MNI US OPEN - Political Rumourmill Speculates Over Macron's Future

NEWS

MNI FED PREVIEW - JUNE 2024: See You In September

The FOMC will ensure a full year of the Fed funds rate remaining at 5.25-5.50% when it holds steady at the June 11-12 meeting, but focus remains firmly on what they signal for potential easing later this year. The new Dot Plot is likely to show a shift in the Fed funds median to 2 cuts in 2024, versus 3 in the prior two editions, alongside a nudge higher in the inflation forecasts. There are increasing risks of a shift to just 1 cut after May's strong payroll gains, particularly if next Wednesday’s CPI data comes in on the strong side.

ISRAEL (MNI): Hamas Accepts UN Ceasefire Deal; Blinken Talks Up Israel Backing - Reuters

Wires carrying comments from US Secretary of State Antony Blinken following his talks with Israeli PM Benjamin Netanyahu on the evening of 10 June. Says that "It is on Hamas to move forward with [peace] proposal or not". Says that Netanyahu "reaffirmed his commitment to the proposal" last night. Conversations on "day after" plans will continue over the coming days, says that it is "imperative" that these plans are compiled. Reuters reports a Hamas official saying that the group accepts the UN ceasefire resolution, and is ready to negotiate over the details. Blinken says the Hamas statement regarding the UN proposal is "a hopeful sign."

FRANCE (MNI): Macron Presser Delayed to 12 June; Left Alliance Expands to Counter RN

Wires reporting that the office of French President Emmanuel Macron has confirmed a press conference for around 1200CET (0600ET, 1100BST) on Wednesday 12 June. This will be the first time Macron has spoken publicly since the announcement a snap legislative election on 30 June. The presser could be used as the launch for the centrist Renaissance-led bloc of parties that back Macron. There have been unsubstantiated rumours circling that Macron is considering resigning depending on the election result. The Elysee Palace has firmly rebutted this prospect.

ECB (BBG): ECB Mustn’t Rush Nor Dally After Decisive Cut, Villeroy Says

The European Central Bank should neither rush nor procrastinate over future interest-rate cuts after a “decisive orientation” to start loosening last week, Bank of France Governor Francois Villeroy de Galhau said. With uncertainty over reigning over the ECB’s next steps after its widely expected reduction to borrowing costs last week, the French central banker’s tone differs slightly from the chorus of colleagues who have since called for caution before moving again. “As regards our next rate cuts, I plead for a “pragmatic gradualism”, both on the timing, without haste nor procrastination,” Villeroy said in a speech at the Paris Finance Forum on Tuesday.

ECB (BBG): ECB Can’t Declare Victory Over Inflation Yet, Simkus Says

The European Central Bank’s battle to bring inflation under control isn’t over, according to Governing Council member Gediminas Simkus. “It’s too early to raise a victory flag,” the Lithuanian central-bank chief said Tuesday in Vilnius. He did, though say that last week’s reduction in borrowing costs by the ECB indicates a “significant step forward” in taming consumer-price growth. More monetary easing is likely to follow as long as inflation continues to head toward the 2% target, he said.

ECB (BBG): ECB Won’t Pre-Commit to Any Path for Interest Rates, Rehn Says

The European Central Bank isn’t pre-committing to any path for interest rates, Governing Council member Olli Rehn said. “It is important to see the forest for the trees,” Rehn said Tuesday in a statement. “Considerable progress has been made in bringing inflation down to target, especially since September 2023.” “We set our rates at each Governing Council meeting based on three factors: the inflation outlook, the dynamics of underlying inflation and the strength of monetary transmission”

UK (The Guardian): Rightwing Tories Plan ‘Rebel Manifesto’ if Sunak’s Policy Launch Falls Flat

Conservative rightwingers are planning to present Rishi Sunak with demands for tougher action on immigration and human rights law before the election if the prime minister’s manifesto promises on Tuesday fall flat. Prominent party figures including Suella Braverman and Robert Jenrick are said by Tory insiders to be among those waiting to see how the manifesto is received by the public before they act. In the event Sunak’s launch fails to shift the dial on the Tories’ floundering election campaign, one option under discussion is a press conference next week to set out a series of alternative pledges.

EU/CHINA (BBG): China Says It Will Respond If EU Imposes Tariffs on EVS

China has made clear its opposition to the EU’s probe into electric cars on multiple occasions, according to Foreign Ministry spokesman Lin Jian. “This probe is in nature trade protectionism,” Lin says at a regular presser briefing in Beijing on Tuesday. EU has taken many unreasonable steps in the probe which are inconsistent with regulations: Lin.

CHINA (MNI): Premier Li to Visit New Zealand, Australia & Malaysia 13-20 June

MNI (London) The Chinese Foreign Ministry has confirmed that Premier Li Qiang will visit New Zealand, Australia and Malaysia from 13-20 June. This will be the highest-level Chinese delegation to visit either Australia or New Zealand since 2017. Australian PM Anthony Albanese said Li's visit, running from 15-18 June, was "another important step in stabilising our relationship with China... Australia continues to pursue a stable and direct relationship with China, with dialogue at its core."

S.KOREA (BBG): South Korea Fires at North’s Troops Briefly Crossing Border

South Korea’s military said it fired warning shots after several North Korean soldiers briefly crossed into its territory and retreated Sunday, in a move that could stoke tensions along one of the world’s most heavily militarized borders. Several of the North Korean soldiers were armed but many had equipment for maintenance work, South Korea’s Joint Chiefs of Staff said in a news briefing Tuesday. The JCS did not say how many shots were fired or how many soldiers breached the divide.

MEXICO (BBG): Mexico’s Peso Sinks as Sheinbaum Embraces Judicial Reform

Mexico’s peso sank after President-elect Claudia Sheinbaum said a proposed reform of the nation’s judicial system would be among the first to be discussed in congress, spooking investors who worry it will erode checks on the ruling party. A constitutional reform to the judiciary system will be part of a group of legislative projects left over from President Andres Manuel Lopez Obrador’s administration that she supports moving forward during the political transition, Sheinbaum said following a meeting with the outgoing president.

INDIA (BBG): Modi Opts for Policy Stability With Familiar Cabinet Team

India’s Prime Minister Narendra Modi retained several cabinet ministers in key portfolios, including finance, signaling policy continuity in a new coalition government in charge of the world’s fastest-growing major economy. Nirmala Sitharaman was reappointed India’s finance minister, a position she’s held since 2019, the government said Monday. Home Affairs Minister Amit Shah, External Affairs Minister Subrahmanyam Jaishankar, Commerce Minister Piyush Goyal and Transport Minister Nitin Gadkari all kept their posts.

DATA

UK DATA (MNI): Jobs Report Mixed - Unemployment Up, Wages Sticky

• UK APR AVE WEEKLY EARNINGS +5.9% YY
• UK APR AVE WEEKLY EARNINGS EX-BONUS +6% YY
• UK MAY PAYROLLS -3k TO 30.3 MN: HMRC/ONS
• UK APR UNEMPLOYMENT RATE 4.4%
• UK MAY CLAIMANT RATE +4.3%

The key private sector regular AWE is in line with the median of the analyst previews that we read at 5.8% Y/Y while total regular AWE was 6.0% Y/Y in the 3-months to April (in line with a number of analyst forecasts but the median from the surveys we read and the Bloomberg consensus were both 0.1ppt higher). The unemployment rate at 4.4% was in line with half of the analyst previews we read (the other half and the Bloomberg median looked for 4.3%). Digging into the wage numbers, there were some small upward revisions to the March single month wage numbers (periods before that only saw minimal changes) which was the single month for March revised up to 5.94% Y/Y from 5.88% Y/Y.

CHINA DATA (MNI): China SME Index Down Slightly in May

MNI (Beijing) China’s SME development index reached 89.2 in May, down 0.2 points from April but higher than the 88.9 level seen in the same month last year, the China Association of Small and Medium Sized Enterprises said on Tuesday. "Market expectations need to be restored as the overall level of economic activity has declined, with insufficient endogenous momentum and weakened market expectations," the association said in a press release.

AUSTRALIA DATA (MNI): Business Activity Weakening But Cost/Price Pressures Worrying

The May NAB business survey showed further deterioration in conditions and confidence. They fell one point to +6, lowest since January 2022, and 5 points to -3, the first negative since November 2023, respectively. Despite the survey showing slower business activity, price and cost measures picked up which NAB pointed out is consistent with the return of inflation to target being "gradual and uneven". The RBA believes that supply and demand are not yet in balance and this survey is in line with that view.

FOREX: Political Rumourmill Puts EUR Lower into NY Cut

• The greenback trades firmer headed into the NY crossover, in a session dominated by political speculation and economic releases, as rumours circulate that the French President Macron could consider resignation should the right-wing emerge victorious in the snap election called on Sunday night. While the Presidency have seemingly denied the rumours, the rescheduling of a press conference originally set for today will have added to the uncertainty, which continues to weigh on French bonds and benefit haven currencies.
• As a result, the USD Index is stronger early Tuesday, while the EUR slips. EUR/USD has traded back below 1.0750, however the Monday lows remain out of reach for now and mark next support at 1.0733.
• Meanwhile, UK labour market data has been in focus, and showed a faster pace of wage gains than expected, however softness is beginning to build around joblessness, as the claimant count and employment change numbers for May and April respectively fared worse than expected. 
• GBP/JPY remains either side of the 200 level, within striking distance of the 200.74 cycle high. USD and GBP are the session's best performers, while NOK is the weakest. 
• Focus for the remainder of the Tuesday session rests on US NFIB Small Business Optimism data as well as Building Permits numbers from Canada. The ECB speaker slate further picks up, with appearances from ECB's Holzmann, Villeroy, Lane, Makhlouf and Elderson all scheduled. 

EGBS: French Political Speculation Spurs Further OAT/Bund Widening

Speculation surrounding the possible resignation of French President Macron triggered a renewed sell-off in OATs, alongside a bid in German paper, as EGB spread moves dominated.

• The moves have since faded from extremes after the Elysée denied the speculation.
• The 10-year OAT/Bund spread is above 60bps and tested ’23 wides during today’s vol.
• OATs were underperforming before the rumours did the rounds, with Moody’s noting that France’s snap election was negative for the country’s credit rating, a sentiment echoed by Morningstar DBRS yesterday.
• Bunds are +15 at 129.80, after reaching knee-jerk highs of 129.98.
• Meanwhile, OAT futures are -60 at 122.70, hitting the lowest level seen since October 2023.
• The French cash curve has bear steepened, with the 2s10s curve hitting multi-week steeps.
• The German curve has lightly bull steepened.
• 10-year peripheral spreads to Bunds have widened alongside OATs, with the BTP/Bund spread around 5bps wider at 145bps at typing.
• While political matters continue to dominate regionally, wider market focus remains on tomorrow’s US CPI data and FOMC decision.

GILTS: Yesterday’s High in Futures Holds

Gilts extended higher on the back of the latest round of French political uncertainty.

• This came after a marginally softer-than-expected round of domestic labour market data provided support for gilts & SONIA markets.
• Gilts topped out at 96.69, just ahead of initial resistance at yesterday’s high (96.70), before backing off to 96.57 last.
• Cash gilt yields are 2-4bp lower, with the curve bull steepening.
• 2s10s has hit fresh ’24 steeps (albeit aided by prior benchmark rolls), while 5s30s sticks comfortably within its recent range.
• SONIA futures are flat to +5.5, a little off session highs.
• BoE-dated OIS shows ~34bp of cuts through year end vs. 31bp yesterday, with a 25bp step once again fully discounted through the Nov MPC.
• The syndication of the new 4.25% Jul-34 gilt saw books close above GBP100bn, with the spread set at the tight end of the guidance range.

EQUITIES: E-Mini S&P Holds Onto Recent Gains, Uptrend Intact

The trend condition in Eurostoxx 50 futures is bullish and short-term weakness is considered corrective. A resumption of gains would refocus attention on key resistance and the bull trigger at 5110.00, the May 16 high. Clearance of this level would confirm a resumption of the uptrend. On the downside, support to watch lies at 4947.00, the Jun 4 low. A break would be bearish and instead expose 4894.90, a Fibonacci retracement. The uptrend in S&P E-Minis remains intact and the contract is holding on to its recent gains. Price has traded above 5368.25, the May 23 high and bull trigger. The move confirms a resumption of the uptrend. A continuation higher would signal scope for a climb towards the 5400.00 handle next. On the downside, key short-term support has been defined at 5205.50, the May 31 low. Clearance of this level is required to signal a short-term reversal.

• Japan's NIKKEI closed higher by 96.63 pts or +0.25% at 39134.79 and the TOPIX ended 5.69 pts lower or -0.2% at 2776.8.
• Elsewhere, in China the SHANGHAI closed lower by 23.234 pts or -0.76% at 3028.045 and the HANG SENG ended 190.61 pts lower or -1.04% at 18176.34.
• Across Europe, Germany's DAX trades higher by 8.42 pts or +0.05% at 18501.57, FTSE 100 lower by 7.92 pts or -0.1% at 8219.87, CAC 40 up 17.36 pts or +0.22% at 7911.69 and Euro Stoxx 50 up 3.53 pts or +0.07% at 5020.05.
• Dow Jones mini down 77 pts or -0.2% at 38853, S&P 500 mini down 6.75 pts or -0.13% at 5364.5, NASDAQ mini down 27.75 pts or -0.15% at 19082.

Time: 09:50 BST

COMMODITIES: Short-Term Gains in WTI Futures Considered Technically Corrective

WTI futures traded higher Monday. For now, short-term gains are considered corrective and the trend direction remains bearish. Resistance to watch is $78.38, the 50-day EMA. Clearance of this EMA would expose the key short-term resistance at $80.62, the May 1 high, where a break is required to cancel a bear theme. On the downside, a resumption of weakness would open $71.33, the Feb 5 low. A sharp sell-off in Gold Friday reinforces a short-term bearish theme. The yellow metal has cleared support around the 50-day EMA, at 2313.5. The break confirms a resumption of the reversal that started May 20 and signals scope for a deeper correction near-term. This has opened $2277.4, the May 3 low. Clearance of this price point would strengthen a bearish theme. Initial resistance to watch is $2387.8, last Friday’s high.

• WTI Crude down $0.01 or -0.01% at $77.71
• Natural Gas up $0.12 or +4.16% at $3.027
• Gold spot down $4.78 or -0.21% at $2305.71
• Copper down $6.15 or -1.35% at $448.3
• Silver down $0.5 or -1.67% at $29.242
• Platinum down $13.66 or -1.4% at $960.94

Time: 09:50 BST