Persistent inflation worries and growth concerns continue

Notes/Observations

– Persistent inflation worries and growth concerns continue; Risk sentiment awaits a direction after mixed to flat market performance from Asia, Europe and US futures. EU bond yields.

– German Retail Sales slump in April.

– UK House Prices defy slowdown fears that the economy may be stumbling.

-A multitude of European PMI data announced and indicating that economies are clutching onto expansion territory. New orders component surprised to the downside in a couple of readings. Summary: Major EU PMI Manufacturing data (Beats: Euro Zone, Germany, France, Spain Misses: Italy).

– ECB message at the upcoming June meeting is expected to be very clear that policy normalization starts are higher after ECB Holzmann confirms need for 50bps hike following record EU inflation yesterday.

-Many speakers today including ECB’s Lagarde, Panetta and Lane, BOE’s Breeden, BOE’s Hauser and Riksbank’s Brema. Bank of Canada interest rate decision during the US session with expectation of 50bps hike to 1.50%.

-China began significant easing of business restrictions today and a Beijing official declared the covid situation as ‘effectively controlled’.

-Elsewhere, Russia continued their anti-west hazing with comments from Russian Deputy Foreign Minister expressing anger over the US decision to debate on further military aid to Ukraine.

-Brent and WTI are higher as EU 6th sanctions package is priced in. Gazprom halted gas flows to several companies after citing a lack of payment.

-Overall, subdued movement in trading due to a lack of change in the macro environment.

Asia

– China May Caixin PMI Manufacturing registered its 3rd month of contraction (48.1 v 48.8e).

– Australia Q1 GDP Q/Q: 0.8% v 0.6%e ;Y/Y: 3.3% v 2.9%e.

– Australia May Final PMI Manufacturing confirms 24th month of expansion (55.7 v 55.3 prelim).

– Japan May Final PMI Manufacturing confirmed its 16th consecutive expansion: 53.3 v 53.2 prelim.

– Japan Q1 Capital Spending (capex) registered its 4th straight increase (Y/Y: 3.0% v 3.6%e).

– South Korea May Trade Balance: -$1.7B v -$2.5Be; Exports Y/Y: 21.3% v 18.4%e; Imports Y/Y: 32.0% v 31.4%e.

– Shanghai began to end lockdown conditions from Wed, Jun 1st (as previously announced).

– BOJ Dep Gov Wakatabe stated that most goods prices were not rising. Reiterated that recent inflation was driven mostly by energy and some food price hikes; Reiterated stance that must maintain powerful monetary easing and sustain environment where wages could rise.

– RBNZ Hawkesby stated that needed to keep Inflation expectations anchored; Added that demand needed to moderate.

Ukraine conflict

– US President Biden: Reiterates US will not try to oust Putin – NYT Op-Ed.

Americas

– President Biden noted the need to transition from recovery to steady growth. He respected the Fed’s independence; Powell had noted Fed has laser focus on inflation and would use policy tools to address rising prices.

– Treasury Sec Yellen stated that she was wrong last year on Inflation Path; Inflation was the number one concern for President Biden who shared priority with US FedD to slow inflation.

– Fed’s Bostic (non-voter, hawk): Idea of a pause in rate hikes in Sept would not be a ‘Fed Put’. Pause in rate hikes was not tied to any rescue of the market.

Energy

– Russia confirmed that Foreign Minister Lavrov met with Saudi counterpart on Tues (May 31st), both men praised the level of cooperation in OPEC+.

– EU ban on insuring ships carrying Russian oil to be phased in over 6 months as part of sanctions package.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.1% at 3,793, FTSE -0.2% at 7,591, DAX +0.2% at 14,418, CAC-40 +0.2% at 6,479, IBEX-35 -0.2% at 8,836, FTSE MIB +0.1% at 24,514, SMI +0.1% at 11,622, S&P 500 Futures %].

Market focal points/key themes

Equities

– Consumer discretionary: [PETS.UK] Pets at Home -2.5% (New CEO).

– Communication Services: [TELIA.SE] Telia Company +1.0% (Buyback announced).

– Energy: [ORSTED.DK] Orsted -2.3% (Gazprom halts gas flows citing non payment).

Speakers

– ECB’s Holzmann (Austria) stated that new inflation record backed the need for a 50bps rate hike. Clear rate signal would also support the Euro was near a peak on war-triggered inflation. Believed the worst of energy price shocks were probably behind us.

– German Chancellor Scholz stated that wanted to return to debt brake in 2023 as credit financed long-term subsidies were not a solution.

– France Fin Min Le Maire stated that the country should pass inflation peak at the end of 2023.

– Hungary Fin Min Varga stated that the govt was committed to securing EU Pandemic funds; talks were in the latter stages.

– EU said to back Poland €36B aid plan with conditions attached.

– China govt said to urge stabilizing food prices amid the covid outbreak.

– China official stated that the Beijing pandemic situation was effectively controlled.

Currencies/fixed Income

– The session was summarized by persistent inflation worries and growth concerns continue.

– EUR/USD tested the 1.0740 level after ECB member Holzmann noted that new inflation record backed the need for a 50bps rate hike while various economic data showed the precarious situation that central banks must address.

– USD/JPY hit a 2-week high at 129.54 with focus on rising US bond yields.

Economic data

– (DE) Germany Apr Retail Sales M/M: -5.4% v -0.5%e; Y/Y: 2.5% v 4.4%e.

– (UK) May Nationwide House Price Index M/M: 0.9% v 0.6%e; Y/Y: 11.2% v 10.5%e.

– (RU) Russia May Manufacturing PMI: 50.8 v 48.3e (1st expansion in 4 months).

– (AU) Australia May Commodity Index: 155.0 v 153.1 prior.

– (SE) Sweden May PMI Manufacturing: 55.2 v 54.9 prior (24th month of expansion).

– (NL) Netherlands May Manufacturing PMI: 57.8 v 59.0e (22nd straight expansion).

– (TR) Turkey May PMI Manufacturing: 49.2 v 49.2 prior r (3rd straight contraction).

– (PL) Poland May Manufacturing PMI: 48.5 v 51.9e (1st contraction in 23 months).

– (HU) Hungary May Manufacturing PMI: 51.5 v 55.0e (14th straight expansion).

– (HU) Hungary Q1 Final GDP Q/Q: 2.1% v 2.1% prelim; Y/Y: 8.2% v 8.2% prelim.

– (ES) Spain May Manufacturing PMI: 53.8 v 52.0e (16th month of expansion).

– (CH) Swiss May PMI Manufacturing: 60.0 v 61.3e (22nd straight expansion).

– (CZ) Czech Republic May Manufacturing PMI: 52.3 v 54.1e (21st straight expansion).

– (TH) Thailand May Business Sentiment Index: 49.3 v 48.2 prior.

– (IT) Italy May Manufacturing PMI: 51.9 v 53.6e (23rd month of expansion but lowest since Jun 2020).

– (FR) France May Final Manufacturing PMI: 54.6 v 54.5 prelim (confirmed 18th month of expansion but lowest since Oct).

– (DE) Germany May Final Manufacturing PMI: 54.8 v 54.7 prelim (confirmed 23rd month of expansion).

– (EU) Euro Zone May Final Manufacturing PMI: 54.6 v 54.4 prelim (confirmed 23rd month of expansion).

– (GR) Greece May Manufacturing PMI: 53.8 v 54.8 prior (15th month of expansion).

– (NO) Norway May PMI Manufacturing: 54.9 v 59.9 prior (21st month of expansion).

– (IT) Italy Apr Unemployment Rate: 8.4% v 8.3%e.

– (IL) Israel Apr Leading “S” Indicator M/M: 0.2% v 0.2% prior.

– (UK) May Final Manufacturing PMI: 54.6 v 54.6 prelim (confirmed 24th straight expansion).

– (HK) Hong Kong Apr Retail Sales Value Y/Y: +11.7% v -7.9%e; Retail Sales Volume Y/Y: +8.1% v -10.8%e.

– (NG) Nigeria May PMI Manufacturing: 53.9 v 55.8 prior.

– (EU) Euro Zone Apr Unemployment Rate: 6.8% v 6.8%e.

– (BE) Belgium Apr Unemployment Rate: 5.7% v 5.6% prior.

– (DK) Denmark May PMI Survey: 60.7 v 62.8 prior (15th straight expansion).

– (ZA) South Africa May Manufacturing PMI: 54.8 v 50.7e (10th month of expansion).

Fixed income issuance

– (DE) Germany opened its book to sell €4.0B in 30-year green bond via syndicate; guidance seen -1.25bps to bunds.

– (IN) India sold total INR330B vs. INR330B indicated in 3-month, 6-month and 12-month bills.

– (DK) Denmark sold total DKK2.17B in 2024, 2031 and 2052 DGB bonds.

– (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 1.75% Nov 2033 Bonds; Avg Yield: 1.6217% v 1.8773% prior, bid-to-cover: 1.91x v 3.66x prior.

Looking ahead

– OPEC+ JMMC technical panel meeting.

– (IT) Italy May Budget Balance: No est v €6.0B prior.

– (IL) Israel Apr Leading “S” Indicator M/M: No est v 0.2% prior.

– (ZA) South Africa May Naamsa Vehicle Sales Y/Y: 4.4%e v 4.3% prior.

– 05:25 (EU) Daily ECB Liquidity Stats.

– 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 26-week Bills.

– 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

– 06:00 (IE) Ireland May Unemployment Rate: No est v 4.8% prior.

– 06:00 (PT) Portugal Apr Industrial Production M/M: No est v 0.5% prior; Y/Y: No est v 4.3% prior.

– 06:00 (UK) DMO to sell £B in 1-month, 3-month and 6-month bills (£B, B and £B respectively).

– 06:00 (EU) EU Commission to sell €2.5B in 3-month and 6-month bills.

– 06:45 (US) Daily Libor Fixing.

– 07:00 (US) MBA Mortgage Applications w/e May 27th: No est v -1.2% prior.

– 07:00 (UK) Weekly PM Question time in House.

– 07:00 (EU) ECB chief Lagarde on green transition (With Brazil Central bank Gov Neto and ECB’s Villeroy (France).

– 08:00 (CZ) Czech May Budget Balance (CZK): No est v -100.1B prior.

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

– 08:30 (CL) Chile Apr Economic Activity Index (Monthly GDP) M/M: No est v 1.6% prior; Y/Y: 8.5%e v 7.2% prior.

– 08:55 (US) Weekly Redbook LFL Sales data.

– 09:00 (BR) Brazil May Manufacturing PMI: No est v 51.8 prior.

– 09:30 (CA) Canada May Manufacturing PMI: No est v 56.2 prior.

– 09:45 (US) May Final S&P/Markit Manufacturing PMI: 57.5e v 57.5 prelim.

– 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to raise Interest Rates by 50bps to 1.50%.

– 10:00 (US) Apr Construction Spending M/M: 0.7%e v 0.1% prior.

– 10:00 (US) May ISM Manufacturing: 54.5e v 55.4 prior; Prices Paid: 80.5e v 84.6 prior.

– 10:00 (US) Apr JOLTS Job Openings: 11.40Me v 11.549M prior.

– 10:00 (MX) Mexico Apr Total Remittances: $4.5Be v $4.68B prior.

– 10:00 (MX) Mexico Central Bank Economist Survey.

– 10:30 (MX) Mexico May Manufacturing PMI: No est v 49.3 prior.

– 11:00 (CO) Colombia May PMI Manufacturing: No est v 54.4 prior.

– 11:00 (PE) Peru May CPI M/M: 0.6%e v 1.0% prior; Y/Y: 8.5%e v 8.0% prior.

– 11:15 (IT) ECB’s Panetta.

– 11:30 (US) Fed’s Williams.

– 11:30 (IE) ECB’s Lane (Ireland) in Paris.

– 11:30 (UK) BOE’s: Hauser.

– 12:00 (IT) Italy May New Car Registrations Y/Y: No est v -33.0% prior.

– 12:00 (RU) Russia Apr Unemployment Rate: 4.3%e v 4.1% prior.

– 12:00 (RU) Russia Mar Real Wages Y/Y: -4.1%e v +2.6% prior.

– 12:00 (RU) Russia Apr Real Retail Sales Y/Y: -5.8%e v +2.2% prior.

– 12:00 (RU) Russia Apr Industrial Production Y/Y: -1.1%e v +3.0% prior.

– 13:00 (MX) Mexico May IMEF Manufacturing Index: No est v 52.5 prior; Non-Manufacturing Index: No est v 53.0 prior.

– 13:00 (US) Fed’s Bullard.

– 14:00 (BR) Brazil May Trade Balance: $4.5Be v $8.1B prior; Total Exports: $29.5Be v $28.9B prior; Total Imports: $24.8Be v $20.8B prior.

– 14:00 (US) Federal Reserve Beige Book.

– 16:30 (US) Weekly API Oil Inventories.

– 18:45 (NZ) New Zealand Q1 Terms of Trade Index Q/Q: +1.3%e v -1.0% prior.

– 19:50 (JP) Japan May Monetary Base Y/Y: No est v 6.6% prior; Monetary Base End of Period: No est v ¥688.4T prior.

– 20:30 (ID) Indonesia May PMI Manufacturing: No est v 51.9 prior.

– 21:30 (AU) Australia Apr Trade Balance (A$): 9.0Be v 9.3B prior; Exports M/M: 1%e v 0% prior; Imports M/M: +1%e v -5% prior.

– 23:35 (JP) Japan to sell 10-Year JGB Bonds.

Source: FXStreet – TradeTheNews.com Staff

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