The Morning Hark - 17 June 2024
Today’s focus...Little to inspire to start this central bank heavy week but at least we have the Euros. Plus of course The Week Ahead.
Overnight Highlights
Prices are at 6.45 BST/1.45 EST, with changes reflecting movement from midnight GMT
Oil - Oil unchanged in Asia with Brent and Crude August futures currently at 82.40 and 78, bang on our opening levels we saw at the tail end of last week.
EQ - Asian equity markets mixed with the Hang Seng up one percent with the futures currently at 17,977. Meanwhile the Nikkei futures trading off one percent at 38,070.
The US indicies unchanged with the S&P and Nasdaq futures now at 5500 and 19,955 respectively. The indicies closing the week at yet more record highs driven by the Top3 which seem to have replaced the Mag7 as Apple, Nvidia and Microsoft lead the way.
Gold - Gold opening the week a touch softer in Asia with the August futures trading currently at 2336.
FI - US yields recovering to start the week after Friday saw a continuation of the weakening yields landscape. The US2y futures trading at 4.72% whilst the US10y futures yield at 4.24%.
European yields continued their poor week post Macron’s gamble with the German 10y closing at 2.36% and the Italian 10y yield at 3.91%.
UK gilt 10y at 4.06%.
FX - The USD flat in Asia with the USD Index currently at 105.54. The majors now trading at; JPY, EUR and GBP 157.45, 1.07 and 1.2680 respectively.
Today’s major FX option expiries we have an eclectic mix; USDJPY sees $1bn at 157.50 and in the AUD we have AUD1.8bn between 0.6600/15.
Others - Bitcoin and Ethereum continuing to remain on the back foot with the pair currently at 66,530 and 3594 respectively.
Macro Themes At Play
Recap
The Swedish Inflation Report for May showed a rather worrying blip up across the board. Both MoM measures printed at 0.2% having been touted to come in in negative territory. That ;leaves headline and core YoY a touch higher at 3.7% and 2.3% respectively. .
The Michigan Survey continued on a downward trend to 65.6, and a further downside miss for this series taking it to its lowest levels since November. Inflation expectation wise the 5y ticked up smalls to 3.1% with the 1y remaining steady at 3.3%.
Central Bank Speakers
Fed’s Goolsbee wanted to see more inflation prints like May’s to convince him that inflation was returning to target.
ECB’s Centeno stressed the need for prudence on rates in the coming months. The ECB should continue to be data driven. Disinflation is to resume after August.
Kazaks there is no autopilot on rate profile.
The Week Ahead
RBA Interest Rate Decision. Little expectations of a move from the RBA. Indeed no move is expected until the early part of 2025. The May meeting had stressed the higher for longer thesis and we see no reason to alter this path so soon, especially with a backdrop of decent job creation, inflation remaining high and wage growth strengthening.
US Retail Sales. The canaries in the coal mine, auto sales and gasoline prices, would suggest modest gains in retail sales for the month, although returning to growth territory after last month’s stagnation. However, outwith the high income households, it is clear the runaway US consumer is slowly getting reeled back in with financial pressures, high borrowing costs and pandemic savings depleted all contributing to a more cautious consumer.
UK Inflation Report. The headline writers will be on tenterhooks for this print with the potential for headline inflation to dip below 2% for the first time in three years! However the headlines will not, as so often is the case, give the full picture. The main contributor for the expected dip is down to base effects. In addition services inflation is close to triple that rate and core remains sticky. All a good precursor for the BoE to sit on their hands the next day at their meeting.
China Interest Rate Decisions. Usual will they, won’t they argument. A further nudge to stimulate the economy versus the weakening Yuan. Guess is they do nothing.
SNB Interest Rate Decision. This is the only close call with around a 35% chance of no change with 65% leaning towards a further 25bp cut. Last month’s inflation data came in a touch hotter than expected but remains well within the SNB’s tolerance band. Furthermore the CHF has remained strong and, with the EUR on the back foot post Macron’s election call, this may be a good time to front run the ECB. Remember too that the SNB only meet quarterly giving them less opportunity to move.
Norges Bank Interest Rate Decision. The last meeting stressed that rates would remain on hold for longer than previously thought and as such nothing is expected here. The market has all but taken September out of the equation and are now looking towards December as the first opportunity for the Norges to move. Admittedly inflation is lower than the Norges’ forecast but is still above 4% and wages remain above 5%.
BoE Interest Rate Decision. Dull one ahead with no press conference and an election a couple off weeks away. Indeed the BoE have cancelled all speeches in the run up to July 4 so we’d expect this to be no change and no alteration to forward guidance.
Flash PMIs. Overall a continuation of the trend with services leading the way but starting to tail off whilst manufacturing continues its gradual recovery.
Japan Inflation Report. Once again follow the Tokyo inflation trend with the earlier print showing signs of a rebound on the back of utility fee hikes and a weaker JPY.
UK Retail Sales. A rebound is expected after April’s soggy print although not quite enough to fully erase all memories of that print.
The Day Ahead
Little…….
Overnight we had the China Data Dump for May which came in pretty much as expected. Unemployment rate remains at 5%. Fixed asset investment drops to its lowest this year at 4% whilst still remaining at a healthy level. Retail sales climbed to 3.7% arresting a 5 month decline and industrial production printed 5.6% a touch lower than expected but again still decent growth levels.
The PBOC held the 1y MLF Rate at 2.5% as expected.
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Main Highlights Ahead
All times in BST (EST+5 / CET-1 / JST-9)
The main highlights for the week ahead ahead in terms of data and speakers:
Monday
Fed Speakers
Harker (18.00 BST)
ECB Speakers
Lane (09.00 BST)
de Guindos (12.30 BST)
Tuesday
RBA Interest Rate Decision rates to remain on hold at 4.35% (05.30 BST)
RBA Press Conference (06.30 BST)
EU Inflation Rate MoM Final May consensus 0.2% vs previous 0.6% (10.00 BST)
EU Inflation Rate YoY Final May consensus 2.6% vs previous 2.4% (10.00 BST)
EU Core Inflation Rate YoY Final May consensus 2.9% vs previous 2.7% (10.00 BST)
EU ZEW Economic Sentiment Index June consensus 47.8 vs previous 47 (10.00 BST)
Germany ZEW Economic Sentiment Index June consensus 50 vs previous 47.1 (10.00 BST)
US Retail Sales MoM May consensus 0.3% vs previous 0% (13.30 BST)
US Retail Sales YoY May consensus % vs previous 3% (13.30 BST)
US Industrial Production MoM May consensus 0.2% vs previous 0% (13.30 BST)
US Industrial Production YoY May consensus % vs previous -0.4% (13.30 BST)
US Manufacturing Production MoM May consensus % vs previous -0.3% (13.30 BST)
US Manufacturing Production YoY May consensus % vs previous -0.5% (13.30 BST)
Fed Speakers
Cook (02.00 BST)
Barkin (15.00 BST)
Collins (16.40 BST)
Kugler (18.00 BST)
Logan (18.00 BST)
Goolsbee (19.00 BST)
ECB Speakers
Knot (10.00 BST)
Cippollone (13.00 BST)
de Guindos (14.30 BST)
Villeroy (17.00 BST)
Wednesday
Japan Reuters Tankan Index June consensus vs previous 9 (00.50 BST)
Japan Balance of Trade May consensus JPY -1313.7Bn vs previous JPY-462.5bn (00.50 BST)
Japan Exports YoY May consensus 13% vs previous 8.3% (00.50 BST)
Japan Imports YoY May consensus 10.4% vs previous 8.3% (00.50 BST)
Japan BoJ Monetary Policy Meeting Minutes April meeting minutes (00.50 BST)
UK Inflation Rate MoM May consensus % vs previous 0.3% (07.30 BST)
UK Inflation Rate YoY May consensus 2% vs previous 2.3% (07.30 BST)
UK Core Inflation Rate MoM May consensus % vs previous 0.9% (07.30 BST)
UK Core Inflation Rate YoY May consensus 3.5% vs previous 3.9% (07.30 BST)
BoC Summary of Deliberations (18.30 BST)
Thursday
China Loan Prime Rate 1y Announcement rates to remain on hold 3.45% (02.15 BST)
China Loan Prime Rate 5y Announcement rates to remain on hold 3.95% (02.15 BST)
SNB Interest Rate Decision rates to remain on hold at 1.5% (08.30 BST)
Norges Bank Interest Rate Decision rates to remain on hold at 4.5% (09.00 BST)
Norges Bank Monetary Policy Report (09.00 BST)
BoE Interest Rate Decision rates to remain on hold at 5.25% (12.00 BST)
BoE MPC Meeting Minutes (12.00 BST)
US Building Permits Prel May consensus 1.45m vs previous 1.44m (13.30 BST)
US Housing Starts May consensus 1.38m vs previous 1.36m (13.30 BST)
US Philadelphia Fed Manufacturing Index June consensus 4.5 vs previous 4.5 (13.30 BST)
US Philly Fed Business Conditions June consensus vs previous 32.4 (13.30 BST)
US Philly Fed Employment June consensus vs previous -7.9 (13.30 BST)
US Philly Fed New Orders June consensus vs previous -7.9 (13.30 BST)
US Philly Fed Prices Paid June consensus vs previous 18.7 (13.30 BST)
Fed Speakers
Barkin (21.00 BST)
ECB Speakers
Centeno (09.30 BST)
Friday
Australia Judo Bank Manufacturing PMI Flash June consensus vs previous 49.7 (00.00 BST)
Australia Judo Bank Services PMI Flash June consensus vs previous 52.5 (00.00 BST)
Japan Inflation Rate MoM May consensus % vs previous 0.2% (00.30 BST)
Japan Inflation Rate YoY May consensus % vs previous 2.5% (00.30 BST)
Japan Core Inflation Rate YoY May consensus 2.6% vs previous 2.2% (00.30 BST)
Japan Jibun Bank Manufacturing PMI Flash June consensus 50.6 vs previous 50.4 (01.30 BST)
Japan Jibun Bank Services PMI Flash June consensus vs previous 53.8 (01.30 BST)
UK Retail Sales MoM May consensus 1.6% vs previous -2.3% (07.00 BST)
UK Retail Sales YoY May consensus % vs previous -2.7% (07.00 BST)
Germany HCOB Manufacturing PMI Flash June consensus 46.4 vs previous 45.4 (08.30 BST)
Germany HCOB Services PMI Flash June consensus 54.4 vs previous 54.2 (08.30 BST)
EU HCOB Manufacturing PMI Flash June consensus 48 vs previous 47.3 (09.00 BST)
EU HCOB Services PMI Flash June consensus 53.5 vs previous 53.2 (09.00 BST)
UK S&P Global Manufacturing PMI Flash June consensus 51 vs previous 51.2 (08.30 BST)
UK S&P Global Services PMI Flash June consensus 53.2 vs previous 52.9 (08.30 BST)
Canada Retail Sales MoM April consensus 0.9% vs previous -0.2% (13.30 BST)
Canada Retail Sales YoY April consensus % vs previous 1.9% (13.30 BST)
US S&P Global Manufacturing PMI Flash June consensus 51 vs previous 51.3 (14.45 BST)
US S&P Global Services PMI Flash June consensus 53.5 vs previous 54.8 (14.45 BST)
US Existing Home Sales May consensus 4.10m vs previous 4.14m (15.00 BST)
ECB Speakers
Nagel (08.00 BST)
Good luck.
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