MNI US OPEN - Israel’s Gallant Calls on US to Support Conflict With Hezbollah

NEWS

US/ISRAEL (BBG): Israel’s Gallant Calls on US to Support Conflict With Hezbollah

Israeli Defense Minister Yoav Gallant urged US Secretary of State Antony Blinken to support the country in its conflict with Hezbollah in neighboring Lebanon, saying the world is watching for signs of strain in the relationship between the two allies. Israel’s military said last week that operational planning for an offensive in Lebanon has been approved, after months of cross-border fire between the two sides started to escalate. The US has been striving to prevent a full-blown war with the Iran-backed militant group, which would open a second front to the ongoing conflict with Hamas in Gaza.

US/CHINA (RTRS): US Probing Cloud Arms of China’s Big Three Telcos

Washington is investigating whether China’s largest state-controlled telecom carriers are providing American data to Beijing through their US cloud services, Reuters reported, citing three sources familiar with the matter. The Commerce Department is running a probe into the activities of China Mobile Ltd., China Telecom Corp. and China Unicom, the news agency said. They’ve subpoenaed information from the trio and conducted risk-based analyses of the companies, though they’re less advanced in their investigation of Unicom, Reuters cited the people as saying.

FRANCE (Politico): Political Circles Openly Discussing Possibility of Emergency Government of Experts

French political circles are already discussing the possibility of appointing technocrats to lead the country. The polls suggest that no single political group will secure a majority in the two-round election, and fears are growing that the French economy will nosedive. “One of the solutions could be to appoint a government of experts that would be able to hold for a year or so,” said public law specialist Eric Landot, who cited former ECB President and Jean-Claude Trichet or Lagarde as possible candidates.

FRANCE (BBG): Le Pen Brands Macron’s ‘Civil War’ Comment as Scaremongering

Marine Le Pen said French President Emmanuel Macron’s accusations that the agendas of the far right National Rally and leftist alliance could lead to “civil war” indicate that he knows he’s going to lose the upcoming legislative vote that begins on Sunday. “He always campaigned saying ‘it’s me or chaos’,” Le Pen said on RTL radio Tuesday morning. “It’s a very weak argument that shows that he thinks he’s lost this election.” Macron on Monday said that the way the far-right and far-left blocs pit people against each other could lead to a dangerous domestic situation.

CHINA (BBG): China Premier Warns Decoupling Will Lead to ‘Destructive Spiral’

Chinese Premier Li Qiang warned of negative consequences for the world if nations part ways economically, while also countering criticism that his country’s industrial policy has led to overcapacity. The “regressive actions of decoupling” would only “drag the world into a destructive spiral where the fierce competition for a larger slice ends up in a diminishing pie,” Li said at the World Economic Forum’s meeting Tuesday in the northeastern city of Dalian. “This is something we do not want to see.”

JAPAN/S.KOREA (BBG): South Korea, Japan to Seek Ways to Reinforce Currency Swap Deal

Japan and South Korea agreed to seek ways to bolster their currency swap deal in an effort to address persistent weakness in both the yen and won that has exacerbated inflationary pressure via import costs. The $10 billion swap agreement that was put in place last year strengthens financial stability in both countries, South Korea said in a statement on Tuesday after Finance Minister Choi Sang-mok and his Japanese counterpart, Shunichi Suzuki, met in Seoul. The two nations had agreed to restore the deal in Tokyo last year after an eight-year hiatus.

N.KOREA/S.KOREA (BBG): North Korea Sends More Trash Balloons as South Detects Parasites

North Korea sent a new batch of balloons carrying trash across the border into South Korea after Seoul said it detected parasites such as roundworms in the contents of previous dispatches. About 350 balloons were sent from Monday night, South Korea’s Joint Chiefs of Staff said, and the government advised the public not to touch any content that was carried across. About 100 balloons mainly fell in northern Gyeonggi province, which circles Seoul, and in the capital region, the JCS said Tuesday in a message sent to reporters.

RUSSIA (MNI): Kremlin on Trump Ukraine 'Plan' - Must Take Into Account Situ on Ground

The Kremlin has responded to a Reuters report regarding a potential peace plan for Ukraine from the camp of US presidential hopeful Donald Trump. States that 'the value of any plan is in the details and any plan must take into account the real situation on the ground'. Adds that 'we do not know the exact details of this plan and we would need to see them to be able to comment.' Says that President Vladimir Putin 'has repeatedly said that Russia remains open to talks based on the real situation on the ground in Ukraine', and that Putin 'came out with a peace initiative recently which unfortunately was accepted neither by the west nor by Ukraine'.

DATA

SPAIN DATA (MNI): Recent PPI Trends Signal Stalling of Core Goods HICP Disinflation

Spanish May PPI was -4.6% Y/Y NSA (vs a one tenth downwardly revised -6.7% prior). On a 3m/3m NSA basis, PPI also remained in deflation at -3.8% (vs -4.1% prior). Excluding energy, PPI rose 0.4% Y/Y (vs 0.0% prior) and 0.5% 3m/3m (vs 0.6% prior). Consumer and capital goods PPI each moderated to 0.4% 3m/3m in May (vs 0.7% and 0.8% prior respectively), while intermediate goods rose a touch to 0.5% (vs 0.4% prior). The recent development in core goods pipeline pressures suggests non-energy industrial goods HICP disinflation should stall in the coming months. This is supported by the uptick in industry expected prices in the May EC business survey.

JAPAN DATA (MNI): Japan May Services PPI Rises 2.5% vs. April 2.7%

• JAPAN MAY SERVICES PPI +2.5% Y/Y; APRIL +2.7%
• JAPAN MAY SERVICES PPI -0.1% M/M: APRIL +0.7%

Japan's services producer price index rose 2.5% y/y in May vs. April's 2.7%, according to preliminary data released by the Bank of Japan on Tuesday, which also showed firms transferring higher labour costs to services prices. The May index fell due to other services (+3.3% vs. +3.6%), including hotels, although it was boosted by advertising services (+2.2% vs. +1.3%).The services index with high labour cost ratio – the first release and linked to wages – rose 2.5% y/y in May, unchanged from +2.5% in April, while the index of services with low labour cost ratio rose 2.5% y/y in May, slowing from +2.8% in April.

JAPAN DATA (MNI): Japan's May Trimmed Mean Rises 2.1% vs. 1.8% - BOJ

Japan’s trimmed mean measure of underlying inflation rose 2.1% in May, accelerating from 1.8% in April, indicating the pass-through of cost increases is increasing again on the back of the weak yen, data released by the Bank of Japan showed on Tuesday. Bank officials are focused on how the recent rise in import price, which rose 6.9% y/y in May for the fourth third straight rise, has affected corporate price-setting. The trimmed mean came after data released on Friday showed Japan's annual core consumer price inflation rate rose 2.5% y/y in May, up from April's 2.2% for the 26th straight month above the 2% target.

FOREX: GBP/USD Awaits Cues for Any Extension of Possible Reversal

• GBP/USD's progress off the Monday low has the pair again testing 1.2700. Further gains through 1.2724 would form the beginnings of a reversal pattern off the recent low and support at the 50-dma. With UK opinion polling still pointing to a sizeable majority for the Labour Party and the Bank of England inside the pre-election media blackout, focus will rest on the USD Index, which is consolidating yesterday's downtick, and has opening a small gap with recent highs.
• The fade in the USD Index so far this week has provided scant relief for USD/JPY. The JPY spot trade-weighted index trades within close proximity to the pre-intervention low, keeping the strength of the currency a key concern for the Japanese authorities. For now, the technical trend in USD/JPY remains bullish, but the intraday volatility noted during the Monday session shows markets remain subject to corrective pullbacks.
• JPY is the firmest in G10 alongside GBP so far Tuesday, with NOK the weakest. 
• Focus for the duration of the Tuesday session rests on the Canadian CPI release, at which markets expected M/M CPI to moderate to 0.3% from 0.5% and the trimmed mean down to 2.8% from 2.9%. 

EGBS: Futures Drift Lower; German Curve Flattens Ahead of Schatz Supply

Core/semi-core EGB futures have drifted away from intraday highs, with Bund futures now over 20 ticks off the high of 132.65.

• Short-end supply from Italy and Germany headlined this morning’s calendar, with little notable data or ECB speak.
• The E4.5bln Schatz auction prompted a light twist flattening of the German cash curve in the run-up to the bidding deadline, with 2-year yields slightly higher today.
• OAT/Bund spreads have tightened across the curve. Promises of fiscal restraint from RN officials in recent days has prevented an extension of last week’s widening.
• Canada CPI headlines this afternoon’s macro calendar, with this week’s main risk events skewed towards the end of the week.

GILTS: Curve Flattens, Subdued Demand at Latest I/L Auction

Gilt futures are a little firmer after adjusting to Monday’s late uptick in U.S. Tsys. A subsequent pullback from session highs in wider core global FI has limited the move.

• Futures last +14 at 98.63, sticking to a very narrow 14-tick range thus far.
• The bullish technical picture for the contract remains intact. Initial resistance seen at 99.25, while initial support comes in at 98.21.
• Cash gilt yields are 0.5bp higher to 3bp lower, as the curve flattens.
• Both 2s10s and 5s30s have moved away from recent highs early this week.
• 2s10s last -12.7bp vs. ’24 highs of -5.8bp. 5s30s last 61.9bp vs. June highs of 68.2bp.
• GBP STIRs are essentially unchanged on the day, showing ~60% odds of a 25bp cut at the August MPC and ~47bp of cuts through year end.
• GBP1.5bn of 0.75% Nov-33 I/L supply saw subdued demand, with a dip in the cover ratio and the average awarded price printing below pre-auction mids.
• UK headline flow has been very limited.

Source: MNI - Market News/Bloomberg. 2025 meeting dates are estimated.

EQUITIES: E-Mini S&P Continues to Trade Close to Recent Highs

The trend condition in Eurostoxx 50 futures remains bullish. A corrective cycle is in play and this has resulted in a pullback from the May high. Recent weakness has seen price breach 4988.00, Jun 11 low, highlighting potential for a deeper retracement and has exposed 4846.00, Apr 19 low and a key support. The recovery from the Jun 14 low is potentially an early bullish signal. Resistance to watch is at 5039.84, a Fibonacci retracement. The uptrend in S&P E-Minis remains intact and the contract continues to trade closer to its recent highs. Price has recently cleared 5430.75, the May 23 high and bull trigger. This confirmed a resumption of the uptrend. Note that moving average studies remain in a bull-mode position too, highlighting positive market sentiment. Sights are on 5594.66 next, a Fibonacci projection. Initial support to watch lies at 5458.51, the 20-day EMA.

• Japan's NIKKEI closed higher by 368.5 pts or +0.95% at 39173.15 and the TOPIX ended 47.18 pts higher or +1.72% at 2787.37.
• Elsewhere, in China the SHANGHAI closed lower by 13.103 pts or -0.44% at 2949.996 and the HANG SENG ended 45.19 pts higher or +0.25% at 18072.9.
• Across Europe, Germany's DAX trades lower by 214.63 pts or -1.17% at 18110.76, FTSE 100 lower by 5.59 pts or -0.07% at 8275.76, CAC 40 down 57.37 pts or -0.74% at 7649.97 and Euro Stoxx 50 down 28.23 pts or -0.57% at 4923.03.
• Dow Jones mini down 30 pts or -0.08% at 39817, S&P 500 mini up 3.25 pts or +0.06% at 5520.5, NASDAQ mini up 54 pts or +0.27% at 19805.25.

Time: 10:00 BST

COMMODITIES: Bear Threat in Gold Remains Present Following Friday's Sell-Off

WTI futures are trading at their latest highs and the current bull phase remains intact. The recent move higher has resulted in a break of $80.11, the May 29 high and a key resistance. The clear breach of this hurdle cancels a bearish theme and paves the way for $82.24, a Fibonacci retracement point. Initial firm support to watch is $78.65, the 20-day EMA. A break would be seen as an early potential reversal signal. Gold continues to trade below resistance and a bear threat remains present. A sharp sell-off on Jun 7 reinforced a short-term bearish theme. The yellow metal has pierced the 50-day EMA, at 2318.4. A clear break would confirm a resumption of the reversal from May 20 and open $2277.4, the May 3 low. Clearance of this price point would also strengthen a bearish theme. Initial firm resistance is $2387.8, the Jun 7 high.

• WTI Crude down $0.19 or -0.23% at $81.42
• Natural Gas up $0.01 or +0.32% at $2.82
• Gold spot down $4.79 or -0.21% at $2328.99
• Copper up $0.75 or +0.17% at $443.3
• Silver down $0 or -0.01% at $29.5675
• Platinum up $1.26 or +0.13% at $999.37

Time: 10:00 BST