MNI US OPEN - South Africa’s ANC on Course to Fall Short of Majority

NEWS

FED (BBG): Fed’s Bostic Says Many Inflation Measures Moving to Target Range

Federal Reserve Bank of Atlanta President Raphael Bostic said he’s hopeful that the “explosive” price pressures seen during the Covid-19 pandemic will normalize over the next year. Speaking at a conference in Atlanta on Wednesday, Bostic said “we still have a ways to go” to curb the significant price growth seen over the last few years. While the breadth of inflation is still quite high, he said a reduction in that breadth would help him gain the confidence needed to cut interest rates.

US/UKRAINE (NYT): Blinken Hints U.S. May Accept Ukrainian Strikes in Russia With American Arms

Secretary of State Antony J. Blinken made his remarks after some European leaders called on President Biden to lift the restrictions he has imposed on Ukraine’s use of U.S. weapons. Secretary of State Antony J. Blinken suggested on Wednesday that the Biden administration could be open to tolerating strikes by the Ukrainian military inside Russia using American-made weapons, saying that the United States would “adapt and adjust” its stance based on changing conditions on the battlefield.

ISRAEL (WaPo): Israel Says it Gained ‘Tactical Control’ of Philadelphi Buffer Zone

Israel said Wednesday it had achieved "tactical control" over the boundary that separates Gaza and Egypt, a significant success for Prime Minister Benjamin Netanyahu, who has repeatedly described control of the area as an objective for Israel in Gaza. An official with the Israel Defense Forces, speaking on the condition of anonymity to brief reporters, said that while Israel does not have "boots on the ground" throughout the boundary, known as the Philadelphi corridor, its control means Israel can "cut off" Hamas supplies via underground tunnels in the corridor.

ISRAEL (BBG): Netanyahu’s Popularity on the Rise in Blow to Israeli Rivals

Israeli Prime Minister Benjamin Netanyahu is starting to regain his popularity after struggling politically for more than a year, out-polling main rival Benny Gantz for the first time since the war against Hamas started in October. A Channel 12 survey conducted on Wednesday of 500 voters representing a cross-section of Israeli society asked “Who is better suited to serve as prime minister?” It found 36% chose Netanyahu and 30% Gantz. The margin of error was 4.4%.Last month, Gantz was ahead 35% to 29%.

CHINA (MNI): PBOC to Strengthen Offshore Yuan Markets

MNI (Beijing) The People’s Bank of China will further support the growth of offshore yuan markets and improve cross-border financial infrastructure while making efforts to promote the currency's internationalisation, said Tao Ling, deputy-governor at the central bank, in an interview with Financial News on Thursday. The Bank will improve the liquidity supply system of offshore markets, perfect the long-term mechanism for the issuance of offshore sovereign bonds, enrich offshore yuan financial products and expand the “connect program” between the mainland and Hong Kong, she said.

CHINA/AUSTRALIA (BBG): China Lifts Australian Beef Exporter Bans as Tensions Ease

Five major Australian beef producers banned from exporting meat to China will be allowed to resume the trade immediately, in the latest move by Beijing to normalize economic ties with Canberra. The Australian government was informed on Wednesday night the curbs would be relaxed, Agriculture Minister Murray Watt told the Australian Broadcasting Corp. on Thursday. China lifted curbs on three other local beef exporters in December, while shipments from two other suppliers remain restricted.

NEW ZEALAND (BBG): New Zealand Government Cuts Taxes as Budget Deficit Widens

New Zealand’s new center-right government delivered on its election promise to cut taxes in its first budget even as the Treasury Department forecast bigger deficits and a delayed return to surplus. The tax package is worth NZ$14.7 billion ($9 billion) over four years and targets low and middle-income households, with young families benefiting the most, Finance Minister Nicola Willis said Thursday in Wellington. At the same time, Treasury projections show the government’s deficit will widen to NZ$13.4 billion next year and the budget won’t return to the black until 2028, a year later than previously expected.

SOUTH AFRICA (MNI): ENCA Projects ANC Support ~45%, Higher Than Earlier Projections

South African broadcaster ENCA projects that the governing African National Congress (ANC) will fall short of a majority in the national vote for the first time since the end of apartheid. Notably, it projects ANC support coming in around 45%, higher than the 42% projected earlier this morning by the CSIR. The exact vote share the ANC receives is likely to prove crucial. If it comes in around 45% it is likely that it could form a coalition with smaller parties in the National Assembly, ensuring broad policy continuity while offering relatively small concessions to other parties. However, if the ANC's vote share comes in around 42% then this option becomes more unlikely, if not impossible.

MEXICO (BBG): Campaign Ends With 21 Point Advantage for Sheinbaum

Mexico's presidential campaign closes with Claudia Sheinbaum holding a 21-point lead over her closest rival, Xóchitl Gálvez, according to data aggregated by the Bloomberg Poll Tracker. Even with her advantage narrowing from as much as 35 points back in January, that's still a very comfortable margin in the world of electoral forecasting, particularly with only four days to go until the Sunday vote.

SAUDIA ARABIA (BBG): Saudi Arabia Ramps Up Bonds to Help Fund MBS’s Big Projects

Saudi Arabia hasn’t had a busier stretch in the debt market since the 2014-2016 oil crash left its budget with a double-digit deficit. Even with crude prices up 10% this year, it’s trying to borrow its way through a fiscal squeeze caused by the need to fund huge projects championed by Crown Prince Mohammed bin Salman, widely known as MBS, to transform the economy. A $5 billion sukuk, or Islamic bond, on Tuesday brought total international debt sales from the kingdom this year to $17 billion, more than any other emerging-market sovereign, according to data compiled by Bloomberg.

CORPORATE (BBG): BHP Abandons $49 Billion Bid After Anglo Refuses More Talks

BHP Group decided against making a firm offer for Anglo American Plc, instead walking away for now from what would have been the biggest mining deal in over a decade. The announcement — less than one hour before a 5 p.m. UK deadline — marked an abrupt end to the five-week public battle between two of mining’s biggest names. It will ratchet up the pressure on Anglo Chief Executive Officer Duncan Wanblad to deliver on an ambitious turnaround plan, while his counterpart at BHP may have to look elsewhere for the copper growth that Anglo would have provided.

DATA

EUROZONE APR UNEMPLOYMENT RATE 6.4% (MNI)

GERMANY DATA (MNI): Bundesbank SA Shows Sequential Services Inflation Reaccelerating

The Bundesbank's estimate of seasonally-adjusted May CPI shows a clear sequential uptick in core inflation after April's negative print, driven by an incline in service inflation, which was stronger than estimated by MNI. The less volatile 3mma SA measure shows services inflation accelerating continuously. Overall core inflation increased to 0.35% M/M (vs -0.09% in April; and 4.3% annualized), and services inflation to 0.71% M/M (vs 0.00% Apr; 8.9% annualized). On a 3mma comparison, services inflation came in at 5.5% - its highest rate since January 2023 (vs 5.1% Apr).

SPAIN DATA (MNI): Electricity and Fuels Drives May Inflation

• SPAIN MAY FLASH HICP +0.2% M/M, +3.8% Y/Y
• SPAIN MAY FLASH CPI +0.3% M/M, +3.6% Y/Y
• SPAIN MAY FLASH CORE CPI +3% Y/Y

Spanish preliminary May HICP came in higher than expected on the yearly rate at 3.8% (vs 3.7% cons; 3.4% prior), but the sequential reading at +0.2% M/M (0.2% cons; 0.6% prior). The national CPI came in lower than expected at +3.6% Y/Y (vs 3.7% cons; 3.3% prior) and 0.3 % M/M (0.3% cons; 0.7% prior). Core CPI came in-line with expectations at +3.0% Y/Y (vs +2.9% prior): the first acceleration after 8 consecutive downticks.

SWEDEN (MNI): Inventories Skew Quarterly GDP Higher

• SWEDEN Q1 GDP +0.7% Y/Y

Swedish Q1 GDP saw a large upward revision relative to last month's flash estimate, printing at 0.7% Q/Q (vs 0.0% cons, -0.1% flash) and 0.7% Y/Y (vs-0.9% cons, -1.1% flash). The flash GDP indicator is often revised - sometimes heavily - but the extent of this revision is still surprising. Analysts had expected a much more modest upward revision following the March monthly activity data, where GDP was positive on a sequential basis. Since Q1 2016, the average absolute error of the flash estimate (vs the final) has been 0.5pp, below Q1 2024's 0.8pp.

SWEDEN DATA (MNI): Consumer Confidence Rises for 8th Consecutive Month

The Swedish May Economic Tendency Indicator softened a touch to 94.0, with April's reading revised a tenth lower to 94.9. The fall was driven by a sharp drop in retail confidence (to 92.3 vs 101.9 prior) while consumer confidence improved for an 8th consecutive month to 91.3 (vs 88.8 prior). There was no consensus for the data. The continued improvement of consumer confidence should help support a gradual recovery in Swedish activity going forward.

SWITZERLAND DATA (MNI): Trade and Hospitality Industries Drive Moderate Q1 Growth

• SWISS Q1 GDP +0.5% Q/Q, +0.6% Y/Y

Swiss Q1 real GDP came in higher than expected on the sequential reading, at 0.5% Q/Q (vs 0.3% cons and prior) on a non sports event-adjusted basis, but lower than expected on a yearly comparison (+0.6% Y/Y vs +0.7% cons; 0.5%prior, revised from 0.6%). The Bloomberg median consensus was not consistent amid noticeably more estimates being submitted for the Q/Q reading. When adjusting for sports events, growth was not as strong at +0.3% Q/Q vs 0.3% prior). The main takeaway here being that the report suggests that the moderate pace of growth in the Swiss economy continued in Q1.

SWISS KOF MAY ECONOMIC BAROMETER 100.3 (MNI)

AUSTRALIA DATA (MNI): Approvals Stabilising But Still Well Below Pre-Covid Levels

• AUSTRALIA MAR BUILDING APPROVALS -0.3% M/M, +3.5% Y/Y

Building approvals for April came in weaker than expected falling 0.3% m/m but March was revised higher to +2.7% m/m. There was weakness in the month in both houses and multi-dwelling units. With working age population growth running at 2.9% y/y and dwelling approvals almost 20% below their pre-Covid level, housing shortages are likely to persist. Approvals are up 3.5% y/y after -1.1% y/y in March but the series is volatile and May 2023's 24.1% m/m rise will weigh on the annual rate next month.

FOREX: USD/JPY Reverses Off Highs, But Weakness Looks Corrective

• In a partial reversal of the recent rally, USD/JPY was sold across Asia-Pac hours, and traded heavy through the European open. Moves concurred with rates markets fading somewhat after the sharp run higher in US yields since the beginning of the week. The US10y yield faded around 5bps off highs, favouring USD/JPY selling and adding to the downward momentum. That said, the pair remains within range of the Y157.00 handle and support should be found into 156.50.
• Antipodean currencies are trading poorly, with AUD and NZD softer to provide a generally poor risk backdrop to G10 currency markets, although more stable equity markets should prevent any protracted fallout.
• Outside of G10 markets, much market focus is on the ZAR as the Presidential election results begin to roll in and show the ANC with a poorer showing than expected, exposing the party to being forced into a market-unfriendly coalition. ZAR is lower by close to 2% against the USD, trading levels last seen in early May.
• Weekly jobless claims data, advanced trade balance stats and the pending home sales release for April are set to cross later today. The speaker slate could be of more consequence, with Fed's Williams & Logan and ECB's Makhlouf all due to make appearances.

EGBS: Off Lows But Bearish Technical Cycle Remains In Play

Core/semi-core EGBs are off lows to trade broadly flat this morning, providing some counter to the heavy selling seen over the past two days.

• While Spanish flash May HICP was a tenth above consensus at 3.8% Y/Y, the lack of details within the report make it hard to discern much read-through to the Eurozone-wide core figure due Friday.
• Elsewhere, the EC’s Economic Confidence reading was broadly in line with consensus while Eurozone unemployment reached a new all-time low of 6.4% (below the 6.5% consensus and prior).
• 5/10-year BTP supply from Italy will have helped cap rallies in the run-up to the 1000BST bidding deadline.
• Bunds are -3 ticks at 129.03, with a breach of the 20-day EMA at 130.54 needed to ease bearish pressure.
• The German and French cash curves are slightly flatter, with yields flat to 2bps lower today.
• 10-year peripheral spreads to Bunds have tightened this morning, with European equities also bouncing back from lows.
• A reminder that the ECB entered their pre-meeting quiet period today.
• This afternoon’s calendar is headlined by the second estimate of US Q1 GDP, alongside weekly jobless claims data.

EQUITIES: E-Mini S&P Extends Corrective Pullback Lower

Eurostoxx 50 futures traded lower yesterday and the contract remains soft today. This week’s pullback has resulted in a breach of the 20- and 50- day EMAs. The 50-day average lies at 4963.20 and a clear break of it would undermine the recent short-term bullish theme and signal scope for a deeper retracement. This would open 4894.90, a Fibonacci retracement. Initial resistance is seen at 5022.40, the 20-day EMA. The uptrend in S&P E-Minis remains intact, however, a corrective cycle has resulted in a pullback from the recent high of 5368.25 (May 23). The contract has traded through the 20-day EMA and this exposes a firmer support at 5208.12, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement. On the upside, a resumption of gains and a break of 5368.25, would confirm a resumption of the uptrend.

• Japan's NIKKEI closed lower by 502.74 pts or -1.3% at 38054.13 and the TOPIX ended 15.42 pts lower or -0.56% at 2726.2.
• Elsewhere, in China the SHANGHAI closed lower by 19.34 pts or -0.62% at 3091.678 and the HANG SENG ended 246.82 pts lower or -1.34% at 18230.19.
• Across Europe, Germany's DAX trades higher by 13.48 pts or +0.07% at 18486.83, FTSE 100 higher by 16.72 pts or +0.2% at 8199.48, CAC 40 up 21.69 pts or +0.27% at 7956.21 and Euro Stoxx 50 up 5.47 pts or +0.11% at 4968.69.
• Dow Jones mini down 330 pts or -0.86% at 38196, S&P 500 mini down 23.25 pts or -0.44% at 5261, NASDAQ mini down 81.75 pts or -0.43% at 18721.25.

Time: 09:50 BST

COMMODITIES: WTI Futures Remain Below Wednesday's Highs

WTI futures traded higher yesterday and the contract is holding on to its most recent gains. The trend direction remains down and the latest recovery appears to be a correction - for now. A resumption of weakness would signal scope for a move towards $75.64, the Mar 11 low. Key resistance and the bull trigger is at $86.16, the Apr 12 high. Initial firm resistance to watch is at $83.63, the Apr 26 high. Gold is trading lower today and a short-term bear cycle remains in play, for now. The medium-term trend structure is bullish and the recent move down appears to be a correction that is allowing an overbought condition to unwind. Moving average studies are in a bull-mode position, highlighting an uptrend. A resumption of gains would open $2452.5 next, a Fibonacci projection. The 50-day EMA, at $2305.5, represents a key support.

• WTI Crude down $0.19 or -0.24% at $79.05
• Natural Gas down $0.01 or -0.45% at $2.654
• Gold spot down $4.03 or -0.17% at $2334.93
• Copper down $8.9 or -1.86% at $470.3
• Silver down $0.46 or -1.44% at $31.5245
• Platinum down $0.65 or -0.06% at $1040.09