MNI US OPEN - Watching for Hike, Skip or Pause Clues

NEWS

PAYROLLS PREVIEW (MNI): Watching Hike, Skip Or Pause Clues
Bloomberg consensus looks for further moderation in payrolls growth in May with 195k after 253k, but once again watch two-month revisions to see if they continue to unwind prior sizeable “beats”. Already at fresh multi-decade lows, the u/e rate could again be set up for a hawkish surprise judging by the primary dealer survey skew, something that doesn’t show in the broader Bloomberg survey. AHE seen moderating after April’s surprise strength, with any weakness watched after today’s surprise downward revisions for ULCs in Q422 and Q123.

US (MNI): Debt Limit Bill Passes Senate, Biden To Sign & Address Nation Today
Last night, by a 63-36 margin, the US Senate passed the Fiscal Responsibility Act 2023 averting what would have been a catastrophic default by the US gov't when it hit the debt ceiling in just a few days time. Following on from this, President Joe Biden will sign the legislation later today before delivering an address to the nation at 1900ET (0000BST, 0100CET, 0800JST).

In the event, 44 Democrats, 17 Republicans and 2 Independents voted in favour of the deal. Despite the vocal support of Senate minority leader Mitch McConnell (R-KY), 31 Republican senators voted against the deal, while four Democrats from the left of the party and veteran left-wing Senator Bernie Sanders (I-VT) also refused to give their backing.

US (MNI): MNI INTERVIEW: Soft Landing Could Turn Hard - ISM Chief
U.S. manufacturing has contracted for the seventh consecutive month and if consumer confidence and demand do not pick up again in coming months then the sector could move from a soft to a hard landing, according to Timothy Fiore of the Institute for Supply Management.

BOJ (MNI): MNI BRIEF: BOJ's Ueda Says Price Target Timing Difficult
Bank of Japan Governor Kazuo Ueda said on Friday that he cannot predict when the Bank's 2% price target will be achieved and that easy policy will continue for some time. “If the Bank shows the timing of achieving the target amid high uncertainties, it will increase the risk of causing unexpected conditions in markets," Ueda told lawmakers. Ueda on Wednesday indicated a shift to a new normal away from low interest rates for a prolonged period, which may lead to a tweak to yield curve control.

NEW ZEALAND (MNI): MNI INTERVIEW: Early OCR Cut On Rising Bank Costs - Ex-RBNZ
The cost of funding for New Zealand’s banks will increase as a key Reserve Bank of New Zealand support facility winds down, increasing interest and deposit rates, slowing the economy and potentially prompting an earlier-than-forecasted cut to the Official Cash Rate, John McDermott, executive director at Motu Economic and Public Policy Research, told MNI.

AUSTRALIA (MNI): MNI BRIEF: Aussie Minimum Wage Lift Sparks RBA Rate Concerns
The Fair Work Commission has raised Australia’s minimum wage by 5.75%, lifting the pay of 0.7% of the country’s workforce and potentially affecting about 20.5% of all Australian employees via the award system, a move that could impact the Reserve Bank of Australia’s upcoming June 6 interest rate decision.

RBA (MNI): MNI RBA WATCH: Anticipation Builds for Another RBA Rate Rise
The likelihood of another 25bp bump to the Reserve Bank of Australia's official cash rate – taking it to 4.1% – at the RBA's June 6 meeting has risen following a sharp jump in the country's minimum- and award-wage system and a persistently high monthly inflation print earlier in the week.

DATA

FRANCE APR MANUFACTURING OUTPUT +0.7% M/M, +2.1% Y/Y
FRANCE APR INDUSTRIAL PRODUCTION +0.8% M/M, +1.3% Y/Y

Bund Curve Bear Flattens, EGB/Bund Spreads A Little Tighter

The Bund curve holds the early bear flattening momentum, with the major benchmarks running 2.5-5.0bp cheaper after the overnight bid in Chinese equities provided some cheapening pressure for core FI markets from the get-go. Bund futures are ~25 ticks lower on the day, just off session lows.

• 10-Year semi-core and peripheral EGBs are generally a touch tighter vs. Bunds, with little market worry evident ahead of this evening’s potential sovereign rating update from S&P on France (current rating: AA; Outlook Negative). BTPs have tightened by 3bp vs. Bunds at the 10-Year point, outperforming regional counterparts.
• ECB’s Vasle reiterated worry re: high and persistent core inflation, along with highlighting the need for further tightening, requesting help from other policy areas. These comments failed to impact the broader EGB space.
• Futures roll volumes on EUREX have boosted activity levels in the background.
• Belgian supply presents the only auction hurdle ahead of the weekend, and shouldn’t be too impactful for the wider space, leaving calendar focus squarely on the impending U.S. NFP print.

GILTS: Bear Flattening, Front End Losses A Little More Pronounced Than On German Curve

The early bear flattening on the Gilt curve remains evident, with the major cash benchmarks running 2.5-5.5bp cheaper. Futures last sit ~20 ticks lower on the day, 15 ticks off session lows,

• While we haven’t seen much in the way of domestic headline drivers to note, the move in the front end of the Gilt curve has been a little more pronounced than what we have seen on the German curve (although both now operate off of session cheaps).
• This is with the SONIA strip running little changed to 4.5bp cheaper through the reds, also off session lows, with the move in the red generally outstripping moves in EURIBOR, which is perhaps reflective of the perceived differences in headroom until we reach BoE & ECB terminal rate pricing (filtering into the front end of the Gilt curve).
• The local docket is empty ahead of the weekend.

USD/CNH Sinks to Session Lows on Property Package Headlines

• Bloomberg reports that China are weighing a property market support package as a means to boost the economy. The report sees regulators considering reducing the down payment in some non-core neighborhoods of major cities, lowering agent commissions on transactions, and further relaxing restrictions for residential purchases, according to sources.
• CNH firms on the back of the news, spilling over to cross-asset markets and boosting risk appetite. USD/CNH slips to new daily lows at 7.0722 - pair now within range of 7.0678 lows from May29.

EQUITIES: Stocks on Solid Footing Pre-Payrolls

S&P E-minis trend conditions remain bullish and the contract is trading closer to its recent highs. The bounce from 4114.00, the May 24 low, means that support around the 50-day EMA has remained intact. Eurostoxx 50 futures traded lower Wednesday and cleared the 50-day EMA and support at 4252.00, the May 25 low. Price has also pierced support at 4233.00, the May 4 low and a key short-term level. A clear break of 4233.00 would signal a potential reversal and highlight a stronger bearish theme.

• Japan's NIKKEI closed higher by 376.21 pts or +1.21% at 31524.22 and the TOPIX ended 33.41 pts higher or +1.55% at 2182.7. Across China the SHANGHAI closed higher by 25.434 pts or +0.79% at 3230.069 and the HANG SENG ended 733.03 pts higher or +4.02% at 18949.94.
• Germany's DAX trades higher by 135.47 pts or +0.85% at 15988.5, FTSE 100 higher by 50.39 pts or +0.67% at 7540.54, CAC 40 up 68.94 pts or +0.97% at 7206.34 and EuroStoxx50 up 36.8 pts or +0.86% at 4294.35.
• Dow Jones mini up 131 pts or +0.4% at 33234, S&P 500 mini up 14.25 pts or +0.34% at 4242.25, NASDAQ mini up 45.75 pts or +0.32% at 14518.25.

COMMODITIES: WTI Futures Hold Bearish Pattern Pre-OPEC

The bear cycle in Gold remains intact and short-term gains are - for now - considered corrective. The yellow metal has this week pierced trendline support drawn from Nov 3 2022. A clear breach of this trendline, at $1944.7, would reinforce bearish conditions and open $1903.5. WTI futures remain in a bear mode position. The strong sell-off this week has resulted in a break of support at $69.39, the May 15 low. The clear breach strengthens bearish conditions and paves the way for weakness towards $63.90, the May 4 low.

• WTI Crude up $0.61 or +0.87% at $70.74
• Natural Gas up $0.02 or +0.93% at $2.176
• Gold spot up $1.12 or +0.06% at $1978.63
• Copper up $5.1 or +1.37% at $376.05
• Silver up $0.08 or +0.35% at $23.9382
• Platinum up $7.53 or +0.75% at $1017.16