Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- EUROPEAN COMMISSION'S NEW FORECASTS SEE STRONGER EUROZONE GROWTH
- GERMANY INDUSTRY DISAPPOINTS AMID SUPPLY CONSTRAINTS
- JAPAN CONSIDERS DECLARING STATE OF EMERGENCY IN TOKYO: SANKEI
- CHINA TO SELL MORE METALS FROM RESERVES TO ENSURE STABLE PRICES
Fig. 1: Treasuries Continue To Trend Higher (TY1 Future)
Source: BBG, MNI
NEWS:
EUROPEAN ECONOMY: The European Commission's Summer 2021 Economic Forecast sees economic growth in both the eurozone and wider EU rebound faster than previously expected, as activity to date has exceeded expectations and an improvement in the health situation has allowed for a faster easing of restrictions. Both the EZ and EU economies are now projected to grow by 4.8% in 2021 and by 4.5% in 2022 -- similar to the ECB's latest projections -- which is significantly better than anticipated in the spring forecast. GDP in both areas is now expected to return to the pre-crisis level in Q4 2021, one quarter earlier than previously expected. Growth will primarily be driven by private consumption and investment.
GERMANY DATA (BBG): Germany's industrial production output dropped by 0.3%, missing consensus for 0.5% growth. The April reading was revised up to a smaller 0.3% contraction from an initial reading of -1.0% -- partly offsetting the weaker than expected performance in May. Production was supported by a 1.3% rebound in the construction industry, but output in industry excluding construction was down 0.6%.
JAPAN / OLYMPICS (BBG/SANKEI): Japan is considering declaring a new state of emergency in Tokyo, a move that would likely mean the Olympic Games would be held without spectators, Sankei reports, citing several unidentified government officials.Prime Minister Yoshihide Suga to meet with relevant ministers tonight and make a final decision. Tokyo is currently subject to quasi state of emergency measures, scheduled to end July 11; reports had indicated authorities planned to extend those measures
CHINA / METALS (BBG): China, the world's top commodities consumer, pledged to release more base metals from its state reserves after completing a first batch of sales in its latest effort to rein in surging raw material costs.More sales will be arranged in the near term to ensure market stability, the National Food and Strategic Reserves Administration said in a statement on its website Wednesday. The first release of metals in over a decade included 20,000 tons of copper, 30,000 tons of zinc and 50,000 tons of aluminum and was concluded via a public auction conducted on Monday. The reserves agency didn't reveal the prices at which the metals were sold.
CHINA / TECH STOCKS (BBG): China's move to rein in two of the most powerful corporate trends of the past decade -- the rise of data-hungry tech titans and the flood of Chinese listings in the U.S. -- is rippling through markets as investors brace for a new era of tighter oversight from Beijing. A gauge of Chinese technology stocks traded in Hong Kong fell as much as 1.9% on Wednesday to approach its lowest level since November. The index has slumped more than 30% since its February high, while a measure of Chinese American depositary receipts tumbled 3% on Tuesday. Didi Global Inc., which is the focus of a cybersecurity probe, sank 20% in New York.
U.K.: Prime Minister Boris Johnson faces a tough day of parliamentary questions, with prime minister's questions in the House of Commons at 1200BST (0700ET, 1300CET), followed by an appearance before the House of Commons Liaison Committee - the most senior committee of the Commons, comprised of all the chairs of the 32 subject-specific select committees - at 1530BST (1030ET, 1630CET). The prime minister's announcement on Monday of the planned removal of nearly all COVID-19 restrictions amidst a significant spike in new cases is likely to feature heavily in questioning from Labour leader Sir Keir Starmer (boosted by his party's recent win in the Batley and Spen by-election) and the committee chairs.
U.K. DATA (BBG): U.K. house prices fell for the first time in five months in June, an indication the property market may have lost momentum as a tax incentive was due to come to an end.The average value of a home declined 0.5% to 260,358 pounds ($359,000), mortgage lender Halifax said Wednesday. The drop followed a 1.2% increase in May and left prices 8.8% higher than a year earlier.
GERMANY (BBG): Germany's health minister stepped up his plea for as many people as possible to get a Covid-19 shot amid signs the country's vaccination drive is losing steam. Jens Spahn made the call on Wednesday as the spread of the delta variant threatens to spark a new wave of virus infections in the European Union. There are signs that other countries, including France, Italy, Switzerland and Austria, are also struggling to maintain the pace of shots.
MALAYSIA (MNI STATE OF PLAY): A sluggish economy under nationwide lockdown since June is likely to prompt Bank Negara Malaysia to consider its first rate cut in a year in at its meeting this week, but it may prefer to leave policy settings unchanged whilst it monitors the effect of a new government fiscal package. For full article contact sales@marketnews.com
DATA:
FIXED INCOME: The rally continues
Core fixed income has continued its move higher this morning with 10-year and 30-year UST and gilt yields at their lowest levels since mid-February, 10-year Bund yields approaching mid-June lows (30-year their lowest levels since March).
- The continued rally in fixed income is in contrast to the moves higher in oil and equities.
- Economic data has generally been disappointing today again. German IP fell for a second consecutive month (albeit with the prior month revised a bit higher). Italian retail sales also missed expectations.
- Looking ahead, attention turns to the FOMC Minutes (and JOLTS to a much lesser extent). The Minutes will be read closely for any views from Fed members that inflation may not be transitory and for any tapering timing hints (or hints of the process of tapering e.g. MBS first).
- TY1 futures are up 0-5 today at 133-12 with 10y UST yields down -0.4bp at 1.346% and 2y yields up 0.5bp at 0.225%.
- Bund futures are up 0.20 today at 173.80 with 10y Bund yields down -1.3bp at -0.282% and Schatz yields down -0.1bp at -0.683%.
- Gilt futures are up 0.01 today at 129.11 with 10y yields down -0.8bp at 0.625% and 2y yields up 0.1bp at 0.046%.
FOREX: Markets in Recovery Mode After Tuesday Risk-Off
- Following Tuesday's sharp bout of risk-off, currency markets are mainly in recovery mode, with the JPY weaker alongside the USD, while the likes of AUD, NOK and NZD are clawing back a small portion of yesterday's losses.
- AUD/USD remains either side of the $0.75 handle, as much as a point off the best levels of the week, with traders still cautious over the persistent spread of the more transmissible Delta strain of COVID, the efficacy of jabs against the latest wave of infections and global PMI numbers signposting a near-term peak in global GDP growth.
- US yields are once again lower, with the 10y yield south of 1.35% for the first time since February, although the buy-the-dip approach to equity weakness continues to pervade, as the e-mini S&P narrows in on 4350.
- Focus turns to the Fed minutes release from their latest rate decision, in which markets saw the FOMC as erring on the hawkish end of market expectations. Ahead of that, Canada's Ivey PMI and US JOLTs job openings are on the docket. Fed's Bostic is also due to speak.
EQUITIES: Strong Start, With Tech Leading
- Asian markets closed weaker, with Japan's NIKKEI down 276.26 pts or -0.96% at 28366.95 and the TOPIX down 16.82 pts or -0.86% at 1937.68. China's SHANGHAI closed up 23.457 pts or +0.66% at 3553.716 and the HANG SENG ended 112.24 pts lower or -0.4% at 27960.62.
- European stocks have gained, with the German Dax up 127.06 pts or +0.82% at 15609.98, FTSE 100 up 31.26 pts or +0.44% at 7100.88, CAC 40 up 18.17 pts or +0.28% at 6507.48 and Euro Stoxx 50 up 21.08 pts or +0.52% at 4071.05.
- U.S. futures are higher too, led by tech, with the Dow Jones mini up 21 pts or +0.06% at 34481, S&P 500 mini up 6.25 pts or +0.14% at 4340.25, NASDAQ mini up 60 pts or +0.41% at 14835.5.
COMMODITIES: Copper Leads Gains
- WTI Crude up $0.63 or +0.86% at $74.14
- Natural Gas up $0.04 or +1.1% at $3.692
- Gold spot up $6.73 or +0.37% at $1803.15
- Copper up $8.5 or +2% at $434.05
- Silver up $0.16 or +0.62% at $26.3479
- Platinum up $0.56 or +0.05% at $1097.77
LOOK AHEAD:
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.