The central banker’s speech continues to view inflation as transitory
Notes / Observations
- Central bankers continue to reduce the threat of global inflation further.
- The RBNZ left the official treasury rate (OCR) unchanged at 0.25% (as expected). Resumption of its OCR rate trajectory which now provided for 150 basis points of tightening by 2Q 2024.
- RBNZ Dep Gov Hawkesby: noted that the important message was that the OCR flow path was NOT forward guidance.
- China PBOC sets the benchmark rate for the yuan at 6.4099 from 6.4283 previously (biggest correction since mid-June 2018). The markets took the sign that the PBOC was comfortable with the recent rally.
- Yamamoto, an official with the Japanese PLD Party, noted that the BOJ was making a mistake in gradually decreasing because deflation was always a risk; The BOJ should seek to further weaken the yen currency through asset purchases.
- BOE’s Tenreyro: Expects global financial conditions to remain accommodative for a few years.
- SNB Chairman Jordan reiterated his position that he saw no reason at this time to change monetary policy, as it still had very low inflation and a very strong CHF (franc) currency.
- Fed’s Daly (non-voting, dove) reiterated that Fed policy was well placed and needed to overcome volatility in economic data. The assumed rise in inflation was transitory.
- Fed Vice President Clarida noted that the recent increase in consumer prices was a very unpleasant surprise, but reiterated the Fed’s view that inflation is likely to be transient.
- White House Press Sec Psak noted that house price increases were a cause for concern.
- The US House bill said China is moving forward to boost economic competitiveness and international cooperation. Would also address human rights concerns
- Senate Majority Leader Schumer: TVote on China’s competition bill this week.
- Weekly API crude oil inventories: -0.4 M v + 0.6 M previously.
Speakers / Fixed income / FX / Commodities / Erratum
- The clues [Stoxx600 +0.18% at 445.98, FTSE +0.06% at 7,033.80, DAX +0.07% at 15,476.40, CAC-40 +0.26% at 6,406.88, IBEX-35 +0.17% at 9,224.00 , FTSE MIB +0.02% at 24,898.50, SMI +0.48% at 11,360.31, S&P 500 Futures +0.27%].
- Market focal points / key themes: European indices open slightly higher, but then slipped into generally mixed trading; the consumer discretionary and healthcare sectors among those showing an upward trend; while finance and materials underperformed; Vectura enters into agreement to be acquired by funds managed by Carlyle; Engie finalizes the sale of the state to GTT; Delivery Hero sells operations in the Balkans; Spire Health Receives Takeover Offer from Ramsay; earnings expected in the next US session include Bank of Montreal, Abercrombie & Fitch and Dicks Sporting Goods.
- Consumer Discretionary: Marks & Spencer [MKS.UK] + 4% (revenue), Go-Ahead [GOG.UK] -4% (the CEO retires).
- Healthcare: Spire Healthcare [SPI.UK] + 25% (offer), Vectura Group [VEC.UK] + 32% (offer), Mediclinic [MDC.UK] + 8% (income).
- Industrial: Softcat [SCT.,UK] + 6% (commercial update).
- Materials: SSE [SSE.UK] -1% (gains).
- Panetta (Italy) from the ECB noted that the ECB’s tapering discourse was premature as current conditions did not justify such a decision. Must watch to see what the recovery will look like 6-9 months from now and developments on inflation.
- ECB’s Villeroy (France) told the French Parliament that it must implement Basel III in a fair and reasonable manner.
- Central Bank of Sweden (Riksbank) Financial Stability Report: Prospects were brighter but risks remain high.
- The governor of the Central Bank of Sweden (Riksbank) Ingves noted that the stimulus measures resulted in moral hazard and risk-taking.
- Czech Central Bank (CNB) Governor Rusnok noted that interest rates could be raised during meetings in June or August.
- Japan Cabinet Office (Govt) May The economic report downgraded its overall economic assessment and has now seen further weakness in parts of the economy.
- Tokyo, Japan Governor Koike has said she will seek an extension of the state of emergency for Tokyo and surrounding areas.
- Japan has said it will set up a panel to strengthen its economic security.
- Chinese State Media: The appreciation of the CNY (Yuan) currency may not be a good way to fight rising commodity prices.
- The Chinese banking regulator (CBIRC) said it has asked lenders to stop selling investment products linked to commodity futures to small retail buyers.
Currency / Fixed Income
- EUR / USD drifted lower after ECB Panetti stressed it was too early to consider a reduction in the pandemic bond fund. The pair traded at 1.2240 mid-session and dealers noted it remained stuck below current year highs by more than one high figure.
- The NZD currency was old after the RBNZ took a hawkish tone with its OCR rate trajectory. New Zealand is now projecting that it could raise interest rates as early as September of next year.
- (FI) Finland April A / A preliminary retail sales volume: 8.0 vs. 6.4% before.
- (DK) Denmark Apr Retail sales M / M: -8.3% v + 19.8% before; Y / Y: 9.8% against 24.3% before.
- (FR) France May Business Confidence: 108 v 98th; Manufacturing confidence: 107 against 105th; Indicator of production prospects: 18 v 5th; Production prospects of own company: 19 v 10th.
- (FR) France May Consumer Confidence: 97 v 97e.
- (SE) Sweden Unemployment rate in April: 9.4% against 10.0% before; Unemployment rate (depending on the season): 9.1% v 9.0% e; Trend unemployment rate: 9.1% against 9.1% previously.
- (PL) Poland Unemployment rate in April: 6.3% vs. 6.3% e.
- 04:00 (PL) Poland Unemployment rate in the first quarter:% vs. 3.3% e.
- (CH) Swiss survey on expectations for May: 72.2 against 68.3 before.
Issue of fixed income securities
- (SE) Sweden sold 7.5 billion SEK against 7.5 billion SEK shown in the 3-month invoices; Average return: -0.1867% against -0.1980% before; Bid-to-cover: 2.40xv 2.47x front.
- (IT) The Italian debt agency (Tesoro) sold 3.5 billion euros against 3.0-3.5 billion euros in the range indicated of CTZ bonds at 0.00% in November 2022 ; Average return: -0.330% against -0.300% before; submission to cover: 1.45xv 1.37x front.
- (IT) The Italian Debt Agency (Tesoro) sold € 1.25B against € 0.75-1.25B range indicated as 0.4% inflation-linked bonds (BTPei) in May 2030; Real return: -0.45% against -0.60% before; submission to cover: 1.40xv 1.31x front.
- (EU) ECB Daily Liquidity Statistics.
- 05:30 (DE) Germany will sell 2.5 billion euros in 0% Bunds in May 2036.
- 05:30 (HU) The Hungarian Debt Agency (AKK) will sell 12 month bonds.
- 5:30 a.m. (EU) Alloment from the ECB as part of a 3-month LTRO tender.
- 05:30 (ZA) South Africa announces details of the next bond auction (held on Tuesday).
- 06:00 (CZ) The Czech Republic will sell 2024, 2031 and 2032 bonds.
- 06:45 (United States) Daily Libor fixing.
- 7:00 am (US) MBA mortgage applications with May 21: not estimated v 1.2% before.
- 07:00 (MX) Mexico Q1 Final GDP Q / Q: 0.7% ev 0.4% prelim; Y / Y: -3.5% ev -3.8% prelim; Nominal GDP Y / Y: No is v -0.1% before.
- 07:00 (MX) Mexico Mar IGAE Economic activity index (monthly GDP) M / M: + 2.8% ev -0.3% before; Y / Y: + 0.1% ev -5.1% before.
- 07:00 (BR) Brazil May FGV M / M construction costs: 1.3% ev 1.0% before.
- 07:00 (UK) Weekly PM Question Time in the House.
- 07:00 (UK) OFZ Russian bond auction (if applicable).
- 07:00 (TR) Turkey will sell bonds denominated in EUR.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:30 (BR) Brazil’s current account balance in April: + 6.1 Be v – $ 4.0 billion before; Foreign direct investment (FDI): 5.0B against 6.9B $ previously.
- 10:00 a.m. (US) Fed Vice President Quarleson, Insurance Regulation.
- 10:30 a.m. (US) DOE weekly oil inventories.
- 1:00 p.m. (United States) The Treasury will sell the reopening of the 2-year FRN.
- 1:00 p.m. (United States) Treasury to sell 5-year notes.
- 15:00 (AR) Sales of supermarkets in Argentina Mar Y / Y: No is v -5.8% before; Y / Y shopping center sales: No is v -33.3% before.
- (CO) Colombia Apr Industrial trust: No est v 6.8 before; Retail Trust: No est v 38.7 before.
- 3:00 p.m. (US) Fed Vice President Quarles on Economic Outlook.
- 9:00 p.m. (KR) Bank of Korea (BoK) interest rate decision: Expected to leave the 7-day repo rate unchanged at 0.50%.
- 21:30 (UA) Australia Private capital expenditure in the first quarter: 2.0% ev 3.0% before.
- 21:30 (CN) China Apr Industrial Profits Y / Y: No est v 92.3% before.
- 22:00 (KR) South Korea Apr Y / Y Department Store Sales: No est v 77.6% forward; Y / Y Discount Store Sales: No is 2.1% v before.