MNI US OPEN - RBA Unchanged at 4.35%, CPI Outlook Adjusted Higher

NEWS

US (BBG): US Seeks to Curb Iran’s Fundraising Capacity in Southeast Asia

Washington is concerned about growing efforts by Iran and groups like Hamas to solicit money in Southeast Asia, a senior US Treasury official said on Tuesday during a visit intended to rally support for sanctions enforcement in the region. American officials are meeting oil industry executives, regulators and financial institutions in Singapore and Malaysia this week to prop up US efforts to tighten restrictions on Iranian crude exports and to curb Russia’s ability to keep funding its costly war in Ukraine.

RUSSIA (MNI): No US Rep at Putin Inauguration as Nuke Deployment Drills Raise Tensions

State-run RIA reporting comments from Russian Deputy Foreign Minister Sergei Ryabkov, claiming that the Russian and US gov't are still in infrequent contact with one another despite relations entering the deep-freeze after Russia's invasion of Ukraine. Ryabkov confirms that the two countries "occasionally exchange views on strategic stability." Ryabkov also says that the US Ambassador to Russia, Lynne Tracy, 'has left Russia for a certain period of time'. Comes after the US (as well as the UK and Canada) confirmed they would not be sending any representative to the inauguration ceremony for President Vladimir Putin, taking place today following his election win in March.

RBA (MNI): RBA Leaves Rate at 4.35%, Adjusts CPI Outlook Higher

The Reserve Bank of Australia board held the cash rate steady at 4.35% Tuesday, noting services inflation had eased slower than forecast while repeating March’s message that it would not rule “anything in or out.” Recent data indicate that, while inflation is easing, it is doing so more slowly than previously expected and it remains high," the board said in its statement. "The Board expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks."

ISRAEL (MNI): Cairo Talks Set to Resume as IDF Seizes Palestine Side of Rafah Crossing

Indirect ceasefire negotiations between Israel and Hamas are set to resume today following the Netanyahu gov'ts rejection of the Egyptian and Qatari-brokered deal that had the backing of Hamas on 6 May. The Israeli gov't claimed that the deal on the table was 'far from' its 'obligatory demands'. Instead, the IDF has seized control of the Palestinian side of the border crossing with Egypt in Rafah, halting the supply of humanitarian aid through the crossing. US President Joe Biden spoke to PM Benjamin Netanyahu for around 30 mins on 6 May, with the US president seeking to push for Israel to accept a ceasefire deal and, as has been the case consistently, warn against a full military operation in Rafah without a plan to avoid mass civilian casualties.

BOJ (BBG): Ueda Says Will Closely Monitor How Weak Yen Will Affect Prices

Bank of Japan Governor Kazuo Ueda said after meeting with Prime Minister Fumio Kishida that he’s carefully watching the impact of the weak yen on prices and he discussed recent currency moves with the premier. Ueda was speaking Tuesday with reporters after emerging from his first meeting with Kishida since March 19, the day the BOJ ended its negative rate regime. The two shared opinions on that decision, Ueda said. “In general on foreign exchange rates, they could potentially have a large impact on the economy and prices, so I confirmed that the Bank will closely monitor the recent yen’s weakness in operating its policy.”

UK/CHINA (BBG): China Seen as Likely Culprit in UK Defense Ministry Cyberattack

UK armed forces personnel had personal data accessed in a recent cyberattack that was likely carried out by China, British officials familiar with the matter said. The hackers breached the payroll system used by Britain’s defense ministry and obtained the names and bank account details of members of the army, Royal Navy, Royal Air Force and some veterans, according to the people, who asked not to be identified because the investigation was not public. In a few thousand cases, personal addresses were included in the compromised information, they added.

UK (BBG): Sunak Says Next UK Election May Be Closer Than Polls Suggest

Rishi Sunak said the next UK election may be closer than polls suggest now, raising the prospect of a hung Parliament where no party has overall control. The prime minister’s remarks follow defeats for the ruling Conservative Party in local and mayoral elections last week and aim to undermine the confidence of the Labour opposition in taking office for the first time since 2010. “Whilst of course this was a disappointing weekend for us, the result of the next general election isn’t a foregone conclusion,” Sunak told broadcasters Monday at an event in north London. “The situation is closer than many people are saying or indeed some of the opinion polls are predicting.”

MNI RIKSBANK PREVIEW - MAY 2024: Threshold for First Cut Appears to be Met

The Riksbank is expected to deliver its first cut of the cycle at the May meeting. In the March press conference, Governor Thedéen noted that if all data (i.e. not just inflation) were in line with the March MPR projections, a cut in May would be the most likely scenario. The macroeconomic data since the March meeting appears to have met this threshold. If a rate cut is enacted, we expect it to be delivered with a hawkish tilt in order to protect the SEK from a renewed bout of weakness. If a rate cut is enacted, we expect it to be delivered with a hawkish tilt in order to protect the SEK from a renewed bout of weakness.

GERMANY (MNI): German Insolvencies Peak Before Summer Slowdown

A record number of German firms went bust in April with around 34,000 jobs lost among the largest 10% of affected firms, according to the latest IWH insolvency trend data, although the recent wave of insolvencies is expected to break soon. Some 1,367 companies were declared bankrupt last month, 5% more than in March - when the previous record was set - and 47% higher than in April 2023. Construction, trade and services were the worst affected sectors, with renewed insolvency of the Galeria Karstadt chain and a rise in the number of failing SME also blamed for an increase in job losses.

CHINA/FRANCE (BBG): Xi Urges Macron to Help China to Avoid a ‘New Cold War’

Chinese President Xi Jinping called on France to help fend off a “new Cold War” as the European Union increasingly aligns with US concerns over security risks and trade tensions. He told French President Emmanuel Macron the two nations should uphold mutual benefits, and jointly oppose decoupling and the disruption of supply chains, the official Xinhua News Agency said, citing comments made during talks between the two leaders on Monday.

CHINA (MNI): China to Contain Property Spillover - Advisor

MNI (Beijing) China will work to ensure the property sector's adjustment, expected to unfold over several years, does not spill over into the financial system, a senior policy advisor to the National Development and Reform Commission told MNI, adding authorities will launch more policies aimed at stabilising sentiment, growth and employment to boost investment and consumer spending. The property slowdown represents a significant headwind to China’s economic recovery and financial stability, together with local-government and small financial institution debt, said Wu Sa, deputy-director of the Economics Institute at the Academy of Macroeconomic Research, a think tank with a focus on development issues under the NDRC.

DATA

EUROZONE DATA (MNI): Retail Trade Growth Rebounds in March

• EUROZONE MAR RETAIL SALES +0.8% M/M, +0.7% Y/Y

Eurozone retail trade growth was marginally above consensus at +0.8% M/M in March (vs +0.7% consensus, -0.3% revised prior - all figures are real and calendar/seasonally adjusted), reflecting a strong rebound from a weak February. On an annual basis, volumes rose 0.7% Y/Y (vs +0.2% consensus, -0.5%revised prior) - the first positive reading since September 2022. Both 'food, drinks, tobacco' (+1.2% M/M - the highest level since June 2021) and fuel (+2.0% vs -0.9% prior) contributed to M/M gains after declines in February.* Meanwhile, 'non-food products' recorded no change M/M (vs +0.3% prior).

GERMAN DATA (MNI): Weak Domestic Demand Drives Factory Orders Drop, But 'Core' Stable

German factory orders fell by 0.4% M/M in March, softer than the +0.4% expected and an even bigger downside miss when considering a downward revision in February (by 1.0pp to -0.8% - all figures are real, SWDA). The underlying 'core' measure pointed towards some stabilisation, however. Factory orders fell 1.9% Y/Y (vs -0.7% consensus) vs -8.8% in February, with the improvement in the annual comparison mainly due to base effects. Core (ex-large ticket items) orders, a better measure of underlying activity, increased by 0.1% in March (vs -0.6% prior); its less volatile 3M/3M measure printed weaker than before, though, at -2.3% (vs -0.9% prior).

UK DATA (MNI): BRC-KPMG Retail Sales Decline for First Time Since June '22 Due to Easter Effect

• UK BRC APR BY VALUE SHOP SALES LFL -4.4% YY, TOTAL -4% YY

The value of UK Total Retail Sales in the BRC-KPMG measure declined in April on a year-over-year basis for the first time since June 2022 (by 4.0% Y/Y vs growth of +3.5% Y/Y in March). The majority of this decline was due to the earlier timing of Easter, as the BRC notes that the average growth for the combined period of March and April together was +0.2%. However, this is still a very weak print as there have been no months with Y/Y growth of less than +1.0% since June 2022.

SWISS APR UNEMPLOYMENT RATE +2.3% (MNI)

FOREX: USD Index Firmer, But Recent Ranges Respected

• The greenback is furtively the firmest currency in G10 early Tuesday, but ranges are narrow and markets are awaiting the next macro cue to turn markets with conviction. Bank of Japan chief Ueda met with the Japanese PM earlier today to discuss the economy, markets and inflation - another signal that these issues are still top-of-mind for the most senior policymakers in the country, resulting in a reaffirmation of the commitment to intervene in currency markets if required.
• USD/JPY remains higher on the week, with the 50-dma support helping underpin from the tail-end of last week. Today that level crosses at 152.07.
• The RBA kept policy rates unchanged - as expected - overnight. AUD/USD was little changed, but the pair remains tilted higher following the breach of resistance on the way to a new multi-month high on Friday of last week. This leaves 0.6647 and 0.6668 as the next upside levels of note.
• Focus for the duration of the Tuesday session turns to Canada's Ivey PMI release for April and appearances from ECB's de Cos & Nagel and Fed's Kashkari.

EGBS: Core/Semi-Core Firmer Alongside Wider Global FI; Peripherals Tighten

Core/semi-core EGBs are firmer this morning, tracking global FI peers.

• Bund futures are +42 ticks at 131.66. The technical trend outlook is nonetheless unchanged. It remains bearish and the latest short-term gains are considered corrective.
• There hasn’t been much market moving news flow to note, with FI markets beginning the session on a positive note following a less hawkish than expected RBA decision overnight.
• Eurozone retail sales rebounded from a weak February, printing at 0.7% Y/Y (vs -0.2% cons, -0.5% prior), though Bunds were unmoved.
• The German and French cash curves have bull flattened, with yields 1.5 to 4bps lower.
• 10-year periphery spreads to Bunds are tighter, with European equities around 0.6% higher today.
• ECB speak from de Cos and Nagel is scheduled today, with no tier 1 data due in the Eurozone or the US today.

GILTS: Futures Through Initial Resistance After Long Weekend, 2s Comfortably Outperform Schatz

Gilt futures have moved through initial resistance (50-day EMA at 97.65) to last trade +88 at 97.84. Highs of 97.88 seen, with bulls looking to target 98.00 on any extension higher.

• Yields are 5.5-8bp lower across the curve, light bull flattening.
• Benchmark yields are 18-26bp off last week’s highs, a little below the midpoint of their respective April ranges. The most pronounced pullback has come in the short end and belly.
• Cross-market, gilts outperform Bunds.
• Some of that is related to catch up after the long London weekend.
• However, some of the move represents gilt outperformance, with the 2-Year gilt/Schatz spread ~2bp through Friday’s lows, aided by the movement in GBP STIRs.
• SONIA futures are little changed to 9bp firmer, at/just off session highs.
• BoE-dated OIS shows ~55bp of ‘24 cuts.
• Further forwards, pricing for this week’s BoE is essentially flat, with ~11bp of cuts showing through the June MPC and a 25bp cut fully discounted come the end of the August meeting.
• Expect our full preview of that event later today.

EQUITIES: E-Mini S&P Extends Current Bull Cycle

Eurostoxx 50 futures continue to trade above 4762.00, the Apr 19 low. The contract recently traded through the 20-day EMA and resistance at 4990.00, the Apr 15 high. This highlights a potentially stronger reversal. An extension higher would expose the bull trigger at 5079.00, the Apr 2 high. Initial resistance is at 5006.00, the Apr 30 high. Key support lies at 4762.00, a break would be bearish. Initial support to watch is 4880.90, the 50-day EMA. S&P E-Minis traded higher Monday, extending the current bull cycle. The contract has traded through resistance at the 20-day EMA and is trading at its recent highs. This highlights a stronger short-term bullish condition and a continuation higher would expose the key resistance and bull trigger at 5333.50, the Apr 1 high. Initial resistance is 5246.18, a Fibonacci retracement. Firm support lies at 5036.25, the May 2 low.

• Japan's NIKKEI closed higher by 599.03 pts or +1.57% at 38835.1 and the TOPIX ended 17.69 pts higher or +0.65% at 2746.22.
• Elsewhere, in China the SHANGHAI closed higher by 7.018 pts or +0.22% at 3147.738 and the HANG SENG ended 98.93 pts lower or -0.53% at 18479.37.
• Across Europe, Germany's DAX trades higher by 78.59 pts or +0.43% at 18252.42, FTSE 100 higher by 96.25 pts or +1.17% at 8308.43, CAC 40 up 19.54 pts or +0.24% at 8016.18 and Euro Stoxx 50 up 20.17 pts or +0.41% at 4977.13.
• Dow Jones mini up 28 pts or +0.07% at 39023, S&P 500 mini up 1 pts or +0.02% at 5207, NASDAQ mini down 18.75 pts or -0.1% at 18175.25.

COMMODITIES: WTI Futures Trading Just Above Recent Lows

WTI futures traded lower last week and the contract is currently trading just above its recent lows. Price has breached key support at the 50-day EMA, at $81.05. The clear breach of this average strengthens a short-term bearish theme and highlights scope for a deeper correction. This has opened $76.07, the Mar 11 low. Key resistance and the bull trigger has been defined at $86.97, the Apr 12 high. Initial firm resistance is at $84.46, the Apr 26 high. Gold is in consolidation mode. A bearish condition remains intact. The precious metal has recently traded through the 20-day EMA and this highlights a corrective cycle. A continuation lower would signal scope for an extension towards $2250.3, the 50-day EMA. Note that a short-term bear cycle is allowing a significant overbought condition to unwind. Key resistance and the bull trigger is at $2431.5, the recent Apr 12 high.

• WTI Crude up $0.22 or +0.28% at $78.73
• Natural Gas down $0.04 or -1.96% at $2.154
• Gold spot down $8.92 or -0.38% at $2315.61
• Copper down $2.5 or -0.54% at $459.05
• Silver down $0.21 or -0.76% at $27.2405
• Platinum down $3.41 or -0.36% at $956.04