Written Commentary
USA/Iran and Israel/Lebanon newsflow a dizzying array of contradictory indications on status quo; Eurozone, South Korea and Indonesia inflation, UK credit aggregates, US JOLTS Job Openings and Auto Sales; busy run of central bank speakers, commodity conferences and US primary elections.
- Eurozone CPI: further modest rise expected, but die is already cast on June rate hike, but rate path still written in the stars.
- USA: JOLTS Job Openings seen little changed after very choppy run and frequent revisions; Auto sales seen holding April level.
EVENTS PREVIEW
News flow related to the US/Iran negotiations and the ‘ceasefire’ in the Lebanon remains fluid, confused and contradictory, but as with the conflict in the Ukraine, two things should now be clear, a) neither Netanyahu nor Putin want or can politically afford peace, b) the divisions between Israel and the US are now large. Elsewhere, inflation data tops the statistical run, with monthly CPI from Eurozone, Indonesia and South Korea, accompanied by the overnight run of GDP components in Australia (underlining a big drag from Trade, and only a modest offset from inventories) ahead of tomorrow’s Q1 GDP, UK credit aggregates, US Auto Sales and JOLTS Job Openings. There are many central bank speakers, and the list of commodity and other conferences is very plentiful, while six US states hold Congressional primary elections.
** Eurozone – May CPI **
ECB speakers are largely signalling that rates will need to rise in June, per se, rendering today’s CPI (median headline 0.1% m/m, 3.2% y/y from 3.0%, and core 2.4% y/y from 2.3%) somewhat academic, though certainly justifying a hike. The real question remains how the ECB guides markets in terms of further hikes, which they will not pre-commit to, given the high level of uncertainty about the Middle East. But they will likely temper a commitment to keep inflation under control, by emphasizing the downside risks to growth, and perhaps suggest that knock on effects to wages may be more muted than was the case in the post pandemic ‘boom’. This was also evident in Manufacturing PMIs, which showed little pass through of rising input costs to prices received.
** U.S.A. – April JOLTS Job Openings, May Auto Sales **
JOLTS Job Openings have been very volatile over the past year, and subject to often major revisions, the April reading is seen barely changed at 6.857 Mln, still well above December’s 6.550 Mln low, and well below January’s 7.240 Mln high – which to be honest, suggests that this measure is not really very helpful in forming a picture of labour demand. Auto Sales are seen little changed and erring on the side of sluggish at 16.0 Mln, and if forecasts are correct, they will not be a significant factor in the May Retail Sales Report.
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