- APAC stocks began mixed in what was a holiday-thinned start to the week with markets in Australia, China, Hong Kong and Taiwan all closed.
- EUR slides as results in the European Parliament elections prompted Macron to dissolve the French parliament and announce a snap election.
- European equity futures declined with the Euro Stoxx 50 future down 0.4% after the cash market also closed lower by 0.4% on Friday.
- Israeli minister Gantz resigned from the emergency government and called for early elections.
- Looking ahead, highlights include Norwegian CPI, EZ Sentix Index, US Employment Trends, Chinese Money Supply, Supply from the US.
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US TRADE
EQUITIES
- US stocks ultimately finished relatively flat on Friday with mild losses for the major indices on what was a choppy session, while the small-cap Russell 2000 index was the notable laggard as participants digested a hot NFP report which heavily weighed on bonds and spurred a rally in the dollar. Money markets are now only fully pricing in just one rate cut by year-end vs. two rate cuts priced in pre-data although there is still around a 50% probability of two cuts in 2024.
- SPX -0.08% at 5,347, NDX -0.11% at 19,001, DJI -0.22% at 38,799, RUT -1.12% at 2,027.
- Click here for a detailed summary.
APAC TRADE
EQUITIES
- APAC stocks began mixed ahead of key events including the FOMC and BoJ policy decisions, as well as US and Chinese CPI data, while it was a holiday-thinned start to the week with markets in Australia, China, Hong Kong and Taiwan all closed for holiday.
- Nikkei 225 advanced on the back of recent currency weakness and after revised GDP data showed a slightly narrower annualised contraction in Japan's economy than initially reported.
- KOSPI traded subdued amid ongoing geopolitical tensions after South Korea restarted loudspeaker broadcasts and North Korea sent another round of waste balloons and warned of new responses.
- US equity futures lacked direction after the post-NFP price swings and as participants await looming risk events.
- European equity futures declined after gains by the far right in the European Parliament elections spurred political uncertainty with Euro Stoxx 50 futures down 0.4%, while the cash market also closed lower by 0.4% on Friday.
FX
- DXY extended on recent gains above the 105.00 level after climbing on the back of the NFP report.
- EUR/USD gapped beneath the 1.0800 level at the reopening after the European Parliament elections where the centre-right strengthened its majority although the far-right made gains, especially in France where they crushed President Macron's party and prompted him to dissolve the French parliament and announce a snap election.
- GBP/USD traded sideways around Friday's trough as polls suggested the Tories face a wipeout at next month's election.
- USD/JPY strengthened to reclaim the 157.00 level as the latest GDP data confirmed an economic contraction.
- Antipodeans were little changed amid the holiday closures in Australia and the Greater China region.
FIXED INCOME
- 10-year UST futures were lacklustre after the hot NFP report saw money markets just fully price in a single rate cut for this year although odds for a second cut are just beneath 50%.
- Bund futures remained near Friday's worst levels amid political uncertainty following the European parliamentary elections.
- 10-year JGB futures tracked the post-NFP losses in global peers, while there was also a slight upward revision to Japan's annualised GDP for Q1 which remained at a contraction.
COMMODITIES
- Crude futures were rangebound as recent dollar strength mostly offset the geopolitical risk premium.
- Iraq set the July Basrah medium crude official selling price to Asia at plus USD 0.60/bbl vs Oman/Dubai average and to Europe at minus USD 2.85/bbl vs dated Brent, while it set the OSP to North and South America at minus USD 0.65/bbl vs ASCI, according to SOMO.
- Iraqi Oil Minister said there was progress in talks held on Sunday with Kurdish regional government officials regarding resuming northern oil exports, according to Reuters.
- US Department of Energy was seeking 6mln more barrels for the SPR, according to a report on Friday.
- Spot gold languished beneath the USD 2300/oz level after sliding during Friday's USD 100 price swing.
- Copper futures remained subdued after the broad selling across the metals complex late last week and with its largest buyer absent from the market due to the Dragon Boat Festival.
CRYPTO
- Bitcoin was ultimately flat after trading sideways throughout the weekend on both sides of USD 69,500.
NOTABLE ASIA-PAC HEADLINES
- China and Pakistan agreed to strengthen mining development and industrial cooperation, while they are willing to actively promote investment and cooperation between Chinese firms in the mining industry in Pakistan and jointly strengthen the planning of mining industry parks including deep processing of ores.
- BoJ is expected to consider whether to scale back its roughly JPY 6tln in monthly government bond purchases at the upcoming meeting as it moves toward policy normalisation, according to a report in Nikkei on Friday.
- Japan's government said in a draft economic blueprint that it will work closely with the BoJ and guide policy 'flexibly' as monetary policy has entered a new stage, while it added that consumption is lacking momentum and the price outlook is uncertain due partly to the declines of the yen.
DATA RECAP
- Japanese GDP Revised QQ (Q1) -0.5% vs. Exp. -0.5% (Prev. -0.5%)
- Japanese GDP Revised Annualised (Q1) -1.8% vs. Exp. -1.9% (Prev. -2.0%)
GEOPOLITICAL
MIDDLE EAST
- Gaza health ministry said 274 Palestinians were killed and 698 were injured during an Israeli offensive on a Nuseirat camp, while a Palestinian Islamic Jihad official said Israel’s offensive at Nuseirat will not affect the prisoners/hostages swap deal.
- Hamas chief Haniyeh said Israel cannot force its choices on them and they won’t accept any deal that doesn’t achieve security for their people. It was also reported that the Hamas armed wing said three Israeli hostages were killed including a US citizen during an Israeli hostage-freeing operation in Gaza.
- Israeli minister Gantz resigned from the emergency government and called for early elections, while he accused PM Netanyahu of mishandling Israel’s war in Gaza, according to FT.
- US circulated a new draft UN Security Council resolution calling on Hamas to accept the hostage and ceasefire deal, while a vote is expected on Monday, according to two sources with direct knowledge cited by Axios' Ravid.
- Hezbollah said it fired a salvo of Falaq 2 rockets at Israel for the first time.
- Yemen’s Houthis said they targeted a British destroyer and two related ships in the Red Sea with ballistic missiles, although the UK Defence Ministry said assertions by Houthis that they attacked a British destroyer in the Red Sea are false.
- UKMTO said a vessel was hit by an unknown projectile 70 NM southwest of Yemen’s Aden which resulted in a fire although no casualties were reported.
OTHER
- Russian forces appeared to have made headway in the key Ukrainian town of Chasiv Yar, according to sources cited by Reuters.
- US National Security Advisor said the Ukrainian army carried out strikes with US weapons on targets in Russian territory, according to Asharq News.
- US President Biden and French President Macron committed to supporting efforts to bring forward extraordinary profits from immobilised Russian sovereign assets for the benefit of Ukraine. Furthermore, they expressed strong concern about transfers of weapons especially from Iran and North Korea, as well as dual-use materials from China to support Russia’s war against Ukraine, while they support actions to curtail access to US and French financial systems for such transfers.
- G7 plans to warn small Chinese banks over helping Russia evade Western sanctions, according to sources cited by Reuters.
- South Korea restarted loudspeaker broadcasts in response to North Korea's sewage balloons, according to Asahi. It was separately reported that North Korean leader Kim's sister warned of new responses against South Korea’s loudspeaker broadcasts and leafleting, while she called for South Korea to stop dangerous acts. Furthermore, the South Korean military later announced that North Korea sent around 310 trash-carrying balloons in its latest launch, according to Yonhap.
- Philippines National Security Adviser said they reaffirmed a commitment to uphold their sovereign rights and jurisdiction over the second Thomas Shoal, while they will continue to maintain and supply their outposts in the South China Sea without seeking permission from any other nation.
EU/UK
NOTABLE HEADLINES
- UK PM Sunak is set to promise another 2p cut to national insurance in the Conservative manifesto, according to The Sunday Times.
- Transatlantic trade association BritishAmerican Business chief said US companies are worried the costs of operating in the UK would increase under a Labour government, making the country a less attractive place to invest, according to FT.
- Deltapoll survey showed UK opposition Labour Party with 46% of support (-2) vs the ruling Conservative Party at 21% (-4) with the Labour Party set to gain a 416 majority.
- The centre-right European People’s Party is set to hold the most seats in the European Parliament with 189 seats, according to the latest EU-wide projections cited by Reuters. However, far-right parties made significant gains as they performed well in Germany and comfortably won in France which prompted French President Macon to dissolve parliament and announce snap elections to be held on June 30th and July 7th. Furthermore, Belgian PM Alexander De Croo announced his resignation after the defeat of his party in the European elections, according to APA.
- EU's von der Leyen said there remains a majority in the centre for a strong Europe and the centre is holding but added that extremes on the left and right have gained support, while she is confident she can win a new mandate as EU Commission President.
- ECB President Lagarde said via an op-ed in a newspaper on Friday that the ECB still needs to have its foot on the brake for a while and that the path to 2% inflation won't be an entirely smooth ride. Lagarde also said that they made major progress but the inflation fight is not over and rates are to remain restrictive for as long as necessary.
- ECB's Nagel said on Friday that a rate cut reflects receding inflation and the German economy is picking up speed, while he added the German debt brake is important and the Bundesbank is a big supporter of it.
- ECB’s Holzmann said the ECB can declare victory on inflation when it is at 2%, while he added that they are on the path to an economic recovery.
