Focus remains on US debt ceiling as agreement moves towards Congressional vote

EU mid-market update: Focus remains on US debt ceiling as agreement moves towards Congressional vote; Spanish CPI continues to ease.

Notes/observations

- US debt limit agreement in principle deal remains on forefront of minds as Congress vote is expected tomorrow on Wed, and to be put forward to Senate on Fri. Details of deal continue to emerge.

- JPY initially stronger due to verbal intervention following an emergency meeting announcement between Japan's BOJ, MOF and FSA to discuss financial markets, putting weight on USD/JPY back towards 140 handle. Comments following the meeting from Top FX Diplomat Kanda that reiterated stance on FX reflecting fundamentals allowed JPY to weaken again.

- Positive inflation data out of Spain after Apr preliminary CPI cooler than expected at 3.2% YoY, core also cooler at 6.1% YoY.

- Asia closed mixed with Korean KOSPI outperforming at +1.0%. EU indices are -0.1% to +0.5%. US futures are +0.2-1.0% (Nasdaq100 +1.0%). Gold -0.2%, DXY +0.1%; Commodity: Brent -2.1%, WTI -2.0%, TTF -0.3%; Crypto: BTC -0.4%, ETH +0.4%.

Asia

- Japan Apr Jobless Rate: 2.6% v 2.7%e prior.

- BOJ Gov Ueda reiterated that Japan had not yet reached sustainable 2% inflation. Would patiently maintain easy monetary policy.

- China Beige Book Survey noted that the manufacturing output picked up “notably” in May compared to April.

Europe

- ECB's Wunsch (Netherlands) stated that had already hiked by 400bps but might need to do more; Real rates were still relatively low. If fiscal remained supportive, then monetary policy would have to do more to get inflation under control.

- ECB's de Cos (Spain) stated that still had some tightening to do but getting closer to end of cycle.

- UK May BRC Shop Price Index Y/Y: 9.0% v 8.8% prior (record high since data began in 2005).

Debt ceiling talks

- US House Rules Committee panel expected to consider the debt ceiling legislation on Tuesday.

- White House and Republican leaders’ express confidence that have secured the backing of crucial lawmakers for the debt ceiling agreement for swift approval by Congress.

- Handful of hard-right Republican lawmakers have noted that they would oppose debt-ceiling bill.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.1% at 461.50, FTSE -0.2% at 7,612, DAX +0.5% at 16,034, CAC-40 -0.2% at 7,291, IBEX-35 +0.6% at 9,238, FTSE MIB +0.4% at 2,617, SMI -0.1% at 11,419, S&P 500 Futures +0.6%].

Market focal points/key themes: European indices open lower across the board but later turned around to trade generally mixed; better performing sectors include real estate (follows earnings from Aroundtown) and utilities; sectors leading the way lower include energy and consumer discretionary; oil & gas subsector under pressure as Brent prices decline; Daimler Truck and Toyota enter MoU to combine Fuso and Hino units with spin-off; Tornos considering merger with Starrag; RHI receives approach from Ignite Luxembourg to take 20% stake; earnings expected in the upcoming US session include HP.

Equities

- Communication Services: Tremor International [TRMR.UK] -8.0% (Q1 results, low end of expectations).

- Energy: Hunting [HTG.UK] +16.6% (raises FY23 guidance).

- Financials: Aroundtown [AT1.DE] +5.5% (Q1 results, affirms FY23 guidance).

- Healthcare: Valneva [VLA.FR] +2.6% (Applies for Chikungunya vaccine authorization with Health Canada).

- Industrials: RHI Magnesita [RHIM.UK] +23.8% (possible Ignite taking stake).

- Technology: Siltronic [WAF.DE] +4.1% (analyst action - raised to Buy at Jefferies).

Speakers

- Israel Central Bank Gov Yaron stated that CPI was expected to return back to target range in early 2024. Could have more rate hikes if ISL currency (Shekel) continued to depreciate. Inflation was at least 1% higher due to weak ISL currency.

- Japan Top FX Diplomat Kanda reiterated stance that FX should reflect fundamentals. Would take appropriate steps as needed on market moves. Not focusing on FX levels; Refrained from commenting on 140.00 USD/JPY level. Reiterated govt stance that was closely watching market moves impacts on economy.

- China Finance Ministry to extend tariff waivers on some US goods until end-2023 (**Note: 6-month extension).

Currencies/fixed income

- USD continued to muster up some strength despite a recent ceiling agreement between the White House and Republican leaders. Dealers did not that the agreement could face a rocky path through Congress to get the package through the Republican-controlled House and Democratic-controlled Senate before the limit was reached. Greenback also aided by pick-up in Fed hike expectations for June or July.

- USD/JPY probed the 141 neighborhood during the Asian session as standard BOJ rhetoric noted of the need to maintain its ultra-loose monetary policy to achieve a sustainable inflation level. The JPY currency did exhibit some volatility after Japan BOJ, MOF and FSA announced ot would hold an emergency meeting . However, top FX diplomat Kanda reiterated stance that FX should reflect fundamentals and was not focusing on FX levels; Refrained from commenting on 140.00 USD/JPY level.

- EUR/USD at 2-month lows as focus turned to various EU inflation data in the coming days. Spanish CPI continued its trend of retreating and built the case for the coming end of rate hikes by the ECB. Confidence data in the region has been softer than expectations and hints of a continued economic slowdown.

Economic data

- (NL) Netherlands May Producer Confidence: 2.1 v 3.0 prior.

- (FI) Finland Apr House Price Index M/M: 0.2% v 0.1% prior; Y/Y: -6.2% v -5.8% prior.

- (FI) Finland Apr Preliminary Retail Sales Volume Y/Y: -3.1% v -4.4% prior.

- (SE) Sweden Q1 GDP Q/Q: 0.6% v 0.2%e; Y/Y: 0.8% v 0.1%e (**Note: avoids a technical recession).

- (SE) Sweden Apr Trade Balance (SEK): -2.7B v +8.5B prior.

- (SE) Sweden Mar Non-Manual Workers Wages Y/Y: 3.1% v 3.3% prior.

- (DK) Denmark Apr Retail Sales M/M: +1.6% v -1.4% prior; Y/Y: -6.0% v -4.5% prior.

- (ZA) South Africa Apr M3 Money Supply Y/Y: 10.1% v 8.6%e; Private Sector Credit Y/Y: 7.1% v 7.0%e.

- (ES) Spain May Preliminary CPI M/M: -0.1% v 0.0%e; Y/Y: 3.2% v 3.6%e; CPI Core Y/Y: % v 6.4%e.

- (ES) Spain May Preliminary CPI EU Harmonized M/M: -0.2% v +0.2%e; Y/Y: 2.9% v 3.3%e.

- (ES) Spain Apr Adjusted Retail Sales Y/Y: 5.5% v 9.9% prior; Retail Sales (unadj) Y/Y: 5.0% v 9.9% prior.

- (CH) Swiss Q1 GDP Q/Q:0.3 % v 0.1%e; Y/Y: 0.6% v 0.6%e.

- (CH) Swiss May KOF Leading Indicator: 90.2 v 95.8e.

- (AT) Austria Apr PPI M/M: -1.5% v -0.9% prior; Y/Y: 4.6% v 7.7% prior.

- (SE) Sweden May Consumer Confidence: 69.5 v 65.8 prior; Manufacturing Confidence : 102.9 v 101.2 prior; Economic Tendency Survey: 89.4 v 87.3 prior.

- (CZ) Czech Q1 Preliminary GDP (2nd of 3 readings) Q/Q: 0.0% v 0.1% advance; Y/Y: -0.4% v -0.2% advance.

- (TR) Turkey Apr Preliminary Trade Balance: -$8.7B v -$8.8Be.

- (TH) Thailand Apr Customs Trade Balance: -$1.5B v -$0.5Be; Exports Y/Y: -7.6% v -2.1%e; Imports Y/Y: -7.3% v -5.9%e.

- (EU) Euro Zone Apr M3 Money Supply Y/Y: 1.9% v 2.0%e.

- (IT) Italy Apr PPI M/M: -6.5% v -2.0% prior; Y/Y: -3.5% v 3.0% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 516.7B v 515.7B prior; Domestic Sight Deposits: 505.2B v 504.5B prior.

- (IT) Italy Mar Industrial Sales M/M: -0.3% v +1.3% prior; Y/Y: 4.3% v 7.2% prior.

- (EU) Euro Zone May Economic Confidence: 96.5 v 98.8e; Industrial Confidence: -5.2 v -3.6e; Services Confidence: 7.0 v 10.2e; Consumer Confidence (final): -17.4 v -17.4 advance.

- (GR) Greece Apr PPI Y/Y: -13.3% v -10.9% prior.

Fixed income issuance

- (DK) Denmark sold total DKK5.78B in 3-month and 6-month Bills.

- (IT) Italy Debt Agency (Tesoro) sold total €9.5B vs. €8.0-9.5B indicated range in 5-year and 10-year BTP Bonds.

- Sold €5.0B vs. €4.5-5.0B indicated range in 3.80% Aug 2028 BTP bonds; Avg Yield: 3.79% v 3.77% prior; Bid-to-cover: 1.39x v 1.60x prior (Apr 27th 2023 under 3.40% Apr 2028 BTP).

- Sold €2.0B vs. €1.5-2.0B indicated range in 4.40% May 2033 BTP; Avg Yield: 4.24% v 4.42% prior; bid-to-cover: 1.53x v 1.32x prior (Apr 27th 2023).

- Sold €2.5B vs. €2.0-2.5B indicated range in 4.35% Nov 2033 BTP; Avg Yield: 4.32%, bid-to-cover: 1.43x.

- (IT) Italy Debt Agency (Tesoro) sold €B vs. €1.0-1.5B indicated range in Oct 2028 CCTeu (floating rate Notes); Real Yield: 4.38% v 4.45% prior; Bid-to-cover: 1.82x v 1.75x prior.

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2032, 2037 and 2048 bonds.

Looking ahead

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

- 05:30 (BE) Belgium May CPI M/M: No est v -0.7% prior; Y/Y: No est v 5.6% prior.

- 05:30 ((DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2037 and 2048 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (PT) Portugal Apr Retail Sales M/M: No est v 2.2% prior; Y/Y: No est v 0.4% prior.

- 06:00 (PT) Portugal May Consumer Confidence: No est v -31.7 prior; Economic Climate Indicator: No est v 2.3 prior.

- 06:00 (IL) Israel to sell combined ILS1.4B in 2025, 2026, 2029, 2031 and 2052 bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:00 (BR) Brazil May FGV Inflation IGPM M/M: -1.7%e v -1.0% prior; Y/Y: -4.3%e v -2.2% prior.

- 07:30 (BR) Brazil Apr Total Outstanding Loans (BRL): No est v 5.361T prior; M/M: No est v 0.7% prior; Personal Loan Default Rate: No est v 6.2% prior.

- 08:00 (ZA) South Africa Apr Monthly Budget Balance (ZAR): -67.0Be v -46.1B prior.

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

- 08:30 (CA) Canada Q1 Current Account: -$9.5Be v -$10.6B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.3-6.9B in 3-month, 6-month and 12-month bills (4 tranches).

- 09:00 (US) Mar FHFA House Price Index M/M: 0.2%e v 0.5% prior; Q/Q: No est v 0.3% prior.

- 09:00 (US) Mar S&P/Case-Shiller House Price Index (20-City) M/M: 0.00%e v +0.06% prior; Y/Y:-1.70%e v +0.36% prior; House Price Index (Overall) Y/Y: No est v +2.05% prior.

- 09:00 (CL) Chile Apr Unemployment Rate: 8.9%e v 8.8% prior.

- 09:00 (AT) ECB’s Holzmann (Austria).

- 10:00 (US) May Consumer Confidence: 99.0e v 101.3 prior.

- 10:30 (US) May Dallas Fed Manufacturing Activity: -18.0e v -23.4 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:00 (US) Fed’s Barkin.

- 13:30 (BR) Brazil Apr Central Govt Budget Balance (BRL): +16.1Be v -7.1B prior.

- 16:00 (US) Weekly Crop Progress Report.

- 19:00 (KR) South Korea Apr Industrial Production M/M: -2.0%e v +5.1% prior; Y/Y: -7.8%e v -7.6% prior.

- 19:00 (KR) South Korea Apr Cyclical Leading Index: No est v -0.3 prior.

- 19:00 (AU) RBA Gov Lowe.

- 19:01 (UK) May Lloyds Business Barometer: No est v 33 prior.

- 19:50 (JP) Japan Apr Retail Sales M/M: 0.5%e v 0.3% prior (revised from 0.6%); Y/Y: 7.1%e v 6.9% prior (revised from 7.2%); Dept. Store, Supermarket Sales Y/Y: No est v 3.2% prior.

- 19:50 (JP) Japan Apr Preliminary Industrial Production M/M: 1.3%e v 1.1% prior; Y/Y: +1.9%e v -0.6% prior.

- 21:00 (NZ) New Zealand May ANZ Business Confidence: No est v -43.8 prior; Activity Outlook: No est v -7.6 prior.

- 21:30 (AU) Australia Q1 Construction Work Done: +0.5%e v -0.4% prior.

- 21:30 (AU) Australia Apr Private Sector Credit M/M: 0.3%e v 0.3% prior; Y/Y: No est v 6.8% prior.

- 21:30 (CN) China May Manufacturing PMI (Govt Official): 49.5e v 49.2 prior; Non-manufacturing PMI: 55.3e v 56.4 prior; Composite PMI: No est v 54.4 prior.

- 21:30 (AU) Australia Apr CPI Y/Y: 6.4%e v 6.3% prior.

- 22:00 (SG) Singapore Apr M2 Money Supply Y/Y: No est v 2.5% prior; M1 Money Supply Y/Y: No est v -13.9% prior.