EXECUTIVE SUMMARY:
- UK RETAIL SALES A WASHOUT, BUT LITTLE READ-THROUGH FOR MONPOL
- FIRST POLLING SHOWS LABOUR ON COURSE FOR COMFORTABLE MAJORITY
- UMICH, WALLER, DURABLE GOODS ON TAP
NEWS
US (FT): Janet Yellen says many Americans still struggling with inflation
US Treasury secretary Janet Yellen has said “substantial increases” in living costs are a “problem to a lot of people” as persistent inflation dents President Joe Biden’s standing with voters ahead of November’s election.
UK (MNI): First Post-Election Call Polling Shows Labour Retaining Wide Lead
In the first two opinion polls carried out either on the day PM Rishi Sunak announced a 4 July general election or afterwards, the main opposition centre-left Labour party has retained its sizeable lead that continues to indicate that it will win a majority in the House of Commons.
BOJ (RTRS): BOJ to decide bond-purchase reduction by end-July, say economists
The Bank of Japan will decide to start tapering the size of its bond-buying by end-July, according to nearly two-thirds of economists polled by Reuters, while close to 90% forecast an interest rate hike to at least 0.20% by the end of the year.
UKRAINE (BBG): Danish, German Tanks for Ukraine Delayed Due to Flaws, DR Says
A donation of used tanks to Ukraine by Denmark and Germany has been delayed due to several flaws, broadcaster DR reported, citing documents from the Danish ministry of defense. The tanks are part of the more than 100 Leopard-1s, which Denmark, Germany and the Netherlands pledged to ship in the beginning of 2023, DR said. Some couldn’t shoot due to electronics problems while other had flaws in the recoil brakes of their cannons, the broadcaster said.
CHINA (MNI): China Car Sales To Recover After April Drop
China’s month-on-month automobile sales will turn positive in May and June following April's 9.4% fall, a key factor behind slowing domestic consumption, as prices stabilise and government trade-in policies take effect, but year-on-year growth remains uncertain, a leading industry expert told MNI.
TAIWAN (RTRS): China's second day of war games around Taiwan tests ability to 'seize power'
China's military carried out a second day of war games around Taiwan on Friday, with drills to test its ability to "seize power" and control key areas in exercises Beijing has said were launched to punish Taiwan's new president, Lai Ching-te.
INDUSTRIAL METALS (MNI): Copper Prices To Fall, Chinese Demand To Remain Flat
China’s copper demand will remain roughly unchanged over 2024 at single digit percentage growth over 2023 levels despite recent property-sector support and a historic global price rally, while reports of official domestic smelter output cuts are yet to materialise, local analysts have told MNI.
RBNZ (MNI): RBNZ Credible, Cuts Still Distant - Conway
The Reserve Bank of New Zealand’s credibility regarding its future Official Cash Rate assumptions remains intact, despite it being well out of sync with market pricing, Chief Economist Paul Conway told MNI, noting cuts were still some way off.
RBNZ (BBG): RBNZ ‘Absolutely’ Prepared to Hike Rates If Necessary, Silk Says
New Zealand’s central bank is prepared to raise interest rates if economic developments mean current policy settings aren’t restrictive enough to bring inflation back to target, Assistant Governor Karen Silk said.
RBNZ (NBR) ‘Rate cuts are just not part of the discussion’: Hawkesby
RBNZ deputy governor Christian Hawkesby tells NBR cuts are not on the cards in the near term.
DATA
MNI: UK APR RETAIL SALES -2.3% M/M, -2.7% Y/Y
MNI: UK MAY GFK CONSUMER CONFIDENCE INDEX -17
Japan April Core CPI At 2.2% Vs. March 2.6%
- The year-on-year rise of Japan's annual core consumer inflation rate decelerated to 2.2% in April from March’s 2.6%, showing the pass-through of cost increases is weakening, data released by the Ministry of Internal Affairs and Communications showed on Friday.
- April’s index remained above the Bank of Japan’s 2% target for the 25th consecutive month.
- The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) was 2.4% y/y in April, also slowing from March’s 2.9% for the eighth straight deceleration.
FOREX: Greenback Off Highs, But Little Relief for USD/JPY
- The greenback trades poorer against all others early Friday, keeping the USD Index pinned to the 50-dma and holding just below weekly highs. This has provided little relief for USD/JPY, however, which remains tilted higher and within reach of the post-intervention highs printed this week at 157.20. Clearance here keeps markets on watch, as the trade-weighted JPY index within just 1.5% of the pre-intervention lows.
- GBP shrugged off the particularly poor retail sales release. April data showed sales fell 2.7% Y/Y and fell 2.3% on the month after a particularly poor bout of weather kept consumption subdued. The ONS noted "Sales volumes fell across most sectors, with clothing retailers, sports equipment, games and toys stores, and furniture stores doing badly as poor weather reduced footfall." This limited read-through for monetary policy, protecting GBP from any broad sell-off, although EUR/GBP sits again in minor positive territory.
- Preliminary US durable goods orders are the data highlight Friday, although the final release of UMich sentiment for April will also be watched for any revisions to the sharp bump higher in inflation expectations as part of the preliminary release. Fed's Waller also is set to speak later today on rates, and with a text release, however his recent TV appearances and prepared statements should mean we hear little new on current policy.
BONDS: Firmer Following Soft UK Retail Sales
Core/semi-core EGBs and Gilts trade at session highs, but ranges remain tight with little notable macro news flow since this morning’s UK retail sales data.
- UK retail sales were much softer than expected, but the market impact was limited with the data not moving the needle for the BoE’s current monetary policy outlook.
- German Q1 GDP confirmed flash estimates at 0.2% Q/Q.
- Comments from ECB’s Schnabel added little new to the debate, once again cautioning against cutting rates too quickly.
- Bunds are +35 ticks at 130.09, having traded in a 32 tick range this morning. Yesterday’s pre-US PMI high remains some way off.
- 10-year periphery spreads to Bunds are a touch wider.
- Gilt futures are +20 at 96.89, testing session highs at typing. We note the potential for an increase in roll activity today, given the limited event risk and the impending long-weekend.
- The DMO announced the that a new 10-year Gilt will be launched via syndication in the w/c 10 June, in line with MNI’s expectations. We see a risk this gets upsized potentially to GBP10bln (vs GBP8.5bln in the DMO’s funding plan)
- Gilt yields are -0.5 to -3.5bps today, with the curve bull steepening.
- The UK/EU data calendar is light today, with broader European focus on next week’s May flash inflation data.
EQUITIES: Eurostoxx Pullback Appears Corrective For Now
The uptrend in S&P E-Minis remains intact and the pullback Thursday appears to be a correction. The contract also traded to a fresh cycle high yesterday, reinforcing a bullish theme. Recent gains have resulted in a break of a key resistance at 5333.50, the Apr 1 high. A bullish theme in Eurostoxx 50 futures remains intact and the recent pullback appears to be a correction - for now. The contract has recently cleared key resistance at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend.
- Japan's NIKKEI closed lower by 457.11 pts or -1.17% at 38646.11 and the TOPIX ended 12.21 pts lower or -0.44% at 2742.54.
- Elsewhere, in China the SHANGHAI closed lower by 27.516 pts or -0.88% at 3088.871 and the HANG SENG ended 259.77 pts lower or -1.38% at 18608.94.
- Across Europe, Germany's DAX trades lower by 73.92 pts or -0.4% at 18607.62, FTSE 100 lower by 35.97 pts or -0.43% at 8300.19, CAC 40 down 15.86 pts or -0.2% at 8079.99 and Euro Stoxx 50 down 19.13 pts or -0.38% at 5014.65.
- Dow Jones mini up 47 pts or +0.12% at 39199, S&P 500 mini up 13.25 pts or +0.25% at 5289.75, NASDAQ mini up 44.75 pts or +0.24% at 18738.
COMMODITIES: WTI Trades Below 50-day EMA
Gold traded lower yesterday, extending the pullback from its recent high. The trend structure remains bullish and the move lower appears to be a correction - for now. Moving average studies are in a bull-mode position and the move lower is allowing an overbought condition to unwind. WTI futures have pulled back from their most recent highs. A bearish theme remains intact. Price has recently traded below the 50-day EMA, strengthening a bearish set-up that highlights potential for a deeper correction.
- WTI Crude down $0.21 or -0.27% at $76.65
- Natural Gas up $0.05 or +1.77% at $2.704
- Gold spot up $11.24 or +0.48% at $2340.58
- Copper down $1.5 or -0.31% at $477.75
- Silver up $0.36 or +1.2% at $30.4966
- Platinum up $1.06 or +0.1% at $1020.83
| Date | GMT/Local | Impact | Flag | Country | Event |
| 24/05/2024 | 1230/0830 | * |  | CA | Quarterly financial statistics for enterprises |
| 24/05/2024 | 1230/0830 | ** | | CA | Retail Trade |
| 24/05/2024 | 1230/0830 | ** |  | US | Durable Goods New Orders |
| 24/05/2024 | 1335/0935 | | US | Fed Governor Christopher Waller | |
| 24/05/2024 | 1400/1000 | ** | | US | U. Mich. Survey of Consumers |
| 24/05/2024 | 1700/1300 | ** | | US | Baker Hughes Rig Count Overview - Weekly |