Breaking

Giorgia Meloni warns of ‘fragile majority’ for von der Leyen 2.0 [FT]

Russian-linked gang claims Federal Reserve hack - and threatens to release America's banking secrets TODAY [Daily Mail]

World headed for ‘food wars’, warns major commodities trader [FT]

In Focus

Following the trainwreck presidential debate, Governor of California Gavin Newsom appears to be the favoured candidate for the Democratic Party nomination if Biden gets ousted.

Under Newsom's watch California has gone from the place everyone in the world wants to visit to the place everyone wants to avoid.

Reckless spending, homelessness, crazy taxes and the flight of companies away from Silicon Valley leaves markets nervous about this outcome.

California Reveals All Job Gains In 2023 Were Fake [Zerohedge]

And financial markets hate uncertainty. Better the devil you know.

So after a benign PCE report on Friday US Treasuries sold off to close the important end-of-month candle back in the yield uptrend.

Increasingly bad economic news, with companies like Nike falling 20% on Friday and Walgreens 25%, leaves the US economy looking perilous...with no-one at the wheel.

US 10 Year Treasury Yields Monthly

Japan

USD / YEN closed the month above the 160 level where the Bank of Japan intervened previously. You have to say that there is a big seller above 160, looking at the price action,  but they're not hitting bids so maybe they're just trying to make sure it's an orderly decline in the YEN.

Possibility of a USD swap line with the FED so no need to sell US Treasuries !

USD / YEN Daily

‘Crazy’ for Japan to Intervene on Yen Before Friday, Traders Say [Bloomberg]

Japan Industrial Production May 2024

Although the Japanese economy seems to be stagnant, those forward looking industrial production forecasts look ominous.

US Economy

Housing is now in focus and with the consumer under pressure (large part of US GDP is contributed by consumers unlike Australia and Canada) those rising treasury yields could add further pressure.

If Hooters is closing stores then the consumer is really in trouble

Hooters closed dozens of ‘underperforming stores’ across US. What about California? [Yahoo News]

Home Sales Fell to One of the Lowest Levels on Record in May[Redfin]

US New Home Sales May 2024

US Pending Home Sales May 2024

US GDP Q1 2024

US Core PCE May 2024

Markets were waiting all week for core PCE and it came in as expected but the perception has changed.

For the last few months markets have breathed a sigh of relief that inflation hasn't bounced but now they're disappointed that the numbers haven't improved further,

Top Fed official warns interest rates may need to go up again [AFR]

Fed’s Daly Warns of Labor Market Risks, Nearing Inflection Point [Bloomberg]

Powell seems increasingly isolated at the FOMC. Politically he's desperate to cuts rates but the other members don't agree. Currently only a black swan event will let him cut. And more QE.

In The Background

CRE / Banks / CLOs

Bank of Hawaii (BOH) Eyes Capital Raise Amid Bond Losses [Yahoo Finance]

Canada

Canada CPI May 2024

Canada GDP May 2024

Markets are re-evaluating Canada's recent interest rate cut in the light of higher inflation numbers combined with low GDP. A massive housing bubble and weaking currency suggest Canada could be the canary in the mine.

Canadian rents surge 8.9 %, the highest since Jan 1983. Consumer Price Index, May 2024 [Statistics Canada]

China

The Yuan weakened further this week as government bond yields fell. 

Australia

Australia Monthly CPI YoY May 2024

A shocking CPI indicator means most are now expecting another hiking cycle although evidence is growing that current rates are causing pain.

What's Next ?

European CPI and US Nonfarm payroll are the important economic release this week but geopolitics could surprise

Watch for

• New Democrat candidate in US
• Zelensky to fold in Ukraine
• Increasing pressure on US from Russia, North Korea and China

This Week's Important Economic Indicators [London time]