MNI US OPEN - PCE Marks Last Major Data Release Pre-Fed
EXECUTIVE SUMMARY
- WATCHING WHERE CORE PCE UPWARD REVISIONS LAND IN Q2
- CHINA’S WANG TO MEET WITH US' BLINKEN ON ASEAN SIDELINES
- ECB 1 AND 3-YEAR CONSUMER INFLATION EXPECTATIONS UNCHANGED
- TOKYO CPI SLIGHTLY BELOW EXPECTATION, HEADLINE ABOVE 2% Y/Y
MNI (LONDON) - Figure 1: Recent US consumer expenditure data
NEWS
US DATA (MNI): Watching Where Core PCE Upward Revisions Land in Q2
Today's PCE report for June at 0830ET headlines the docket. Bloomberg consensus sees core PCE inflation at 0.2% M/M in a close call with 0.1 (average 0.15). Indeed, the unrounded estimates we'd seen after CPI and PPI estimates had averaged 0.17% M/M. Those are now a little stale after yesterday's stronger than expected Q2 advance release of 2.89% annualized vs cons 2.7 (albeit with slight skew to 2.8) and above every analyst entry. On its own it would imply a 0.28% M/M reading for core PCE in June but we feel it more likely to instead be spread over prior months in the quarter. That has happened a few times recently after past quarterly surprises, providing a partly offsetting market reaction to the prior day's surprise. The current profile sees 0.26% M/M in Apr before what was a surprisingly soft 0.08% M/M in May.
US (BBG): Obamas Endorse Harris for President as Party Unites Behind Her
Barack and Michelle Obama endorsed Kamala Harris’ bid to become the Democratic nominee, offering their support to follow in his footsteps as only the second Black president in US history. A video released Friday shows the couple calling Harris to encourage her campaign - a symbolic passing of the torch from Obama, one of the youngest ever elected to the White House, to Harris. Harris is a historic figure in her own right as vice president - and is now running to become the first female, Asian and Black woman US president.
US (The Times): Donald Trump Leads Kamala Harris by Two Points in Times Poll
The polling shows that the election is still Trump’s to lose with a little over three months to go until polling day on November 5. He is viewed more favourably than Harris: 44 per cent of likely voters have a very or somewhat favourable view of the former president, compared with 41 per cent for Harris, while 50 per cent view him unfavourably and 51 per cent view her unfavourably. He remains clearly the most trusted candidate on the two big issues of the economy and immigration, and is also ahead on foreign policy and crime. Harris, meanwhile, leads Trump in trust on handling the issues of abortion and the environment.
US/ISRAEL (WaPo): Harris Calls for Cease-fire And Hostage Release After Netanyahu Meeting
Vice President Harris implored Israeli Prime Minister Benjamin Netanyahu on Thursday to accept a cease-fire deal that would pause the fighting in Gaza and release hostages, as U.S. leaders say they are closer than ever to an agreement. "Let's get the deal done so we can get a cease-fire to end the war," she told reporters in brief remarks after her bilateral meeting with Netanyahu at the White House. "Let's bring the hostages home, and let's provide much-needed relief to the Palestinian people."
US/CHINA (MNI): FM Wang to Meet with US' Blinken on ASEAN Sidelines
MNI (London) The Chinese Foreign Ministry has confirmed that Foreign Minister Wang Yi will meet US Secretary of State Antony Blinken in Laos. Blinken is on a multi-nation tour of Southeast Asia, visiting Vietnam, Laos, Japan, the Philippines, Singapore, and Mongolia until 3 August. In Laos, Biden will "participate in the annual ASEAN-U.S. Post Ministerial Conference, 14th East Asia Summit Foreign Ministers’ Meeting, and the 31st ASEAN Regional Forum Foreign Ministers’ Meeting." The ministers last met in Beijing in late-April when Wang "acknowledged the China-US relationship was beginning to stabilise, but said it was still being tested by "negative factors".
G20 (BBG): G-20 Finance Chiefs Punt on Billionaire Tax in Draft Communique
Group of 20 finance chiefs are set to leave Brazil’s controversial plan for a global billionaires tax to future summits, pledging in a draft communique to continue discussions after debating the idea this week in Rio de Janeiro. The draft communique, which was obtained by Bloomberg News, includes a pledge to continue “dialogue on fair and progressive taxation, including of ultra high net worth individuals,” a reference to the 2% minimum tax on billionaires that Brazil President Luiz Inacio Lula da Silva has made the centerpiece of his nation’s year atop the group.
FRANCE (The Times): Rail Network Hit by Acts of Vandalism Before Olympics
France’s high-speed rail network has been hit by widespread “malicious acts” of vandalism just hours before the Paris Olympics begin. SNCF, the train operator, said that the attacks were designed to “paralyse” the network and that there would be widespread disruption all weekend. “This is a massive attack on a large scale to paralyse the TGV network,” SNCF told the news agency Agence France-Presse. Eurostar departures to Paris have been delayed, with passengers warned to “postpone” their journey.
CHINA (BBG): China Weighs Tenfold Fee Increase on High-Frequency Traders
China is considering a fee hike of at least tenfold on high-frequency trading, its latest attempt to rein in some quantitative strategies deemed by regulators as a threat to fairness in the nation’s retail investor-dominated stock market. The China Securities Regulatory Commission and the country’s stock exchanges have consulted some market participants on draft plans to raise a 0.1 yuan (1.4 cents) fee on buy and sell orders to at least 1 yuan if the transactions meet the threshold of high-frequency trading, according to people familiar with the matter, who requested not to be named as the discussions were private.
CHINA (MNI): Further Easing to Boost Property After China’s 3rd Plenum
China's Third Plenum has strongly targeted the housing market - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
JAPAN (BBG): MOF Is Said to Want BOJ to Consider Bank Capacity in Bond Plan
Japan’s Ministry of Finance believes Bank of Japan officials should take into account commercial banks’ capacity to hold bonds, in deciding how much to cut bond purchases themselves, according to people familiar with the matter. It’s better to reduce the purchases little by little rather than making a big cut in one go to avoid unsettling the market, they said. The finance ministry’s view makes it likely that the central bank will proceed cautiously when it unveils its plan to cut bond buying at its policy decision meeting next week. This is the BOJ’s first step toward quantitative tightening after more than a decade of monetary easing.
JAPAN (BBG): Japan Stresses Need for Greater Attention to FX Moves at G20
Japan stressed the need for countries to pay closer attention to excessive movements in the currency market at the Group of 20 meeting, according to the Vice Finance Minister for International Affairs. “We pointed out the need for greater caution regarding excessive volatility in the foreign exchange market driven by speculation, and the spillover effects of continued high interest rates in some countries,” Masato Kanda told reporters Thursday. He was speaking after the first day of the G-20 finance ministers and central bank governors meetings in Rio de Janeiro, Brazil.
SINGAPORE (BBG): Singapore Keeps Tight Monetary Policy Even as Inflation Ebbs
Singapore’s central bank kept its monetary policy settings unchanged for a fifth straight time in a widely anticipated move and reiterated that inflation will cool to about 2% in 2025, opening the window slightly for easing to begin next year. The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool rather than interest rates, maintained the slope, width, and center of the currency band, it said in a statement Friday. That will keep the local dollar on an appreciating path to blunt imported inflation.
COMMODITIES (BBG): Iron Ore Jumps on Bets China’s Policy Stimulus Will Boost Demand
Iron ore rose, rebounding from the lowest level since April, on speculation China’s string of policy support measures will boost demand for the steelmaking material. It advanced as much as 3.6% to touch $103.50 in Singapore, after closing below the $100 a ton threshold in the previous session. It slipped below that level in March and April as China’s prolonged property crisis sapped demand. Beijing is ramping up efforts to rejuvenate the sluggish economy. Some $41 billion of funds obtained from special debt issuance will be allocated for purposes such as industrial equipment upgrades, authorities announced on Thursday, raising hopes for more infrastructure spending.
COMMODITIES (BBG): Copper Heads for Third Weekly Decline Despite China Stimulus
Copper headed for a third weekly decline despite stimulus efforts by Chinese authorities, with investors searching for signs demand may recover. The industrial metal edged lower on Friday after falling below the $9,000-a-ton threshold for the first time since early April on Thursday amid a selloff in global stock markets and rising pessimism about the outlook for demand in China and elsewhere. Copper is now down by almost a fifth from a record high in May.
DATA
EUROZONE DATA (MNI): 1 and 3-Year Consumer Inflation Expectations Remain Unchanged
- ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 2.8%
- ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.3%
Eurozone consumer inflation median expectations for both the 1-year and 3-year ahead horizon remained unchanged in June at 2.8% Y/Y and 2.3% Y/Y, as measured by the ECB's CES survey. The 1-year ahead median inflation expectation therefore remained at the lowest level since September 2021. Meanwhile, consumer nominal income growth mean expectations for the year ahead increased to 1.4% from 1.2% in May - returning it to the 2024 high reached in February. The economic growth mean expectation for the year ahead weakened to -0.9% from -0.8% in May - although higher than March's -1.1% reading.
FRANCE DATA (MNI): France Consumer Sentiment a Touch Above Consensus
- FRANCE JUL CONSUMER SENTIMENT 91
France Consumer Sentiment was marginally higher than expected printing at 91 in July (vs 90 consensus, 90 revised prior from 89), making it the highest level since March 2024, but it continues to remain in the range of 88-91 since November 2023. From the sub-components, there was a slight rise in both unemployment expectations in the next 12 months to 28 (the highest since August 2021) as well as Financial situation expectations in the next 12 months to -10 (the highest since December 2023). This was followed by a 2 point increase in consumer price expectations in the next 12 months, as well as financial situation in the last 12 months and expected saving capacity.
SPAIN DATA (MNI): Unemployment Falls to 11.3% in Q2, Driven by Services
Spanish unemployment was 11.27% in Q2, down from 12.29% in Q1. The number of unemployed persons fell by 222.6k in Q2 (-7.5% Q/Q NSA), led by a 190.5k fall in the services sector. Meanwhile, total employment rose by 434.7k (2.05% Q/Q NSA). Services accounted for 304k of this increase. This is unsurprising, with services the largest sector by employment (76% of total employment) and also driving the Spanish economic recovery (the services PMI has been in expansion since September 2023). In seasonally adjusted terms, the number of emplyomed persons rose 0.4% Q/Q (vs 0.5% in Q1) while unemployed persons ticked up 1.2% Q/Q (after 14 consecutive quarters of negative Q/Q SA growth).
SWEDEN DATA (MNI): Unemployment Rate Steady as Labour Force Expands
- SWEDEN JUN UNEMPLOYMENT 9.4%
The Swedish LFS SA unemployment rate held at 8.2% in June. The three analysts that submitted a forecast to Bloomberg had forecasted readings of between 8.4-8.6%. The unemployment rate thus averaged 8.3% in Q2, below the Riksbank's June projection of 8.5%. However, the steadiness in the unemployment rate (or at least, lack of increase), reflected a rise in the labour force alongside a tick up in the number of unemployed persons. Employment growth was 0.1% 3m/3m (vs -0.2% prior), bringing the 3m average of the employment rate to 69.2%. That's above the Riksbank's June projection of 68.9%.
JAPAN DATA (MNI): Tokyo CPI Slightly Below Expectation, Headline Above 2% Y/Y
- JAPAN JULY TOKYO CORE CPI +2.2% Y/Y; JUNE +2.1%
- JAPAN JULY TOKYO CORE-CORE CPI +1.5% Y/Y; JUNE +1.8%
- JAPAN JULY SERVICES PRICES +0.5% Y/Y; JUNE +0.9%
Japan's July Tokyo CPI print was a little below forecasts. Headline 2.2% y/y (2.3% was forecast), ex fresh food as expected at 2.2%, while ex fresh food and energy was 1.5%y/y (1.6% forecast and 1.8% prior). Headline and core (ex fresh food) have had an average around 2% y/y since the start of this year. In m/m terms, headline was up 0.1% (versus 0.3% prior). The ex fresh food measure was 0.3% similar to the pace of the past two months. Good prices rose 0.3%, services were flat. In y/y terms services eased to 0.5% from 0.9% in June.
FOREX: Sanguine Start Allows JPY, CHF to Roll Off Weekly Highs
- For the first time this week, JPY heads into the NY crossover as the poorest performing currency on an intraday basis, sitting mildly softer against all others in G10 after the sharp rally posted over the past few sessions. The resultant bounce in USD/JPY keeps spot prices pinned between two sizeable option expiries rolling off at today's NY cut, with $1.1bln of strikes expiring between Y153.91-00, and $1.4bln at Y155.30-50.
- The JPY rally this week, and subsequent fade today, had dragged funding currencies higher in tandem, and the co-movement persists. CHF is softer alongside JPY, helping EUR/CHF bounce back toward the 200-dma of 0.9604.
- The USD Index headed through the European open in negative territory, but greenback is off lows into NY hours. Ranges are tight, however, as markets tread water before the bigger data prints later today.
- While spot markets are muted, front-end vol markets remain firm, with markets looking ahead to a busy week next week. The BoJ/Fed/BoE decisions are all due within a single 36 hour period, and all of which could have heavy market implications. USD/JPY one-week vols have been marked above 15 points for the first time since April, and only the second time in 2024.
- Today’s US PCE report for June will take focus, and markets will particularly watch non-housing core services PCE for the latest outturn and revisions, having moderated from 0.28% M/M to 0.096% M/M in May. There are no central bank speakers of note, with both the BoE and the Fed inside their pre-decision blackout periods.
BONDS: Gilts, BTPs and OATs Recover From Lows
Gilt, BTP and OAT futures have recovered from intraday lows after coming under pressure at the cash open, while Bunds have seen much less intraday volatility.
- Bund futures are -29 at 132.35, with the 50-day EMA once again providing the first support (at 131.80 today).
- Gilts are -9 at 97.89, after reaching a low of 97.46. There was no obvious trigger for the weakness at the open.
- A steepening theme remains present across the German/UK cash curves, though today’s dynamic has been a bear steepening with the long-end underperforming.
- 10-year peripheral spreads to Bunds are biased tighter, as European equity markets recover from the multi-month lows attained yesterday.
- Today’s regional data hasn’t been market moving. ECB consumer inflation expectations were steady at 1/3-year horizons, while Italian and French consumer confidence improved a little.
- Next week’s calendar sees the Eurozone July flash inflation round alongside preliminary Q2 GDP prints across countries.
- For today, broader macro focus remains on the US PCE report at 1330BST.
EQUITIES: Break of 20-, 50-Day EMAs Reinforce Bearish Theme for E-Mini S&P
Eurostoxx 50 futures traded lower Thursday, reinforcing current bearish conditions. The contract has traded through a key support at 4846.00, the Apr 19 low. A clear break of this level would pave the way for an extension towards 4724.21, the 200 day MA on the continuation chart. Moving average studies are in a bear-mode set-up, highlighting a downtrend. Initial firm resistance to watch is 4980.00, the Jul 23 high. S&P E-Minis have traded lower this week and the move down has resulted in a break of both the 20- and 50-day EMAs. This reinforces a short-term bearish cycle and signals scope for an extension near-term. Note that the move down is considered corrective. Potential is seen for a move towards 5429.62, the lower band of a MA envelope, ahead of 5370.62 a Fibonacci retracement. Key short-term resistance is 5629.75, the Jul 23 high.
- Japan's NIKKEI closed lower by 202.1 pts or -0.53% at 37667.41 and the TOPIX ended 10.32 pts lower or -0.38% at 2699.54.
- Elsewhere, in China the SHANGHAI closed higher by 4.155 pts or +0.14% at 2890.897 and the HANG SENG ended 16.34 pts higher or +0.1% at 17021.31.
- Across Europe, Germany's DAX trades higher by 46.94 pts or +0.26% at 18345.37, FTSE 100 higher by 70.59 pts or +0.86% at 8256.63, CAC 40 up 65.77 pts or +0.89% at 7492.03 and Euro Stoxx 50 up 40.35 pts or +0.84% at 4851.23.
- Dow Jones mini up 189 pts or +0.47% at 40382, S&P 500 mini up 39.75 pts or +0.73% at 5481.25, NASDAQ mini up 181 pts or +0.95% at 19175.25.
Time: 09:55 BST
COMMODITIES: Short-Term Bearish Threat in WTI Futures Remains Present
The recent move lower in WTI futures signals scope for an extension near-term. The contract has traded through both the 20- and 50-day EMAs, reinforcing a short-term bearish threat. A resumption of the bear leg would open $72.23, the Jun 4 low and the next key support. For bulls, a reversal higher would instead refocus attention on the key resistance points at $83.58, the Jul 5 high, and $84.36, the Apr 12 high. Gold has pulled back from its recent highs. The move down is considered corrective, however, the yellow metal has pierced support at the 50-day EMA - at $2360.0. A clear break of this average would signal scope for a deeper retracement. This would open $2277.4, the May 3 low and a key support. For bulls, a reversal higher would refocus attention on $2483.7, the Jul 17 high, and a bull trigger. A break would resume the primary uptrend.
- WTI Crude down $0.14 or -0.18% at $78.12
- Natural Gas down $0 or -0.2% at $2.036
- Gold spot up $8.77 or +0.37% at $2372.68
- Copper up $1.15 or +0.28% at $413.55
- Silver down $0.09 or -0.32% at $27.751
- Platinum down $3.07 or -0.33% at $934.31
Time: 09:55 BST
Date | GMT/Local | Impact | Country | Event |
26/07/2024 | - | EU | ECB's Cipollone at Rio de Janeiro G20 Fin min/central bank meeting | |
26/07/2024 | 1230/0830 | *** | US | Personal Income and Consumption |
26/07/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
26/07/2024 | 1500/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
26/07/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |