Euro Area Inflation Expectations Hit Lowest Since 2021: ECB Survey

Economic

Summary:

Inflation expectations in the euro area have dropped to their lowest since September 2021, according to the ECB's April 2024 survey.

Inflation expectations across the euro area have declined to their lowest since September 2021, according to the April 2024 European Central Bank (ECB) Consumer Expectations Survey. The survey reported that the median inflation expectation for the coming 12 months edged down to 2.9 per cent from 3 per cent in March, while expectations for three years ahead also decreased slightly to 2.4 per cent from 2.5 per cent.

Despite these reductions, the median rate of perceived inflation over the past 12 months remained unchanged at 5 per cent. This suggests that while inflation expectations are softening, they still lag behind the levels of perceived past inflation, which may influence consumer sentiment and spending behaviours, as per the survey.

The survey also highlighted stability in income and consumption expectations, with consumer expectations for nominal income growth holding steady at 1.3 per cent. However, perceptions of nominal spending growth over the previous 12 months slightly decreased to 6.3 per cent from 6.4 per cent, a decline observed mainly among older respondents aged 35-70. Expectations for nominal spending growth over the next year remained stable at 3.6 per cent.

On the labour market front, the outlook appears cautiously optimistic. Economic growth expectations for the next 12 months were less negative, improving to minus 0.8 per cent from minus 1.1 per cent in March. However, expectations for the unemployment rate over the next 12 months rose slightly to 10.9 per cent from 10.7 per cent, suggesting a broadly stable yet cautious labour market scenario. Notably, the probability of finding a job decreased among unemployed respondents, while the probability of job loss increased among employed individuals.

The survey also observed that inflation perceptions and expectations were relatively aligned across different income groups, with slightly lower expectations among the highest income quintile. Younger respondents (aged 18-34) reported lower inflation expectations compared to older age groups, though there was a noted convergence in inflation perceptions across all ages.

Source：fibre2fashion

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Danske Bank

Economic

In focus today

Today, focus is on German inflation data for May which will give an important clue as to what the euro area print on Friday will show. We expect a large increase in core services inflation due to a base effect from the “German ticket”, which lowered prices on public transportation in May last year. On Friday, we expect euro area headline inflation to remain at 2.4% y/y driven by rising energy inflation, falling foods inflation and unchanged core inflation at 2.7% y/y.

In the euro area, we will also look out for the April monetary aggregates and lending data. We focus especially on the lending data as we have recently seen signs of a gradual improvement in loan dynamics and thus the credit impulse.

In Sweden we receive retail sales and household lending data at 08.00 CET. NIER's retail confidence indicator suggests there may be a rebound in April after a setback in March. As for household lending it has begun reaccelerating in recent months, and we expect today's print to also be in this direction.

The Riksbank releases the first Stability Report for 2024 at 09.30 CET, followed by a press conference at 11.00 CET.

Fed's Williams (Vice Chair of the FOMC) and Bostic (voting member) speaks at 19.45 CET, and 01.00 CET (Thursday morning) respectively. SNB Chairman Jordan speaks at a conference in South Korea at 02.00 CET (Thursday morning).

Economic and market news

What happened overnight

In China, the IMF upgraded its growth outlook to 5% GDP growth for the year (prior 4.6%) and 4.5% in 2025 (prior 4.1%). The upgrade came after a stronger-than-expected first quarter, as well as recent initiatives by the Chinese government to stimulate the Chinese economy.

In Australia, inflation for April stood at 3.6% y/y compared to expectations of 3.4% y/y according to Reuters. The CPI reading also beat the reading in March which stood at 3.5% y/y. The upside surprise was in part driven by increases to petrol, health, and holiday costs. CPI excluding volatile items and holiday travel remained unchanged from March at 4.1% y/y.

In Asia, most equity markets are in the red this morning with only Shanghai slightly up.

In the US, yesterday marked the shift in markets to a shorter settlement period, as settlement has gone from T+2 to T+1.

US equity futures are pointing down this morning, after a somewhat mixed session yesterday which saw Nasdaq increase by 0.59%, and the Dow Jones fall by 0.55%, whereas the S&P500 and Russell 3000 were more or less flat.

What happened yesterday

In Norway, retail sales came in at -0.3% m/m seasonally adjusted for April. The figure confirms the sideways trend seen in retail sales since last autumn, as is also seen in the 3-month moving average standing at +0.1% m/m.

In the US, consumer confidence for May came in at 102.0 up from April's revised figure of 97.5. The figure beat consensus expectations of a 96.0 print. The higher print in May compared to April marked the first time in three months that the confidence indicator did not decline. Average 12-month inflation expectations rose to 5.4% from 5.3% in April.

The ‘perceived likelihood of a US recession over the next 12 months' also increased in May, as 69% (up from 65% in April) of consumers now believe a US recession is ‘somewhat' or ‘very' likely in the coming 12 months. Also in the US, Fed's Kashkari was hawkish when he said that he did not believe that any FOMC member had ruled out a rate hike. Markets sent yields higher on the statement. That said, Kashkari also said that he thinks the odds for a Fed hike is quite low.

In New York City, closing arguments were heard in the trial against former president Donald Trump who is accused of falsifying business records. With Trump aiming to reclaim the Oval Office from incumbent Joe Biden this 5 November, there is a lot on the line for the former president, although being the first ever former president convicted of a crime would not formally bar Trump from taking office.

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Alex

Economic

Goldman Sachs Group Inc. expects the Bank of Thailand to start easing monetary policy in the first-half of 2025 instead of the second-half this year, as the government’s plan to spend more to support economic growth lowers pressure on the central bank to cut rates.

“Sequential growth is likely to accelerate from Q2, as government spending jumps and with the new digital wallet spending boost later this year,” strategists including Danny Suwanapruti and Andrew Tilton wrote in a note on Tuesday. They now expect a 25-basis point cut in the second and third quarter of 2025, a push back from their earlier projection for easing to begin in the third quarter of this year.

Goldman Delays Thai Rate Cut Call to 2025 on Cash Handouts_1

The Thai government has sought to widen annual spending by 122 billion baht ($3.3 billion) this fiscal year ending September to fund the so-called digital cash handout program aimed at boosting consumption. This is expected to push the fiscal deficit to 4.3% of gross domestic product, from an earlier projection of 3.7% shortfall, according to government estimates.

Traders have pared their bets for an early rate cut after the BOT’s April decision, and are now pricing only about 12 basis points of cuts in the next six months, according to baht swaps. In comparison, in early March swaps were factoring nearly 50-basis points of easing over the same horizon.

After keeping rates unchanged last month, the BOT said the economy faced risks including from fiscal stimulus measures — a reference to the $14 billion cash handout program scheme.

Standard Chartered Bank Thailand has similarly delayed its rate cut call, expecting the easing to start in December from June previously, according to economist Tim Leelahaphan.

“We continue to be bearish” on both rates and FX as the wider fiscal deficit will add to financing needs, while the baht will remain weighed down by wide Thai-US rate differentials and growth differentials with peers, the Goldman strategists added.

Source：Bloomberg

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Thomas

Economic

Cryptocurrency

US Economic Indicators and US Politics Take Center Stage

On Tuesday (May 28), bitcoin (BTC) declined by 1.50%. Reversing a 1.35% gain from Monday (May 27), BTC ended the session at $68,327.

An unexpected rise in US consumer confidence and hawkish Fed chatter impacted buyer demand for BTC. The CB Consumer Confidence Index increased from 97.0 to 102.0 in May. An improving consumer confidence environment could fuel consumer spending and demand-driven inflation. The Fed could delay the timing of rate cuts to impact disposable income and consumer spending.

Furthermore, FOMC member Neel Kashkari spoke on Tuesday, wanting to see more progress on taming inflation before supporting rate cuts. A more hawkish Fed rate path could affect buyer appetite for riskier assets.

However, hopes of a shift in sentiment toward crypto on Capitol Hill could counter the effects of a hawkish Fed interest rate trajectory.

On Tuesday, Ripple CEO Brad Garlinghouse reflected on the possible shift in US political sentiment toward cryptos, saying,

“For the first time in US history, crypto voters will be a significant force in this year's election.”

In 2023, Coinbase (COIN) CEO Brian Armstrong and 40 crypto founders were on Capitol Hill raising crypto awareness. Kickstarting the #StandWithCrypto campaign, crypto leaders highlighted that 52 million Americans owned digital assets.

The numbers may have increased significantly since the launch of the US BTC-spot ETFs. Since launching on January 11, the US BTC-spot ETF market saw total net inflows of $13,628.5 million.

Republican Party front-runner Donald Trump recognized the significance of the crypto vote. In May, Trump targeted crypto voters, saying,

“If you like crypto in any form…and it comes in many forms…if you're in favor of crypto, you better vote Trump.”

Nevertheless, uncertainty about the Fed interest rate trajectory influenced buyer demand for US BTC-spot ETFs.

US BTC-Spot ETF Inflow Streak Hinged on iShares Bitcoin Trust

Going into the Tuesday session, the US BTC-spot ETF market had enjoyed a 10-day inflow streak. However, flow data for the Tuesday session showed a marked pullback in demand.

According to Farside Investors,

Grayscale Bitcoin Trust (GBTC) saw net outflows of $105.2 million after zero net flows on Friday (May 24).Fidelity Wise Origin Bitcoin Fund (FBTC) reported net inflows of $34.3 million, down from $43.7 million on Friday.Five issuers reported net inflows excluding numbers from BlackRock (BLK) and Valkyrie.Excluding flow data for iShares Bitcoin Trust (IBIT) and Valkyrie Bitcoin Fund (BRRR), the US BTC-Spot ETF market saw total net outflows of $58.7 million. On Friday, the spot market saw total net inflows of $251.9 million.

Technical Analysis

Bitcoin Analysis

Bitcoin (BTC) News Today: US Political Shifts and ETF Dynamics Stir BTC Market_1

BTC sat above the 50-day and 200-day EMAs, sending bullish price signals.

A BTC break above the $69,000 resistance level would support a move toward the $73,808 all-time high.

FOMC member chatter, US BTC-spot ETF market flow data, and US lawmakers need consideration.

Conversely, a BTC drop below the $67,500 handle could give the bears a run at the 50-day EMA.

With a 56.21 14-Daily RSI reading, BTC could return to the all-time high of $73,808 before entering overbought territory.

Ethereum Analysis

Bitcoin (BTC) News Today: US Political Shifts and ETF Dynamics Stir BTC Market_2

ETH hovered well above the 50-day and 200-day EMAs, confirming the bullish price trends.

An ETH breakout from the $3,835 resistance level would support a move to the $4,000 handle. A break above the $4,000 handle could signal a return to the March high of $4,091.

US ETH-spot ETF market-related updates need consideration.

Conversely, an ETH fall below the $3,750 handle could give the bears a run at the $3,480 support level.

The 14-period Daily RSI reading, 68.50, suggests an ETH return to $4,000 before entering overbought territory.

Source: FX Empire

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Alex

Economic

Stocks

Most Asian stocks fell on Wednesday, weighed by persistent concerns that sticky inflation will push major central banks into keeping interest rates high for longer.

Chinese markets were somewhat of an exception, advancing slightly after the government announced more measures to support the beleaguered property sector.

Regional stocks took middling overnight cues from Wall Street, which was boosted chiefly by a rally in NVIDIA Corporation (NASDAQ:NVDA), which in turn pushed the NASDAQ Composite to record highs.

But beyond tech, broader U.S. stocks were muted in anticipation of key inflation data due later this week. Federal Reserve officials also kept up their hawkish commentary on interest rates.

U.S. stock index futures were flat in Asian trade.

Australia sinks on inflation shock, RBA jitters

Australia's ASX 200 index was among the worst performers in Asia, sinking 1% after consumer price index inflation data read stronger than expected for April.

The reading marked a second straight month of increased inflation, and drummed up concerns over a more hawkish Reserve Bank of Australia.

Sticky inflation could push the RBA into keep rates high for longer, or even potentially raising rates further this year, as it moves to bring down inflation.

The central bank had considered a rate hike in its May meeting, and had signaled that it would not rule out any measures to bring down sticky inflation.

Japanese stocks hit by mixed BOJ signals

Japan's Nikkei 225 index fell 0.3%, while the broader TOPIX index lost 0.5% on Wednesday.

Bank of Japan member Adachi Seiji warned that excessive declines in the yen could attract policy tightening by the central bank, especially if it impacted inflation.

Adachi also forecast that inflation would pick up in the summer-autumn period, and that the BOJ will gradually phase out its stimulative asset purchase programs.

But he warned against any quick increases in interest rates, due to risks to Japan's economy, and stressed on the need to keep policy accommodative in the near-term.

Broader Asian stocks also retreated, as anticipation of more cues on U.S. inflation and interest rates battered sentiment.

South Korea's KOSPI fell 0.9%, while futures for India's Nifty 50 index pointed to a negative open, with the index set for more profit-taking after hitting record highs this week.

Hong Kong's Hang Seng index slid nearly 1% on profit-taking in technology stocks, which offset gains in the property sector.

Chinese stocks rise on more property support

China's Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were the sole gainers in Asia on Wednesday, rising 0.5% and 0.4%, respectively.

A slew of major Chinese cities, including Shanghai and Shenzhen, were seen further loosening restrictions on home buying and lending requirements for property investment.

The measures come just weeks after Beijing announced a swathe of supportive measures for the property market, a slowdown in which has been a major point of contention for the Chinese economy.

Source: Investing.com

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Samantha Luan

Economic

Commodity

Soybean futures also slipped amid ample supply from South America, while corn dipped as U.S. planting weather improved.

The most-active wheat contract on the Chicago Board of Trade (CBOT) Wv1 was down 1% at $6.93-1/2 a bushel by 0220 GMT, after rising to $7.20 on Tuesday, its highest since July 2023.

Wheat prices have surged from a 3-1/2-year low in March, with analysts cutting Russian wheat harvest estimates by around 10 million metric tons due to dry conditions and frosts.

Russia is the world's biggest and lowest-cost wheat exporter, and crop losses there are driving up prices despite improving growing conditions in other exporters including U.S. and Canada, said Commonwealth Bank analyst Dennis Voznesenski.

"Also, on the demand side, you have China importing significantly more than many people expected at the start of the year," he said, adding that prices should be well supported for the time being.

Weather charts suggest that rain this week could reach more of southern Russia than previously expected, pausing wheat's rally.

In neighbouring Ukraine, the grain union also this week slightly reduced its harvest estimates due to dry weather and a smaller planted area.

CombinedRussian and Ukrainian wheat production of less than the current forecast of around 100 million tons would significantly impact global trading patterns, said StoneX analyst Arlan Suderman.

However, he said the region could still produce a solid crop.

"Ukraine's potential is still relatively good, due to good soil moisture reserves, whereas Russia's crop could also benefit from improved moisture in June, if that were to occur," hesaid.

Meanwhile, the U.S. Department of Agriculture (USDA)rated 48% of the domestic winter wheat cropin good-to-excellent condition, below trade expectations but still the highest for this time of year since 2021.

In other crops, CBOT soybeans Sv1 slipped 0.5% to $12.23-3/4 a bushel and corn Cv1 was 0.4% lower at $4.60-3/4 a bushel.

Both have risen slightly in recent months as the supply outlook tightened but remain near their lowest levels since 2020.

Source:Reuters

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Cohen

Economic

Three of China’s biggest cities have rolled out major easing for homebuyers, as local authorities follow through on the central government’s aid for the embattled property sector.

Shanghai, Shenzhen and Guangzhou slashed downpayment requirements and allowed room for cheaper home loans in a bid to revive demand for residential properties. Analysts expect Beijing, the other tier-1 city, to do the same.

A Bloomberg gauge of Chinese developer shares rose as much as 2.4% on Wednesday morning before paring gains. It has climbed about 50% from an April low on optimism that authorities would take further steps to support the market.

Officials are trying to revive homebuyer confidence that has been crushed by falling prices, unfinished apartments and job insecurity. The latest easing comes after the government unveiled a package earlier this month to unleash 300 billion yuan ($41 billion) of funding to help local authorities buy unsold homes.

“We expect Beijing city to follow suit later,” said Jeff Zhang, a property analyst at Morningstar Inc. “We expect these combined policies will help boost property sales and the stabilization of housing prices.”

The central government recently allowed cities to reduce minimum downpayments and make their own decisions for interest rates on mortgages.

Shanghai and Shenzhen reduced downpayment requirements by 10 percentage points to a minimum of 20% for first-time buyers and 30% for second-home purchasers. Guangzhou cut the threshold by 15 percentage points to as little as 15% of the price for first-time homebuyers. Shanghai and Shenzhen lowered floors for mortgage rates, while Guangzhou removed them entirely.

Tianjin, a city neighboring Beijing with a population of 14 million, on Wednesday also lowered the downpayment ratio to a minimum of 15% and scrapped the mortgage-rate floor. The northern city of Shenyang did similar.

The measures will likely lead to a sales recovery in the next month or two, according to Zhang Hongwei, founder of Jingjian Consulting, which advises real estate companies. Still, whether the recovery will extend to the second half of the year remains unknown, he cautioned.

Reviving sentiment is a daunting challenge. There was a flurry of activity among homebuyers after the central government announced its rescue package earlier this month, but it has already begun losing steam.

In Shenzhen, which has more property investors than other cities and tends to react the most to loosening, home sales tapered off in the week ended May 26 from a week earlier, which immediately followed the rescue, according to data compiled by Midland Holdings’ realty unit. Homebuyer visits for existing properties shrank 6.9% last weekend, following an initial 127% surge the previous weekend, according to local agency Leyoujia.

New-home sales by area in tier-1 cities declined 7% in the week ended May 26 from the previous week, according to data agency Wind. Sales gained 9% and 13% in tier-2 and tier-3 cities respectively, both close to levels seen in the March busy season. Still, sales remained more than 25% below last year’s weekly average across all three city tiers.

To be sure, green shoots are emerging in the second-hand market. In Shanghai, sales of existing homes reached an average 779 units over the two weekends following the central government’s announcement, better than the weekends following two rounds of major loosening last year, according to calculations based on the official housing transaction website.

“Policymakers’ determined stance to rescue the property sector is quite obvious and local governments also turn to be more cooperative this time around,” Raymond Cheng, head of China property research at CGS International Securities HK, wrote in a note. “They may take accountability for further deterioration of their property markets.”