Quiet start to the week, US market closed for public holiday – Low Calorie Diets Tips

Notes/Observations

– Quiet EU morning session as US markets closed for Federal Holiday.

– The slowdown in US economic momentum cast some doubt on the Fed’s rate hike expectations.

– While liquidity is being reduced, risk appetite has crept back in slightly. Asia ended mixed with Nikkei225 underperforming at -0.75%. EU indices start positive at 0.25-1.0%, EU bond yields are mixed. Elsewhere Gold +0.1%, BTC +12.1%, ETH +17.5%, DXY -0.25%, Brent -0.7%, WTI -0.3%.

– Germany May PPI reading hits new record high.

– A meeting of EU foreign ministers led to a flurry of replies from various ministers condemning Russia’s activities in relation to Ukraine’s blocked Black Sea ports and citing its actions as war crimes as fears of global food shortages mount.

– ECB’s Centeno noted that the ECB is discussing tools that allow the market to inject discipline where it appears to be absent when spreads extend beyond savings fundamentals.

– Japan has released its June economic report which suggests the economy is picking up. BOJ Governor Kuroda’s daily verbal interventions continue as he reiterated her stance that FX moves must reflect fundamentals.

– CAC40 gains slightly +0.3% as Macron loses his overall majority in the National Assembly over the weekend.

– FSTE100 also gains +0.7% amid a major strike on the UK rail network which begins this week today. The UK Treasury announced “buy-now-pay-later” rules.

– In Germany, PPI data confirmed the highest annual pace since 1949 at 33.6%y/y. Econ Min Habeck unveiled new measures to reduce natural gas consumption after Russia halted supplies last week.

– Looking ahead, a plethora of ECB speakers is expected including: Muller, Visco, Lagarde, Kazaks, Panetta and Lane. Also expected are BOE’s Mann, BOE’s Haskel and Fed’s Bullard.

Asia

– The Chinese PBoC left the 1-year and 5-year LPR rates unchanged in June (as expected).

– The BOJ offered to buy 5-10 year JGBs at a fixed rate of 25 basis points; Open window to buy unlimited 10-year JGBs at 0.25% [as expected].

– Japan’s Prime Minister Kishida: reiterated his stance that the BoJ’s monetary easing should continue.

Europe

– The ECB’s Rehn (Finland) said the ECB should limit the rise in borrowing costs from more indebted eurozone members, but fiscal concerns should not dictate monetary policy. Outright Monetary Transactions (OMT) could be used to deal with deeper problems of structural economic weakness and debt sustainability.

– French President Macron loses absolute majority in Parliament (keeps largest bloc). Won 245 seats out of 577. 289 needed to retain majority). Le Pen’s far right gets 89 seats to prior’s 8 (prior’s highest number was 35 in 1986).

– More than 40,000 British railway workers will go on three-day strike from Tuesday 21 June. The railway unions have threatened strikes until Christmas.

America

– The Fed’s Waller (hawk, voter) said over the weekend that he would support a 75 basis point hike at the July meeting if data comes in as expected. During the phase in which the Fed had to move interest rates sharply in order to become neutral, it then became hawkish.

– Finance Minister Yellen: The pace of inflation is likely to slow down in the coming months; Affirmed President Biden reviewing tariff policy towards China. Some inherited customs served no strategic purpose. The US recession “was not inevitable.

energy

– Germany Econ Min Habeck presented new measures to reduce natural gas consumption; To store as much natural gas as possible with a new set of measures, including increased use of coal-fired power plants.

– US Energy Sec Granholm: The government was studying the possibility of suspending the state gas tax to lower prices.

Speakers/Fixed Income/FX/Commodities/Erratum

Shares

indices [Stoxx600 +0.11% at 403.68, FTSE +0.69% at 7,064.45, DAX +0.62% at 13,207.82, CAC-40 +0.40% at 5,906.14, IBEX-35 +0.70% at 8,202.70, FTSE MIB +0.50% at 21,897.00, SMI -0.16% at 10,434.60, S&P 500 Futures +0.60%].

Market focus/key topics: European indices opened slightly higher in light trade and stayed in the green throughout the session; better performing sectors are energy and consumer discretionary; underperforming sectors include materials and industries; Mining sub-sector under pressure after China blast furnace shutdown; Roche takes a stake in Valneva; USA closed for vacation.

Shares

consumer goods: EasyJet [EZJ.UK] -3% (trade update), Deliveroo [ROO.UK] -8% (new CFO).

Consumer Staples: Associated British Foods [ABF.UK] +1% (Trade Refresh).

Energy: Uniper [UN01.DE] -1.5% (cutting of Russian gas supplies).

Finance: Euromoney Institutional Investor [ERM.UK] +24% (confirms PE interest).

speaker

Centeno of the ECB (Portugal) noted that inflation in Europe is heavily imported and the euro is by no means at risk. The natural interest rate is an indicator, and policy normalization will be gradual.

Stournaras of the ECB (Greece, dove) states that the focus must be on medium-term inflation. Monetary policy could afford to proceed step by step.

The Kazakhs of the ECB (Latvia, Falcon): The current issue was the speed of market revaluation; Decisions in July and September depend on the circumstances. The market should not get carried away by bets on rate hikes. Didn’t have a specific target on spread levels.

Spain Economy Min Calvino noted that it was positive that the ECB had acted quickly to tackle fragmentation risks in the EU.

Russia 1st Dept. PM Belousov: Russia is discussing alignment with the rate of Russian RUB currency (ruble); Floating ruble now essentially does not work.

Budget guidelines for Russia 2023 said to have no plans to issue Eurobonds in the next 3 years; Target net domestic debt of USD 19 billion in 2023. The Russian budget is to remain in deficit in 2022-2025.

BOJ Governor Kuroda commented after meeting PM that it is important that FX moves reflect fundamentals and closely monitor FX markets. Recent sudden currency moves have been undesirable. No particular comments from PM. I hoped to coordinate closely with the government and respond appropriately to FX.

Japan’s Prime Minister Kishida noted that he had spoken to the BOJ governor about concerns over the rapidly weakening JPY (yen) currency.

Japan Cabinet Office (Government) June Economic Report: Maintaining the macro view that the economy is showing signs of picking up.

Currencies/Fixed Income

– The USD is holding steady after a recent retracement as markets reacted to the slowdown in US economic momentum, raising some doubts about the Fed’s rate hike expectations.

– EUR/USD stable in the 1.0515 area. ECB speakers continued to talk about their anti-fragmentation goals. Markets awaiting ECB program design.

– UK focus will be Wed inflation data. Traders noted that the UK started the week with rising inflation coupled with labor strikes. The latest monthly GDP data highlighted the rising risk of a recession. Everything is reminiscent of the 1970s.

– USD/JPY remains off recent 24-year lows as Japanese officials continue to tout G7 rhetoric that FX moves should reflect fundamentals and that they will closely monitor FX markets. Pair at 134.75 by mid-session.

economic data

– (DE) Germany May PPI M/M: 1.6% v 1.5%e; Y/Y: 33.6% vs. 33.8%e (highest annual pace since 1949).

– (TW) Taiwan May Export Orders Y/Y: 6.0% vs. 1.1%e.

– (CH) Swiss Weekly Total Sight Deposits (CHF): 751.8 bn vs. 753.1 bn before; Domestic demand deposits: 661.7 billion per month 753.1 billion before that.

– (TR) Turkey May Foreign Tourist Arrivals Y/Y: 308.5% vs. 225.6% before.

– (GR) Greece April current account: -€1.6bn vs. -€2.3bn previously.

– (EU) Eurozone April construction output M/M: -1.1% vs. +0.1% previously; Y/Y: 3.0% vs. 3.4% previously.

issue of fixed income securities

– None seen.

looking ahead

– 05:00 (SK) Slovakia Debt Agency (Ardal) sells 2025, 2027, 2030 and 2051 bonds.

– 05:25 (EU) ECB daily liquidity statistics.

– 05:30 ((DE) Germany sells €3.0bn in 12-month BuBills.

– 05:30 (NL) Dutch Debt Agency (DSTA) sells €3.0bn in 3-month and 6-month bills.

– 05:30 (BE) Belgian Debt Agency (BDA) sells 2.7 to 3.7 billion euros worth of OLO bonds in 2029, 2032 and 2053.

– 05:30 (ZA) South Africa to provide details on forthcoming sale of I/L bonds (Friday).

– 06:00 (IL) Israel sells bonds totaling 850 million in 2024, 2026, 2032 and 2051.

– 06:00 (RO) Romania sells RON500M in 2.5% Oct 2027 bonds.

– 06:45 (US) Daily Libor fixing.

– 07:00 (IN) India to provide details on forthcoming bond sale (Friday).

– 07:25 (BR) Weekly economist survey by the Central Bank of Brazil.

– 08:00 (IS) Iceland May Unemployment Rate: No est v 4.5% before.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 09:00 (FR) France Debt Agency (AFT) sells €4.8-6.0bn in 3-month, 6-month, 9-month and 12-month bills.

– 09:00 (EU) Lagarde of the ECB.

– 09:00 (UK) man from BOE.

– 10:00 (PT) Centeno of the ECB (Portugal).

– 11:00 (EU) Lagarde of the ECB.

– 13:00 (IT) Panetti of the ECB (Italy).

– 12:45 (US) Bullard of the Fed.

– 15:30 (IE) Lane of the ECB (Ireland, Chief Economist).

– 17:00 (NZ) New Zealand Q2 Westpac Consumer Confidence: No est v 92.1 before.

– 20:00 (KR) South Korea 1st-20th June Exports Y/Y: No est v 24.1% before; Imports Y/Y: No est v 37.8% before; Trade Balance: No est v -$4.8B before.

– 20:00 (AU) RBA Governor Lowe.

21:30 (AU) RBA June minutes.

– 22:30 (KR) South Korea sells KRW600B in 20-year bonds.

– 23:00 (TH) The Central Bank of Thailand sells THB50B in 3-month bills.

– 23:35 (JP) Japan sells 5-year JGB bonds.

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