MNI US OPEN: Markets Generally Look Through Latest Geopolitical Threat
EXECUTIVE SUMMARY
- DIMON LED BANK CEOS TO FEND OFF TOUGHER CAPITAL RULES (WSJ)
- CHINA REGULATORS TO MEET EUROPE FUNDS THIS WEEK TO REVIVE STOCKS (BBG)
- ECB’S KAZAKS WARNS AGAINST HASTY INTEREST-RATE CUTS AFTER JUNE (BBG)
- CHINA’S HOUSING RESCUE TOO SMALL TO END CRISIS, ANALYSTS SAY (BBG)
- IRANIAN PRESIDENT RAISI, FM AMIR-ABDOLLAHIAN CONFIRMED DEAD IN HELICOPTER CRASH (MNI)
Source: MNI - Market News/Bloomberg
NEWS
U.S./BANKS (WSJ): Dimon Led Bank CEOs to Fend Off Tougher Capital Rules
JPMorgan Chase’s Jamie Dimon and other big-bank CEOs played hardball with the Federal Reserve over proposals that the lenders hold more capital.
US (FT):US companies find borrowing conditions improving as markets rally
Surging share prices and falling borrowing premiums are making it easier for companies to access fresh cash, as an index of US financial conditions returns to levels last seen before the Federal Reserve started raising interest rates more than two years ago.
GLOBAL TRADE: China retaliates against the US and EU with anti-dumping probe
China has signalled it will retaliate against trade barriers introduced by the US and the EU as it launched an anti-dumping probe into chemical imports.
U.S./CHINA (WSJ): U.S. Fears Undersea Cables Are Vulnerable to Espionage From Chinese Repair Ships
U.S. officials are privately delivering an unusual warning to telecommunications companies: Undersea cables that ferry internet traffic across the Pacific Ocean could be vulnerable to tampering by Chinese repair ships.
EU/CHINA (BBG): China Regulators to Meet Europe Funds This Week to Revive Stocks
China’s markets regulators plan to meet with investors in Europe this week, according to people familiar with the matter, part of a broader move by authorities to shore up interest in the world’s second-largest stock market.
ECB (BBG): ECB’s Kazaks Warns Against Hasty Interest-Rate Cuts After June
The pace of European Central Bank interest-rate cuts must match the gradual slowdown of euro-area inflation, according to Governing Council member Martins Kazaks.
UK (The Times): Economists hopeful inflation will hit 2% target this week
Inflation could reach the Bank of England’s 2 per cent target this week, boosting the chances of an interest rate cut in June.
BOE (MNI): Broadbent gives little away about near-term monpol
Broadbent spends little time in this speech discussing the upcoming policy decision - simply noting that it's "possible" that Bank Rate can be cut in the summer (and gives little hint as to his view regarding June - only that the MPC decisions are data dependent). He is due to leave the MPC at the end of June so the June policy meeting will be his last.
BOE (MNI): BOE Models Can Ditch 2% Inflation Expectations
Bank of England models can be reworked in line with recommendations by former Fed chief Ben Bernanke to remove an assumption that inflation expectations always return to the 2% target, but it would be better to produce staff forecasts without input from policymakers, a former head of BOE modelling told MNI.
BOE (BBG): Tory MPs Demand Review of Bank of England Independence
A group of Conservative backbenchers have demanded a review of the Bank of England's independence, accusing it of costing taxpayers thousands of pounds.
CHINA (MNI): LPR Holds As Property Stimulus Strengthened
Chances China's Loan Prime Rate could see a cut in the near term have lowered thanks to the central bank’s recently announced property market stimulus and its additional focus on the sector.
CHINA (BBG): Homebuyers Return After China’s Support Package, Paper Says
Chinese developers’ sales centers saw a surge of visits by homebuyers over the weekend, after the authorities announced property support measures on Friday, the Securities Times reports.
CHINA (BBG): PBOC-Backed Paper Sees ‘Significant’ Mortgage Rate Decline
China’s mortgage interest rates are expected to fall “significantly” after recent removal of rate floor, releasing housing demand and alleviating funding pressure on real estate developers, according to a front-page report in PBOC-backed newspaper Financial News, citing analysts.
CHINA (BBG): China’s Housing Rescue Too Small to End Crisis, Analysts Say
China’s latest housing initiative is aimed at vacant properties, a major pain point in a crisis that’s dragged on for almost three years. But analysts say the package of measures is still too small to end the rout.
BOJ (Nikkei): Potential for earlier BOJ rate hike rises amid hawkish signals, weak yen
When the Bank of Japan ended the world's only negative interest policy in March, it emphasized that financial conditions would be kept easy and interest rates would slowly increase.
BOJ (MNI): June Cut To JGB Buys Possible For BOJ-Sakurai
The Bank of Japan could reduce its purchases of government bonds from about JPY6 trillion per month to around JPY5 trillion by as early as June but it is likely to keep its policy interest rate unchanged at a range of zero percent to 0.1% until at least July given the contraction in first quarter GDP and the lack of immediate justification for a hike from price data, a former BOJ board member told MNI.
JAPAN (CNA): Top Japan companies agreed to average 5.58% pay hike, business lobby says
Top Japanese companies agreed to pay increases of an average 5.58 per cent at annual labour talks that wrapped up in March, the Keidanren business lobby's preliminary data showed on Monday.
JAPAN (Nikkei): Bain Capital aims to double its investment in Japan
Bain Capital is looking to double its investment in Japan in the next five years with the country emerging from decades of stagnation as one of the hottest destinations for global investors.
JAPAN (Nikkei): Weak yen and lower costs lure factories back to Japan
The depreciating yen is reviving Japan’s appeal as a manufacturing hub for goods such as cosmetics, while the lower costs for exporters have bolstered the competitiveness of Japanese rice abroad.
JAPAN: Japan manufacturers want stable FX from BOJ policy, survey shows
Japan's large manufacturers saw exchange rate stability as the biggest factor they wanted out of the central bank's monetary policy, a Bank of Japan survey showed on Monday.
IRAN (MNI): President Raisi, FM Amir-Abdollahian Confirmed Dead In Helicopter Crash
First Vice President Mohammad Mokhber convened an emergency meeting of the cabinet after Iranian state media confirmed that President Ebrahim Raisi, Foreign Minister Hossein Amir-Abdollahian and other passengers have died in a helicopter crash in the province of East Azerbaijan.
ISRAEL (RTRS):Gantz demands Gaza day-after plan by June 8, threatens to quit Netanyahu cabinet
Israeli war cabinet minister Benny Gantz demanded on Saturday that Prime Minister Benjamin Netanyahu commit to an agreed vision for the Gaza conflict that would include stipulating who might rule the territory after the war with Hamas.
ISRAEL (BBC):US security adviser urges Netanyahu to connect war to 'political strategy'
US President Joe Biden's national security adviser has urged Israeli Prime Minister Benjamin Netanyahu to connect the war in Gaza to a "political strategy" for the territory's future. Jake Sullivan met Mr Netanyahu in Israel after holding talks in Saudi Arabia on Saturday.
MIDDLE EAST (CBS):Houthi missile strikes Greek-owned oil tanker in Red Sea, U.S. says
Yemen's Houthi militants hit an oil tanker in the Red Sea with a ballistic missile early Saturday, damaging the Panama-flagged, Greek-owned vessel in their latest assault over the Israel-Hamas war in the Gaza Strip, officials said.
RUSSIA (BBC): Russia could increase Ukraine attacks, says Zelensky
Ukrainian President Volodymyr Zelensky says Russia could increase its attacks in Ukraine's north east following its recent gains near the city of Kharkiv. Russian troops have been trying to push forward as Ukraine’s outgunned forces attempt to shore up a weakened front line.
NORTH KOREA (RTRS): North Korea's Kim seeks to shore up nuclear force, oversees missile test, KCNA says
North Korean leader Kim Jong Un ordered accelerated production to strengthen the country's nuclear force more rapidly, on the same day he oversaw a test of tactical ballistic missiles with new guidance system, state media KCNA said on Saturday.
OIL: Virtually Every Sanctioned Russian Oil Tanker Remains Idle and Empty Months After Sanctions (BBG)
Dozens of tankers remain stuck doing nothing months after being sanctioned by the Treasury Department — a signal of the US’s scope to disrupt Moscow’s petroleum supply chain if it chooses to.
FOREX: Tight Holiday Ranges Across Global FX Markets, NZD Underperforms
- While most European markets are open, the observance of the Whit Monday holiday is tempering activity to start the week, with most G10 currencies exhibiting narrow ranges as we approach the NY crossover.
- The USD index remains unchanged and hovers around 40 pips off the recent lows. Market participants will monitor the April lows just below the 104 handle as the next notable support as markets await further US data to assess short-term Fed pricing.
- NZDUSD (-0.24%) is a relative underperformer following a Q2 RBNZ survey of inflation expectations showed households saw a slightly lower median expected inflation rate for the next two years at 3% from 3.2% in 1Q. This comes ahead of the RBNZ meeting on Wednesday, where markets expect an unchanged decision.
- For USDJPY, the pullback from 156.74, the May 14 high, continues to signal the end of the corrective recovery between May 3 - 14, and a possible resumption of a short-term bearish cycle. Attention is on 153.45, the 50-day EMA, and 152.49, trendline support drawn from the Dec 28 low. Clearance of these two price points would strengthen a bearish threat. 156.74 is the resistance to watch.
- No data is due for the rest of the session, however, there could be comments from multiple Fed speakers including Bostic, Barr, Waller, Jefferson and Mester speak. The RBA minutes and Canadian inflation highlight Tuesday’s calendar.
EGBS: Biased Weaker With Headline Flow Light
Core/semi-core EGBs have traded in tight ranges this morning, currently trading weaker vs Friday’s close.
- Bunds are -15 ticks at 130.67, with volumes light due to the observance of the Whit Monday public holiday across many Eurozone countries. OAT and BTP futures trade similarly.
- Weekend news that Iran’s President had died in a helicopter crash has not generated any meaningful geopolitical risk premium, with no evidence of external involvement at this stage.
- Comments from BoE Deputy Governor Broadbent have not generated any meaningful spillovers into EGBs.
- German and French cash yields are little changed, while 10-year peripheral spreads to Bunds are biased slightly tighter.
- Primary focus this week will be the ECB’s Q1 indicator of negotiated pay growth and the May flash PMIs, both due on Thursday.
- Sell-side estimates we have seen suggest that Eurozone Q1 negotiated pay growth is set to remain above 4.0% Y/Y, although a deceleration from the 4.5% seen in Q423 is still likely.
GILTS: A Little Softer, No Meaningful Clues From BoE’s Broadbent
Bulls failed to solidify the early rebound back above 98.00 in futures, with the contract fading to fresh session lows of 97.74 in the time since.
- Initial support at 97.23 is still some way off.
- Cash gilt yields are ~1.5bp higher across the curve.
- Gilts widen vs. all major European peers across the curve.
- Some desks have noted that they are looking for entry points in gilt/bund wideners after the recent outperformance for UK paper.
- SONIA futures are flat to -4.0, with BoE-dated OIS pricing 50/50 odds of a June cut and ~54bp of easing through year end.
- Outgoing BoE Deputy Governor Broadbent spent little time discussing the upcoming policy decision - simply noting that it's “possible” that Bank Rate can be cut in the summer (and gives little hint as to his view regarding June - only that the MPC decisions are data dependent).
- Broadbent will cast his final MPC vote in June, before departing at the end of the same month.
- The DMO will hold its quarterly consultation with investors/GEMM today and the BoE will conduct GBP750mn of medium term APF gilt sales.
EQUITIES: S&P Extends Bull Cycle
In the equity space, S&P E-Minis traded higher last week as the contract extends the bull cycle from Apr 19. Recent gains have resulted in a break of key resistance at 5333.50, Apr 1 high. This confirms a resumption of the primary uptrend and signals scope for a climb to 5372.73, 1.764 projection of the Apr 19 - 29 - May 2 price swing. Initial support is at 5218.92, the 20-day EMA.
- EUROSTOXX 50 futures maintain a bullish tone despite the latest pullback. Last week’s gains resulted in a break of key resistance at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend and maintain the price sequence of higher highs and higher lows. This opens 5127.70 next,1.382 projection of the Jan 17 - Feb 12 - 13 price swing. The initial support zone to watch is 5006.50/4934.90, the area between the 20- and 50- day EMAs.
COMMODITIES: Prevailing Technical Themes In Gold & Oil Persist
The medium-term trend structure in Gold is unchanged and remains bullish. Today’s gains reinforce this condition - the yellow metal has traded through resistance at $2431.5, the Apr 12 high and bull trigger. The break confirms a resumption of the primary uptrend and paves the way for a climb towards 2452.5 next, a Fibonacci projection. On the downside, the 50-day EMA, at $2283.1, represents a key support. A clear break of it would be bearish.
- Despite the latest move higher, a bearish theme in WTI futures remains intact and short-term gains are considered corrective. Price has recently traded below the 50-day EMA, strengthening a bearish set-up that highlights potential for a deeper correction. Scope is seen for a move to $76.07, the Mar 11 low. Key resistance and the bull trigger is at $86.97, the Apr 12 high. Initial firm resistance to watch is at $84.46, the Apr 26 high.
Date | GMT/Local | Impact | Flag | Country | Event |
20/05/2024 | - | ![]() | UK | DMO to hold quarterly consultation investors / GEMM consultation | |
20/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for 26 Week Bill |
20/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for 13 Week Bill |
21/05/2024 | 0130/1130 | ![]() | AU | RBA Minutes | |
21/05/2024 | 0800/1000 | ** | ![]() | EU | Current Account |
21/05/2024 | 0900/1100 | ** | ![]() | EU | Construction Production |
21/05/2024 | 0900/1100 | * | ![]() | EU | Trade Balance |
21/05/2024 | 0900/1000 | ** | ![]() | UK | Gilt Outright Auction Result |
21/05/2024 | 1000/1100 | ** | ![]() | UK | CBI Industrial Trends |
21/05/2024 | 1230/0830 | *** | ![]() | CA | CPI |
21/05/2024 | 1230/0830 | ** | ![]() | US | Philadelphia Fed Nonmanufacturing Index |
21/05/2024 | 1255/0855 | ** | ![]() | US | Redbook Retail Sales Index |
21/05/2024 | 1300/0900 | ![]() | US | Fed Governor Christopher Waller | |
21/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for Cash Management Bill |
21/05/2024 | 1700/1800 | ![]() | UK | BOE's Bailey Lecture at LSE | |
21/05/2024 | 2300/1900 | ![]() | US | Atlanta Fed's Raphael Bostic | |
21/05/2024 | 2300/1900 | ![]() | US | Cleveland Fed President Loretta Mester |