd. have been asked to pay back part of their past bonus in recent months, according to people familiar with the matter, who asked not to be identified discussing private information.
COMMODITIES (BBG): Iron Ore Declines as Supplies Abound and China Growth Falters
Iron ore fell on investor concerns weak Chinese demand will not hold up against an incoming surplus of global supplies. Rio Tinto Group reported a 1.5% rise in second-quarter shipments of iron ore from a year earlier, while Brazil exported an average of 1.66 million metric tons a day in the first ten business days of July, up 14% from the full-month pace of July 2023.
DATA
EUROZONE DATA (MNI): Q2 Sees Pick-Up in Consumer Loan Demand - ECB BLS
- ECB Q2 ENTERPRISE CREDIT STANDARD +3
- ECB Q2 CONSUMER CREDIT STANDARDS +6
Euro area credit standards were broadly unchanged at tight levels in Q2 2024, with loan demand continuing to decline for firms, the latest ECB Bank Lending Survey showed, albeit at a slower pace than in Q1. However, loan demand for households picked up for the first time since 2022, despite a further modest net tightening of standards. Looking ahead, banks across the euro area expect a moderate net tightening for loans to firms and unchanged credit standards for loans to households in Q3. Credit standards for firms displayed some heterogeneity across economic sectors, tightening strongly in commercial real estate.
GERMANY JUL ZEW CURRENT CONDITIONS -68.9 (MNI)
GERMANY ZEW JUL ECONOMIC EXPECTATIONS 41.8 (MNI)
FOREX: Early USD Bid Fades, While BoJ Accounts Confirm 2nd Phase of Intervention
- JPY trades more poorly, slipping against all others in G10 as markets continue to reverse the much broader impact of heavily suspected BoJ intervention on two occasions last week. USD/JPY has traded back above the 50-dma, and the release of daily BoJ accounts likely confirms intervention amounting to Y5.6trl across two phases last week - still significant, but of smaller scale relative to April/May this year.
- Early USD strength has reversed across the European morning, as the pull lower in the belly of the US curve undermines the greenback. 10y US yields have slipped through both the Monday and Friday lows, prompting the recovery across both EUR/USD and GBP/USD.
- The standout across G10 is now CHF, which is firmer against all others in G10 - NZD/CHF is now fast approaching several layers of key support at 0.5407 and 5397 - the mid-June low and 200-dma respectively. Weakness through here would open lowest level since early May.
- Focus for the remainder of Tuesday trade turns to Canada's June CPI and the US retail sales release, expected to decline by 0.3% across the month but fare better ex-autos and ex-autos and gas.
- The central bank speaker slate revolves around Fed's Kugler - who appears after the London close at an NABE conference on challenges to economic measurement. Kugler, a permanent voter on the FOMC, last spoke in June and warned against discounting upside risks to inflation, stating the need to see more progress on wage moderation.
EGBS: Bunds Just Off Intraday Highs Following ZEW, EZ Trade
Bunds sit a little shy of intraday highs, with a slightly stronger-than-expected German ZEW survey offset somewhat by the lower-than-expected Eurozone trade balance for May.
- Bund futures remain +36 at 132.32, with first resistance seen at 132.51 (76.4% retracement of the Jun 14 - Jul 3 bear leg). Clearance of this level would expose 133.21, the Jun 14 high.
- Softer equities and crude prices have supported global core FI this morning.
- The ZEW survey’s current situation component was the highest since July 2023 at -68.9 (vs -74.8 cons, -73.8 prior).
- German cash yields are ~3bps lower today, while the new on-the-run 2.50% 5-year Oct-29 Bobl is set to be launched shortly (bidding deadline at 1030BST, E4bln on offer).
- The 10-year BTP/OAT spread trades at multi-year tights around ~63bps, down further from around 70bps following the French second round election result.
- 10-year peripheral spreads to Bunds are slightly wider owing to the equity market weakness.
- US retail sales and Canadian CPI provide some spillover potential this afternoon, while Thursday’s ECB meeting remains the regional focus.
GILTS: Rally Extends
A move lower in equity & crude oil futures has allowed gilts to rally.
- Gilt futures +36 at 98.64, initial resistance (98.53) breached. Bulls now look to the June 25 high (98.92), protecting key resistance at the June 21 high (99.23).
- Cash gilt yields are 3.5-5.5bp lower, bull steepening.
- 20-Year supply passed smoothly, with recent cheapening on the 10-/20-/30-Year fly helping generate solid demand metrics.
- SONIA futures extend early gains alongside gilts, last flat to +8.0.
- BoE-dated OIS shows 11.5bp of cuts for August and ~51bp of easing through year end, still off recent dovish extremes.
- Kantar supermarket price metrics showed the lowest Y/Y rise in nearly 3 years.
- UK CPI & labour market data, as well as the King’s speech, are due over the next ~48 hours.
EQUITIES: E-Mini S&P Holding Onto Recent Gains, Trend Condition Bullish
A bull cycle in Eurostoxx 50 futures remains intact despite Monday’s move lower - a correction. 5039.84, 61.8% of the May 16 - Jun 14 sell-off, has been cleared. This resulted in a print above 5082.32, the 76.4% retracement. A clear break of it would be a positive development and suggest scope for an extension towards 5132.00, the Jun 6 high. The 50-day EMA has been pierced, the next support is at 4903.00, the Jul 2 low. The trend condition in S&P E-Minis is bullish and the contract is holding on to its recent gains. The continuation higher last week confirms a resumption of the uptrend and maintains the bullish sequence of higher highs and higher lows. Moving average studies are in a clear bull-mode set-up too and this continues to highlight positive market sentiment. Sights are on the 5713.31, a Fibonacci projection. Firm support is at 5569.65, the 20-day EMA.
- Japan's NIKKEI closed higher by 84.4 pts or +0.2% at 41275.08 and the TOPIX ended 9.94 pts higher or +0.34% at 2904.5.
- Elsewhere, in China the SHANGHAI closed higher by 2.293 pts or +0.08% at 2976.304 and the HANG SENG ended 287.96 pts lower or -1.6% at 17727.98.
- Across Europe, Germany's DAX trades lower by 100.18 pts or -0.54% at 18491.57, FTSE 100 lower by 32.69 pts or -0.4% at 8150.23, CAC 40 down 48.97 pts or -0.64% at 7583.46 and Euro Stoxx 50 down 34.08 pts or -0.68% at 4949.43.
- Dow Jones mini down 11 pts or -0.03% at 40499, S&P 500 mini down 3 pts or -0.05% at 5680, NASDAQ mini down 9.5 pts or -0.05% at 20575.25.
Time: 09:55 BST
COMMODITIES: Recent Bear Leg in WTI Futures Appears to Be a Correction
WTI futures remain above last week’s low and the recent bear leg appears to be a correction. Recent cycle highs have reinforced bullish conditions, signalling scope for a continuation of the bull cycle near-term. Moving average studies are in a bull-mode set-up too, highlighting a rising trend. Sights are on $85.27, the Apr 12 high and a bull trigger. Initial firm support to watch is $80.07, the 50-day EMA. The trend condition in Gold remains bullish and recent gains reinforce this condition. The yellow metal last week breached $2387.8, the Jun 7 high. This undermineD a recent bearish theme and a clear break represents a bullish development that opens the key resistance at $2450.1, the May 20 high. Initial firm support to watch lies at the 50-day EMA, at 2339.3. A clear break of this average would alter the picture and expose $2277.4, May 3 low.
- WTI Crude down $0.72 or -0.88% at $81.18
- Natural Gas up $0.01 or +0.42% at $2.167
- Gold spot up $13.64 or +0.56% at $2436.01
- Copper down $3.3 or -0.73% at $449.2
- Silver up $0.08 or +0.27% at $30.7537
- Platinum down $6.81 or -0.68% at $991.58
Time: 09:55 BST
| Date | GMT/Local | Impact | Country | Event |
| 16/07/2024 | 0800/1000 | ** |  EU | ECB Bank Lending Survey |
| 16/07/2024 | 0800/1000 | ** |  IT | Italy Final HICP |
| 16/07/2024 | 0900/1100 | *** |  DE | ZEW Current Conditions Index |
| 16/07/2024 | 0900/1100 | *** | DE | ZEW Current Expectations Index |
| 16/07/2024 | 0900/1100 | * | EU | Trade Balance |
| 16/07/2024 | 0900/1000 | ** |  GB | Gilt Outright Auction Result |
| 16/07/2024 | 1215/0815 | ** |  CA | CMHC Housing Starts |
| 16/07/2024 | 1230/0830 | ** |  US | Import/Export Price Index |
| 16/07/2024 | 1230/0830 | *** | CA | CPI |
| 16/07/2024 | 1230/0830 | *** | US | Retail Sales |
| 16/07/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 16/07/2024 | 1400/1000 | * | US | Business Inventories |
| 16/07/2024 | 1400/1000 | ** | US | NAHB Home Builder Index |
| 16/07/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 16/07/2024 | 1845/1445 | US | Fed Governor Adriana Kugler | |
| 17/07/2024 | 2245/1045 | *** |  NZ | CPI inflation quarterly |
| 17/07/2024 | 0600/0700 | *** | GB | Consumer inflation report |
| 17/07/2024 | 0600/0700 | *** | GB | Producer Prices |
| 17/07/2024 | 0900/1100 | *** | EU | HICP (f) |
| 17/07/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 17/07/2024 | 1030/1130 | GB | King's Speech | |
| 17/07/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 17/07/2024 | 1230/0830 | * | CA | International Canadian Transaction in Securities |
| 17/07/2024 | 1230/0830 | *** | US | Housing Starts |
| 17/07/2024 | 1300/0900 | US | Richmond Fed's Tom Barkin | |
| 17/07/2024 | 1315/0915 | *** | US | Industrial Production |
| 17/07/2024 | 1335/0935 | US | Fed Governor Christopher Waller | |
| 17/07/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 17/07/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 17/07/2024 | 1800/1400 | US | Fed Beige Book |