Sun, Nov 27, 2022 @ 16:24 GMT

Cottarelli accepted mandate to form an interim Italian government

    In swift arrangements, former IMF Director of the Fiscal Affairs Carlo Cottarelli accepted Italian President Sergio Mattarella’s appointment to form an interim government. That came after Giuseppe Conte abandoned the effort to form a new coalition government of the 5-Star Movement and the League, following Mattarella’s veto of eurosceptic Paolo Savona as the as economy minister.

    The Prime Minister designate Cottarelli said that “I’ll present myself to parliament with a program which – if it wins the backing of parliament – would include the approval of the 2019 budget. Then parliament would be dissolved with elections at the beginning of 2019.”

    Or, “in the absence of (parliament’s) confidence, the government would resign immediately and its main function would be the management of ordinary affairs until elections are held after the month of August,”

    South Korean Moon: Meeting with Kim Jong-un was easy like a casual meeting

      South Korean President Moon Jae-in said in a meeting with senior secretaries that the meeting with North Korean leader Kim Jong-un on Saturday was “just like a casual meeting” and that’s “more important than anything”.

      He added that “leaders easily got in contact, easily made an appointment and easily met to discuss urgent matters, without complicated procedures and formalities, just like a casual meeting.”

      Moon also noted that the Saturday meeting was organized on short notice after Kim’s request. And that could be a model for further contact between the two Koreas. He noted “if we could hold working-level, back-to-back talks on both sides of Panmunjom if urgently necessary in addition to formal summits, it would expedite faster advancement of inter-Korean relations,”

      After Moon’s effort to revive the Kim-Trump summit, US officials are now in North Korea for the details.

      It’s reported that Sung Kim, the former US ambassador to South Korea, was leading the American delegation to meet North Korean officials. Sung Kim was hailed by a former senior South Korean official as ” capable, level-headed, cautious, and has solid grasp of the issues and knows North Koreans well.” At the same time, Sung Kim has “healthy scepticism”.

      Abe to tell Trump Japanese carmakers made huge contributions to the US economy

        Japan Prime Minister Shinzo Abe was asked in the parliament today about Trump intention to impose tariffs on car imports using national security as excuse. Abe said he would seek to convince Trump that Japan carmakers are important in boosting the US economy.

        He noted that Japan automakes have “created jobs and made huge contributions to the US economy.” And he added that the number of cars Japanese automakers produce in the US is double the number it exports to the country.

        And he emphasized that “as a country that prioritizes a rule-based, multilateral trade system, Japan believes that any steps taken on trade must be in line with World Trade Organization rules.”

        Separately, he added that “Japan has explained to the United States its stance that TPP is the best format for both countries. We will continue to talk with the United States based on this view.”

        Euro rebounds as formation of eurosceptic Italy government collapsed

          Italy is in fresh political turmoil again as the formation of the new eurosceptic government collapsed. Nonetheless, the Euro is lifted mildly higher today as that’s seen as a positive development for the common currency.

          President Sergio Mattarella vetoed Paolo Savona as the as economy minister. Savona is an 81-year-old eurosceptic economist who’s a vocal critic of the common currency. Mattarella said in a televised speech that “the uncertainty over our position (on euro) has alarmed investors and savers both in Italy and abroad.” And, he emphasized that “membership of the euro is a fundamental choice. If we want to discuss it, then we should do so in a serious fashion.” Mattarella added that “I asked for that ministry an authoritative political figure from the coalition parties who was not seen as the supporter of a line that could provoke Italy’s exit from the euro.”

          Prime Minister-designate Giuseppe Conte promptly abandoned the effort to form a new government. Tthe far-right League and anti-establishment Five Star Movement, accused Mattarella of abusing his authority and working under the orders of European powers. Five Star leader Luigi D Maio even demanded that parliament impeach Mattarella. League chief Matteo Salvini threatened mass protests unless snap elections were called.

          Former IMF director of discal affairs Carlo Cottarelli was called in to head a stopgap government. But he’s unlikely to have enough supoort from the parliament. So, that’s only a short-term solution and an election is now likely to be held to solve the political crisis, possibly in September or October.

          South Korea Moon revived the Kim-Trump summit. He could join to make it three-way

            South Korean president Moon Jae-in had a surprised meeting with North Korean leader Kim Jong-un on Saturday, regarding the summit with the US. Moon’s office said after the meeting that the leaders “exchanged views and discussed ways to implement the Panmunjom Declaration and to ensure a successful US-North Korea summit.”

            Moon added in a press conference that “should the North Korea-US summit succeed, I would like to see efforts to formally end the (Korean) war through a three-way summit of the South, the North and the US.” Moon also sought agreement from Kim that the summit must be held.

            A South Korean official said that “the discussions are just getting started, so we are still waiting to see how they come out, but depending on their outcome, the president could join President Trump and Chairman Kim in Singapore.”

            White House spokeswoman Sarah Sanders also said that “the White House pre-advance team for Singapore will leave as scheduled in order to prepare should the summit take place.”

            Also, Trump himself tweeted that the US teams is now in North Korea to discuss the meeting.

            Trump in very productive talks with North Korea to reinstate the summit with Kim

              After a week of exchange in words, the summit between Trump and Kim Jong Un is back on the table. Trump tweeted

              Trump suddenly pulled out of the summit on Thursday, after strong words from North Korean Vice Foreign Minister Choe Son-Hui issued a strong statement criticizing US Vice President Mike Pence. Trump sent an open letter to Kim Jong Un through the White HOuse announcing the cancellation.

              But North Korea responded by hailing that “we have inwardly highly appreciated President Trump for having made the bold decision, which any other U.S. presidents dared not, and made efforts for such a crucial event as the summit.” Though, “His sudden and unilateral announcement to cancel the summit is something unexpected to us and we can not but feel great regret for it.”

              It remains to be seen whether the summit will happen on not.

              Euro selloff accelerates as German 10 year bund yield breaks 0.4%

                Euro’s selloff accelerates further as German 10 year bund yield breaks 0.4 handle, reaching as low as 0.389 so far.

                Chart snapshot from MarketWatch

                EUR/JPY reaches as low as 127.14 and moves further away from medium term channel support. Based on current momentum, there now a realistic threat of breaking 38.2% retracement of 109.03 to 137.49 at 126.61. That would carry rather bearish medium term implication. We’ll see how it goes.

                Into US session: CAD the weakest on oil, EUR and GBP follow as yields dive

                  Entering into US session, CAD, EUR and GBP are trading as the strongest ones, while USD, AUD and JPY are the strongest. Some note that USD is the strongest one. Yes, admitted it is. But considering the USD/JPY is lacking follow through buying through 109.50, and AUD/USD is also held in tight range, it should be more about the weaknest of CAD, EUR and GBP, rather than strength of USD.

                  CAD is clearly weighed down by falling oil price as WTI drops below 70 handle on talk that OPEC and Russia are going to raise production. USD/CAD would soon be retesting 1.2996 resstance.

                  Meanwihle, we believe that the free falls in German and UK yields are the reasons dragging EUR and GBP down. Data from both countries together are not bad and won’t add to more dovish ECB or BoE expectation.

                  Instead, we’ve noticed that Italian 10 year yield has another day of strong rally today to 2.481, up 0.081 at the time of writing. German 10 year bund yield is down -0.048 at 0.426. The Italy-German yield spread surpassed 200 pts level for the first time since last June. The decline in German bund yield is particularly serious if we consider that it it as high as 0.583 earlier this week. Concerns over the new Italian government is the driving force in the markets.

                  UK 10 year gilt yields also dropped -0.50 to 1.351 so far.

                  WTI oil price drops below 70 as OPEC and Russia consider lifting production

                    WTI crude oil drops below 70 handle on reports that Saudi Arabia and Russia are going to push for lifting production later in the year. The total of boost in production from OPEC and non-OPEC countries could add up to as high as 1 million barrels a day.

                    Saudi Arabia a Energy Minister Khalid al-Falih is quoted saying in St. Petersburg that the easing of restriction on production would be gradual, so as to avoid shocking the markets. He also added that “all options are on the table” regarding output cuts.

                    Meanwhile USD 80 a barrel seems to be a psychological level that the oil producing countries want to avoid.

                    The decision could be made as soon as during the next OPEC meeting on June 22 in Vienna.

                    No revision in UK GDP, EURGBP slightly higher

                      UK Q1 GDP was left unrevised at 0.1% qoq meeting market consensus, but probably not BoE Governor Mark Carney’s expectation. Index of services rose 0.3% mom in March. BBA mortgage approvals rose to 38.0k in April.

                      EUR/GBP jumps slightly after as German Ifo came in slightly higher than expected. But it’s limited well inside near term falling channel. There is no clear sign of a breakout yet. And price actions could remain choppy and relatively directionless.

                      German Ifo stopped declining trend, Euro mildly higher

                        German Ifo business climate rose to 102.2 in May, up from 102.1 and beat expectation of 102.0.

                        Expectations gauge dropped to 98.5, down fro 98.7, met consensus.

                        Current assessment gauge rose to 106.0, up from 105.7, beat expectation of 105.5.

                        Ifo President Clemens Fuest noted in the release that “the declining trend in the ifo Business Climate has stopped. The index held steady at 102.2 points (The April value was seasonally corrected.), after having fallen five months in succession. The very good current business situation improved slightly, but the optimistic expectations weakened slightly. The German economy is performing well in a difficult international situation. The current business survey and other indicators point to economic growth of 0.4 percent in the second quarter.”

                        Full release here.

                        Euro recovers mildly after the release.

                        Philadelphia Fed Harker could support one more hike if inflation accelerates

                          Philadelphia Fed President Patrick Harker said if inflation start to “accelerate” then he’s “open to a fourth increase” in interest rate this year. But he emphasized that “I’d have to see evidence of that first”. And he noted that it’s not so much as a number around 2% but it’s acceleration or deceleration. He added that “if we’re creeping up to 2 percent and we creep up to, say, 2.25 percent, that’s a different story than [if] we’re accelerating past 2 percent. ”

                          Harker sees neutral rate as between 2.75% and 3.0%. And asked if Fed would end the current tightening cycle in 2019, he said “could be, yeah, it’s possible”.

                          Fed Kaplan not prepared for interest rates to go above neutral

                            Dallas Fed President Robert Kaplan said he’s “not prepared” for interest rates to “go above neutral”. And, he estimated that netural rate is between 2.50% and 2.75%. And that is, after four 25bps hike from the current 1.50-1.75%, fed fund rate will hit the neutral level.

                            For inflation he said “I want to run around 2, and if we got a little bit above it and I thought it would be short term and not long term, I could tolerate it.” On the other hand, “if I thought it would persist I think it would affect my policy views.”

                            Xi hailed Merkel’s effort in the bilateral ties

                              German Chancellor Angela Merkel was welcomed by Chinese President Xi Jinping in Beijing yesterday. Xi hailed her effort in the bilateral ties since the two countries launched an all dimensional strategic partnership in 2014. Xi urged that China and Germany should set an example of “win-win cooperation”. And, “this should be the direction that bilateral ties will move to in the next stage.”

                              In addition, Xi said the Chinese “welcome Germany to grasp opportunities arising from China’s new round of reform and opening up.” And, there should be expanded industrial and market cooperation. Xi added that “we would like to promote global governance and multilateralism together with Germany within the multilateral frameworks.”

                              North Korea responds to Trump’s sudden and unilateral cancellation of the Kim-Trump summit

                                North Korean Vice Foreign Minister Kim Kye Gwan responded to Trump’s cancellation of the June 12 summit in Singapore in a statement carried by state media.

                                “We have inwardly highly appreciated President Trump for having made the bold decision, which any other U.S. presidents dared not, and made efforts for such a crucial event as the summit.”

                                “We even inwardly hoped that what is called ‘Trump formula’ would help clear both sides of their worries and comply with the requirements of our side and would be a wise way of substantial effect for settling the issue.”

                                “His sudden and unilateral announcement to cancel the summit is something unexpected to us and we can not but feel great regret for it.” And, North Korea remained open to dialogue with the US “regardless of ways at any time”.

                                “The first meeting would not solve all, but solving even one at a time in a phased way would make the relations get better rather than making them get worse. The U.S. should ponder over it.”

                                Swiss Franc unconvincingly the second strongest today, a look at EURCHF again

                                  Yen is trading as the strongest one for today as boosted by risk aversion and falling treasury yields. Trump’s pull out from the meeting with Kim triggered some selloff in stocks. But loss is relatively limited. On the other hand, it’s the steep decline in 10 year yield, which hit as low as 2.955 so far, that looks more serious.

                                  Swiss Franc follow as the second strongest one for today. However, even so, it’s held below yesterday’s high against all major currencies. Momentum is rather unconvincing. Having a look at EURCHF action bias table, while D action bias stays consistently downside red, 6H Action Bias is showing some hesitation.

                                  A further look at the 6H Action Bias chart, it seems that EUR/CHF started to lose downside momentum after hitting 1.1580. Though, there is no convincing evidence that the cross is reversing yet.

                                  Following up on our short strategy here. In the current situation, there are two choices, get out, or stay short. Considering that EUR/CHF is in deep over sold region as seen in daily RSI, we’d prefer to close short right now, with around 80 pt profit first. For those we’d like to hold on for 1.1445 target, we’d suggest to lower the stop to break even at 1.1705.

                                  Gold surges and regain 1300 as Kim-Trump meeting is called off

                                    Gold jumps sharply and is back above 1300 handle on news that Trump cancels his summit with North Korean Leader Kim Jong Un.

                                    1282.27 is now seen as a short term bottom. More importantly, the the long term trend line, established since De 2016 at 1122.81, was defended.

                                    Focus will now be back on 55 day EMA (now at 1316.59) and 1325.91 resistance zone. As long as these zone holds, further fall is still mildly in favor. And sustained break of the trend line support will be a strong indication of bearish reversal.

                                    Nonetheless, firm break of 1325.91 will set the stage for a test on 1366.05. And, probably the real key resistance at 1380.56.

                                    USDJPY heading lower after Trump cancels summit with North Korean Kim

                                      Stocks tumble sharply, while treasury yields dive as Trump announced to cancel the meeting with North Korean Leader Kim Jong Un in Singapore on June 12. At the time of writing, DOW is down -0.5%, at around 24770. Deeper fall could be seen but the key is whether near term support at around 24600 would hold. There is some distance to this level yet.

                                      But 10 year yield is looking much worse. TNX opened the day at 3% and hit as long as 2.963 so far. There is some clear downside acceleration after Trump’s announcement through the White House. And the sharp fall in TNX drags USD/JPY to 109.10so far.

                                      Below is the tweet from the White House regarding the cancellation.

                                      US initial claims rose 11k to 234k in the week ended May 19

                                        US initial jobless claims rose 11k to 234k in the week ended May 19, above expectation of 220k.

                                        Four-week moving average of initial claims rose 6.25k to 219.75k.

                                        Continuing claims rose 29k to 1.741m in the week ended May 12.

                                        Four-week moving average of continuing claims dropped 23.25k to 1.752m, hitting the lowest since 1973.

                                        Full release here.

                                        ECB accounts offer nothing more than a bit of cautiousness

                                          ECB’s monetary meeting accounts offer nothing new to the markets, just a bit more cautiousness.  Thus, Euro’s reaction is rather muted.

                                          Some quote from the monetary stance and policy considerations sections of the ECB monetary policy meeting accounts:

                                          • The recent incoming information pointed to some moderation in activity but so far remained consistent with a solid and broad-based expansion of the euro area economy.
                                          • The underlying strength of the euro area economy continued to support the Governing Council’s confidence that inflation would gradually converge to its inflation aim of below, but close to, 2% over the medium term
                                          • Measures of underlying inflation remained subdued and had yet to show convincing signs of a sustained upward trend.
                                          • For underlying inflation pressures to continue to build up and support the path of headline inflation over the medium term, patience, persistence and prudence with regard to monetary policy remained warranted.
                                          • Despite the observed moderation in activity, confidence in the underlying strength of the euro area economy and the eventual convergence of inflation to the Governing Council’s inflation aim remained unchanged.
                                          • While measures of underlying inflation continued to be subdued, some comfort was drawn from encouraging signs of a strengthening in nominal wage growth and the continued anchoring of long-term inflation expectations at levels consistent with the Governing Council’s aim.
                                          • While risks surrounding the euro area growth outlook remained broadly balanced, it was acknowledged that risks related to global factors, including the threat of increased protectionism, had become more prominent and warranted monitoring with regard to their implications for the medium-term outlook for growth and prices.

                                          Full release here.