MNI US OPEN - RBNZ Holds OCR, Tilts Dovish
EXECUTIVE SUMMARY
- BIDEN LOOKS TO MOVE PAST TROUBLES, OPENS NATO SUMMIT WITH WARNING TO PUTIN
- RBNZ HOLDS OCR, TURNS DOVISH
- MACRON MINISTERS CALLS FOR ENSEMBLE-LR ALLIANCE TO OUTFLANK NFP
- CHINA CPI HITS THREE MONTH LOW IN JUNE
MNI (LONDON) - Figure 1: RBNZ dated OIS post-RBNZ versus pre-RBNZ levels (%)
![](https://media.marketnews.com/image_f86b6bc6cc.png)
Source: MNI/BBG
NEWS
MNI US CPI PREVIEW: More “Modest” Progress Within Wider Tails
Consensus sees core CPI at 0.2% M/M in June after the softer than expected 0.16% M/M in May (vs cons 0.3), with a mild skew toward a “high” 0.2%, per MNI’s compilation of sell-side previews. But there is an unusually wide range of estimates for core this month. Uncertainty over some categories (eg auto insurance) means that a surprise reading in either direction should be interpreted with caution. That may prove especially true for the “supercore’ reading, which is expected to bounce from May’s slightly negative M/M print, to 0.27% (MNI sell-side average), but with a wide range of estimates.
US (NYT): Biden Looks to Move Past His Troubles, Opening NATO Summit With Warning to Putin
President Biden opened NATO’s 75th anniversary summit on Tuesday seeking to bolster confidence in both the alliance and his own political standing with a forceful speech warning of the threat posed by Russia and other authoritarian states as the world plunges into a new era of superpower conflict. Mr. Biden, speaking in a strong voice, with few errors, sounded themes from some of the most memorable speeches of his presidency, painting an image of a fearsome and growing NATO with an ironclad commitment to Ukraine in its fight against a Russian invasion.
US (BBG): Trump Teases Rubio at Miami Rally as VP Announcement Nears
Donald Trump injected reality television-level drama into his Miami rally, repeatedly teasing - but stopping short of announcing - Florida Senator Marco Rubio as a running mate as he seeks to draw maximum attention to his vice presidential selection. The former reality television star-turned politician sought to gin up speculation with a series of plot twists around the event Tuesday evening at the Trump National Doral Miami golf course, suggesting the possibility the candidate would share his decision on a running mate
RBNZ (MNI): MPC Holds, Turns Dovish
The Reserve Bank of New Zealand’s monetary policy committee held its official cash rate at 5.5% Wednesday, and shifted to a more dovish tone by stressing evidence of slowing inflation, excess productive capacity and an eased labour market. In its statement, the MPC noted the extent of the OCR’s “restraint will be tempered over time consistent with the expected decline in inflation pressures,” a departure from May’s statement that “monetary policy needs to remain restrictive."
FRANCE (MNI): Macron Ministers Calls for Ensemble-LR Alliance to Outflank NFP
Minister of the Interior Gérald Darmanin and Minister for Gender Equality Aurore Bergé hailing from the centrist Renaissance party have this morning both called for the centrist Ensemble alliance supportive of President Emmanuel Macron and PM Gabriel Attal, to form an alliance with the conservative Les Republicains (LR) party (Darmanin and Bergé are both former LR members). According to figures from Le Monde, this grouping would command 214 seats in National Assembly, short of a majority but comfortably the largest alliance. This would put it in a stronger position to argue that PM Emmanuel Macron should appoint one of its figures to the position of prime minister.
ECB (BBG): ECB’s Vujcic Proposed for New Term at Croatian Central Bank
Croatian central-bank Governor Boris Vujcic is on course to be reappointed for a third six-year term, ending uncertainty about his future at the bank following parliamentary elections in his homeland. Vujcic, whose current stint ends on July 13, has received backing from Prime Minister Andrej Plenkovic and on Wednesday was formally proposed by the parliamentary committee for finances and budget, parliament spokeswoman Marina Buntic told Bloomberg. The posting must be approved by lawmakers, who are expected to take up the recommendation this week.
BOE (MNI EXCLUSIVE): BOE's Pill Holds August Rate Cut Trump Card
MNI looks ahead to the BOE's August meeting - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
BOE (MNI): Pill and Mann Both Due to Speak Today
Huw Pill will speak at Asia house at 14:30BST today with a Q&A to follow. Pill is generally seen as the most hawkish of the internal members - if he strikes a more dovish tone it would likely be interpreted as a dovish shift for all of the internal members and increase the probability of an August cut. In our view this is the most important UK event of the week. Mann will appear on a panel on business investment this afternoon at 16:30BST in Manchester. She has been one of the most hawkish MPC members for some time, but her stance seemed to have softened a little in recent speeches.
CHINA/EU (BBG): China Launches Tit-for-Tat Investigation Into EU Trade Barriers
China is investigating whether the European Union’s recent tariffs and actions against the world’s No. 2 economy constitute a barrier to free trade, underscoring tensions between the two blocs. The Ministry of Commerce launched the probe after receiving a request from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, it said in a Wednesday statement. The process will cover actions taken against Chinese industries including trains, photovoltaic products, wind power and security equipment, per the chamber’s request. It should be completed by Jan. 10, with a possible extension till mid-April.
SAUDI ARABIA (BBG): Saudi Aramco Kicks Off First Dollar Bond Sale in Three Years
Saudi Aramco started the sale of triple-tranche dollar debt, extending the oil-rich kingdom’s debt spree as it brings in cash to help fund projects. The world’s biggest oil exporter is selling dollar bonds for the first time since 2021, according to data compiled by Bloomberg. The debt has 10-, 30- and 40-year maturities, according to a person with knowledge of the matter, who asked not to be identified. Initial pricing thoughts, announced after calls with investors, are at about 140, 180 and 195 basis points over treasuries for the three tranches respectively.
DATA
ITALY MAY INDUSTRIAL PRODUCTION +0.5% M/M ; -3.3% WDA Y/Y (MNI)
NORWAY DATA (MNI): Services Drive Downside Surprise in CPI-ATE Norwegian
June CPI surprised to the downside, with CPI-ATE at 3.4% Y/Y (vs 3.6% expected by consensus and the Norges Bank, 4.1% prior). Despite the downward surprise, we maintain our view that meaningful alterations to Norges Bank rate cut expectations will need to wait for after the July inflation data, due August 9. A sharp pullback in services inflation appears to have driven the surprise, with services CPI-ATE inflation at 4.0% Y/Y (vs 4.7% prior) and 0.2% M/M (vs 0.8% prior). Rents moderated, as did the "services excluding rent" measure.
CHINA DATA (MNI): China June CPI Hits Three Month Low
- CHINA JUNE CPI +0.2% Y/Y VS MEDIAN +0.4%; MAY +0.3% Y/Y
- CHINA JUNE CPI -0.2% M/M VS -0.1% M/M MAY
- CHINA JUNE FOOD PRICES -2.1% Y/Y VS -2.0% Y/Y MAY
- CHINA JUNE PPI -0.8% Y/Y VS MEDIAN -0.8% Y/Y; MAY -1.4% Y/Y
MNI (Beijing) China's Consumer Price Index hit a three-month low in June, rising 0.2% y/y, slowing from May’s 0.3% and missing the 0.4% consensus, data from the National Bureau of Statistics showed Wednesday. Food prices fell 2.1% y/y, reducing headline inflation by 0.39 pp, as the 18.1% increase in pork prices were offset by declines in vegetables, fruits, eggs, beef, mutton and poultry. Non-food prices rose 0.8%, contributing 0.64 pp to CPI growth. Inflation fell 0.2% m/m, compared with the previous 0.1% fall.
JAPAN DATA (MNI): Japan June CGPI Rises 2.9% Y/Y, Higher Import Price
- JAPAN JUNE CORP GOODS PRICE INDEX +2.9% Y/Y; MAY REV 2.6%
- JAPAN JUNE CORP GOODS PRICE INDEX +0.2% M/M; MAY UNREV +0.7%
Japan's corporate goods price index rose 2.9% y/y in June, following May's revised 2.6%, with import price rises accelerating for the fifth straight month, Bank of Japan data on Wednesday showed. June data was boosted by prices of electric power, gas and water up 0.1% y/y following -7.2% in May, with chemical and related products growing 1.7%, versus 0.8% previous. Import prices rose 9.5% y/y in June for the fifth straight rise, accelerating from 7.2% in May.
AUSTRALIA DATA (MNI): Increased Housing Stresses Could Pressure Rates
Housing costs continue to be elevated with June CoreLogic capital city house prices rising 0.7% m/m and 8.6% y/y and May rents up 7.4% y/y. The housing market in Australia remains very tight with a supply shortage and working-age population growth just under 3% y/y and little immediate prospect of an improvement in fundamentals. The RBA noted in June that there has "been an increase in wealth, driven by housing prices". While it doesn't target housing, it is worth monitoring indicators as it has become an issue for the central bank.
FOREX: AUD/NZD Lurches to Multi-Year High on Dovish RBNZ
- The single currency trades firmly, outstripping most others in G10 on the back of further horse-trading in France, as Macron's Ensemble look to secure the highest offices in parliament by making a potential cross-aisle deal with the right-of-centre Les Republicains in order to freeze Marine Le Pen's RN out of power.
- Resultantly, EUR/JPY has traded a new high in European trade, touching 174.89 and extending the recent bull run. The cross (much like other JPY crosses) remains technically overbought, but subdued vols continue to favour carry trade dynamics, working against the JPY.
- Lastly, NZD is weaker, falling against all others in G10 space after the dovish turn from the RBNZ. While the bank kept rates unchanged, they moderated their language on future policy considerably, suggesting that rates could be eased as inflation slows. AUD/NZD traded a new YTD high at 1.1103 - and holds the bulk of those gains into the NY crossover.
- The data schedule remains light Wednesday, with just wholesale trade sales and inventories data on the docket. This should, again, keep focus on the central bank speaker slate - BoE's Pill is set to speak, an MPC member that's seen potentially swinging a decision around an August rate cut at the BoE.
US TSYS: Multi-Week Yield Ranges Respected, Dovish Fed Repricing Likely Required for Extension Lower
2s and 10s have failed to breach late March yield lows. Bulls will be eying potential triggers for a range break.
- Tomorrow’s CPI release provides the next major fundamental input, although we note that there is an unusually wide range of estimates for the core readings and uncertainty surrounding some sub-indices, heightening the need for caution when interpretating the data.
- Also, we believe that a ‘hawkish’ surprise presents the greatest risk to prevailing market positioning, raising the bar for dovish market interpretation of the data.
- More broadly, the recent run of disappointing U.S. labour market and economic activity data leaves the door open to a data-dependent Fed cut in September.
- Fed fund futures price ~20bp of cuts through the Sep FOMC and ~50bp through year end, representing a cut at 2/4 remaining ’24 meetings.
- This seems relatively fair to us at this juncture, so a dovish adjustment to ’25 FOMC pricing may present the most likely avenue for a move lower in yields.
- This could come via a continued moderation in the U.S. economic exceptionalism thesis.
- Zooming out, we caution that the election presents a medium-term source of uncertainty for markets and could limit any moves lower in yields.
EGBS: Futures Reverse Tuesday Losses; Cross-market Focus on BoE Speakers
Bund futures have reversed much of yesterday’s move lower, currently +42 ticks at 131.28 (versus yesterday’s high of 131.39).
- Dovish spillovers from the RBNZ decision overnight supported the wider FI space this morning.
- The 50-day EMA at 131.56 remains the first resistance in Bunds, but a breach of 132.24 (June 28 high) is needed to signal a reversal of the current bearish theme.
- Uncertainty remains around the eventual composition of the French Government, but OATs have nonetheless rallied 60 ticks this morning and the 10-year OAT/Bund spread is just over 1bp tighter.
- Impending Bund supply is not likely to have weighed in the run-up to the 1030BST bidding deadline.
- The June Indeed wage tracker saw the Euro-area estimate tick up to 3.7% Y/Y (vs a one tenth upwardly revised 3.5% prior), though we note the potential for revisions in future months.
- European equity futures have risen from intraday lows, contributing to modest peripheral spread tightening.
- The remainder of today’s regional calendar is light, with broader focus on today’s BoE speakers and tomorrow’s US CPI release.
GILTS: Rally a Little, Monday’s High in Futures Eyed
Gilts rally at the open, with spill over from solid demand at yesterday’s 3-Year Tsy auction and a dovish RBNZ outcome providing support.
- Futures +48 at 98.16. Initial resistance at the July 8 high (98.27), a break above there would threaten the bearish short-term outlook.
- Gilt yields are 2-4bp lower, curve a touch flatter.
- A second-round bid comes into STIRs alongside the gilt rally, SONIA futures flat to +5.5.
- Comments from BoE’s Pill & Mann will headline today.
- We will provide greater colour on those appearances shortly.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Intact Despite Recent Pullback
A bull cycle in Eurostoxx 50 futures is intact, despite yesterday’s move down. Attention is on resistance at 5039.84, 61.8% of the May 16 - Jun 14 sell-off. It was pierced last Friday, a clear break of this level would be a positive development and suggest scope for an extension of the bull cycle that started Jun 14. This would open 5082.32, the 76.4% retracement. A stronger reversal would instead expose 4846.00, the Apr 19 low and a key support. The trend condition in S&P E-Minis is bullish and this week’s extension reinforces this set-up. The contract is trading at its latest highs. Fresh cycle highs confirm a resumption of the uptrend and maintain the bullish sequence of higher highs and higher lows. MA studies are in a clear bull-mode set-up too and this continues to highlight positive market sentiment. Sights are on 5668.00, a Fibonacci projection. Support is at 5536.81, the 20-day EMA.
- Japan's NIKKEI closed higher by 251.82 pts or +0.61% at 41831.99 and the TOPIX ended 13.65 pts higher or +0.47% at 2909.2.
- Elsewhere, in China the SHANGHAI closed lower by 20.008 pts or -0.68% at 2939.364 and the HANG SENG ended 51.56 pts lower or -0.29% at 17471.67.
- Across Europe, Germany's DAX trades higher by 64.62 pts or +0.35% at 18301.58, FTSE 100 higher by 25.03 pts or +0.31% at 8166.33, CAC 40 up 28.34 pts or +0.38% at 7538.72 and Euro Stoxx 50 up 14.81 pts or +0.3% at 4919.1.
- Dow Jones mini down 4 pts or -0.01% at 39593, S&P 500 mini up 5.75 pts or +0.1% at 5637, NASDAQ mini up 47 pts or +0.23% at 20726.25.
Time: 09:50 BST
COMMODITIES: WTI Futures Extend Pullback From Last Week's High
WTI futures are trading lower today as the contract extends the pullback from last week’s high. The move down is likely a correction. Recent gains reinforced bullish conditions, signalling scope for a continuation higher near-term. Moving average studies are in a bull-mode set-up too, highlighting a rising trend. Sights are on $85.27, the Apr 12 high and a bull trigger. Initial firm support to watch is $79.70, the 50-day EMA. Recent gains in Gold resulted in a print above resistance at $2387.8, the Jun 7 high. This undermines a recent bearish theme and a clear break would be viewed as a bullish development and open the key resistance at $2450.1, the May 20 high. Initial support to watch lies at the 50-day EMA, at 2327.8. A clear break of this average would instead confirm a resumption of the reversal from May 20 and expose $2277.4, May 3 low.
- WTI Crude up $0.07 or +0.09% at $81.46
- Natural Gas up $0.03 or +1.11% at $2.371
- Gold spot up $8.76 or +0.37% at $2372.6
- Copper down $2.25 or -0.49% at $455.85
- Silver up $0.17 or +0.55% at $30.9718
- Platinum up $0.43 or +0.04% at $988.85
Time: 09:50 BST
Date | GMT/Local | Impact | Country | Event |
10/07/2024 | 1100/0700 | ** | ![]() | MBA Weekly Applications Index |
10/07/2024 | - | *** | ![]() | Money Supply |
10/07/2024 | - | *** | ![]() | New Loans |
10/07/2024 | - | *** | ![]() | Social Financing |
10/07/2024 | 1330/1430 | ![]() | BoE Pill At Asia House | |
10/07/2024 | 1400/1000 | ** | ![]() | Wholesale Trade |
10/07/2024 | 1400/1000 | ![]() | Fed Chair Jerome Powell | |
10/07/2024 | 1430/1030 | ** | ![]() | DOE Weekly Crude Oil Stocks |
10/07/2024 | 1530/1630 | ![]() | BOE's Mann Panellist on UK Business investment | |
10/07/2024 | 1700/1300 | ** | ![]() | US Note 10 Year Treasury Auction Result |
10/07/2024 | 1830/1430 | ![]() | Chicago Fed's Austan Goolsbee | |
10/07/2024 | 2330/1930 | ![]() | Fed Governor Lisa Cook | |
11/07/2024 | 2350/0850 | * | ![]() | Machinery orders |
11/07/2024 | 0600/0700 | ** | ![]() | UK Monthly GDP |
11/07/2024 | 0600/0700 | ** | ![]() | Trade Balance |
11/07/2024 | 0600/0700 | ** | ![]() | Index of Services |
11/07/2024 | 0600/0700 | *** | ![]() | Index of Production |
11/07/2024 | 0600/0700 | ** | ![]() | Output in the Construction Industry |
11/07/2024 | 0600/0800 | *** | ![]() | HICP (f) |
11/07/2024 | 0900/1000 | ** | ![]() | Gilt Outright Auction Result |
11/07/2024 | 1230/0830 | *** | ![]() | Jobless Claims |
11/07/2024 | 1230/0830 | ** | ![]() | WASDE Weekly Import/Export |
11/07/2024 | 1230/0830 | *** | ![]() | CPI |
11/07/2024 | 1430/1030 | ** | ![]() | Natural Gas Stocks |
11/07/2024 | 1515/1115 | ![]() | Atlanta Fed's Raphael Bostic | |
11/07/2024 | 1530/1130 | ** | ![]() | US Bill 04 Week Treasury Auction Result |
11/07/2024 | 1530/1130 | * | ![]() | US Bill 08 Week Treasury Auction Result |
11/07/2024 | 1700/1300 | ![]() | St. Louis Fed's Alberto Musalem | |
11/07/2024 | 1700/1300 | *** | ![]() | US Treasury Auction Result for 30 Year Bond |
11/07/2024 | 1800/1400 | ** | ![]() | Treasury Budget |