MNI US OPEN - UK's Labour Secures Landslide Win as Conservatives Collapse
EXECUTIVE SUMMARY
- MNI US PAYROLLS PREVIEW - WATCHING FOR SURPRISES
- UK'S LABOUR SECURES LANDSLIDE WIN AS CONSERVATIVES COLLAPSE
- BIDEN HEADS INTO MAKE-OR-BREAK WEEKEND FOR 2024 ELECTION
- ISRAEL-HAMAS TRUCE TALKS ADVANCE AS HEZBOLLAH FIRES ROCKETS
MNI (LONDON) - Figure 1: Recent US labour market developments
![](https://media.marketnews.com/image_bddf8b84e4.png)
NEWS
MNI US PAYROLLS PREVIEW: Watching for Surprises to Help Guide Sept Cut Prospects
Nonfarm payrolls are expected to moderate in June after a surprisingly strong May. However, with heightened uncertainty around what’s the genuine pace of employment growth, there could be greater focus on the unemployment rate to assess labor market imbalances. The unemployment rate has been trending higher and is already at a level where the FOMC expects it to end 2024, although data volatility could see it surprise lower on a rounded basis this month.
UK (MNI): Labour Secures Landslide Win as Conservatives Collapse
With all but five constituencies declared, Sir Keir Starmer’s centre-left Labour party have won a substantial majority in the House of Commons while PM Rishi Sunak’s centre-right Conservatives suffered the ignominy of the party’s worst result since forming in 1832. Labour have won 411 of the 650 seats available, an increase of 210, while the Conservatives have fallen to 119, a loss of 249. The centre-left Liberal Democrats have come in third after a strong showing with 71 seats (up 63). One of the major stories of the election is the huge showing for the right-wing anti-immigration Reform UK, which won four seats on 14.3% of the nationwide vote. The Scottish National Party fell from 47 seats to just nine in a major blow to the Scottish independence movement. In line with commentary before the election talking of broad voter disillusionment
with politics, turnout fell to an estimated 60%, the lowest since 2001. Starmer will be able to govern with a free hand given his significant majority, with focus now on whether he sticks to his manifesto’s cautious economic strategy, emphasising stability, or uses such a large mandate as impetus for a more expansionary plan to reshape the UK economy.
US (BBG): Biden Heads Into Make-or-Break Weekend for 2024 Election
President Joe Biden is embarking on the most consequential weekend of his political career, knowing that he must restore the faith of voters, donors, and party officials deeply skeptical of his acuity — and that any misstep will prove fatal to his reelection campaign. Most crucial for Biden will be an interview on Friday with ABC News, offering voters and allies the first unscripted, high-pressure look at the president since he faltered in his showdown with former President Donald Trump, the Republican presidential candidate.
ISRAEL/MIDDLE EAST (BBG): Israel-Hamas Truce Talks Advance as Hezbollah Fires Rockets
Hamas has broadly agreed to a US-proposed cease-fire plan with Israel, according to a senior American official, though the details still have to be resolved. Israel is sending negotiators to Qatar to try to finalize an agreement, with US officials also set to take part. It’s the clearest sign in weeks that a pause in hostilities could be on the cards after nearly nine months of war in Gaza. The progress came as Israel weathered an intense rocket attack from Hezbollah militants across the Lebanese border, raising fears about a full-blown regional conflict that could draw in the US and Iran.
ECB (BBG): Lagarde Says ECB Needs More Data to Reassure It on Inflation
The European Central Bank requires additional reassurance that inflation is headed back to the 2% target before it lowers interest rates further, according to President Christine Lagarde. While disinflation is continuing in the euro zone, officials must stay alert, Lagarde said Thursday. A particular focus is the growth in services prices, which is being driven by elevated gains in wages, she said. “We have to remain vigilant and we have to be confident that inflation is continuously down and that the data that we receive on wages, on profit, on activity, reinforce our confidence that we are on a path to win the fight,” Lagarde told Portuguese TV station RTP.
FRANCE (MNI): National Rally on Course for 200-230 Seats - Elabe
The latest opinion poll from Elabe ahead of the 7 July legislative election run-off shows the right-wing nationalist Rassemblement National (National Rally, RN) on course to win between 200 and 230 seats in the 577-member National Assembly, well below the 289 seats required for a majority. The poll, carried out between 3-4 July, shows the left-wing New Popular Front (NFP) on course to win 165-190 seats, with the centrist Ensemble bloc of President Emmanuel Macron projected to take between 120 and 140 seats. The centre-right Les Republicains are projected to win between 35 and 50 seats.
FRANCE (BBG): Le Pen Rejects Polls Showing Far Right Short of French Majority
Marine Le Pen dismissed projections that show her far-right National Rally party is set to fall well short of an absolute majority in the French legislative election and warned of a “quagmire” if she doesn’t get a mandate to govern. The National Rally and its allies are on course to win 190 to 250 of the 577 seats in the National Assembly Sunday, based on five surveys released between Wednesday and Friday. That would be significantly below the 289 that would enable it to pass bills easily and push through its agenda.
GERMANY (MNI): Coalition Partners Reach Deal on 2025 Draft Budget - Reuters
Reuters reporting that according to a gov't source the coalition gov't has agreed on a 2025 draft budget. The agreement comes after months of negotiations between Chancellor Olaf Scholz's centre-left Social Democrats, Economy Minister Robert Habeck's environmentalist Greens and Finace Minister Christian Lindner's pro-business liberal Free Democrats (FDP). The German Press Agency reports "...July 17 is now under discussion for the cabinet decision. In order to meet this deadline, a quick consensus on principles was necessary, as the drafting of the budget law usually takes approximately ten days. The Bundestag will then deal with the budget draft from mid-September, which could be passed in November or December."
CHINA (MNI): PBOC Plans to Borrow Hundred Billion Yuan CGB - Press
(MNI) Beijing Hundreds of billions of yuan worth of treasury bonds are available for the People’s Bank of China to borrow from financial institutions, according to Financial News, a paper run by the central bank on Friday. The PBOC has signed agreements and will borrow the medium- to long-term bonds using an open-ended, credit-based method. “(The Bank) will continue to borrow and sell treasury bonds based on market conditions,” the report said.
CHINA (BBG): China’s ‘National Team’ Gets Active in ETFs as Stocks Slump
Some exchange traded funds favored by China’s sovereign wealth fund have seen spikes in inflows after the country’s stocks tumbled below a key psychological level. Daily inflows into four ETFs that Central Huijin Investment Ltd. purchased during a market slump have more than doubled from this year’s average in the past two weeks, according to Bloomberg calculations. The more active buying came after the Shanghai Composite Index closed below 3,000 points for the first time since March on June 21.
BITCOIN (BBG): Bitcoin Falls to Lowest Since February Even as Stocks Hit Record
Bitcoin sank for a fourth consecutive trading session, part of a wider crypto selloff that contrasts with recent record highs in global stocks. The digital asset fell as much as 8.1% to the lowest since February and changed hands at about $54,400 as of 7:20 a.m. Friday in London. Smaller coins like Ether, XRP and Cardano nursed steeper losses in some cases exceeding 10%. Crypto speculators currently face a range of challenges, including waning demand for US Bitcoin exchange-traded funds, signs that governments are disposing of seized tokens and the hard-to-parse impact of US political flux.
DATA
EUROZONE DATA (MNI): Retail Trade Broadly In-Line With Consensus
- EUROZONE MAY RETAIL SALES +0.1% M/M, +0.3% Y/Y
Eurozone volume of retail trade growth came in slightly below consensus at 0.1% M/M in May (vs 0.2% consensus, -0.2% prior revised from -0.5%). On an annual basis, volume of retail trade came in slightly above consensus at 0.3% Y/Y (vs 0.2% consensus, 0.6% prior revised from 0%) - the third successive month of a positive reading on an annual basis. The M/M improvement was driven by increases in both 'Food, drinks, tobacco' trade where volumes rose 0.7% M/M (vs a fall of 0.9% in April) and Automotive fuel, which rose 0.4% M/M (vs -0.7% in the prior month). Meanwhile, Non-food product ex fuel fell 0.2% M/M - the first fall since December 2023.
FRANCE DATA (MNI): France Industrial Production Y/Y Lowest Since October 2022
- FRANCE MAY INDUSTRIAL PRODUCTION -2.1% M/M, -3.1% Y/Y
- FRANCE MAY MANUFACTURING OUTPUT -2.7% M/M, -3.9% Y/Y
France Industrial Production disappointed on both a yearly and monthly basis in May making it the lowest since October 2022 after reaching the highest level seen since November 2023 last month in Y/Y terms. Industrial Production printed at -2.1% Y/Y (vs -1.1% consensus, 1.1% revised prior from 0.9%) and -3.1% M/M (vs -0.5% consensus, 0.6% revised prior from 0.5%). The deterioration was driven by manufacturing production (which accounts for over 80% of industrial production). This component fell 2.7% M/M (vs growth of 0.5% in April). As a result on a Y/Y basis, it saw its weakest reading since February 2021 printing at -3.9% Y/Y (vs 1.4% prior).
GERMANY MAY IND PROD -2.5% M/M (MNI)
SPAIN MAY IND PROD +0.4% Y/Y ; +0.2%r Y/Y PRIOR (MNI)
SPAIN MAY IND PROD -0.1% M/M; +0.2%r M/M PRIOR (MNI)
JAPAN DATA (MNI): BOJ Consumption Activity Index Flat M/M in May
The Bank of Japan's Consumption Activity Index was unchanged in May following a 1.0% rise from March to April. Services associated spending remained firm, but spending on non-durable goods fell as higher prices continued to squeeze consumers’ purchasing power. Bank officials admitted that private consumption lacked strength as households faced high prices amid weak real wages, which fell y/y in April for the 25th straight month.
FOREX: UK Election Results Stick to Expectations, GBP/USD Bounce Persists
- UK election results came and went with little market reaction. As expected over the past few weeks and months, the opposition Labour party won a sizeable majority in the Commons, and will form the next government, displacing the Conservatives and ousting the PM Sunak. GBP has proved relatively unresponsive, and is broadly flat against the rest of G10. This keeps the technical parameters in EUR/GBP unchanged, with the 0.8456-0.8499 range the consolidative range after the rally off June lows.
- JPY outperforms, extending its correction off the multi-decade lows posted earlier this week. USD/JPY has opened a near 150 pip gap with the 161.95 level, leaving focus on the US jobs data later today to provide the next leg for the pair.
- Despite the proximity to the NFP report, implied vols across G10 FX remain well subdued, suggesting a likely muted intraday response to today's jobs release, absent a major surprise. MXN, BRL and GBP are posting vol premiums of just over 5 points apiece, which falls short of the prevailing levels before the other jobs prints this year, and could suggest a more muted reaction this month. USD/JPY breakevens, for example, price a ~60 pip swing into the Friday cut, vs. The 50-55 pip YTD average.
- The US and Canadian jobs reports are due, with markets expecting the US to have added 190k jobs over the month, keeping the unemployment rate unchanged at 4.0%. However Canada's unemployment rate is seen ticking higher by 0.1ppts to 6.3%. Central bank speakers are set to include Fed's Williams and ECB's Lagarde.
BONDS: Gilts Outperform After Labour Landslide
Bonds rally early Friday, although the U.S. NFP release provides plenty of event risk, particularly with Tsy market liquidity set to be impaired by the July 4 weekend.
- Further reduced odds of an RN absolute majority in France and Labour’s strong showing in the UK election seem to be removing some political risk premium from markets.
- Ranges remain contained, TY, Bund, Gilt & OAT futures below this week’s highs.
- Gilt yields are 2-3bp lower across the curve, while German yields are 0.5-1.5bp lower, both curves see light flattening.
- Gilts outperform core global FI peers, while OATs narrow by ~1bp vs. Bunds.
- Light dovish moves seen in EUR & GBP STIRs alongside the rally in the long end, leaving ~40bp of further ECB easing & ~45bp of BoE cuts priced through Dec.
- ECB speak is due from Lagarde, Elderson & Nagel, but shouldn’t be market moving.
EQUITIES: E-Mini S&P Trading at Weekly High, Trend Conditions Bullish
Eurostoxx 50 futures have traded higher this week. Attention is on resistance at 5039.84, 61.8% retracement of the May 16 - Jun 14 sell-off. Clearance of this level would be a positive development and suggest scope for an extension of the bull cycle that started Jun 14. This would open 5082.32, the 76.4% retracement point. On the downside, a reversal would refocus attention on 4846.00, Apr 19 low and a key support. The trend condition in S&P E-Minis remains bullish. Resistance at 5430.75, the May 23 high and bull trigger, has recently been cleared. This break confirmed a resumption of the primary uptrend. The move higher this week confirms a recent bull flag formation on the daily scale. This is a continuation pattern and reinforces bullish conditions. Sights are on the 5600.00 handle. Support to watch is 5505.46, the 20-day EMA.
- Japan's NIKKEI closed lower by 1.28 pts or 0% at 40912.37 and the TOPIX ended 14.29 pts lower or -0.49% at 2884.18.
- Elsewhere, in China the SHANGHAI closed lower by 7.634 pts or -0.26% at 2949.933 and the HANG SENG ended 228.67 pts lower or -1.27% at 17799.61.
- Across Europe, Germany's DAX trades higher by 152.24 pts or +0.83% at 18603.91, FTSE 100 higher by 16.4 pts or +0.2% at 8257.91, CAC 40 up 20.95 pts or +0.27% at 7717.65 and Euro Stoxx 50 up 21.26 pts or +0.43% at 5009.34.
- Dow Jones mini up 13 pts or +0.03% at 39646, S&P 500 mini up 2 pts or +0.04% at 5592.25, NASDAQ mini up 25.25 pts or +0.12% at 20437.
Time: 09:55 BST
COMMODITIES: Gold Extends Recovery From Late-June Lows, Below Initial Resistance
A bull cycle in WTI futures remains in play and the contract is holding on to its recent gains. The recent breach of $80.11, the May 29 high and a key resistance, strengthened a bullish theme. Note too that $82.24, 76.4% of the Apr 12 - Jun 4 bear leg, has been cleared. Moving average studies are in a bull-mode set-up too. Sights are on $85.27, the Apr 12 high and a bull trigger. Initial firm support to watch is $79.37, the 50-day EMA. Gold has traded higher but, price remains inside a range - for now. A bear threat is present and the sell-off on Jun 7 reinforced a S/T bearish theme. Price has pierced the 50-day EMA, at 2322.2. A clear break of this average would confirm a resumption of the reversal from May 20 and open $2277.4, May 3 low. Initial firm resistance is $2387.8, Jun 7 high. A clear break would be a bullish development. Key resistance is at $2450.1, the May 20 high.
- WTI Crude up $0.21 or +0.25% at $84.14
- Natural Gas down $0.05 or -2.07% at $2.37
- Gold spot up $8.97 or +0.38% at $2366.09
- Copper up $8.4 or +1.85% at $461.65
- Silver up $0.18 or +0.58% at $30.587
- Platinum up $9.72 or +0.97% at $1010.26
Time: 09:55 BST
Date | GMT/Local | Impact | Country | Event |
05/07/2024 | 1215/1415 | ![]() | ECB's Elderson in Panel on data culture at DiFoR Conference | |
05/07/2024 | 1230/0830 | *** | ![]() | Employment Report |
05/07/2024 | 1230/0830 | *** | ![]() | Labour Force Survey |
05/07/2024 | 1230/0830 | ** | ![]() | WASDE Weekly Import/Export |
05/07/2024 | 1400/1000 | * | ![]() | Ivey PMI |
05/07/2024 | 1700/1300 | ** | ![]() | Baker Hughes Rig Count Overview - Weekly |
05/07/2024 | 1715/1915 | ![]() | ECB's Lagarde speech at Les Rencontres Economiques d'Aix-en-Provence 2024 | |
07/07/2024 | - | ![]() | Second round election |