MNI US OPEN - Renewed JPY Pressure Prompts Additional Verbal Warning

NEWS

ISRAEL (BBG): Israel Winding Down Gaza Operations as Focus Shifts to Hezbollah

Prime Minister Benjamin Netanyahu said Israel will end the intense stage of fighting in Gaza soon and redeploy some forces to northern Israel where violence with Lebanon-based Hezbollah has escalated and triggered fears of another all-out conflict. Israel will now use more targeted operations against Hamas in Gaza, Netanyahu said, when asked in a TV interview with Israel’s Channel 14 aired late Sunday whether fighting in the southern city of Rafah will end in a month’s time.

US/ASIA (BBG): US and Key Asian Allies Denounce Putin and Kim’s Military Pact

The US and its allies Japan and South Korea condemned in “the strongest possible terms” the deepening military cooperation between Russia and North Korea, calling it a grave concern and a threat to stability. Top envoys from the three nations discussed Vladimir Putin and leader Kim Jong Un reaching an agreement last week to come to each other’s defense in case of attack, according to a joint statement released by the US State Department. The US and its Asian allies have said they saw the visit as advancing the transfer of munitions from Kim’s regime to help Putin in his war on Ukraine.

FRANCE (BBG): Le Pen’s Far Right Keeps Rising Less Than a Week Before Election

Marine Le Pen’s far-right National Rally has made further gains ahead of the first round of France’s snap legislative election on Sunday, according to Bloomberg’s poll of polls, as President Emmanuel Macron faces the increasing likelihood of having to share power with an opposition government. The party has increased its lead by 0.3 point to 34.2% in Bloomberg’s composite, while a leftist alliance called the New Popular Front, bringing together Socialists, Communists, Greens and the far-left France Unbowed, is second with 28.2%, up 0.1 point. Macron’s Renaissance party and its allies are in third at 20.6%.

UK (BBG): Sunak’s Tories Fear Betting Scandal May Expand and Bury Them

Rishi Sunak’s chances of avoiding a landslide defeat in the UK election dwindled further as his Conservative Party battled revelations that several of the prime minister’s close aides placed bets on the date of the vote. A Sunday Times report that a senior Conservative official made dozens of bets with bookmakers that Sunak would call a July election makes it four prominent Tories who have now been accused of trying to profit by gambling on its timing. There are serious concerns at the top of the Sunak’s party that other leading figures may be drawn into the affair with just 10 days to go until the election, people with knowledge of the matter said.

JAPAN (BBG): Japan’s Kanda Says Ready to Intervene 24 Hours a Day If Needed

Japan is ready to intervene in the foreign exchange market “24 hours a day” if needed, top currency official Masato Kanda tells reporters in Tokyo on Monday. Doesn’t have specific levels for intervention. Says excessive moves have negative impact on economy. US report on Japan’s forex policy has “no impact,” Kanda says.

BOJ (MNI): BOJ Board Split on Rate Hike; JGB Cuts Agreed - Opinions

Bank of Japan board members were divided on the timing of rate hike at the June 13-14 policy-setting meeting, the summary of opinions showed on Monday. Some board members saw the need to consider raising the policy interest rate appropriately. “It is therefore necessary for the Bank to consider whether further adjustments to monetary accommodation are needed from the perspective of risk management,” one member said. Another member noted, although price developments were on track to achieve the 2% price-stability target in the second half of fiscal 2025, "upside risks to prices have become more noticeable.”

CHINA (BBG): Yuan Pressure Mounts as Trading Disruptions Appear Once More

The yuan is bumping up against the weak edge of its allowed trading range against the dollar, and once again, certain currency transactions with shorter settlement dates are being affected. Overnight swaps haven’t traded since Tuesday, as the implied yuan price they would settle at would fall outside the managed currency’s permitted 2% daily band, according to traders who asked not to be identified discussing private matters. The swaps are typically used by banks and corporates looking to settle currency transactions earlier than the industry standard of two days.

CHINA (BBG): China Imposes More Fertilizer Export Controls to Protect Farmers

China is further restricting fertilizer exports, as it seeks to contain domestic prices, cut farming costs and bolster grain security. The curbs imposed earlier this month apply to urea, a nitrogen-based fertilizer, and phosphates, according to people familiar with the matter, who didn’t want to be named discussing a sensitive issue. In years past, China has been a key supplier of the two types, and the new restrictions risk pushing up prices of essential crop nutrients around the world.

BITCOIN (BBG): Bitcoin Extends Drop After One of Crypto’s Worst Weeks of 2024

Losses are piling up in the crypto market after its second-worst weekly drop of 2024, a reflection of cooling demand for Bitcoin exchange-traded funds and uncertainty over monetary policy. A gauge of the largest 100 digital assets fell about 5% in the seven days through Sunday, the worst such decline since April, data compiled by Bloomberg show. Market leader Bitcoin shed approximately 2% to trade at $62,275 as of 7:05 a.m. Monday in London, a more than one-month low, hurt by a six-day streak of outflows from US ETFs for the token.

DATA

GERMANY JUN IFO BUSINESS CLIMATE INDEX 88.6 (MNI)

NEW ZEALAND DATA (MNI): Exports to US Strong While Struggling to China

NZ recorded a merchandise trade surplus of $204m for May after a small deficit of $3m. The YTD deficit narrowed moderately to $10.05bn from $10.22bn and appears to have stalled around here. Exports rose 2.9% y/y outpacing imports at 0.6% y/y. The trade position is being helped by strong demand from the US, NZ's second largest destination. Exports to the US rose 33.2% y/y in May, driven by beef, compared with shipments to China falling 11.6% y/y. They were weak to Australia but rising solidly to both Japan and Europe. Statistics NZ observes that May was the first time that exports to the US reached the $1bn mark.

FOREX: JPY Remains a Concern as TWI Within Reach of Pre-Intervention Low

• The greenback is modestly softer early Monday, reversing a small part of last week's late rally. Despite today's pullback, the USD Index remains well within range of the multi-month highs posted late last week at 105.915.
• USD weakness has paused USD/JPY's intraday incline - however today's 159.92 print will remain a considerable concern for the Japanese authorities. The JPY trade-weighted index has printed another multi-month low this morning, coming to within just 0.15% of the prevailing level before the late April intervention phase. Any renewed dollar rally will keep focus on the JPY going forward.
• EUR trades firmer, helping EUR/USD show above last Friday's highs, but vol space has seen far more action relative to spot prices. EUR vols gapped higher at the open Monday as the very front-end of the curve now captures the first round of the French legislative elections on Sunday - 1wk vols were marked higher to 7.7 points, a ~2 point premium over background average vol this year.
• The data schedule is typically quiet for a Monday, with just the US Dallas Fed manufacturing data set to cross. This should keep focus on central bank comms, with ECB's Nagel, Villeroy & Schnabel set to speak, as well as Fed's Goolsbee & Daly and BoC's Macklem.

EGBS: Bunds Near Intraday Lows As IFO Bid Fades; Peripheral Spreads Tighter

Bunds are close to intraday lows, after the brief IFO data-driven bid quickly faded.

• All IFO sub-components were weaker-than-expected, consistent with the weakening of the flash June PMI last month.
• Bund futures are -14 ticks at 132.39 after marking a session high of 132.72 post-data. Bunds remain within Friday’s range, with the current technical setup appearing to be a flag - a bullish continuation pattern.
• 10-year OAT and BTP spreads to Bunds are around ~3bps tighter this morning. 
• The 0.7% rally in European equity futures has supported spread tightening this morning, alongside a lack of meaningful change in the French political situation ahead of the first round of voting on Sunday 30 June.
• The regional data calendar picks up towards the end of this week, with flash June inflation data from Spain, France and Italy.

GILTS: Off Highs, Curve a Little Flatter, BoE Sales Due Later

Gilt futures little changed at 98.56, sticking within Friday’s range. Technicals are bullish, resistance 99.25, support 98.21. Yields, 0.5-2.0bp lower across the curve, flattening seen. Morgan Stanley recommended 10s30s flatteners late Friday.

• Softer-than-expected German IFO saw session highs, before the rally was pared.
• BoE-dated OIS little changed, 47.5bp of ’24 cuts priced, 14.5bp through Aug, ~22bp through Sep. SONIA futures +0.5 to -1.5. STIRs off last week’s dovish extremes.
• This BoE will sell GBP750mn of medium-term gilts from its APF this afternoon, after confirming that it will trim medium- and long-term gilt sales in Q3 (the latter likely provides light support for gilts early today). CBI trends data is also due.

EQUITIES: Initial Resistance For Eurostoxx 50 Futures Intact For Now

The trend condition in Eurostoxx 50 futures remains bullish. A corrective cycle has resulted in a pullback from the May high. Recent weakness has seen price breach 4988.00, Jun 11 low, highlighting potential for a deeper retracement and has exposed 4846.00, Apr 19 low and a key support. The recovery from the Jun 14 low is an early bullish signal. Resistance to watch is at 5092.00, Jun 12 high. A break would expose key resistance at 5151.00. The uptrend in S&P E-Minis remains intact and the contract continues to trade close to its recent highs. Price has recently cleared 5430.75, the May 23 high and bull trigger. This confirmed a resumption of the uptrend. Note that moving average studies are in a bull-mode position too, highlighting positive market sentiment. Sights are on 5594.66 next, a Fibonacci projection. Initial support lies at 5452.35, the 20-day EMA.

• Japan's NIKKEI closed higher by 208.18 pts or +0.54% at 38804.65 and the TOPIX ended 15.5 pts higher or +0.57% at 2740.19.
• Elsewhere, in China the SHANGHAI closed lower by 35.039 pts or -1.17% at 2963.099 and the HANG SENG ended 0.81 pts lower or 0% at 18027.71.
• Across Europe, Germany's DAX trades higher by 100.44 pts or +0.55% at 18262.77, FTSE 100 higher by 36.18 pts or +0.44% at 8273.76, CAC 40 up 44.12 pts or +0.58% at 7672.69 and Euro Stoxx 50 up 31.83 pts or +0.65% at 4939.13.
• Dow Jones mini up 73 pts or +0.18% at 39656, S&P 500 mini up 10 pts or +0.18% at 5544, NASDAQ mini up 31.75 pts or +0.16% at 20015.25.

Time: 09:50 BST

COMMODITIES: WTI Futures Remain Above Key Resistance at $80.11

WTI futures traded higher last week, extending the current bull phase. The climb has resulted in a break of $80.11, the May 29 high and a key resistance. The clear breach of this hurdle cancels a recent bearish theme and paves the way for $82.24, a Fibonacci retracement point. Initial firm support to watch is $78.33, the 20-day EMA. A break would be seen as an early potential reversal signal. Gold continues to trade below resistance - for now. A sharp sell-off on Jun 7 reinforced a short-term bearish theme. The yellow metal has pierced the 50-day EMA, at 2317.7. A clear break would confirm a resumption of the reversal from May 20 and open $2277.4, the May 3 low. Clearance of this price point would also strengthen a bearish theme. Initial firm resistance is $2387.8, the Jun 7 high.

• WTI Crude up $0.21 or +0.26% at $80.95
• Natural Gas down $0.01 or -0.22% at $2.7
• Gold spot up $7.53 or +0.32% at $2329.57
• Copper up $0.45 or +0.1% at $443.5
• Silver up $0.15 or +0.51% at $29.7028
• Platinum up $11.14 or +1.12% at $1006.02

Time: 09:50 BST