Capital Markets—ECB Meeting and US CPI: Sic Transit Gloria Mundi

 Everything is transitory. Thus passes the glory of the world.

ECB Meeting and US CPI: Transitory Impact

Overview: The ECB meeting and the US May CPI report is at hand. The US dollar is consolidating at a higher level against most of the major currencies. Softer than expected, inflation readings are weighing on the Scandis, which are bearing the brunt. The US 10-year yield closed below 1.50% for the first time in three months yesterday, and this may have helped underpin the Japanese yen. European benchmark yields are slightly firmer today, while bond yields in the Asia Pacific region fell as they played catch-up to yesterday's US yield slump. The large bourses in the region advanced, though Japan was mixed. Europe's Dow Jones Stoxx 600 is little changed and has a four-day rally in tow ahead of the ECB meeting. US futures are sporting a slightly softer profile. Falling for the third consecutive session, gold has made new lows for the week near $1876. Ahead of OPEC's monthly report, June WTI is consolidating below $70 a barrel. Steel rebar and iron ore futures advanced for the second consecutive session in Asia, while copper is off for the third session. The US Department of Agriculture releases its monthly assessment of global supply and demand later today. The drought in Brazil and in the western part of the US may give the reports a cautious tone

Asia Pacific

US-Chinese commerce officials talked today. It is part of the resumption of the high-level dialogue. However, the suggestion that the talks rallied Chinese stocks today seems like a stretch. More important, reports indicate that the Biden administration is considering a protective tariff on rare earths to help promote the developments of a domestic industry. In particular, neodymium magnets, which are ubiquitous, including in electric vehicles, and nearly 90% come from China.

Meanwhile, China has boosted its orders for US agriculture products and is seen accounting for almost a quarter of US farm exports. Beijing agreed to buy $80 bln of US agriculture products over two years and, as of April, was estimated to be more than 20% behind. However, it is stepping up its pace....

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