MNI US OPEN - Lobbying Push Begins With Debt Deal in the Offing

NEWS

US (BBG): Biden, McCarthy Work Lawmakers to Pass Deal as Time Runs Short
The White House and Republican congressional leaders geared up lobbying campaigns to win approval of a deal to avert a US default as environmentalists, defense hawks and conservative hard-liners condemned concessions. President Joe Biden is personally calling lawmakers to support this bill, while cabinet members and senior White House staff already had called at least 60 House Democrats by early Monday morning, a Democratic official said.

EUROZONE (MNI): Eurozone's Big Banks Most Exposed to NBFI Risk-ECB
Systemically important euro area banks may be disproportionately affect by turbulence in the non-bank financial intermediary (NBFI) sector, a pre-released study from the ECB Financial Stability Review found, with the five biggest European banks accounting for around half of total loan and securities exposure.

JAPAN (MNI): High Chance Core CPI Will Fall Below 2% - Ueda
Bank of Japan Governor Kazuo Ueda on Tuesday told lawmakers the y/y rise in Japan's core CPI rate will fall below 2% towards the middle of this fiscal year. He noted the key inflation rate will rise again afterward, but heightened uncertainty existed over a future price rebound.

AUSTRALIA (MNI): RBA QT Seen Unlikely, Would Have Little Impact
The Reserve Bank of Australia would need to sell a large portion of its portfolio of long-term Australian Commonwealth Government Bonds to slow the economy significantly, while injecting unpredictable volatility into fixed-income markets, making any form of quantitative tightening highly unlikely in the near future, ex-staffers and commentators told MNI.

NEW ZEALAND (MNI): Rates At Peak, No Cuts Soon-RBNZ's Conway
The Reserve Bank of New Zealand’s Official Cash Rate has reached a contractionary level at 5.5% and will likely stay there until mid-2024, despite market expectations for an earlier cut, RBNZ Chief Economist Paul Conway told MNI. Barring any further shocks or changes, the RBNZ has finished adjusting monetary policy for now but is set to hold, Conway added. His remarks run counter to market expectations, which has the rate falling by February.

SOUTH AFRICA/RUSSIA (BBG): S. Africa Grants Immunity for BRICS Meets After Putin Invite
South Africa said it will provide diplomatic immunity to attendees of two meetings of officials from the BRICS group of countries — a practice the government said is routine — as it prepares to host Russian President Vladimir Putin at a summit in August.

RUSSIA (MNI): Drone Attacks On Moscow Bring Front Line To The Capital
The Russian Defence Ministry has accused Kyiv of launching a 'terrorist drone attack' on Moscow. Local media reports that 32 drones were counted over the Russian capital, with 19 shot down, 10 falling by their own, and three damaging houses. The Defence Ministry states that just eight drones were recorded to have attacked the city with all eight brought down. No casualties were recorded. Nevertheless, the presence of drones over the Russian capital will bring home to much of the population that the front line of the war in Ukraine now includes their home city.

CHINA (BBG): Musk’s Jet Lands in Beijing as Foreign Ministry Extends Welcome
Elon Musk’s private jet has landed in Beijing in what would be the billionaire’s first visit to China in three years. “China welcomes Mr. Musk and other leaders from the business community to have a better understanding of China and promote mutually beneficial cooperation,” Ministry of Foreign Affairs spokeswoman Mao Ning said on Tuesday in Beijing.

CORPORATE (BBG): Canary Wharf Debt Downgrade Is Latest Sign of Real Estate Woes
Moody’s has downgraded debt issued by owner of London’s Canary Wharf neighborhood, the latest sign of the difficulties facing real estate globally. The financial district in the east of the capital, owned by Brookfield Asset Management Inc. and Qatar’s sovereign wealth fund, has more than £1.4 billion of debt coming due in 2024 and 2025. The company would probably be highly reliant on asset sales, and potentially shareholder support, to help it de-leverage and refinance, Moody’s said.

DATA

MNI: SPAIN MAY FLASH HICP -0.2% M/M, +2.9% Y/Y
SPAIN MAY FLASH CPI -0.1% M/M, +3.2% Y/Y
SPAIN MAY FLASH CORE CPI +6.1% Y/Y

MNI: UK MAY BRC SHOP PRICES +0.5% M/M, +9% Y/Y

MNI: SWISS KOF MAY ECONOMIC BAROMETER 90.2

MNI: SWEDEN Q1 GDP +0.8% Y/Y

MNI: AUSTRALIA APR BUILDING APPROVALS -8.1% M/M, -24.1% Y/Y
AUSTRALIA APR DWELLING APPROVALS -24.1% Y/Y
AUSTRALIA APR DWELLING APPROVALS -8.1% M/M

MNI JAPAN APR JOBLESS RATE FALLS TO 2.6% FROM MAR 2.8%

FOREX: USD/JPY Retreats From Cycle High as Kanda Warns Speculators

• USD/JPY printed a new cycle high of 140.93 in early European trade, but the pair backtracked following an unscheduled tri-party meeting held between the Japanese FSA, the Ministry of Finance and the Bank of Japan. Following the meeting, Japan's currency diplomat Kanda warned that the Ministry would take appropriate steps on currency markets if required, and outlined their intention to consider various options.
• Following recent weakness, GBP has turned higher in G10, rising against all others in G10 and putting GBP/USD within range of 1.2400 and the 50-dma at 1.2440. The pair saw support on the back of a slowdown in the BRC shop price index, which provided tentative signs of a peak in food prices - a particularly strong contributor to current UK inflation issues.
• The USD is fading into the NY crossover, coming off the better levels of the session as markets got a risk-on boost from China trade headlines. The Chinese trade ministry releaased a statement confirming the extension of tariff waivers on some US goods until the end of December, helping provide headline equity indices with some support ahead of the open.
• US consumer confidence and the Dallas Fed Manufacturing Activity Index makes up the data releases for the day, while ECB's Holzmann, Centeno and Villeroy are set to speak ahead of Fed's Barkin.

BONDS: Spanish inflation and Italian supply dominate the European morning session

• The main talking point of the morning session has been the soft Spanish inflation print with HICP missing expectations by 0.4ppt, and the national core print 0.3ppt lower than expected. For headline HICP, the 2.9%Y/Y print was the lowest since July 2021 while for national core CPI the 6.1%Y/Y print is 1.5ppt off of February's peak.
• EGBs led the rally with peripheral spreads widening and Bunds outperforming gilts and USTs. Over 60% of the CPI-induced rally had been retraced by the time of Italian auction at 10:00BST/5:00ET (with a larger-than-usual E11.0bln auction size) but since those strong results came in we have seen EGBs move higher once again, to start approaching their intraday highs.
• The main events on the calendar for the remainder of the day will be US Conference Board consumer confidence data as well as speeches from ECB's Villeroy and Fed's Barkin.TY1 futures are up 0-18+ today at 112-31+ with 10y UST yields down -8.3bp at 3.717% and 2y yields down -5.1bp at 4.512%.
• Bund futures are up 0.54 today at 134.76 with 10y Bund yields down -4.9bp at 2.383% and Schatz yields down -6.6bp at 2.805%.
• Gilt futures are up 0.62 today at 954.40 with 10y yields down -3.4bp at 4.296% and 2y yields down -0.3bp at 4.472%.

EQUITIES: Trend Condition in E-mini S&P Remains Bullish

• Japan's NIKKEI closed higher by 94.62 pts or +0.3% at 31328.16 and the TOPIX ended 1.43 pts lower or -0.07% at 2159.22.
• In China the SHANGHAI closed higher by 2.765 pts or +0.09% at 3224.213 and the HANG SENG ended 44.67 pts higher or +0.24% at 18595.78.
• Germany's DAX trades higher by 54.8 pts or +0.34% at 16008.98, FTSE 100 lower by 17.88 pts or -0.23% at 7609.54, CAC 40 down 27.25 pts or -0.37% at 7277.29 and Euro Stoxx 50 up 4.66 pts or +0.11% at 4325.09.
• Dow Jones mini up 64 pts or +0.19% at 33194, S&P 500 mini up 20.25 pts or +0.48% at 4226.5, NASDAQ mini up 139.5 pts or +0.97% at 14470.25.

COMMODITIES: WTI Falters at Resistance

The latest pullback in WTI futures means that - for now - the contract has failed to overcome resistance at the 50-day EMA, which intersects at $74.24. Recent short-term gains are considered corrective, however, a clear breach of the 50-day EMA would highlight a stronger bullish theme. The bear cycle in Gold remains intact and the yellow metal is trading lower today. Price is through a key level at $1938.0, trendline support drawn from Nov 3 2022.

• WTI Crude down $1.04 or -1.43% at $71.66
• Natural Gas down $0.06 or -2.61% at $2.353
• Gold spot up $1.59 or +0.08% at $1944.51
• Copper down $1.75 or -0.48% at $366.75
• Silver down $0.03 or -0.12% at $23.1601
• Platinum up $4.23 or +0.41% at $1033.13