MNI US OPEN - Riksbank Hike Puts Rates Near Projected Peak

NEWS

MNI US EARNINGS SCHEDULE - Meta, Boeing headline Wednesday earnings reports

RIKSBANK (MNI): Riksbank Ups Rate 50bps, Sees One More Hike

The Riksbank's Executive Board delivered a widely anticipated 50 basis point hike, lifting the policy rate to 3.5%, at its April meeting, although two members dissented preferring a 25 bps increase and its forecasts and commentary suggested that it was nearly at peak, with one more 25 bps hike likely either in June or September.

ECB (BBG): ECB Has No Choice But to Raise Rates Further, Vujcic Tells Delo

The European Central Bank must lift borrowing costs further because inflation pressures remain too high, according to Governing Council member Boris Vujcic. “Inflation is falling, but core inflation is stubbornly high,” he told Slovenia’s Delo newspaper in comments published Wednesday. “We have no choice but to continue raising interest rates. We’ll have to do this until we see a change in the trend.”

US (BBG): McCarthy Pushes Ahead on Debt Bill Vote Despite Fractious GOP

House Speaker Kevin McCarthy is moving ahead with a vote this week on his bill linking a debt ceiling increase to spending cuts despite deep divisions within his own Republican ranks that threaten to sink the measure. The ultimate outcome of the vote may not be known until the roll call happens, a rarity in US politics. And there were signs that plans to hold the vote on Wednesday were in danger of slipping amid the entrenched opposition.

RUSSIA (BBG): Russia Steps Up Tactical-Nuclear Threats with Belarus Training

Russia trained troops from Belarus on tactical nuclear warheads for Iskander short-range missiles, taking a step toward following through on its threat to deploy the weapons on the territory of its ally. Russia’s Defense Ministry said the training had covered the “storage and use of tactical special munitions,” the euphemism it uses for smaller nuclear weapons. The Belarusian Defense Ministry confirmed the troops had already returned to base after the training, Tass said.

JAPAN (MNI): Japan’s Cost-Push Inflation to Tail Off - Ueda

Bank of Japan Governor Kazuo Ueda said on Wednesday that Japan’s high inflation rate caused by cost-push will peak and then tail off. Ueda told lawmakers, however, that he does not rule out the risk Japan’s inflation rate rises again due to a weak yen, but the possibility is low. When asked about the impact of rate hikes on fiscal conditions, Ueda said the conduct of the BOJ’s monetary policy will not be driven by considerations about increased interest payments imposed on government debt.

AUSTRALIA (MNI): Government Proposing Gas Price Cap Until Mid-2025

The federal government's $12 per gigajoule gas price cap is to be extended to 1 July 2025 when it will be reviewed again. This measure was introduced in December last year for 12 months to bring energy costs down but is to be extended as part of the government's mandatory code of conduct published today for the final stage of consultation due by May 12. According to EnergyQuest Q4 2022 east coast gas prices averaged almost $18/GJ.

NEW ZEALAND (MNI): RBNZ to Ease LVR Restrictions on Banks

The Reserve Bank of New Zealand wants to ease mortgage loan-to-value restriction limits from June 1 to 15% for loans with LVR above 80% for owner occupiers from 10% and 5% for loans with LVR above 65% for investors from 60%. “Our assessment is that the risks to financial stability posed by high-LVR lending have reduced to a level where the current restrictions may be unnecessarily reducing efficiency,” said Deputy Governor Christian Hawkesby.

CORPORATE (BBG): Microsoft Profit, Sales Top Estimates on Strong Cloud Demand

Microsoft Corp. reported quarterly profit and sales that topped projections, fueled by resilient corporate cloud-computing demand, and gave an upbeat outlook for its nascent artificial intelligence services. Shares jumped more than 8% in late trading. The software maker said it will step up spending to bolster its cloud-data centers to meet customer demand for new AI tools, while keeping operating expenses in check. Microsoft has unveiled a procession of AI-based products and features in recent months, including a new internet search chatbot based on OpenAI’s technology.

CORPORATE (BBG): First Republic Mulls $100 Billion Asset Sales in Turnaround Plan

First Republic Bank is exploring divesting $50 billion to $100 billion of assets as the beleaguered lender attempts to rescue itself from the turmoil that engulfed the industry last month. The sales, which include long-dated mortgages and securities, are aimed at reducing the mismatch between the bank’s assets and liabilities — one of the factors that has left First Republic teetering after a run on deposits in March, according to people familiar with the matter.

DATA

GERMAN DATA (MNI): Consumer Confidence Continues Upswing, Income Expectations Rebound

• GERMANY MAY CONSUMER CONF -25.7 (FCST -28); APR -29.3r

Germany's forward-looking GfK consumer sentiment indicator increased by 3.6 points to -25.7 was recorded in May. The improvement beat consensus expectations and represents a seventh consecutive increase. Both economic and income expectations rebounded significantly, with government energy support, cooling inflation and less-recessionary outlooks largely underpinning optimism.

FRANCE DATA (MNI): Consumer Confidence Edges Up, Inflation Expectations Cool Sharply

• FRANCE APR CONSUMER CONF 83; MAR 82r

French consumer confidence improved slightly in April, edging up one point to 83 against consensus expectations of holding steady. The indicator still remains markedly below the long-run average of 100 and has been firmly in the 80s range for 13 months now (averaging 83). Personal finance expectations saw slight improvement (albeit remaining pessimistic), alongside households' opinions of living standards in France.

SWEDEN MAR UNEMPLOYMENT 7.7%

AUSTRALIA DATA (MNI): Softer CPI Gives RBA Space for Additional Pause

• AUSTRALIA Q1 CPI +1.3% Q/Q
• AUSTRALIA Q1 TRIMMED CPI +1.2% Q/Q

The lower-than-expected consumer price inflation levels for the March quarter could give the Reserve Bank of Australia room for another pause to interest-rate hikes when it meets on May 2. Australian CPI for the March quarter printed below market expectations, with trimmed mean CPI rising 1.2% q/q compared to the expected 1.4% and the weighted median rising 5.8% y/y over the estimated 5.9%, according to data released by the Australian Bureau of Statistics Wednesday.

AUSTRALIA DATA (MNI): SEEK Salaries Another Signal That Labour Market Remains Tight

The SEEK advertised salaries index rose 0.4% m/m in March to be up 4.7% y/y. February rose 0.3% m/m and 4.7% y/y. Q1 rose 0.9% q/q down from Q4's 1.3% but higher than 2019's average of 0.5%. Q1 WPI prints on May 17. The index shows that employers continue to offer higher-than-usual salaries to attract people with the right skills.

FOREX: EUR/AUD at New Multiyear Highs on Soft CPI, Iron Ore

• The single currency trades well, leading the rest of G10 and pushing EUR/USD back toward the better levels of the Tuesday session to narrow the gap with first resistance of 1.1067. A break north of here eyes 1.1076 bull trigger and clears the way for the highest levels since April last year.
• AUD makes up the bottom-end of the table, slipping against all others as several factors conspire against the currency. A softer-than-expected core inflation release (trimmed mean at 1.2% vs. Exp. 1.4% for Q1) argues against the RBA re-starting their tightening cycle and a seventh session of lower lows for iron ore further dampens the outlook.
• EUR/AUD has rallied through 1.67 to the upside for the first time since October 2020, clearing the way for the 50% retracement for the 2020 - 2022 downleg at 1.7045.
• Banking concerns have resurfaced, as renewed concern surrounding First Republic's plans to sell as much as $100bln in assets drove their shares lower still. Further regional banking earnings are due Wednesday, and will shed further light on systemic fragility.
• Focus for the coming session turns to US trade balance data for March, as well as prelim March durable goods orders. The speakers slate is light, with just ECB's de Guindos & Herodotou on the docket ahead of the BoC minutes.

BONDS: German Short End In Catch-Up Rally With Tsys

German short-end yields are sharply lower in early Wednesday trade, catching up with the US Treasury rally after Tuesday's European cash close.

• The latest leg of the recent risk-off move was triggered late Tuesday on reports First Republic Bank could divest up to $100B in assets.
• The US curve is a little weaker, steadying out vs Tuesday's bull steepening.
• Meanwhile there is sharp bull steepening in Germany, with 2Y yields down 13bp and 10s down 5bp - again, mostly reflecting the risk-off move after Tuesday's cash close rather than European developments this morning.
• Gilts have been fairly steady by comparison, with no directional move in the UK curve (yields down 2-2.5bp across the board).
• A fairly light events schedule lies ahead, with March durable goods and trade balance the highlights of the US calendar. We also hear from the ECB's Guindos and Herodotou.
• In U.S. supply we get $24B 2Y FRN and $43B 5Y Note auctions.

Latest levels:

• Jun US 10Y futures (TY) down 2.5/32 at 115-23 (L: 115-18 / H: 115-25.5)
• Jun Bund futures (RX) up 40 ticks at 135.42 (L: 134.93 / H: 135.74)
• Jun Gilt futures (G) up 18 ticks at 101.93 (L: 101.68 / H: 102.12)
• Italy / German 10-Yr spread 0.2bps tighter at 189bps

EQUITIES: Sharp Sell Off in E-Mini S&P Results in Break of 20-Day EMA

The Eurostoxx 50 futures contract has pulled back from recent highs. A key short-term support at 4279.90 remains intact. This is the 20-day EMA where a break is required to signal a short-term top and highlight potential for a deeper pullback - towards 4202.40, the 50-day EMA. Trend conditions remain bullish for now and attention is on the bull trigger at 4363.00, the Apr 21 high. A break would open 4381.50, Jan 5 2022 high (cont). A strong sell-off in S&P E-minis Tuesday resulted in a break below support at 20-day EMA, at 4125.55. This exposes a more important support - the 50-day EMA - that intersects at 4086.99. A clear break of this average would highlight a top and expose 4061.11, a Fibonacci retracement. On the upside, initial firm resistance is seen at 4164.25, the Apr 24 high. A breach of this level would ease the developing bearish threat.

• Japan's NIKKEI closed lower by 203.6 pts or -0.71% at 28416.47 and the TOPIX ended 18.25 pts lower or -0.89% at 2023.9.
• Elsewhere, in China the SHANGHAI closed lower by 0.771 pts or -0.02% at 3264.101 and the HANG SENG ended 139.39 pts higher or +0.71% at 19757.27.
• Across Europe, Germany's DAX trades lower by 98.52 pts or -0.62% at 15774.31, FTSE 100 lower by 20.51 pts or -0.26% at 7870.18, CAC 40 down 52.91 pts or -0.7% at 7477.27 and Euro Stoxx 50 down 30.42 pts or -0.69% at 4346.36.
• Dow Jones mini up 31 pts or +0.09% at 33685, S&P 500 mini up 15.5 pts or +0.38% at 4109, NASDAQ mini up 154 pts or +1.2% at 12964.5.

COMMODITIES: Tuesday Price Action Reinforces Bearish Threat to WTI Futures

The outlook in WTI futures remains bearish. Last week’s move lower resulted in a break of $79.04, the Apr 3 low and the gap high on the daily chart. The continuation lower has seen price breach the 20- and 50-day EMAs, exposing $75.83, the Mar 31 high and a gap low on the daily chart. Key short-term resistance has been defined at $83.38, the Apr 12 high. A break would resume the recent uptrend. Gold is in consolidation mode and is trading closer to its recent lows. The broader trend condition remains bullish, however, the yellow metal has entered a short-term corrective cycle. Price has pierced support at $1988.1, the 20-day EMA, highlighting potential for a deeper retracement. This has opened $1949.7, Apr 3 low. Key short-term resistance has been defined at $2048.7, the Apr 5 high. A break would confirm a resumption of the uptrend.

• WTI Crude up $0.77 or +1% at $77.8
• Natural Gas down $0.04 or -1.65% at $2.269
• Gold spot down $0.71 or -0.04% at $1996.47
• Copper up $2.35 or +0.61% at $389.25
• Silver down $0.07 or -0.29% at $24.932
• Platinum up $10.67 or +0.98% at $1102.63