🌐 Macro-News round-up

🇨🇳 China: Industrial production improves and unemployment falls slightly. However, retail sales weaken. Fixed asset investment, including real estate, declines. China plans to issue new bonds to finance an economic stimulus programme.

🏠 Real State: China continues to provide palliative care to the real estate sector with liquidity risks. New and existing home prices in China fell sharply again in April, with property investment also down sharply in the first four months of the year. The People’s Bank of China lowered minimum down payment ratios for first-time and second-home mortgages to 15% and 25% respectively from previous levels of 20% and 30%. Mortgage interest rates were also cut by 0.25 percentage points, and the interest rate floor removed to make financing cheaper. Municipal governments will now be allowed to purchase homes at reasonable prices to convert them into affordable housing. Chinese stocks received the announcement with positivity. CSI 300 index up 1% and property shares rising around 2.5%

🇪🇺 Europe: The unemployment rate in France was 7.5% in the first quarter of 2024. The percentage remains steady for the third quarter and compares to a market consensus of 7.4%. Europe’s inflation rate was 2.4% annualised, in line with expectations and identical to the inflation rate of the previous period. Core inflation, however, came in at 2.7% annualised, also in line with expectations and improving from 2.9% in the previous period.

💶 The European Central Bank sows doubts with statements by its adviser. ECB’s Holzmann: Too early rate moves risk refueling inflation. ECB’s Schnabel: With inflation risks still on the upside, bringing forward the easing process would carry the risk of premature easing. On the other hand, they rule out accepting an inflation rate other than the 2% target.  ECB’s Schnabel: The ECB’s 2% target has served us well, a change in the target is not appropriate.

🇺🇸 US: As you already know from our previous reports, at the moment, several Fed officials argue for keeping US interest rates higher for longer as they await more evidence inflation is easing. This contrasts with market expectations for rate cuts.

🏦 In the last 24 hours the Fed’s Bostic has made a number of comments on the subject. On the one hand he has stated that he still expects inflation to continue to fall. He says that firms are on the edge of pricing, and cannot fully pass on input costs. In this context, he acknowledged that it might be appropriate to cut rates at the end of the year. Paradoxically, however, he insists that the US economy remains quite resilient and robust.

📈 The markets, which have all been in a positive tone since the US started presenting bad macroeconomic data a few weeks ago, are now slightly down after breaking new all-time highs on Wall Street. SP500 is gently retreating from new highs near 5350 points. Nasdaq100 trades above 18500 points. In Europe, the Dax40 is retreating, having reached the 19000 level, falling to 18670 at the moment.

💰 The US 2 year bond, bounces up from 4.75% to almost 4.80%. The DXY Dollar is back to 104.50 and is now trading at 104.72.

🥇 Gold has been very bullish in the last few hours and is very close to its all time high of $2400. Crude oil remains calm, relatively low, trading around $83 a barrel.

🌍 Geopolitics:

🇬🇧🇮🇹🇫🇷🇩🇪🇺🇸🇯🇵🇨🇦 Finance ministers from the Group of Seven major democracies meeting in Italy next week will back a European Union plan to use the income from frozen Russian assets to help Ukraine’s war effort. The G7 froze around $300 billion worth of financial assets post-Moscow’s attack on Ukraine in February 2022, leading to debates within the EU and G7 on utilizing these funds to aid Ukraine. Washington suggested using the assets as collateral for loans to Ukraine amidst European resistance. The G7 will support the EU’s stance on using the income from frozen Russian assets for Ukraine’s benefit, focusing on revenue rather than the assets themselves. Discussions in Stresa will also cover trade relations with China, despite not being on the formal agenda, and Italy’s concerns about tariffs’ impact on global trade.

🇨🇳🇷🇺 Despite Western pressure, China remains steadfast in its support for Russia in the conflict with Ukraine, refusing to cut supplies of dual-use materials and weapons components to Moscow. US Treasury Secretary warning China about supporting Russia’s military procurement efforts.

🇺🇸🇪🇺🇺🇦 However, continued US and European warmongering support for Zelenski, increasingly questioned by citizens, does not seem to be under debate among Western elites. US presidential candidate Robert Kennedy Jr. is one of the politicians who has publicly expressed the interests of the US warmongering industry in prolonging the war. The Republican Party, too, has expressed its discontent, and has called for an audit of the funds the administration is sending out