MNI US OPEN - Russia, China the Focus of G7 Meetings

NEWS

EUROPE: Ascension Day Likely to Limit European Liquidity

A quick reminder that the observance of Ascension Day will likely limit liquidity in European assets throughout today with large chunks of mainland Europe taking the day off, even though many of the regional markets remain open.

US (WaPo): DeSantis Plans to Officially Enter Presidential Race Next Week

Florida Gov. Ron DeSantis plans to officially enter the 2024 presidential race next week, as the Republican gathers top fundraisers in Miami, according to two people familiar with the plans.The second-term governor, widely considered at present to be the most viable GOP challenger to former president Donald Trump, has been laying the groundwork for a campaign for months.

US (BBG): Biden Campaign Maps Out Expanded Battlefields for 2024 Race

President Joe Biden hopes to win reelection in 2024 by defending his victories in 2020 battleground states — but also expanding the map into states like North Carolina and Florida that Democrats haven’t won since Barack Obama. Biden campaign manager Julie Chavez Rodriguez argued in a state-of-the-race memo Thursday that Democrats have strengthened their hand going into the presidential election after a strong performance in last year’s midterm races and in special elections this year.

ECB (BBG): Guindos Says Accelerating Services Inflation a Worry for ECB

European Central Bank Vice President Luis de Guindos said he’s particularly concerned about the accelerating inflation in service industries as policymakers weigh how much further to raise interest rates. Guindos reiterated that the ECB is focused on core inflation as a key indicator of underlying price trends and highlighted the strength of the services sector.

G7 (MNI): Focus of Russia Sanctions Talk at Summit to Be On Circumvention - EU Official

Wires reporting comments from an unnamed EU official ahead of the G7 summit taking place in Hiroshima, Japan from 19-21 May. Says that the focus of G7 talks regarding Russia sanctions will be on circumvention, mirroring the efforts being made within the EU.

UK/JAPAN (BBG): UK Announces Japan Chips Partnership as Fears Grow Over Taiwan

Rishi Sunak announced £18 billion ($22.5 billion) of new investment by Japanese businesses in the UK, mostly in clean energy, as well as a bilateral “semiconductor partnership” aimed at boosting supply chain resilience amid fears over Chinese interference in Taiwan. A “Hiroshima Accord” seeks to deepen economic, security and tech cooperation between the two countries, the British premier said as he landed in Japan on Thursday ahead of the Group of Seven summit.

CHINA (BBG): Xi Summit to Deepen Central Asian Ties in Split-Screen With G-7

President Xi Jinping will seek to deepen Beijing’s influence in Central Asia at a major summit, reminding a parallel Group of Seven conclave of China’s sway outside the US-led world order.The two-day China-Central Asia Summit will assemble the leaders of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan from Thursday in the Chinese city of Xi’an. Trade ties and regional security concerns will likely dominate talks at the inaugural in-person meeting, along with Russia’s war in Ukraine.

NEW ZEALAND (MNI): Larger Deficit and Stronger Growth, RBNZ to Hike Further

The NZ government sees higher growth in FY24, which means it expects a recession to be avoided, but it is forecasting lower near term inflation. Due to the repair costs from recent weather events the budget deficit will be significantly wider in FY24 than projected in December, but in the following years it is due to narrow sharply and be in surplus in FY26, the opposite pattern to Australia. The Treasury has said that the budget is stimulatory and so rates will stay "higher for longer".

RUSSIA/UKRAINE (MNI): Russia Steps Up Air Raids on Kyiv Ahead of Anticipated Counteroffensive

Russia launched cruise missiles at Ukraine's capital and the Odesa region early Thursday, officials said as reported by AP. It was the ninth Russian air raid that targeted the capital this month, a clear escalation after weeks of lull and ahead of a much-anticipated Ukrainian counteroffensive. Most of the missiles were shot down, and one death was reported from the attacks.

RUSSIA (MNI): Kremlin Confirms Grain Deal Extension & African Peace Mission

Comments from Kremlin spox Dmitri Peskov hitting wires. Confirms the already-publicised two month extension of the Black Sea Grain Initiative, saying that there was 'a qualified result' from the quadripartite talks between Russia, Ukraine, Turkey, and the United Nations. Says that the fate of the grain deal 'depends on those with home the UN needs to agree the Russian part of the deal with'. Adds that 'there are certain hopes, that different scenarios are being worked on to east restrictions on Rosselkhozbank [the Russian agricultural bank handling grain payments].'

DATA

JAPAN DATA (MNI): Japan Exports Continue to Rise at Slower Pace

• JAPAN APR EXPORTS +2.6% Y/Y; MAR +4.3%

Exports rose 2.6% y/y in April, the 26th consecutive rise, but slowed from March's 4.3% gain, Ministry of Finance data showed Thursday. The deceleration followed a decline in overseas demand. The data was in line with the Bank of Japan’s view that exports would be flat due to the impact of the slowing global economy. Bank officials expect the U.S. economy to slow from mid-2023, decreasing Japan’s exports and production.

JAPAN DATA (MNI): April Real Export Index Rises 2.7% M/M - BOJ

The Bank of Japan's real export index, calculated using Ministry of Finance trade data, rose 2.7% m/m in April for the third straight gain following March's revised 0.8%, according to BOJ data released Thursday. MNI calculated the figures based on the BOJ data, which bank officials confirmed. The BOJ will release details of the index next Tuesday. The April real export index rose 3.3%, compared with average index for the Q1.

JAPAN POSTS JPY432.4 BLN TRADE DEFICIT IN APR (MNI)

AUSTRALIA DATA (MNI): Aussie Unemployment Ticks Up to 3.7%

• AUSTRALIA APR UNEMPLOYMENT RATE +3.7%
• AUSTRALIA APR LABOR PARTICIPATION RATE +66.7%
• AUSTRALIA APR EMPLOYED PERSONS CHANGE -4.3K
• AUSTRALIA APR F-T EMPLOYED PERSONS CHANGE -27.1K

The seasonally adjusted unemployment rate jumped to 3.7% in April from March’s 3.5%, according to Australian Bureau of Statists data released today. The move higher beat expectations the rate would hold steady. The data showed the participation rate had decreased to 66.7%, while the underemployment rate fell to 6.1%.The jobs data follows wage figures released Wednesday, which showed the seasonally adjusted wage price index rose 0.8% over the March quarter and 3.7% over the year, up from 3.6% recorded over Q4 2022.

AUSTRALIA DATA (MNI): Inflation Expectations Rise in May but Q2 Average Lower than Q1

Melbourne Institute consumer inflation expectations rose to 5.2% in May from4.6% the previous month. It is concerning that moves below 5% are yet to be sustained. The Q2 average to date is still below Q1 at 4.9% compared with 5.2%,despite today's shift up, and signalling that Q2 inflation should continue to moderate. Until recently the series has tended to exceed CPI inflation.

FOREX: Greenback on Front Foot as Markets Favour Debt Ceiling Resolution

• The USD is firmer against all others in G10 early Thursday, adding to gains noted across Asia-Pac hours. Stock markets are on the up alongside the dollar, providing further evidence that markets see the dollar and equities firmer on any debt ceiling resolution ahead. President Biden is conducting G7-related meetings in Japan, meaning headlines may be more muted over next few days, ahead of a planned press conference on Sunday.
• USD/JPY is among the more notable market movers Thursday, tipping to a new 2023 high at 137.94 having shown above the mid-March highs. Mid-December highs sit just above at 138.17.
• NOK is the poorest performer across G10, putting NOK within range of 2023 lows against the USD. EUR/NOK is similarly higher, with the cross having rejected any test of 50-dma support of 11.5033 earlier this week. 11.7681 marks the next level of note, the 61.8% retracement for the Late-April / early-May downleg.
• The firming greenback (buoyed by renewed debt ceiling hopes) is weighing on emerging market currencies, however other idiosyncratic EM stories are adding additional pressure (China growth concerns, South African infrastructure issues/diplomatic spat with US). This led the MSCI EM FX index to shed the entirety of the early May gains and close at the lowest level since mid-March yesterday. The index broke a multi-month uptrendline posted off the mid-October lows.
• Weekly jobless claims data is the highlight Thursday, with existing home sales also on the docket. The central bank speaker slate should be of more interest, with BoE's Bailey and Fed's Jefferson, Barr and Logan all set to speak.

BONDS: Risk-On Tone Has Core FI Testing Month's Lows

Global core FI is weaker with curves trading mixed in Thursday's European morning session. The German (yields up 4.5-6.5bp) and US curves (up 1-2.5bp) have bear steepened, with the UK trading parallel out to 10Y (up 4-4.5bp).

• With markets open but liquidity thinned on Ascension Day in much of Europe, Bunds are underperforming global counterparts in a decisively risk-on session buoyed by optimism over a debt limit deal (stocks are higher alongside the USD).
• Front futures are trading at session lows, with TYs and RXs nearing May's lows, and Gilts plumbing April's worst levels.
• Periphery spreads are largely unchanged with the exception of Greece, with GGBs now trading 22bp inside BTPs, the largest gap since July 2022.
• BoE officials are speaking to the Treasury Select Committee as we publish this note; we also hear from FOMC participants Barr, Jefferson, and Logan.
• US data up later includes jobless claims and existing home sales, while supply consists of $15bln 10Y TIPS reopen.

Latest levels:

• Jun US 10Y futures (TY) down 3.5/32 at 114-15 (L: 114-13 / H: 114-24)
• Jun Bund futures (RX) down 78 ticks at 134.69 (L: 134.62 / H: 135.44)
• Jun Gilt futures (G) down 61 ticks at 99.75 (L: 99.74 / H: 100.11)
• Greek / German 10-Yr bond spread down 4bps at 162.3bps

EQUITIES: Eurostoxx 50 Futures Trade to Fresh May Highs

Eurostoxx 50 futures continue to trade above support at 4247.40, the 50-day EMA. The broader uptrend is intact and moving average studies remain in a bull mode position. A stronger resumption of gains would signal scope for a test of 4363.00, the Apr 21 high and a bull trigger. Clearance of this level would confirm a resumption of the uptrend. On the downside, a clear break of the 50-day EMA is required to signal a top. S&P E-minis traded higher Wednesday. Price remains above the 50-day EMA, which intersects at 4112.23. A continuation higher would open key resistance and the bull trigger at 4206.25, the May 1 high. Clearance of this level would confirm an extension of the bull trend that started Mar 13. Key support has been defined at 4062.25, the May 4 low. A move through this level would instead highlight a bearish threat.

• Japan's NIKKEI closed higher by 480.34 pts or +1.6% at 30573.93 and the TOPIX ended 24.24 pts higher or +1.14% at 2157.85.
• Elsewhere, in China the SHANGHAI closed higher by 13.088 pts or +0.4% at 3297.32 and the HANG SENG ended 166.68 pts higher or +0.85% at 19727.25.
• Across Europe, Germany's DAX trades higher by 229.06 pts or +1.44% at 16180.36, FTSE 100 higher by 49.88 pts or +0.65% at 7773.14, CAC 40 up 66.98 pts or +0.91% at 7466.57 and Euro Stoxx 50 up 46.69 pts or +1.08% at 4370.01.
• Dow Jones mini up 29 pts or +0.09% at 33510, S&P 500 mini up 6.5 pts or +0.16% at 4178, NASDAQ mini up 22 pts or +0.16% at 13666.

COMMODITIES: Gold in Bearish Cycle and Trading Near Recent Lows

WTI futures traded higher Wednesday. A short-term bearish threat remains present and initial resistance at $73.93, the Apr 28 low, is intact. A resumption of weakness and a break of $69.41, the May 15 low, would strengthen near-term bearish conditions. The recent print below $64.58, the Mar 20 low and a key support, is a medium-term bearish development. A clear break of it would resume the broader downtrend. Gold remains in a bearish cycle and is trading at its recent lows. Support to watch is $1977.0, the 50-day EMA and $1969.3, the Apr 19 low. A clear break of this support zone is required to highlight a stronger bearish threat. The medium-term trend condition remains bullish - moving average studies are in a bull-mode set-up and this highlights an uptrend. Key resistance and the bull trigger is at $2063.0, the May 4 high.

• WTI Crude down $0.34 or -0.47% at $72.56
• Natural Gas down $0.01 or -0.21% at $2.361
• Gold spot down $5.93 or -0.3% at $1975.11
• Copper down $2.7 or -0.72% at $372.85
• Silver down $0.27 or -1.15% at $23.4674
• Platinum down $9.3 or -0.87% at $1063.92