MNI US OPEN - Norway Core CPI Reaches Fresh Series High

NEWS

US (BBG): Yellen Says It’s Too Early to Rule Out Risk of US Recession

Treasury Secretary Janet Yellen wouldn’t rule out the threat of a US recession, saying it’s “appropriate and normal” for growth to moderate and that inflation remains too high. The risk of recession is “not completely off the table,” Yellen said in an interview with CBS’s Face the Nation broadcast Sunday. Monthly job growth is slowing as expected after holding at a “high level,” she said from Beijing after meeting with Chinese leaders.

US (WaPo): Biden, US Leaders Insist War With Russia Must End Before Ukraine Joins NATO

Ahead of this week's NATO summit in Lithuania, U.S. leaders are insisting that the war with Russia must end before Ukraine is invited to join the powerful military alliance. President Biden said during an interview with CNN's Fareed Zakaria that aired Sunday that he doesn't believe there will be "unanimity" on the issue of Ukraine's membership while the nation remains "in the middle of a war." "We're determined to [protect] every inch of territory that is NATO territory," Biden said, noting that if Ukraine were part of NATO, it would put the alliance at war with Russia.

US (BBG): Jill Biden Taking ‘Bidenomics’ Tour to 2024 Battleground States

First Lady Jill Biden will travel to 2024 presidential battleground states over the next two weeks to aid the White House’s effort to promote “Bidenomics.” Biden will visit Augusta, Georgia; Pittsburgh, Pennsylvania; and Columbus in increasingly Republican-leaning Ohio to tout the president’s Investing in America agenda, according to a White House official. Georgia and Pennsylvania — two states President Joe Biden narrowly won in 2020 — are seen as potentially pivotal to the success of his reelection bid.

US/CHINA (BBG): Yellen Says US-China Ties on ‘Surer Footing’ After Beijing Visit

US Treasury Secretary Janet Yellen struck a positive but pragmatic tone after completing a high-stakes trip to China that aimed to reassure officials the US won’t hold back its biggest economic competitor. Yellen’s comments were delivered at a press conference capping a four-day visit to Beijing that she’d described as a mission to revive engagement between the two largest economies.

US/CHINA (MNI): China-US Should Set Green Whitelist - Ma

MNI (Beijing) China and the U.S should introduce a “whitelist” mechanism to protect green investment from sanctions and promote climate collaboration, Ma Jun, former chief economist at the People’s Bank of China, told MNI in an interview. Ma, current president at the Beijing-based Institute of Finance and Sustainability and chairman at the Green Finance Committee of the China Society for Finance and Banking, suggested the two countries take concrete steps to work together on climate, including the creation of a “whitelist” that includes climate-positive activities for bilateral investment, trade and technology cooperation.

US/NORTH KOREA (BBG): North Korea Threatens to Shoot Down US Spy Planes

North Korea accused US spy planes of violating its air space and threatened to shoot them down, ramping up tensions just before NATO leaders meet this week in Lithuania for their annual summit. A spokesman for North Korea’s Defense Ministry said the US was engaging in “the most undisguised nuclear blackmail” by planning to bring a nuclear-armed submarine to the peninsula and conducting “hostile espionage activities” by flying spy planes off its east and west coasts, the Korean Central News Agency reported Monday.

MNI EMPLOYMENT INSIGHT: JULY 2023 - Hotter Wages Partly Offset Rare Payrolls Miss

The opposite of last month’s report, nonfarm payrolls growth saw its first miss in fifteen months in June and was coupled with a return of downward revisions. However, both AHE growth and hours worked were stronger than expected, plus the unemployment rate was on the low side of expectations albeit partly offset by the U6 underemployment rate rising on a strong increase in those working part-time for economic reasons. The market continued to almost fully price a 25bp hike for the July 26 FOMC decision and continues to entertain odds of one further hike beyond that.

RIKSBANK (MNI): Minutes Slightly More Hawkish but Inflation Remains Key beyond Sep

The overall tone of the Minutes had few surprises in our view, but probably leaned slightly more hawkishly than the statement and the MPR released on 29 June. All members seemed very on board with another hike in September - that's not really new - but 4/5 members pointed to upside risks in a way that the 20% probability of a hike beyond then in the forecasts didn't really emphasize so much. Every member of the Riksbank seems to be very data driven at present and the inflation prints ahead of the next meeting will be key.

NETHERLANDS (MNI): Rutte Will Not Run For 5th Term after Gov’t Falls, Ends 13yrs as PM

Wires reporting comments from Dutch Prime Minister Mark Rutte stating that he will not run for a fifth term in office. This comes following the collapse of his coalition gov't on 7 July after fractious rows between governing parties regarding the country's immigration policies. Once snap elections are held it will bring an end to Rutte's 13 years as prime minister, the second longest current tenure for any EU leader behind only Hungary's Viktor Orban.

JAPAN (MNI): All Japan Regions Report Positive Econ. - BOJ

All nine Japanese regions reported their economies had either picked up, or moderately recovered, despite being affected by factors such as past high commodity prices, according to the Bank of Japan's quarterly regional economic report Monday. The BOJ's report upgraded three out of the nine regions economic assessment from the previous meeting in April, while the remaining six regions' assessment held steady from three months ago. All the regional managers pointed out that capital investment and private consumption had recovered or was picking up.

JAPAN (MNI): Smaller Firms’ Active Wage Hikes Spreading - BOJ

Many Bank of Japan branch managers see a growing number of smaller firms raising wages to ensure they keep or attract workers , with some officials still cautious about higher earnings. The regional managers also reported that many firms are transferring their own high costs through to retail prices, while others are considering a pass-through of cost increases on expectations that wages will also soon rise, the BOJ reported Monday. The labor shortage has further strengthened on the back of tighter labor market conditions, the Bank said.

RBNZ (MNI): OCR Likely to Hold at 5.5% After May Steer

The Reserve Bank of New Zealand is set to keep its Official Cash Rate on hold at 5.5% at its July 12 meeting, as inflation and the country’s economy continues to slow. The RBNZ has hiked rates continuously since August 2022, however, the May Monetary Policy Statement noted the OCR had likely peaked when it last decided to increase rates 25bp on 24 May and the economic landscape has only helped solidify that view since.

BOK (MNI): Rate Likely on Hold at 3.5%, Policy Focus Shift

The Bank of Korea will likely keep its policy interest rate unchanged at 3.5% at the upcoming policy-decision meeting on July 13, as inflation falls steadily and exports remain weak, according to market observers. “It takes some time for core inflation to fall, although the headline inflation rate continues falling steadily, so the Bank will keep the policy rate unchanged,” said Kota Hirayama, senior economist in charge of emerging economies at SMBC Nikko Securities.

RUSSIA (BBG): Russian Army Chief Appears for First Time Since Wagner Mutiny

Russia’s top military commander was shown on state television Monday for the first time since the abortive mutiny by Wagner mercenaries aimed at ousting him. Chief of the General Staff Valery Gerasimov, who’s in charge of Russia’s war operations in Ukraine, was shown in a brief video receiving battlefield reports from officials. He ordered steps to identify launch sites of Ukrainian missiles and to improve protection against air strikes, the Defense Ministry said in a statement on its Telegram channel that apparently sought to dispel recent speculation in some media that Gerasimov had been dismissed.

DATA

NORWAY DATA (MNI): Core CPI at Fresh High, Ups Pressure on Norges Bank

• NORWAY JUN CPI +0.6% M/M; +6.4% Y/Y (FCST +6.3%); MAY +6.7% Y/Y
• NORWAY JUN UNDERLYING CPI +0.9% M/M; +7.0% Y/Y (FCST +6.6%); MAY +6.7% Y/Y

Norway's June inflation report was mixed, yet likely to add to inflation-concerns at Norges Bank after underlying CPI-ATE (ex. tax changes and energy) reached a fresh series high. Headline CPI was 0.1pp stronger than expectations, cooling by 0.3pp to +6.4% y/y. The decline was largely driven by the -4.3% y/y fall in energy. Yet underlying Norwegian CPI surprised to the upside, accelerating by 0.3pp to +7.0% y/y against expectations of a 0.1pp slowdown. Core goods inflation accounted for the bulk of upwards core pressure, assisted by stronger clothing and furnishing inflation.

CHINA DATA (MNI): China CPI Flat in June, PPI Dips Further

• CHINA JUNE CPI +0.0% Y/Y VS MEDIAN +0.2%; MAY +0.2% Y/Y
• CHINA JUNE CPI -0.2% M/M VS -0.2% M/M MAY
• CHINA JUNE PPI -5.4% Y/Y VS MEDIAN -5.0% Y/Y; MAY -4.6% Y/Y
• CHINA JUNE PPI -0.8% M/M VS -0.9% M/M MAY

MNI (Beijing) China's Consumer Price Index decelerated at a faster pace than expected, registering 0.0% y/y in June, compared with the 0.2% market consensus and down from May’s 0.2% print, data from the National Bureau of Statistics showed Monday. Food costs increased 2.3% y/y in June, up from May’s 1.0% print, with the prices of vegetables, fruits and poultry mainly rising. Pork prices, the main CPI driver, declined further by 7.2% y/y, compared to a 3.2% fall in May. Service prices increased 0.7% y/y, down from the 0.9% in May, the NBS said. On a monthly basis, CPI fell 0.2% m/m compared to May’s 0.2% decline.

CHINA DATA (MNI): China SME Index up in June

MNI (Beijing) China’s small- and medium-sized enterprises reported a slight business sentiment improvement in June, as measures to promote recovery continue to take effect, a leading industry body said Monday. China's SME development index reached 89.1 in June up from May’s 88.9, ending three consecutive months of decline, but remained below the 100 mark which indicates prosperity, according to the China Association of Small and Medium-Sized enterprises.

JAPAN DATA (MNI): Japan June Sentiment Index Sees 1st Drop in 5 Months

Japan's sentiment index posted a first drop in five months in June, with the outlook index for two to three months ahead seeing as econd straight drop, the latest Economy Watchers survey released by the Cabinet Office Monday showed, but the government left its overall assessment unchanged. The fall in sentiment could undermine the Bank of Japan’s view that private consumption should continue rising despite the cost-of-living impact Bank officials see low-income households are holding back on spending amid high prices, with some households shifting spending to cheaper goods.

FOREX: Accelerating Core CPI Provides Further Headache for Norges Bank

• NOK tops the G10 FX table following higher-than-expected CPI for June: core CPI accelerated sharply to 7.0% vs. Exp. 6.6% to print another cycle high and provide another headache for the Norges Bank, who likely now have to consider faster policy action at the August rate decision. EUR/NOK dropped sharply to touch 11.5424 before finding support at the 100-dma at 11.5295.
• AUD sits at the other end of the docket, with the currency undermined by a pullback in Chinese-listed iron ore futures. As such, AUD/USD failed to consolidate any move above the 200-dma of 0.6698, keeping the pair inside the recent range of 0.6596-0.6705.
• Outside of AUD and NOK, currency markets are more muted, with most major pairs respecting the post-NFP ranges. The USD Index holds close to last Friday's lows with 102.226 marking first support. Weakness through here would open losses toward 101.921 and levels not seen since May.
• The Monday docket is typically quiet, with just US Wholesale Inventories and Canadian building permits on the schedule. The central bank speaker slate is busier: Fed's Barr, Daly, Mester and Bostic are on the calendar as well as BoE's Bailey and ECB's Herodotou.

BONDS: USTs and Gilts Steepen While German Curve Sees Parallel Shift

• There have been some mixed moves in core fixed income markets this morning. The UST and gilt curve have steepened but USTs through the 2-year yields moving lower and 10-year steady while gilts have been through 2-year yields moving up less than 10-year yields. While the German curve has seen a parallel shift with yields 1.5bp or so higher across maturities.
• There have been no huge headline drivers this morning, with probably the biggest talking point the lower-than-expected Chinese inflation released during the Asian session.
• Today's highlight is likely to be the release of the text of Governor Bailey's Mansion House speech at 16:00BST / 11:00ET today, which comes ahead of tomorrow's UK labour market data. Elsewhere today we also have Fed's Daly, Mester, Barr and Bostic as well as ECB's Herodotou and Nagel. The big event of the week globally will be the US inflation print on Wednesday.
• TY1 futures are down -0-2+ today at 110-19 with 10y UST yields down -0.3bp at 4.065% and 2y yields down -3.1bp at 4.917%.
• Bund futures are down -0.21 today at 130.91 with 10y Bund yields up 1.6bp at 2.650% and Schatz yields up 1.5bp at 3.261%.
• Gilt futures are down -0.24 today at 924.49 with 10y yields up 2.6bp at 4.672% and 2y yields up 0.9bp at 5.387%.

EQUITIES: Eurostoxx 50 Futures Remain Close to Friday Lows

Eurostoxx 50 futures traded sharply lower last week, clearing a number of key support levels in the process. The contract has breached 4241.00, the May 31 low. This highlights a potential reversal and signals scope for weakness towards 4208.50, a Fibonacci retracement point. On the upside, key short-term resistance is seen at 4332.30, the 50-day EMA. A break of this average would ease bearish pressure. A bull theme in S&P E-minis remains intact and the pullback last week appears to be a correction - for now. Attention is on the first support 4411.98, the 20-day EMA. Clearance of this level would strengthen a bearish threat and expose 4368.50, the Jun 26 low and a key support. The bull trigger is at 4498.00, the Jun 16 high. A clear breach of this level would confirm a resumption of the uptrend and open 4532.08, a Fibonacci projection.

• Japan's NIKKEI closed lower by 198.69 pts or -0.61% at 32189.73 and the TOPIX ended 11.57 pts lower or -0.51% at 2243.33.
• Elsewhere, in China the SHANGHAI closed higher by 7.087 pts or +0.22% at 3203.696 and the HANG SENG ended 114.02 pts higher or +0.62% at 18479.72.
• Across Europe, Germany's DAX trades higher by 39.05 pts or +0.25% at 15643.49, FTSE 100 higher by 9.77 pts or +0.13% at 7266.19, CAC 40 up 20.69 pts or +0.29% at 7132.57 and Euro Stoxx 50 up 11.47 pts or +0.27% at 4248.07.
• Dow Jones mini down 30 pts or -0.09% at 33904, S&P 500 mini down 9.75 pts or -0.22% at 4423.75, NASDAQ mini down 51.25 pts or -0.34% at 15127.75.

COMMODITIES: WTI Futures Technically Bearish Despite Recent Move Higher

WTI futures remain in a bear mode condition, however, a corrective cycle remains in play and the contract has breached resistance at $72.72, the Jun 21 high, This strengthens a short-term bullish condition and a continuation would expose key resistance at $75.70, the Jun 5 high. A break of this level would highlight an important bullish break. On the downside, key short-term support is at $66.96, the Jun 12 low. Gold is consolidating. The trend condition is unchanged and remains bearish. Recent fresh lows reinforce bearish conditions, confirming a resumption of the downtrend and extending the price sequence of lower lows and lower highs. Moving average studies are in a bear mode position highlighting current sentiment. The focus is on $1885.8, the Mar 15 low. Key resistance is $1985.3, the May 24 high. Initial resistance is $1945.1, the 50-day EMA.

• WTI Crude down $0.54 or -0.73% at $73.36
• Natural Gas up $0.08 or +2.94% at $2.659
• Gold spot down $0.47 or -0.02% at $1924.69
• Copper down $2.2 or -0.58% at $375.95
• Silver up $0 or +0.02% at $23.091
• Platinum down $0.08 or -0.01% at $914.33