UK unemployment climbs higher, wages steady, Wednesday's CPI and Fed decision in focus
|Notes/observations
- UK job data surprises with worst unemployment in 3-years at 4.4% amid rising jobless claims. Wages remains sticky. UK asset moves are muted as traders look to US CPI and Fed decision tomorrow.
- Euro and EU bond selloff from yesterday takes a breather, with exception of French yields, which leak higher on snap election uncertainty. Macron’s potential resignation reportedly is “not a taboo” after snap elections.
- Apple sees premarket weakness as investors shake heads at lackluster announcements from WWDC event. Elon Musk expressed concern at personal security with Apple’s new AI integrated of ChatGPT into Siri. Musk threatening to ban devices at his company locations.
- Asia closed mixed with ASX200 underperforming -1.3%. EU indices are lower -0.2% to -0.6%. US futures are -0.2% to -0.3%. Gold -0.3%, DXY +0.1%; Commodity: Brent -0.1%, WTI -0.1%; Crypto: BTC -2.7%, ETH -3.7%.
Asia
- South Korea Apr Current Account Balance: -$285M v $6.9B prior (first deficit since Apr 2023).
- Australia May NAB Business Confidence: -3 v +2 prior; Business Conditions: No est v 7 prior.
Global conflict/tensions
- UN Security Council backs Israel-Hamas ceasefire plan.
Europe
- ECB Chief Lagarde commented that was possible to keep rates on hold for more than one meeting.
- France election polls show Le Pen's right wing party with 34% of the vote, while Macron's party seen getting.
- German Chancellor Scholz dismisses demands for early German election. Says focus to be on winning back trust after EU vote setback.
- UK PM Sunak said to plan to offer tax breaks to landlords. Reports circulated that Sunak faced last-minute calls by cabinet ministers to add new tax cuts and a tougher migration policy to the Conservative manifesto.
Americas
- Mexico Pres-elect Sheinbaum's met with Pres AMLO. She said to signal that her ruling party’s plan for judicial reform would be among the first the new congress would look at approving.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [Stoxx600 -0.18% at 521.24, FTSE -0.23% at 8,209.61, DAX -0.18% at 18,455.15, CAC-40 -0.06% at 7,889.30, IBEX-35 -0.71% at 11,276.50, FTSE MIB -0.62% at 34,327.00, SMI -0.17% at 12,107.20, S&P 500 Futures -0.19%].
Market Focal Points/Key Themes: European indices open generally mixed but then mainly turned into negative territory through the early part of the session; among better performing sectors are Automobiles and Parts; sectors inclined to the downside include Financials Services, Chemicals and Utilities; on the corporate front, shares of Atos in Paris down over 10% after Board decided to proceed with restructuring proposal from Onepoint; Apple supplier ams OSRAM trades slightly higher after WWDC announcements; on M&A front, shares of Covestro in Frankfurt rose over constructive M&A blog comments; corporate events expected in the upcoming US session include earnings from Academy Sports and Outdoors and Walmart presentation at Oppenheimer's 24th Annual Consumer Growth and E-Commerce Conference.
Equities
- Consumer discretionary: FirstGroup [FGP.UK] +1.0% (earnings).
- Energy: Capricorn Energy [CNE.UK] +16.5% (Senegal contingent payment update).
- Healthcare: GSK [GSK.UK] +1.0% (began appeal on Daubert ruling to the Delaware Supreme Court), Novacyt [ALNOV.FR] -17.0% (settlement), Ultimovacs [ULTIMO.NO] +33.5% (provides update from Phase I study in malignant melanoma), UCB [UCB.BE] +4.5% (analyst upgrade), Molecular Partners [MOLN.CH] +11.5% (positive preclinical data of MP0712).
- Technology: ams OSRAM [AMS.CH] +1.0% (reaction to Apple announcements), Atos [ATO.FR] -13.0% (Board decides to proceed with restructuring proposal from Onepoint).
Speakers
- ECB's Villeroy (France) stressed that Council must not be rush into rate cuts nor procrastinate on easing. Remained confident to bring inflation back to target in 2025 via a soft economic landing. Believed that the recent inflation noise was not meaningful.
- ECB's Simkus (Lithuania) reiterated Council stance that was too early to declare victory over inflation; Rates could be cut more if ECB was assured that 2% inflation target wouldbe met.
- France Fin Min Le Maire commented that if upcoming Parliamentary elections didnot result in a clear majority then would have a crisis in the country.
- French Pres Macron said to be discussing potential resignation with his close circle in case of possible right-wing victory in early parliamentary elections.
- Bank of Korea (BOK) May Minutes noted that conditions were forming for easing policy restrictiveness. Stated that was desirable to keep Repo Rate at current level until there was confidence inflation would anchor at target level
Japan PM Kishida stated that needed to maintain momentum for wage gains outside the spring wage talks.
Currencies/fixed income
- Overall FX price action was listless but the GBP was softer following a rise in UK unemployment. Focus remains on upcoming US CPI data and FOMC rate decisions (both Wed).
- GBP/USD at 1.2725 area as UK data kept the door open for BOE to enact rate cut at some point in the coming months. Dealers noted that although UK wage growth remained high it was expected to ease in coming months.
- EUR/USD unable to build momentum despite more ECB speak regarding the possibility of keep rates steady at upcoming meetings. Pair at 1.0760 by mid-session.
- USD/JPY staying above the 157 handle. Focus on the upcoming BOJ policy decision (Fri).
Economic data
- (NL) Netherlands May CPI M/M: 0.2% v 0.7% prior; Y/Y (final): 2.7% v 2.7% pre.
- (NL) Netherlands May CPI EU Harmonized (final) M/M: 0.3% v 0.3% prelim; Y/Y: 2.7% v 2.7% prelim.
- (UK) May Jobless Claims Change: +50.4K v +8.4K prior; Claimant Count Rate: 4.3% v 4.1% prior; Payrolled Employees (monthly change): -3K v -10Ke.
- (UK) Apr Average Weekly Earnings 3M/Y: 5.9% v 5.7%e; Weekly Earnings (ex-bonus) 3M/Y: 6.0% v 6.1%e.
- (UK) Apr ILO Unemployment Rate: 4.4% v 4.3%e; Employment Change 3M/3M: -139K v -98Ke.
- (JP) Japan May Preliminary Machine Tool Orders Y/Y: +4.2% v -8.9% prior.
- (CZ) Czech May CPI M/M: 0.0% v 0.1%e; Y/Y: 2.6% v 2.8%e (2nd month above target).
- (CZ) Czech Apr Import Price Index Y/Y: 3.5% v 0.1% prior; Export Price Index Y/Y: 4.9% v 1.8% prior.
- (TR) Turkey Apr Retail Sales Y/Y: 10.2% v 19.8% prior.
Fixed income issuance
- (UK) DMO opened its book to sell new July 2034 Gilt via syndicate guidance seen +4.0-4.5bps to Jan 2034 Gilts.
- (EU) European Union opened book to sell new EUR-denominated 15-year NGEU bond; guidance seen +53bps to mid-swaps.
- (ID) Indonesia sold total IDR22.0T vs. IDR22.0T target in bills and bonds.
- (NL) Netherlands Debt Agency (DSTA) sold €1.655B vs. €1.0-2.0B indicated in 2.50% July 2034 DSL bonds; Avg Yield: 2.983% v 2.818% prior.
- (ES) Spain Debt Agency (Tesoro) sold total €2.0B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.
Looking ahead
- OPEC Monthly Oil Report.
- (MX) Mexico ANTAD May Same-Store Sales Y/Y: No est v 0.6% prior.
- (CO) Colombia May Consumer Confidence: No est v -11.4 prior.
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 (ZA) South Africa May SACCI Business Confidence: No est v 114.7 prior.
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.2B in 12-month bills.
- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2031, 2032 and 2035 bonds.
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
- 06:00 (US) May NFIB Small Business Optimism: 89.6e v 89.7 prior.
- 06:00 (FI) Finland to sell combined €1.5B in 2034 and 2055 RFGB Bonds.
- 06:30 (TR) Turkey to sell TLREF Indexed Bonds.
- 07:00 (ZA) South Africa Apr Manufacturing Production M/M: +1.9 v -2.2% prior; Y/Y: +1.6%e v -6.4% prior.
- 07:00 (IE) ECB’s Lane (Ireland, chief economist).
- 07:00 (EU) ECB's Holzmann (Austria) with member Villeroy (France) in Vienna.
- 07:00 (CZ) Czech Central Bank to comment on May CPI data.
- 08:00 (MX) Mexico Apr Industrial Production M/M: 0.2%e v 0.6% prior; Y/Y: +5.3%e v -3.0% prior; Manufacturing Production Y/Y: +6.1%e v -5.0% prior.
- 08:00 (BR) Brazil end-May IBGE Inflation IPCA M/M: 0.4%e v 0.4% prior; Y/Y: 3.9%e v 3.7% prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
- 08:30 (CA) Canada Apr Building Permits M/M: +5.0%e v -11.7% prior.
- 08:30 (CL) Chile Central Bank Economist Survey.
- 08:30 (UR) Ukraine Q1 GDP Y/Y: 4.0%e v 4.7% prior.
- 08:55 (US) Weekly Redbook LFL Sales data.
- 11:30 (US) Treasury to sell 52-Week Bills.
- 13:00 (US) Treasury to sell 10-Year Notes Reopening.
- 16:30 (US) Weekly API Oil Inventories.
- 18:45 (NZ) New Zealand Apr Net Migration: No est v 4.9K prior.
- 19:00 (KR) South Korea May Unemployment Rate: 2.8%e v 2.8% prior.
- 19:00 (CO) Colombia May CPI M/M: 0.4%e v 0.6% prior; Y/Y: 7.2%e v 7.2% prior.
- 19:00 (CO) Colombia May CPI Core M/M: 0.4%e v 0.5% prior; Y/Y: 7.8%e v 8.2% prior.
- 19:50 (JP) Japan May PPI (domestic CGPI) M/M: 0.5%e v 0.3% prior; Y/Y: 2.0%e v 0.9% prior.
- 21:30 (CN) China May CPI Y/Y: 0.4%e v 0.3% prior; PPI Y/Y: -1.5%e v -2.5% prior.
- 21:30 (KR) Bank of Korea to sell KRW600N in 1-year Monetary Stabilization Bonds (MSB).
- (SG) Singapore Central Bank (MAS) Survey of Professional Forecasters.
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