US Futures Slide As Oil Extends Plunge, India Stocks Tumble

US stock futures are lower with tech and small-caps underperforming as oil extends its recent rout, bond yields are slightly lower and the USD catches a bid. As of 7:45am, S&P and Nasdaq futures are down 0.4%, as investors weigh concerns about America’s economic health against optimism that the Federal Reserve will cut rates in the fourth quarter, i.e. is "bad news bad news" again; meanwhile Indian stocks crashed the most in 4 years as election results showed a much closer results than exit polls predicted. Commodities are also getting hit again with this global risk-off tone though base metals and grains are bright spots. "What has changed overnight" asks JPMorgan's trading desk and answers that it seems like some de-risking as investors await to see if macro data this week changes the narrative to one of a recession. After figures Monday showed that factory output came close to stagnating in May, while sent the 30-year Treasury yield held near 4.53%, the lowest level since May 23, attention is now turning to the latest JOLTS report which is forecast to indicate a monthly drop in job openings; we also get final readings for Cap Goods/Durable Goods. More important will be tomorrow's ISM-Services data and Friday’s NFP. 

In premarket trading, the Mag7 stocks are all lower by up to 78bps and Semis are weaker ex-INTC. KO, PEP, SBUX, ITW, WMT, and BMY are notable outperformers pre-mkt. Here are all the other premarket movers:

• Annexon jumps 25% after saying its phase 3 trial of blocking antibody Anx005 in Guillain-Barre Syndrome met its primary endpoint.
• Core Scientific surges 40% after the Bitcoin miner signed 12-year contracts with AI startup CoreWeave.
• FibroGen rises 12% after the pharmaceutical company entered a clinical trial supply agreement with Regeneron.
• GitLab declines 2% after the application software company’s revenue forecast for the second quarter came in weaker than anticipated.
• HealthEquity gains 5% after the company raised its full-year forecast and reported forecast-beating first-quarter results.
• Intel advances 1.6% after CEO Pat Gelsinger took the stage at the Computex show in Taiwan to talk about new products he expects will help turn back the tide of share losses to peers, including AI leader Nvidia.
• Viking Therapeutics rises 7% after saying its experimental liver disease drug VK2809 met its Phase 2b second

"At some point weak data should become bad news for risky assets, but we would argue that some point is a few weeks or a couple of months away,” Mohit Kumar, chief strategist for Europe at Jefferies, wrote in a note to clients. “We still remain long risky assets. Initially weaker data could be interpreted as good for risky assets as it increases the probability of a Fed cut.”

Swap contracts tied to upcoming Fed meetings continue to fully price in a quarter-point rate cut in December, with the odds of a move as soon as September edging up to around 50% and November also given high odds. Later Tuesday, economists expect figures to show a third consecutive monthly drop in US job openings, while Friday’s payroll numbers loom as crucial in the search for clues about the outlook for the world’s No. 1 economy and interest rates.  

Meanwhile, oil extended losses from its lowest settlement in almost four months after OPEC+’s plan to return barrels to the market earlier than expected raised concerns about oversupply. Brent fell below $78 a barrel after the August contract tumbled 3.4% on Monday, while West Texas Intermediate was under $74. The move also hurt the shares of supermajors, with BP and TotalEnergies dropping more than 2%

Elsewhere, Indian stocks plummeted, erasing $386 billion in market value, as tallies signaled that Prime Minister Narendra Modi’s ruling party was struggling to win a majority of seats in national elections, a stunning result after exit polls showed he was on pace for a landslide victory. The NSE Nifty 50 Index tumbled as much as 8.5% in Mumbai, the biggest intra-day drop in more than four years, while the rupee and sovereign bonds also fell.

European shares also declined, led lower by banking and oil stocks as crude prices fall for a fifth consecutive session while health care and food beverage stocks lead outperformers. BP Plc and TotalEnergies SE dropped at least 3%, dragging Europe’s Stoxx 600 Index down 0.7%. Here are the biggest movers Tuesday:

• Maersk shares climb as much as 3.7% after the Danish shipping giant boosted its guidance. Nordea says the market may not be “fully cognizant” of the company’s earnings potential in 2024
• Klepierre advances as much as 2.8%, hitting highest since March 2020, after Citi double-upgrades to buy, saying that rental and cyclical prospects now look positive for the French property management company
• Burckhardt Compression shares jump as much as 7.3%, the most since May 2023, to hit a record high after the world’s largest piston compressor manufacturer exceeded FY consensus expectations
• Ceres Power shares jump as much as 6.5% after the fuel cell technology company was awarded a further contract for the second phase of its collaboration with Shell on green hydrogen
• Nibe falls as much as 7.4%, the most since May 17, and Tuesday’s worst performer on the Stoxx 600 regional benchmark, after Barclays cut its recommendation on the Swedish heat-pump firm to underweight from equal weight
• Allianz falls as much as 3.6% on Tuesday after Citi cuts its recommendation on the German insurer to neutral from buy, with analysts saying that Generali and Axa have greater capital optionality on a 3-year view that is expected to be at least partly realized
• British American Tobacco shares slip as much as 1.8%, the most in over two months, after the company’s trading update showed it is “on track” to deliver FY24 guidance, but with revenue growth weighted to the latter half of the year
• DS Smith, falls as much as 1.9% after Bloomberg News reported that Brazilian pulp producer Suzano is working on a revised offer to buy International Paper, a deal that would threaten to derail International Paper’s plan to acquire DS Smith
• Shelf Drilling declines as much as 7.3%, the most in two months, after announcing that the Norwegian Ocean Industry Authority did not accept its application related to a jack-up rig
• Chemring Group shares fall as much as 3.2%, easing further away from recent 12-year highs, as analysts greeted the defense firm’s reiterated guidance and its target of generating £1b in annual revenue by 2030

In Europe, strong economic data and vocal ECB hawks are pushing some analysts and investors to waver in their expectations for rate cuts this year. While most economists still foresee quarterly reductions following an initial move this week, some reckon sticky inflation, rapid wage growth and surprisingly robust euro-zone output will constrain loosening. The region’s equities are still in line for a boost from rate cuts and an improving corporate earnings outlook, according to Citigroup Inc. strategists led by Beata Manthey. If rates settle at pre-global financial crisis levels — as expected by the bank’s economists — that would be a longer-lasting tailwind for stocks, according to the Citi team.

Earlier, Asian stocks declined after weak US manufacturing data triggered concerns of slowing growth in the world’s largest economy. Indian shares led losses as signs emerged that Narendra Modi’s party may secure a narrower victory in India’s elections than previously expected. The MSCI Asia Pacific Index fell as much as 1.4%, with India’s Reliance among the biggest drags along with TSMC and ICICI Bank. Declines were also notable in the Philippines and Taiwan, while benchmarks gained in Indonesia and mainland China. Fears of slower growth in the US set in after data that showed American factory activity shrank at a faster pace in May. While the soft numbers helped revive bets on Federal Reserve policy easing, it also raised concerns about the potential drag on Asian economies.

Key Indian equity gauges fell more than 8% before paring losses. They rose more than 3% Monday on hopes for a landslide win for the Modi-led Bharatiya Janata Party. A stronger majority for the party is seen helping the prime minister push through market reforms.

“After the sharp run-up some profit booking is also expected,” said Kranthi Bathini, a strategist at WealthMills Securities. “While not many investors are expecting a defeat for the BJP-led alliance, if the ruling party gets significantly less seats than initially expected, we may see a sharp reversal.”

In FX, the Bloomberg Dollar Spot Index rises 0.2%. The Norwegian krone, Australian dollar and Swedish krona led Group-of-10 losses on sapped risk appetite, after Monday’s US ISM data showed signs the US economy is cooling. The Japanese yen is the best performer among the G-10 currencies, rising 0.5% against the greenback. USD/JPY dropped as much as 0.7% to 155.04, the lowest level since mid-May after Bloomberg reported that the BOJ is likely to discuss the reduction of bond purchases as early as its policy meeting next week (which doesn't mean it will actually8 do anything). The Swiss franc edges higher after inflation held at its fastest pace this year. EUR/CHF fell as much as 0.5% to 0.97223, the lowest level since April 23; Swiss inflation held at its fastest pace this year, eroding the case for an SNB interest-rate cut when officials meet later this month

In rates, treasuries reversed earlier losses, with US 10-year yields dropping to 4.38% as traders awaited US JOLTS data for an indication of the health of the labor market. Treasuries were slightly richer across the curve supported by bigger gains for European bonds where German 10-year yields are more than 2bp lower on the day. Yields are less than 1bp richer on the day with 10-year around 4.39%, lagging bunds and gilts by 2.5bp and 1.5bp; curve spreads are likewise within 1bp of Monday’s close while in Europe, gilt curve is notably flatter as front-end lags. In front-end, Fed-dated OIS have resumed fully pricing in a 25bp rate cut in November. Fed swaps continue to shift back toward pricing in rate cuts this year, with 25bp of easing priced by November and 42bp for December FOMC vs 34bp at Friday’s close

In commodities, WTI is down 2.2%, trading near $72.60 a barrel. Spot gold falls ~$21 to around $2,329/oz.

US economic data includes April JOLTS job openings and factory orders and April revised durable goods orders (10am). Fed officials are expected to refrain from commenting until after their June 12 policy announcement

Market Snapshot

• S&P 500 futures down 0.3% to 5,280.75
• STOXX Europe 600 down 0.5% to 517.01
• MXAP down 0.7% to 178.90
• MXAPJ down 1.2% to 552.34
• Nikkei down 0.2% to 38,837.46
• Topix down 0.4% to 2,787.48
• Hang Seng Index up 0.2% to 18,444.11
• Shanghai Composite up 0.4% to 3,091.20
• Sensex down 4.7% to 72,887.88
• Australia S&P/ASX 200 down 0.3% to 7,737.06
• Kospi down 0.8% to 2,662.10
• German 10Y yield little changed at 2.55%
• Euro down 0.2% to $1.0880
• Brent Futures down 1.2% to $77.44/bbl
• Gold spot down 0.6% to $2,335.75
• US Dollar Index little changed at 104.22

Top Overnight News

• European stocks slipped, led by a tumble in energy stocks, while Treasuries steadied after Monday’s rally prompted by signs the US economy is cooling.
• The Bank of Japan is likely to discuss the reduction of bond purchases as early as its policy meeting next week, according to people familiar with the matter.
• German unemployment rose more than anticipated — underscoring expectations that Europe’s biggest economy will recover only gradually this year.
• Japan’s finance minister defended the government’s record intervention in the currency market in his first acknowledgment of the action.
• Strong economic data and vocal European Central Bank hawks are pushing some analysts and investors to waver in their expectations for interest-rate cuts this year.
• Swiss inflation held at its fastest pace this year, eroding the case for a Swiss National Bank interest-rate cut when officials meet later this month.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following a similar performance from Wall Street in the absence of any fresh overnight catalysts, with the tone tilting lower towards the end of the session. ASX 200 saw losses in the energy sector being countered by gains among gold names. Nikkei 225 was the regional laggard with losses among energy names, whilst autos slipped after a safety test scandal among some Japanese automakers widened on Monday, with Toyota Motor and Mazda both halting shipments of some vehicles. Hang Seng and Shanghai Comp were mixed with modest gains in the former amid upside in healthcare and properties, whilst the Mainland was flat/slightly softer albeit within tight ranges. India's Nifty 50 slipped as election results are being counted and PM Modi's lead fluctuated, with early weakness in Indian markets attributed to a narrowing lead.

Top Asian News

• BoJ Gov Ueda said if underlying inflation moves as BoJ projects, BoJ will adjust the degree of monetary support. If economic and price projections and assessment of risks change, that will also be a reason to change interest rate levels. The policy goal is price stability, so will not guide policy to fund fiscal spending. The basic stance is to allow markets to set long-term interest rates. Ready to conduct nimble market operations if there are sharp rises in long-term rates.
• Japanese Finance Minister Suzuki said forex intervention had certain effects; intervention was intended to respond to speculative moves; will continue to respond appropriately
• Japan's economy is recovering moderately but consumption is stalling, and wages are not rising enough to offset rising prices, according to a draft roadmap; Japan's govt to call on the need for vigilance to impact of weak yen on households' purchasing power in long-term.
• Japanese PM Kishida not to call a snap election during the current parliament session, according to Asahi newspaper.
• ANZ-Roy Morgan Australian Consumer Confidence changed little, increasing 0.3pts to 80.5pts. Overall confidence is very weak. The series has been below neutral for over 2yrs. Inflation expectations rose 0.1pts to 5.0%.
• The Bank of Korea said inflation is expected to ease gradually as projected in May.
• PBoC injected CNY 2bln via 7-day reverse repos with the rate at 1.80%.
• TSMC (2330 TT/TSM) said they have had conversations with customers about whether to move TSMC's fabs out of Taiwan amid China tensions; added it is impossible to move TSMC's fabs out of Taiwan as 80%-90% of production capacity is in Taiwan.
• BoJ's Himino says firms will likely have more freedom in setting prices flexibly when prices and wages are rising moderately in tandem. In economy facing effect zero lower bound, asset price moves such as FX, stocks and property prices are likely to serve as key transmission channel of monpol. Guiding monpol to attain a situation where underlying inflation moves to around 2%; several measures have underlying inflation short of this figure, but gradually accelerating towards it. Need to look at price data and various factors such as wages and firm activity when judging underlying inflation. Inappropriate for monetary policy to target FX. FX fluctuations have various impacts, not just through import costs but on activity as well. Must be very vigilant to FX action. Must look at various aspects in guiding policy, should not automatically respond to FX moves in setting rates. Need to consider the whole economy and prices when considering what to do with the balance sheet. Desirable for market forces to set long-term rates. Must avoid abrupt bond market moves.
• BoJ is said to mull reducing bond buys as early as the June meeting, via Bloomberg.

European bourses, Stoxx 600 (-0.5%) began the session modestly in the red and have continued to slip throughout the morning as post-ISM demand concerns weigh alongside a marked deterioration in India's performance (NIFTY 50 -5.9%) as the ongoing vote count for Modi is much less favourable than the exit poll implied. European sectors hold a strong negative bias; Energy and Basic Resources are found at the foot of the pile, given the broad weakness in the commodities complex. Banks are also weighed on by the relatively lower yield environment. US Equity Futures (ES -0.6%, NQ -0.6%, RTY -1.1%) are entirely in the red, conforming to the sentiment seen in Europe/India. Nvidia (-0.8%) is softer in the pre-market after reports that the TSMC new Chair has hinted that the Co. could increase the price of AI chip production services.

Top European News

• Airbus (AIR FP) is reportedly in discussions to sell over 100 widebody jets to China, via Bloomberg

FX

• DXY is attempting to claw back some of yesterday's ISM-induced losses which sent the index down as low as 103.99 during APAC trade. Interim resistance is provided by the 200DMA at 104.39 and 100DMA at 104.40. Next up, US JOLTS.
• EUR/USD ventured as high as 1.0915 during APAC trade but the pair's move above 1.09 proved to be short-lived, and currently holds around 1.087.
• GBP is on the backfoot vs. the USD and steady vs. the EUR. Cable went as high as 1.2817 in APAC trade in an extension of yesterday's price action before succumbing to broader Dollar strength, taking the pair back down to c.1.276.
• JPY is benefitting vs. peers amid its safe-haven appeal, narrowing yield differentials and jawboning from various Japanese officials. USD/JPY down as low as 155.21 with not much in the way of support ahead of the 155 figure.
• Antipodeans are both suffering in the current risk environment but AUD more so alongside declines in iron ore prices and ANZ suggesting that Australian consumer confidence remains weak.
• EUR/CHF was initially slightly choppy following Swiss inflation metrics before lifting from 0.9744 to 0.9781 over the course of five minutes. The odds of a 25bp cut at the June meeting have increased to circa. 51% from around 40% earlier in the week. Move has since pared given haven allure for CHF.
• INR is pressured amid some concern over the results of the Indian elections, as while the BJP-led NDA alliance is ahead and on course for victory the margin of result looks to be much less than initial exit polls had suggested and potentially indicative of BJP alone not hitting the 272 simple majority level as they have previously done.
• Reuters reports that the RBI is likely on offer near 83.50 in USD/INR via state-run banks, citing traders; offers described as "mild".
• PBoC set USD/CNY mid-point at 7.1083 vs exp. 7.2297 (prev. 7.1086)
• Brazil's Finance Ministry to announce fiscal measures on Tuesday, according to a statement cited by Reuters.

Fixed Income

• USTs are firmer and continue to extend on the the post-ISM upside, with additional bullishness stemming from a well received JGB sale overnight and the general risk tone. Since, Bloomberg reported that the BoJ is said to mull bond buys as early as the June meeting, sparking some modest pressure across the fixed income complex; as such, USTs are off best levels but still in the green.
• Bunds are in-fitting with Treasury action; German employment data led to very modest upside due to the higher-than-expected unemployment change. Bunds as high as 130.48, just about above last Tuesday's best, though has since pulled off best.
• Gilts are tracking the broader tone and as such entered the morning's auction with upside of almost 40 ticks. An auction which sparked a pullback of around 10 ticks given the chunky tail but still leaves Gilts comfortably in the green and broadly in-fitting with peers.
• UK sells GBP 2bln 4.00% 2063 Gilt: b/c 3.10 (prev. 2.92x), average yield 4.557% (prev. 4.518%), tail 1.3bps (prev. 0.6bps)
• Germany sells EUR 3.689bln vs exp. EUR 4.5bln 2.90% 2026 Schatz: b/c 2.7x (prev. 2.5x) & avg. yield 3.01% (prev. 2.93%) and retention 18.02% (prev. 18.00%)
• Saudi's PIF gives initial price guidance of circa. Gilts +135bps for its GBP 5yr note and Gilts +145bps for GBP 15yr notes, via IFR
• Japan sold JPY 2.6tln in 10-year JGB, b/c 3.66x (prev. 3.15x), average yield 1.048% (prev. 0.857%), tail 0.02 (prev. 0.05).

Commodities

• Crude continues to slump following the OPEC+ 'roadmap' and the growth concerns triggers by Monday's US ISM Manufacturing print. Benchmarks at lows of USD 72.63/bbl and 76.89/bbl for WTI Jul'24 and Brent Aug'24 respectively.
• Nat gas futures were initially only taking a breather from Monday's marked upside after issues to a Norwegian-Britain pipeline. Thereafter, more significant pressure emerged as Gassco announced that the work to repair the crack is a matter of days not weeks.
• Precious metals have come under increasing pressure as the European morning progresses; specifics light, although Dollar has been edging higher in today's session.
• Base metals are also suffering on the demand angle post-PMIs, USD strength and a deterioration in the broader risk tone driven by India alongside negative updates regarding Nvidia.
• Coalition of over 400 Japanese firms is poised to set up a USD 1bln fund as early as the fiscal half ending Sept to boost hydrogen supply chains, according to Nikkei.
• HSBC said their Brent price assumption remains USD 82/bbl for 2024, including USD 80/bbl in H2 2024, falling to USD 76.50/bbl from 2025 onwards.
• UBS on OPEC+ announcements: Expects some near-term volatility on supply concerns, but retains modestly positive outlook for crude prices; says "does not think plan to unwind output cuts will tilt markets into oversupply". Expects Brent to trade around USD 87/bbl at year-end.
• Gassco says we have received a repair schedule from the operator of the Sleipner riser platform and is expected to take 2 days to repair; repairs may take longer than 2 days or could go faster; not a matter of weeks to repair
• Chevron Australia confirms full LNG production has resumed at the Gorgon gas facility after a temporary outage on Monday, 3rd June, according to a spokesperson.

Geopolitics

• "A Hamas official told Al-Mayadeen that no delegation from the group went to Cairo, and that it did not accept what was offered by the mediators", via Guy Elster on X
• "Media close to Hezbollah: Diplomatic letters have arrived in Beirut in recent days warning of the threat of an imminent Israeli strike", according to Sky News Arabia
• "Major differences between Israel and the United States over the second phase of the truce deal", according to Sky News Arabia quoting an Israeli official cited by local press.
• Hamas is slated to send a delegation to Cairo today to discuss the latest Israeli hostage deal proposal, according to Times of Israel sources.
• "Lebanese media: Renewed fires in the forests of several border towns in southern Lebanon as a result of the throwing of Israeli phosphorus bombs", according to Sky News Arabia.
• Israeli PM Netanyahu's office said "No date has yet been set for Prime Minister Netanyahu's speech to both houses of Congress. In any case, the speech will not take place on June 13 due to the second holiday of Shavuot".
• UK, France and Germany have formally submitted a draft resolution against Iran to the IAEA Board of Governors, according to Reuters citing diplomats.

US Event Calendar

• 10:00: April Cap Goods Ship Nondef Ex Air, prior 0.4%
• 10:00: April Cap Goods Orders Nondef Ex Air, est. 0.3%, prior 0.3%
• 10:00: April -Less Transportation, est. 0.4%, prior 0.4%
• 10:00: April JOLTs Job Openings, est. 8.35m, prior 8.49m
• 10:00: April Factory Orders Ex Trans, est. 0.5%, prior 0.5%, revised 0.4%
• 10:00: April Factory Orders, est. 0.6%, prior 1.6%, revised 0.8%
• 10:00: April Durable Goods Orders, est. 0.7%, prior 0.7%

DB's Jim Reid concludes the overnight wrap

Over the last week we've had three sessions now where for a lot of the day weaker economic news has meant bad news for markets rather than bad news automatically being good news due to more dovish rate expectations. However in the last two sessions the pullback has failed to stick before dip buyers have come in. Yesterday, the rates market saw a major rally after the ISM manufacturing print was noticeably weaker than expected. That led to a fresh round of anticipation that the Fed would still cut rates this year, and it meant the 10yr Treasury yield (-11.1bps) fell for a 3rd consecutive day to 4.39%, whilst the 10yr bund yield was down a slightly lesser -8.4bps. The S&P 500 gained +0.11% after being down -0.8% at its lows.

In terms of the details of that manufacturing ISM print, the headline measure fell back to 48.7 (vs. 49.5 expected), marking a second consecutive decline for the measure. But importantly, the new orders subcomponent also fell to a 12-month low of 45.4 (vs. 49.4 expected), so there was little respite from the details either. The one bright spot came from the employment numbers, which did hit a 21-month high of 51.1 (vs. 48.5 expected). But apart from that, the report was definitely one that dampened optimism about the state of the US economy right now. And it follows a run of weaker US data over recent days, including the spending data on Friday and the negative Q1 GDP revisions on Thursday.

Given the worse-than-expected numbers, investors dialled up their expectations for rate cuts this year. For example, the amount priced in by the Fed’s December meeting rose by +5.1bps on the day to 41.4bps. That trend got further support from the prices paid component of the ISM, which fell to 57.0 (vs. 59.0 expected), so it added to the sense that the worst of the recent inflation spike had now passed.

Whilst the ISM was the main catalyst for yesterday’s moves, they got fresh momentum thanks to the latest decline in oil prices, as Brent crude closed beneath $80/bbl for the first time since February. In fact, it was its 4th consecutive daily decline, and the move yesterday left it down by -4.26% at $78.14/bbl. Oil had largely ignored the OPEC+ meeting on Sunday but started selling off sharply half an hour before the US data prints but then seemed to accelerate through the ISM. The initial move lower coincided with the timing of news that Israeli Prime Minister Netanyahu would meet with more right-wing members of his coalition on the current cease-fire proposal, with the market potentially giving the current negotiations more credence. The drop helped to further ease fears about inflationary pressures, and added to the sense that rate cuts were getting closer. Indeed, that rate cut theme is something we could hear a lot more about by the end of the week, as we’ve got the Bank of Canada’s decision tomorrow, followed by the ECB on Thursday.

With rate cut speculation mounting again, sovereign bonds rallied strongly across the world. In the US, it meant the 2yr Treasury yield fell -6.5bps to 4.808%, whilst the 10yr yield was down -11.0bps to 4.388%. That’s the biggest move lower in 10yr yields since January 31st and same with the combined 3-day move (-22.3bps lower). Over in Europe, yields on 10yr bunds (-8.4bps), OATs (-8.4bps) and BTPs (-9.5bps) also fell back, which came as the final manufacturing PMIs for May were revised marginally weaker than the flash prints. For instance, the Euro Area manufacturing PMI was revised down a tenth from the flash print to 47.3, and the UK number was also revised down a tenth from the flash print to 51.2.

For equities, the second half of the US session proved much more optimistic than the first, with the S&P 500 (+0.11%) eventually, after a big struggle, reacting more to the rate cut hopes than the weak growth data. The last three hours of trading in New York saw a +0.94% rally reverse the earlier losses. The rally was built on strong outperformance from the Magnificent 7 (+1.40%) and growth sectors that enjoy lower rates such as semiconductors (+2.4%), biotech (+1.1%), and tech (+0.6%), while energy (-2.6%) saw heavy losses on the move in oil and cyclicals like industrials (-1.3%) and materials (-0.6%) were unable to shake off the weaker growth backdrop. Europe outperformed with the STOXX 600 (+0.32%) advancing for a third consecutive session, alongside the DAX (+0.60%) with the CAC 40 just better than unchanged (+0.06%).

Asian equity markets are struggling to gain momentum this morning though with the KOSPI (-0.46%), Nikkei (-0.45%) and the S&P/ASX 200 (-0.22%) edging lower this morning while Chinese stocks have managed to tick up with the Hang Seng (+0.36%) and the CSI (+0.38%) eking out gains. US stock futures are fairly flat with 10yr US yields back up a couple of bps to 4.41%.

Japan’s Finance minister Shunichi Suzuki has admitted in an overnight speech that the government did intervene in the FX market in late April and early May. He suggested that it likely had some impact in stabilising the currency after the authorities on Friday disclosed that it spent 9.8 trillion yen ($62.7 billion) intervening in the market to prop up the yen. The yen is -0.20% to trade at 156.40 per dollar as we go to print.

In India, early election counting has hinted at a less substantial win for Modi's ruling alliance than the exit polls suggested on Sunday night. After climbing more than 3% yesterday, Indian stocks have dropped around 2% this morning in early trading. We'll have a lot more info as the count progresses today.

Here in the UK, the general election is now exactly a month away, and there was significant news yesterday as Nigel Farage announced that he would become leader of the right-wing Reform UK party. Farage was previously the leader of UKIP for many years, and played a significant role in the Brexit campaign of 2016. He previously said that he wouldn’t stand for Parliament at this election, but reversed course yesterday and said he’d be standing in the Essex seat of Clacton, which was the only seat won by UKIP in the 2015 general election. This could pose a big problem for the governing Conservatives, since if they lose votes to Reform in key seats, it would mean that the opposition Labour Party are able to win many more seats. In terms of the latest polls (taken before Farage’s announcement), the latest seat projection from YouGov suggests that Labour will win a majority of 194, taking 422 seats in the House of Commons. That would exceed their landslide victory in 1997 under Tony Blair. In the meantime, the Conservatives would fall back to just 140 seats, down from 365 at the 2019 election.

To the day ahead now, and data releases include German unemployment for May, whilst in the US there’s the JOLTS job openings and factory orders for April.