MNI US OPEN - German State CPI Readings Imply Below-Consensus National Print

NEWS

US/ISRAEL (NYT): Biden Confers With Netanyahu on a Possible Cease-Fire and Hostage Deal

President Biden spoke with Prime Minister Benjamin Netanyahu of Israel on Sunday to discuss the prospects of a possible cease-fire deal to secure the release of hostages held by Hamas, while repeating his warnings about a new Israeli assault on the city of Rafah in southern Gaza, officials said. The call was meant to pave the way for Secretary of State Antony J. Blinken, who left Washington just a few hours earlier on Sunday for his latest trip to the Middle East aimed at scaling back the war in Gaza.

US (BBG): Blinken to Meet With Saudi, Turkish Foreign Ministers in Riyadh

US Secretary of State Antony Blinken will meet Saudi Foreign Minister Prince Faisal bin Farhan in Riyadh, Saudi Arabia at 11:15am local time, according to his public schedule from the State Department. Blinken will meet with foreign ministers of the Gulf Cooperation Council member states at 10am and Turkish Foreign Minister Hakan Fidan at 1:30pm. Will also meet with representatives from Egypt, Jordan, Qatar, Saudi Arabia, United Arab Emirates, and the Palestinian Authority at 3pm. Will also participate in a conversation with World Economic Forum President Borge Brende.

JAPAN (BBG): Japan’s Kanda Says ‘No Comment for Now’ When Asked If Intervened

Japan’s top currency official declined to comment on whether Tokyo had intervened in the currency market Monday following a sharp move in the market that sliced 2% off the dollar-yen exchange rate. “No comment for now,” said Masato Kanda, vice minister for international affairs, when asked by reporters if authorities had stepped into markets to prop up the yen. Japan’s currency had slipped beyond the 160 mark against the dollar earlier in the day for the first time since 1990 adding to losses of more than 10% this year. The sharp strengthening of the yen around lunchtime briefly took the currency back to 155.06.

ECB (MNI): Inflation Still Far From Normal - ECB's Arce

The euro area economy and inflationary dynamics are “still far away from a normal post-pandemic situation,” as supply-side shocks still resonate, the European Central Bank’s Director General for Economics at the Oscar Arce told MNI. “We are still seeing the persistent effects of the chain of shocks. It is not only the pandemic but it is the pandemic plus the energy crisis the geopolitical uncertainty created by the war in Ukraine but also by the Middle East,” Arce told an MNI podcast, in which he discussed an ECB Occasional Paper on post-pandemic inflation.

ECB (BBG): ECB’s Wunsch Urges Caution on July Cut

The European Central Bank should be cautious about the signal that a second consecutive interest-rate cut in July would send to investors, Governing Council member Pierre Wunsch said in an interview. “Cutting again in July would be interpreted by markets to mean that we’re going to cut every meeting,” the Belgian central-bank chief was cited as saying. “And that would lead to repricing that might go too far.”

SPAIN (MNI): PM Sanchez Confirms He is Staying in Office

Spanish PM Pedro Sanchez has announced that he will not be standing down from office amid the opening of a corruption investigation into his wife. For days, Spain's newsflow has been dominated by speculation as to Sanchez's plans after he announced that he would be evaluating his political future after the court announced its investigation. Sanchez's decision to remain in office does not mean that potentially market-moving political risk is in the rear-view mirror. Catalonia holds its snap regional election on 12 May, and given the elevated political rhetoric from both pro- and anti-independence parties this vote could cause issues between the centre-left pro-union PSOE and the pro-independence Junts.

SCOTLAND (BBG): Scotland First Minister Mulls Resignation Before Confidence Vote

Scotland First Minister Humza Yousaf is preparing to step down on Monday, The Sunday Times and BBC reported, after concluding he wouldn’t survive a confidence vote triggered when he pulled the plug on a power-sharing agreement with the Scottish Greens last week. Senior members of his Scottish National Party were informed of Yousaf’s decision over the weekend, the Times reported, without saying where it obtained the information. John Swinney has been approached to become interim first minister in the event of Yousaf’s departure, though the former SNP leader is reluctant to step up because of personal reasons, the newspaper said.

CHINA/EU (MNI): Xi Visit Confirmed 5-10 May as Trade Tensions Escalate

MNI (London) Wires reporting comments from the Chinese Foreign Ministry ahead of President Xi Jinping's upcoming trip to Europe, taking place 5-10 May. Says that the trip to France, Serbia, Hungary, and the EU institutions in Brussels "are vitally important for China's relations" with each partner, and will "provide new impetus for global peace and development". On the trip to France, China "looks forward to working with France to further enhance political mutual trust, solidarity and cooperation...Xi and Macron will have an in-depth exchange of views on Sino-French relations, China-EU relations, and issues of national interest."

CHINA (BBG): PBOC Expands Warning on Bond Investments to Regional Banks

China’s central bank has advised some regional lenders to curtail their ultra-long bond investments to mitigate risks, people familiar with the matter said. City and rural commercial banks in at least two eastern provinces were instructed in recent weeks to avoid significant exposure to these securities, the people said, asking not to be identified as the information is private. Under the guidance from local branches of the People’s Bank of China, the regional banks have also been asked to reduce duration and leverage on bond holdings, the people said.

CHINA (BBG): Musk Leaves China With Tesla Driving System Hurdles Cleared

Elon Musk’s quick visit to China paid immediate dividends, with Tesla Inc. clearing two key hurdles to introduce its driver-assistance system to the world’s biggest auto market. The US carmaker will partner with Chinese tech giant Baidu Inc. for mapping and navigation functions to support what it calls Full-Self Driving, or FSD, according to people familiar with the matter. Tesla has also passed a key data-security and privacy requirement, which would help ease some of the concerns over bringing FSD to market in China.

CHINA (MNI): China's Housing Trade-ins Will Struggle to Reverse Downturn

MNI (Beijing) Plans for more Chinese cities to launch trade-in schemes aimed at boosting the stagnant real-estate market will likely not reverse the downturn due to its limited scale, particularly as buyers await prices to bottom, advisors and analysts told MNI. Pointing to plans by at least 30 cities that encourage house replacements, Xie Yifeng, dean at the China Urban Real Estate Research Institute and a housing ministry consultant, noted more will follow, especially the remaining tier-one metropolises following Shenzhen’s decision to launch a trade-in programme last week.

CHINA/JAPAN (MNI): China Pushes Back Against Japan's Semiconductor

MNI (Beijing) China will take necessary measures to safeguard the legitimate rights and interests of its enterprises, according to the Ministry of Commerce following revelations that the Japanese government plans to implement export controls on items related to the semiconductor industry. Japan's proposed measures will severely impact normal trade between Chinese and Japanese businesses, undermining the stability of the global supply chain, the Ministry said.

DATA

GERMANY DATA (MNI): MNI Projects 2.2% National CPI Y/Y, Core CPI Disinflation

• BAVARIA APR CPI +0.6% M/M, +2.5% Y/Y (MNI)
• NRW APR CPI +0.4% M/M, +2.3% Y/Y (MNI)
• BRANDENBURG APR CPI +0.6% M/M, +3.0% Y/Y (BBG)
• SAXONY APR CPI +0.6% M/M, +2.7% Y/Y (BBG)

From state-level data that equates to 89.1% weighting of the national April flash German CPI print (due at 13:00 BST / 14:00 CET), MNI estimates that national CPI (non-HICP print) rose by 0.4-0.5% M/M (March: 0.4%) and 2.2% Y/Y (March 2.2%). Analyst consensus currently stands at 0.6% M/M and 2.3% Y/Y so this would represent a softer reading than had been expected. Current tracking of core CPI (ex-energy and food, based on 50% of the national index) implies 3.0% Y/Y (vs 3.4% in February) and 0.3% M/M, per our calculations. Risks appear to lie slightly on the downside of this, (i.e. 2.9% Y/Y), though there is less confidence on this front than usual due to the distortions created by the shifting of the Easter holiday into March this year.

SPAIN DATA (MNI): Gas Drives April Headline Inflation Higher as Expected, But Core Dips

• SPAIN APR FLASH HICP +0.6% M/M, +3.4% Y/Y
• SPAIN APR FLASH CPI +0.7% M/M, +3.3% Y/Y
• SPAIN APR FLASH CORE CPI +2.9% Y/Y

Spanish preliminary April HICP came in in line with expectations on the yearly rate at +3.4% Y/Y (vs 3.4% cons; 3.3% prior), but the sequential reading was slightly lower at +0.6% M/M (vs +0.7% cons; +1.4% prior). The national CPI came in slightly below expectations at +3.3% Y/Y (vs +3.4% Y/Y cons; +3.2% prior). Core CPI clearly undershot expectations, printing at +2.9% Y/Y (vs +3.2% cons; 3.3% prior): the 8th consecutive decline and the lowest value since January 2022.

SWEDEN DATA (MNI): GDP Indicator Only Marginally Disappoints Riksbank Forecasts

• SWEDEN Q1 GDP -1.1% Y/Y
• SWEDEN MAR RETAIL SALES +1.1% Y/Y

Today's soft retail sales numbers likely fed into a disappointing GDP indicator, which was -0.1%Q/Q for Q1 (consensus +0.2% Q/Q, prior +0.1% Q/Q). Only 1/7 of the analysts in the Bloomberg survey had not expected a positive print. On a monthly basis February was revised down from +0.1% M/M to -0.3% M/M with March also coming in at -0.3% M/M. However, compared to the Riksbank's forecast of -0.02% Q/Q for GDP in their March MPR, today's -0.1% Q/Q print isn't a huge surprise, so it appears to be a bigger surprise to the market than it is to the Riksbank.

RATINGS: France Escapes Negative Ratings Action at Fitch & Moody’s

Rating reviews of note from after hours on Friday include:

• Fitch affirmed France at AA-; Outlook Stable
• Fitch affirmed Sweden at AAA; Outlook Stable
• Fitch affirmed Switzerland at AAA; Outlook Stable
• S&P affirmed Hungary at BBB-; Outlook Stable
• S&P affirmed Slovakia A+; Outlook Stable
• Morningstar DBRS confirmed the European Union at AAA, Stable Trend
• Morningstar DBRS confirmed Italy at BBB (high), Stable Trend
• Scope Ratings downgraded Austria to AA+ and revises Outlook to Stable
• Scope Ratings affirmed the Czech Republic at AA-; Outlook Stable
• Scope Ratings affirmed Turkey at B- and revises Outlook to Positive

FOREX: USDJPY Substantially Lower Amid Strong Indications of MOF Intervention

• The Bank of Japan’s decision to downplay the yen’s impact on inflation last Friday prompted a further sharp weakening of the currency. This culminated in USDJPY breaching the 160.00 overnight, amid thin liquidity due to the Japanese holiday. This took the rally from Friday’s lows to over 500 pips to reach a high of 160.17, closely matching the April 1990 peak.
• However, the subsequent aggressive move lower has somewhat justified that market’s cautious rhetoric, with strong indications that the MOF may have intervened to stabilise the JPY. There has been no official confirmation on intervention from Japanese authorities, with top currency official Kanda stating he has ‘no comment for now’.
• The bulk of the move lower came ahead of the European open, with USDJPY moving from around 159.50 to 155.60. A second wave of selling came just after 0800BST, where the pair traded down to a low of 154.54, just shy of initial key support at 154.01, the 20-day EMA.
• As a result, the USD index resides 0.20% lower, in fitting with modestly lower US yields. Stock markets trade marginally in the green, which assists the likes AUD (+0.35%) and NZD (+0.39%) which outperform in G10. Initial readings of Eurozone inflation have had little impact on EURUSD which hovers just above 1.07.
• With Aussie retail sales and China PMIs overnight, attention will be on a developing bullish phase for AUDUSD. Resistance at 0.6526, 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.
• Key attention this week will rest on Wednesday’s Fed meeting and press conference, as well as Friday’s release of NFP.

BONDS: European CPIs Result in EGBs Rally, OATs Tighten on Rating Relief

EGBs rallied on the back of the Spanish CPI data, with the move then extending as German regional CPI readings pointed to downside risk in this afternoon’s national flash reading ( click for further details on the German data)

• Bund futures extended through Friday’s peak but never tested 131.00, paring gains to last trade at 130.70. The speed of this morning’s move may have acted as a limiting factor, with an eye on EU supply also noted.
• German cash yields are 2.5-4.0bp lower across the curve, light flattening seen.
• OATs have benefitted from ratings relief after France avoided negative action from both Fitch (current rating: AA-; Outlook Stable) & Moody’s (current rating: Aa2; Outlook Stable) after hours on Friday. OATs outperform EGBs and core global peers across the curve as a result. Click for further colour.
• Spanish PM Sanchez has decided to stay on after tabling a potential resignation on the back of a corruption scandal surrounding his wife. SPGBs are little changed on the news, with little widening pressure seen ahead of time. Click to see why.
• Gilts follow broader price moves in EGBs, albeit lagging German peers across the curve. Futures had a look through Friday’s highs before fading, while cash gilt yields are 1-2bp lower, curve sees some light bull steepening.
• ECB-speak from Lane, Muller & de Guindos is due during the remainder of the day.

EQUITIES: E-Mini S&P Trading Near Resistance at 20-Day EMA

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, Apr 15 high. This highlights a potentially stronger reversal and signals the end of the correction between Apr 2 - 19. A continuation higher would expose the bull trigger at 5079.00, the Apr 2 high. Key support lies at 4762.00. Initial support to watch is 4874.10, 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 cleared 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 5138.19, 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.

• In China the SHANGHAI closed higher by 24.407 pts or +0.79% at 3113.043 and the HANG SENG ended 95.76 pts higher or +0.54% at 17746.91.
• Across Europe, Germany's DAX trades higher by 33.46 pts or +0.18% at 18194.52, FTSE 100 higher by 33.35 pts or +0.41% at 8173.33, CAC 40 up 21.3 pts or +0.26% at 8109.54 and Euro Stoxx 50 up 6.33 pts or +0.13% at 5013.18.
• Dow Jones mini up 65 pts or +0.17% at 38506, S&P 500 mini up 11.25 pts or +0.22% at 5142.75, NASDAQ mini up 55 pts or +0.31% at 17901.

COMMODITIES: Gold Remains Close to Last Week's Lows

WTI futures continue to trade above key short-term support at $81.14, 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 break would resume the uptrend. Gold remains in consolidation mode and is trading closer to its recent lows. The precious metal last week pierced the 20-day EMA and this highlights the start of a possible corrective cycle. A continuation lower would signal scope for an extension towards $2233.6, 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 down $0.31 or -0.37% at $83.5
• Natural Gas up $0.04 or +1.82% at $1.958
• Gold spot up $0.02 or +0% at $2338.43
• Copper up $2.75 or +0.6% at $460.05
• Silver up $0.18 or +0.67% at $27.383
• Platinum up $5.51 or +0.6% at $922