RUSSIA: Inflation Slowdown, Low Growth Could Prompt 100-300bp Rate Cut in July
Jul-02 07:22
- The faster than expected slowdown of inflation and the cooling of the economy could force the CBR to cut its key interest rate by 100-300bps at its July 25 board meeting, Vedomosti report citing economists. However, they also note that geopolitical events, the instability of the ruble's exchange rate and the tight labor market remain pro-inflationary risks that could push the central bank to be more cautious instead.
- French President Emmanuel Macron and Vladimir Putin agreed to coordinate their approach on Iran in their first phone call since 2022, Bloomberg reported late yesterday. The call is part of an effort to forge a common approach between the five permanent members of the United Nations Security Council on Iran, according to people familiar with the matter.
- Kommersant report that the president has issued a decree "on additional guarantees for the rights of foreign investors" that sets conditions on which investors from "unfriendly" countries can invest in the Russian stock market and banking system without being subject to the restrictions imposed in 2022 in response to sanctions. Such investors will be able to freely transfer money in and out of special new "In" accounts.
- President Vladimir Putin will meet with the President of Kyrgyzstan later today while Bank of Russia Governor Elvira Nabiullina speaks at the Financial Congress in St. Petersburg.
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BONDS: Long End Futures are drifting lower
Jun-02 07:19
- The German and US Treasuries curves started flatter, but there's a small unwind here as the 30yr Futures have caught up to the downside, the German Buxl and TBond are back at session low, helping drag the rest of the strips lower.
- Small support in Bund is at 130.94, but most investors will be seeing better at 130.39.
SPAIN DATA: May Manufacturing PMI: Some Signs Of Tariff Reprieve
Jun-02 07:19
The Spanish May manufacturing PMI surprisingly moved into expansionary territory for the first time since January at 50.5, above the six-analyst strong consensus of 48.4 (vs 48.1 prior). The details of the release suggest some tariff reprieve was at play in May, but sales volumes were still down on the domestic and export markets.
Key notes from the release:
- "Supporting the PMI was a return to growth in manufacturing output following April’s contraction"..."Some panellists linked higher production to a relatively better trend in underlying demand and a partial lifting of global tariff uncertainty that weighed so heavily on market activity in April".
- "Sales volumes were down in May, but only modestly and to the least extent for four months. Similarly, new export orders fell to a much lesser degree. Several panellists noted a relative improvement in European and US demand, albeit still characterised by some hesitation in committing to new work amid the uncertain tariff outlook".
- "Sentiment about output for the next 12 months improved during May to a three-month high. There are expectations amongst many panellists for a more stable economic environment in the year ahead and that previous commercial actions and investment will bear fruit"
- "The soft trend in buying activity helped to explain a drop in input prices during May, which were down for the first time since the start of 2024"..."Despite falling demand and lower prices, supply side delays were again reported".
- "Firms sought to support their own sales by cutting output charges amid reports of intensive market competition".
SWITZERLAND DATA: Retail Sales Weak In April, Clothing/Footwear Driven
Jun-02 07:19
Swiss real retail sales were rather weak in April, printing -0.3% M/M (seasonally-adjusted) and 1.3% Y/Y (calendar adjusted, weakest yearly rate since June 2024). Overall, the print might be consistent with Swiss economic conditions cooling a little in Q2 vs a strong first quarter - the KOF barometer also indicated softer sentiment for the months ahead.
- On a broad Y/Y 3m average basis, Swiss retail sales continue to print above their long-term average recently - suggesting that the sector overall is in solid shape. However, the drop from March was noticeable also here - see first chart below.
- The April weakness appears to be driven by the clothing and footwear category, which can be volatile but saw its softest consecutive print since October 2024. Most other categories were also on the weaker side in April (see bottom chart).
