MNI US OPEN - Rafah Air Strike & Egyptian Soldier Death Escalates Tensions
EXECUTIVE SUMMARY:
- KASHKARI SAYS FED HAS NO REASON TO HURRY WITH CUTTING RATES
- MESTER SUGGESTS FED SAY MORE IN POLICY STATEMENT
- ISRAELI AIRSTRIKE, EGYPTIAN GUARD’S DEATH ESCALATE TENSIONS
- EUROZONE CONSUMER INFLATION EXPECTATIONS EDGE DOWN SLIGHTLY IN APRIL
Figure 1: Eurozone inflation expectations over the next 12 months – pooled
Source: ECB Consumer Expectations Survey
NEWS
FED (BBG): Kashkari Says Fed Has No Reason to Hurry With Cutting Rates
Federal Reserve Bank of Minneapolis President Neel Kashkari said policymakers should take their time in monitoring whether inflation is slowing enough to warrant interest-rate cuts. The economy has remained “remarkably resilient” and the labor market continues to be strong — especially in services — Kashkari told CNBC in an interview. While nothing should be ruled out in terms of future policy, the Fed would be well-advised to wait and see, he added.
FED (MNI): Mester Suggests Fed Say More in Policy Statement
The Federal Reserve should say more in its policy statements and explain how risks to its outlook could change the interest rate path, as well as link each policymaker's economic outlook to his or her policy path in the dot plot, Cleveland Fed President Loretta Mester said Tuesday. "It would be preferable for policymakers to take control of the narrative by using more words to describe the current assessment of economic developments, how they have influenced the outlook, and the risks to that outlook," she said in remarks prepared for a Bank of Japan conference.
FED (MNI): Fed’s Bowman Considered Waiting Longer to Taper QT
Federal Reserve Governor Michelle Bowman said Tuesday she was one of the few officials who thought it might be appropriate to wait longer before tapering QT or taper more gradually. “I would have supported either waiting to slow the pace of balance sheet runoff to a later point in time or implementing a more tapered slowing in the pace of runoff,” she said in a wide-ranging speech about the balance sheet delivered at the Bank of Japan. Minutes from the Fed's May meeting indicated a "few" FOMC members felt that way.
ISRAEL (MNI): Pressure Rising on PM Over Rafah Air Strike & Egyptian Soldier Death
Prime Minister Benjamin Netanyahu could face an attempt by opposition parties to oust him in the coming days amid a series of events that have raised international focus on the actions of the Israeli gov't and IDF in Gaza. An air strike in Rafah on 27 May killed up to 45 according to the Hamas-run health ministry, with Netanyahu calling the incident a "tragic mishap". This was followed by the shooting dead of a member of the Egyptian armed forced near to the Rafah border crossing. Reports suggest that an exchange of fire between the IDF and Hamas on the Gaza side of the border resulted in a gun battle that saw the Egyptian soldier killed.
US/CHINA (MNI): U.S. Will Find Replacing China EV Parts DifficultMNI (Beijing) The U.S. will find it hard to substitute China in the electric vehicle supply chain, a policy advisor told MNI, noting exports will continue to support the Chinese economy this year despite rising trade tension. Chen Wenling, chief economist at high-level government-backed think tank the China Center for International Economic Exchanges, said the U.S.’s recent tariff hikes targeting China’s new energy products, including a 100% tariff on electric vehicles and a 25% levy on lithium-ion EV batteries effective Aug 1, will fail to hurt Chinese companies substantially. U.S. EV parts importers, however, will bear the additional costs, she added.
UK (BBG): Sunak Offers Pensioners Tax Cut as Poll Shows Reform Threat
Prime Minister Rishi Sunak promised pensioners a tax cut if his Conservatives upset the odds and win the general election, the latest gambit to try to shore up the core vote as internal polling showed the Tories could lose more than 100 seats due to the resurgence of the right-wing Reform UK party. Sunak said the tax-free personal allowance for pensioners will rise in line with the so-called triple lock, the guarantee that the state pension rises by the highest of earnings, wages or 2.5%. The change is worth an initial £100 ($128) a year for about 8 million pensioners, the Tory campaign said.
ECB (MNI): Balance Sheets May Weaken Tightening - ECB's Schnabel
The European Central Bank’s large balance sheet “may have weakened the transmission of monetary policy during the recent tightening cycle,” executive board member Isabel Schnabel said in a speech about the benefits and costs of asset purchases on Tuesday. A slow and gradual approach to quantitative tightening “is probably one reason why QT announcements are often found to have smaller effects on bond prices than QE”, she said in Japan.
EU/AUSTRALIA (BBG): EU, Australia Sign Critical Minerals Pact to Ease China’s Grip
Australia and the European Union have struck an agreement to boost cooperation and investment in critical minerals, part of a drive by Western nations to loosen China’s grip on supply chains of materials essential to high-tech and green manufacturing. Ministers in Canberra and Brussels signed a memorandum of understanding on Tuesday, which will be followed by the joint development of “concrete actions” over the next six months to improve collaboration on critical minerals projects.
CHINA (MNI): China to Curb Key Financial Risks - NFRA
MNI (Beijing) China's financial regulator will firmly uphold the bottom line of preventing systemic financial risks and address illegal activities that affect financial stability and disrupt market order, the National Financial Regulatory Administration said Tuesday. According to a statement released on NAFRA's website, the regulator will make full efforts to mitigate risks in small and medium-sized financial institutions, promote "a benign cycle" between finance and real estate via meeting the reasonable financing needs of real-estate projects, and strongly support the construction of the "three major projects" including affordable housing.
BOJ (MNI): BOJ to Consider Soft Yen Price Impact, Hikes Delayed
The Bank of Japan will not raise its policy interest rates immediately as officials monitor the impact of the weak yen on underlying inflation, wage hikes and consumption over the next few months, with hikes more likely after it confirms small business wage hikes in August, MNI understands. While the softer currency initially makes imports more expensive, bank officials must examine how it affects downstream prices and whether it leads to wage, and services price hikes to determine the impact on the underlying inflation trend.
CORPORATE (BBG): Apple’s China iPhone Shipments Jump 52% as Rebound Gains Steam
Apple Inc.’s iPhone staged a rebound in China last month with shipments rising 52% amid a flurry of discounts from retail partners. The latest figures from the China Academy of Information and Communications Technology showed smartphone shipments surging in the country, of which roughly 3.5 million units came from foreign brands, according to a Bloomberg calculation. The iPhone accounts for the vast majority of such devices, and its rapid bounceback comes after it registered growth in March following steep declines in the first two months of the year.
DATA
EUROZONE DATA (MNI): Consumer Inflation Expectations Dip In April - ECB
- ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 2.9%
- ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.4%
Expectations for inflation over the next 12 months fell across the euro area to 2.9% in April, the lowest since September 2021 and down from 3.0% in March, the ECB's consumer expectations survey showed Tuesday. Inflation expectations three years ahead edged down to 2.4%, from 2.5% in March, with the outlook at both the one-year and three-year horizons below consumers' perceived past inflation rate of 5.0%. Uncertainty about inflation expectations over the next 12 months remained unchanged, the survey showed.
UK MAY BRC SHOP PRICES +0.2% M/M, +0.6% Y/Y (MNI)
JAPAN DATA (MNI): Japan April Services PPI Rises 2.8% vs. March's 2.3%
- JAPAN APRIL SERVICES PPI +2.8% Y/Y; MARCH REV +2.4%
- JAPAN APRIL SERVICES PPI +0.7% M/M: MARCH REV +0.9%
Japan's services producer price index rose 2.8% y/y in April, marking the 38th straight rise and accelerating from March's 2.4%, showing that businesses continue to revise retail prices, preliminary data released by the Bank of Japan on Tuesday showed. April’s y/y rise was driven by higher transportation and postal activities (+3.4% in April vs. +2.5% in March) and machinery repair maintenance (+5.5% vs. +2.6%) and training and development services (+6.7% vs. +0.8%).
JAPAN DATA (MNI): Japan's April Trimmed Mean Rises 1.8% vs. 2.2% - BOJ
Japan’s trimmed mean measure of underlying inflation rose 1.8% in April, slowing from 2.2% in March, showing the pace of pass-through of cost increases is slowing, data released by the Bank of Japan showed on Tuesday. Bank officials are focused on how the recent rise in import price, which rose 6.4% y/y in April for the third straight increase, has affected corporate price-setting. The trimmed mean came followed data released on Friday that showed Japan's annual core consumer price inflation rate rose 2.2% y/y in April, slowing from March's 2.6% for the 25th straight month above the Bank's 2% target.
AUSTRALIA APR RETAIL SALES +0.1% M/M (MNI)
FOREX: GBPUSD Rally Contained as BRC Shop Prices Slow
- SEK, NZD modestly outperform, while USD, GBP and JPY are among the poorest performing currencies.
- The UK BRC Shop Price Index came in lower than expected, at 0.6% vs. Exp. 1.0% and the lowest since November 2021. The data, while stopping well short of arguing for a June rate cut, may be helping contain the rally in GBP/USD posted off last week's low, with the 1.28 handle.
- Nonetheless, the GBPUSD trend condition remains bullish and the pair is trading higher this week. An important retracement point at 1.2754 has been cleared, 76.4% of the Mar 8 - Apr 22 bear leg. This reinforces current bullish conditions and paves the way for a climb towards 1.2803 next.
- USD/CNH traded firmer again in early London hours, extending recent outperformance and putting the pair to new monthly highs at 7.2642. Today's price action narrow the gap with next major resistance into 7.2739.
- SEK extends recent outperformance to press EUR/SEK below the 200-dma of 11.4988 - a close below which would be the first since early April.
- Focus for the duration of the Tuesday session turns to house price index data and the May consumer confidence release from the US. Central bank speak includes ECB's Centeno and Knot, while Fed's Kashkari, Cook and Daly also make appearances.
BONDS: Gilts Off Highs But Remain Firmer; EGBs Slightly Weaker
Core/semi-core EGBs sit slightly weaker, with this morning’s corporate and sovereign supply keeping the space under pressure.
- April ECB consumer 3-year ahead inflation expectations were revised a tenth lower to 2.4%, but this was not a market mover.
- Bunds are -8 ticks at 130.28. Last week’s extension lower reinforced a bearish technical cycle, with a break of 132.11 required to re-instate a bullish theme.
- German and French cash yields are slightly higher, while 10-year periphery spreads to Bunds are biased wider, retracing some of yesterday’s compression.
- Gilt futures are off highs, but remain +26 at 97.17 as UK markets caught up with yesterday’s EGB rally upon returning from the long-weekend.
- Gilt yields are -2 to -4bps today, with the curve holding this morning’s bull steepening.
- ECB and BoE-dated OIS remain are little changed on the day.
- ECB’s Centeno and Knot are still scheduled to speak today, while US consumer confidence and UST supply headline this afternoon’s agenda.
EQUITIES: Eurostoxx 50 Futures Extend Corrective Recovery From Last Week's Lows
The trend condition in Eurostoxx 50 futures remains bullish and the recent pullback appears to be a correction. The contract has recently cleared a key hurdle at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend. This opens 5127.70 next, a Fibonacci projection. Key trend support is 4762.00, the Apr 19 low. Support at the 20-day EMA has been pierced. The next level to watch is 4959.80, the 50-day EMA. The uptrend in S&P E-Minis remains intact and the pullback last Thursday appears to have been a correction. The contract also traded to a fresh cycle high that day, reinforcing a bullish theme. Recent gains have also resulted in a break of 5333.50, Apr 1 high. This confirms a resumption of the primary uptrend and opens 5372.73, a Fibonacci projection. Moving average studies are in a bull-mode set-up. Initial support is 5259.02, the 20-day EMA.
- Japan's NIKKEI closed lower by 44.65 pts or -0.11% at 38855.37 and the TOPIX ended 2.14 pts higher or +0.08% at 2768.5.
- Elsewhere, in China the SHANGHAI closed lower by 14.471 pts or -0.46% at 3109.572 and the HANG SENG ended 6.19 pts lower or -0.03% at 18821.16.
- Across Europe, Germany's DAX trades higher by 64.82 pts or +0.35% at 18838.87, FTSE 100 lower by 9.26 pts or -0.11% at 8309.19, CAC 40 down 12.1 pts or -0.15% at 8122.38 and Euro Stoxx 50 up 8.96 pts or +0.18% at 5068.74.
- Dow Jones mini up 26 pts or +0.07% at 39185, S&P 500 mini up 15 pts or +0.28% at 5337.5, NASDAQ mini up 92.75 pts or +0.49% at 18973.
COMMODITIES: Gold Trades Just Ahead of Recent Lows
WTI futures are trading inside a range. A bearish theme remains intact and the sideways move is seen as a pause in the downtrend. 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 $75.64, the Mar 11 low. Key resistance and the bull trigger is at $86.16, the Apr 12 high. Initial resistance to watch is at $80.11, the May 20 high. Gold traded down last week and the yellow metal is trading just ahead of its recent low. The trend structure remains bullish and the move down appears to be a correction Moving average studies are in a bull-mode position and the move lower is allowing an overbought condition to unwind. A resumption of gains would open $2452.5 next, a Fibonacci projection. The 50-day EMA, at $2301.9, represents a key support. A clear break of it would be bearish.
- WTI Crude up $1.06 or +1.36% at $78.81
- Natural Gas down $0.01 or -0.28% at $2.513
- Gold spot down $6.93 or -0.29% at $2343.96
- Copper up $4.35 or +0.92% at $479.8
- Silver down $0.17 or -0.53% at $31.474
- Platinum down $8 or -0.76% at $1047.81
Date | GMT/Local | Impact | Flag | Country | Event |
28/05/2024 | 1230/0830 | * | ![]() | CA | Industrial Product and Raw Material Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | S&P Case-Shiller Home Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Home Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Home Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Quarterly Price Index |
28/05/2024 | 1300/0900 | ** | ![]() | US | FHFA Quarterly Price Index |
28/05/2024 | 1355/0955 | ![]() | US | Minneapolis Fed's Neel Kashkari | |
28/05/2024 | 1400/1000 | *** | ![]() | US | Conference Board Consumer Confidence |
28/05/2024 | 1400/1000 | * | ![]() | US | US Treasury Auction Result for 26 Week Bill |
28/05/2024 | 1400/1000 | * | ![]() | US | US Treasury Auction Result for 13 Week Bill |
28/05/2024 | 1430/1030 | ** | ![]() | US | Dallas Fed manufacturing survey |
28/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for 2 Year Note |
28/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for Cash Management Bill |
28/05/2024 | 1700/1300 | * | ![]() | US | US Treasury Auction Result for 5 Year Note |
28/05/2024 | 1700/1300 | ![]() | US | San Francisco Fed's Mary Daly | |
28/05/2024 | 1705/1305 | ![]() | US | Fed Governor Lisa Cook | |
29/05/2024 | 0130/1130 | *** | ![]() | AU | CPI Inflation Monthly |
29/05/2024 | 0600/0800 | * | ![]() | DE | GFK Consumer Climate |
29/05/2024 | 0600/0800 | ** | ![]() | SE | Retail Sales |
29/05/2024 | 0600/1400 | ** | ![]() | CN | MNI China Liquidity Index (CLI) |
29/05/2024 | 0645/0845 | ** | ![]() | FR | Consumer Sentiment |
29/05/2024 | 0800/1000 | ** | ![]() | EU | M3 |
29/05/2024 | 0800/1000 | ** | ![]() | IT | ISTAT Business Confidence |
29/05/2024 | 0800/1000 | ** | ![]() | IT | ISTAT Consumer Confidence |
29/05/2024 | 0800/1000 | *** | ![]() | DE | North Rhine Westphalia CPI |
29/05/2024 | 0800/1000 | *** | ![]() | DE | Bavaria CPI |
29/05/2024 | 0900/1000 | * | ![]() | UK | Index Linked Gilt Outright Auction Result |
29/05/2024 | 1100/0700 | ** | ![]() | US | MBA Weekly Applications Index |
29/05/2024 | 1200/1400 | *** | ![]() | DE | HICP (p) |
29/05/2024 | 1255/0855 | ** | ![]() | US | Redbook Retail Sales Index |
29/05/2024 | 1400/1000 | ** | ![]() | US | Richmond Fed Survey |
29/05/2024 | 1430/1030 | ** | ![]() | US | Dallas Fed Services Survey |
29/05/2024 | 1530/1130 | ** | ![]() | US | US Treasury Auction Result for 2 Year Floating Rate Note |
29/05/2024 | 1700/1300 | ** | ![]() | US | US Treasury Auction Result for 7 Year Note |
29/05/2024 | 1745/1345 | ![]() | US | New York Fed's John Williams | |
29/05/2024 | 1800/1400 | ![]() | US | Fed Beige Book | |
29/05/2024 | 2300/1900 | ![]() | US | Atlanta Fed's Raphael Bostic |