📢 Macro-News round-up

📈 Market News

🔥 Triple-witching Today: Friday’s US options expiration may provide some short-term market volatility as $5.5 trillion in contracts expire. Goldman Sachs expects the events to result in “explosive trading sessions” as asset managers tactically trade around excess volumes. In principle, the bullish exposure is much higher than three months ago Call>Put. BUT, if traders feel that the trend is changing, we may see rollovers but in bearish (Put) positions. This could completely change the tone of the market.

🇯🇵 Japan: The National Core inflation for May was 2.5%, 2.6% was expected. Some relief for the BoJ. Traders are not hitting the yen because they are waiting for the Fed to act. The currency traded near 160 yen per dollar after weakening for 6 straight sessions, the worst stretch in 3 months. Japan’s top currency official reiterated the government will take proper action as needed to counter excessive yen declines. Persistent US-Japan yield differentials are supporting carry trades pressuring the yen even as differentials narrow. The US added Japan to a currency monitoring list but didn’t label it a manipulator given large trade/current account surpluses. Traders see currency officials giving up on defending the yen due to overwhelming yield differentials and limited Fed easing outlook.

💵 US rate hikes have kept the dollar elevated, straining major importers and countries with dollar debt burdens. Treasury designations have limited market impact and past Japan intervention only stemmed speculation, not caused yen rises. The US Treasury added Japan to its currency monitoring list but stopped short of labeling it or others as manipulators. The US assumes that an allied country, with a synchronised monetary policy and subordinate to the Federal Reserve, will not act without prior notice to its allies.

📉 The US economy might be collapsing, and the Fed is waiting. Even in the scenario of a 25bp rate cut, it will not be enough to have an impact on the economy. But it may be enough to generate optimism in a market addicted to comfort and quantitative easing.

🇪🇺 Europe: Today’s PMIs from Europe came out slightly worse than expected. However, in general terms we can say that the services PMIs at least show economic expansion, above 50. Manufacturing PMIs show more weakness than services, which has been the norm for a while now. In the case of Germany, its manufacturing PMI still indicates economic contraction and comes out below the expected level, but at least its services PMI survives above 50. France is the only country showing clearly contracting PMIs, below 50 for both services and manufacturing.

🇬🇧 UK: Retail sales improve. Both the year-on-year figure and the annualised figure have come out better than expected. Retail sales are expected to increase by 1.6%, and the result by 2.9%. On an annualised basis, the contraction was expected to slow to -0.9%, however, according to the data, it is growing at 1.3% annualised. It should not be forgotten that in the previous period retail sales were negative. This, which might seem good, can actually be interpreted in a negative way, as it reduces the pressure for the Bank of England to cut rates.

🌐 Geopolitics:

⚛️ France loses its supplies of uranium for its nuclear power plants. Niger has revoked French nuclear fuel producer Orano’s operating license for one of the world’s biggest uranium mines, Imouraren. Niger accounts for about a quarter of uranium supplied to European nuclear power plants. The military junta has reviewed mining concessions and turned against France, ordering out French troops. Chinese, Australian, US, British, Canadian, Russian and Indian firms have secured new uranium licenses in Niger.

🚀 New war front in Israel: Israel and Hezbollah exchanged fresh cross-border fire after Israel approved Lebanon offensive plans and Hezbollah vowed blanket rocket attacks. Hezbollah claimed rocket fire into Israel in retaliation for an air strike killing one of its operatives in Lebanon. The US called for avoiding escalation and reaching a diplomatic resolution allowing families to return home.