ITALY: Foreign Min-Need At Least 10 Years To Raise Defence Spending
Reuters reports comments from Deputy PM and Foreign Minister Antonio Tajani, saying that "We need at least 10 years to raise defence spending", and that "I think we are going in the right direction to strike a deal before the next NATO summit [24-25 June]." Italy is hosting a meeting of foreign ministers from the 'Weimar Plus' group of countries (France, Germany, Italy, Poland, Spain, the UK), with European High Representative for Foreign Affairs and Security Policy Kaja Kallas and Ukrainian Foreign Minister Andrii Sybiha also in attendance. NATO Secretary General Mark Rutte will also be in attendance and is holding bilateral talks with Italian Prime Minister Giorgia Meloni.
- Tajani's comments chime with those from Alessandro Marrone at Rome’s Institute for International Affairs, who told the FT, “Moving to 3.5 per cent on core defence [...] will be a big challenge for Italy...Italy will push not to change the target. It’s in the making and it’s hard to change it . . . But it will seek to set a timeline.”
- As the FT notes, "Defence minister Guido Crosetto has said repeatedly that Italy must do more on defence in light of Russia’s challenge, while Meloni is eager to maintain fiscal discipline and avoid unsettling bond markets. Many Italians oppose higher defence spending, a view also espoused by deputy prime minister Matteo Salvini of the far-right League. All that means Meloni faces a tough balancing act to satisfy domestic demands while satisfying Nato allies and avoiding alienating Trump".
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EURIBOR OPTIONS: Notable call spread buyer
ERZ5 98.37/98.50cs, bought for 2.5 in 17.5k (ref 98.18, 8% del).
US TSYS: TYA Eyes Latest Support Ahead Of CPI
- Treasuries broadly consolidate yesterday’s sell-off on US-China trade de-escalation ahead of today’s US CPI report for April.
- MNI US CPI Preview here.
- Cash yields are 0-2.5bp lower on the day, with declines led by 2s/3s and with 20s lagging the move.
- 2s10s at 46.7bp and 5s30s at 81bp sit within some wide recent ranges.
- TYM5 trades at 110-06 (+01), maintaining the softer tone on modest cumulative volumes of 290k.
- Yesterday’s low of 110-01+ met latest support at a 76.4% retracement of the Apr 11 – May 1 bull leg, after which lies a key 109-08 (Apr 24 low). To the upside, resistance at 111-04+ (20-day EMA).
- Some recent downside flow: TYN5 109.00/108.00 put spread 20K lots blocked at 0-14 (05:32:08ET) following 21K of the FVN5 107.00/106.25 put spread being blocked through the London morning.
- Data: US CPI Apr (0830ET), Real avg earnings Apr (0830ET)
- Fedspeak: None scheduled
- Bill issuance: US Tsy $48B 52W & $70B 6W bill auctions (1130ET)
OUTLOOK: Price Signal Summary - Key Support In Gold Remains Intact For Now
- On the commodity front, the latest pullback in Gold appears corrective. Key short-term support to watch is $3202.0, the May 1 low. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3164.3, 61.8% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA is at $3161.0. The medium-term trend condition remains bullish, a reversal would refocus attention on $3500.1, the Apr 22 high and bull trigger.
- In the oil space, a downtrend in WTI futures remains intact and short-term gains are considered corrective. For now, the corrective cycle remains in play and price has traded through the 20-day EMA. Key resistance to watch is $63.55, the 50-day EMA, a clear break of this level would highlight a stronger reversal. This would open $66.41, the Apr 4 high. For bears a reversal lower would refocus attention on $54.67, the Apr 9 low and bear trigger.
