- US stocks ultimately finished with mild gains as European weakness was offset once US trade got underway and with a last-minute boost seen heading into the market close with upside led by gains in the Consumer Discretionary Sector thanks to outperformance in both Tesla (TSLA) and Amazon (AMZN). However, the upside in the major indices was limited and the majority of sectors were in the red, while Fed bank stress test results and Micron earnings failed to inspire futures after hours despite the latter beating on top and bottom lines.
- USD was firmer with DXY above the 106.00 level with little direct catalyst behind the strength in the dollar but was more of a function of the weakness in its peers.
- Looking ahead, highlights include Japanese Retail Sales, Australian MI Inflation Expectations, New Zealand ANZ Business Confidence, Chinese Industrial Profits, Supply from Japan.
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LOOKING AHEAD
- Highlights include Japanese Retail Sales, Australian MI Inflation Expectations, New Zealand ANZ Business Confidence, Chinese Industrial Profits, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately finished with mild gains as European weakness was offset once US trade got underway and with a last-minute boost seen heading into the market close with upside led by gains in the Consumer Discretionary Sector thanks to outperformance in both Tesla (TSLA) and Amazon (AMZN). However, the upside in the major indices was limited and the majority of sectors were in the red, while Fed bank stress test results and Micron earnings failed to inspire futures after hours despite the latter beating on top and bottom lines.
- SPX +0.16% at 5,478, NDX +0.25% at 19,751, DJI +0.04% at 39,128, RUT -0.21% at 2,018.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bowman (Voter) reiterated that she expects inflation to decline with the policy rate held steady.
- Fed Bank Stress Tests showed large US banks are well positioned to weather a recession and stay above minimum capital requirements, while banks passed the stress tests and all 31 banks could withstand a hypothetical recession which paves the way for higher payouts although they reported greater losses than in 2023 stress tests as bank balance sheets are riskier and expenses are higher.
DATA RECAP
- US New Home Sales-Units (May) 0.619M vs. Exp. 0.64M (Prev. 0.634M, Rev. 0.698M)
- US Building Permits Number (May) 1.399M (Prev. 1.386M)
FX
- USD was firmer with DXY above the 106.00 level with little direct catalyst behind the strength in the dollar but was more of a function of the weakness in its peers.
- EUR softened and steadily retreated to beneath the 1.0700 handle against the buck as ECB officials continued to point to further cuts this year.
- GBP trickled lower throughout the session after the recent failure to reclaim the 1.2700 status amid a lack of pertinent drivers.
- JPY underperformed in which USD/JPY reclaimed the 160.00 level status and continued advancing to near the 161.00 handle after ultimately shrugging off more forceful jawboning from Japan's top currency diplomat Kanda who said he is seriously concerned about recent rapid weakness in the yen and will take necessary action on excessive moves.
- SNB appointed Schlegel as the new Chairman to replace Jordan from end-September, while Antoine Martin will replace Schlegel as Vice Chair.
FIXED INCOME
- T-notes were pressured after hot Aussie CPI, pre-French election nerves and Japanese official commentary, while prices failed to meaningfully benefit from the well-received US 5-year auction which comes ahead of Thursday's 7-year auction.
COMMODITIES
- Oil prices swung between gains and losses but settled relatively flat on the day despite bearish headline crude inventories.
- US EIA Weekly Crude Stocks 3.591M vs. Exp. -3.0M (Prev. -2.547M)
- US authorises some maritime transport transactions related to the Sakhalin-2 energy project and importation into Japan through to June 28th 2025.
- Codelco May copper production was at 103.1k ton which was 8.6% below the target of 112.8k tons, while Jan-May copper production was at 484.5k which was 6.1% below the target of 516.1k tons.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu reportedly ordered the resumption of working teams on the Iranian nuclear issue, while officials said the move followed new information about Iranian actions related to the production of nuclear weapons, and concerns that former senior defence officials had expressed to the PM's office that the issue had been neglected since the formation of the government, according to Walla News.
- Israeli Defence Minister Gallant said after meeting with US National Security Adviser Sullivan that significant progress has been made on the issue of the equipping and armaments that Israel needs.
- Israel may have to take a very strong escalatory step at Lebanon, according to Al Jazeera citing an army source via Israeli Channel 12.
- Senior US official said the US reaffirmed commitment to weapons supplies to Israel, except for one shipment of heavy munitions that remains under review, while the official said the onus remains on Hamas to embrace the ceasefire proposal.
OTHER
- Russian Deputy Foreign Minister said Russia does not rule out a military response to the attack on Sevastopol, according to Interfax.
- EU countries agreed on a new sanctions package on Belarus that aligns restrictions with sanctions against Russia.
ASIA-PAC
NOTABLE HEADLINES
- China's cabinet said it will step up policy support for key groups including college students and migrant workers, according to state media.
- EU refined tariff rates set to hit EVs from China with the tariff on SAIC revised to 37.6% from 38.1% and tariff on Geely revised to 19.9% from 20%, according to Bloomberg. Furthermore, German Chancellor Scholz said they have ensured that the EU and China are on the same page on EV tariff talks.
- FCA urged to block the Shein London listing on forced labour concerns, according to FT.
- Japan reportedly plans support for the Philippines 5G network to counter China tech and the US is expected to provide money for the project, according to Nikkei.
- Japanese top currency diplomat Kanda said he is seriously concerned about recent rapid weakness in the yen and will take necessary action on excessive moves, while he said they are always prepared to respond and do not have specific levels in mind. Kanda said he believes the majority view yen weakness as a speculative move and it is generally seen that the current weakness of the yen is not justified. Furthermore, he said recent yen moves are rapid and there is no mistake that the current FX is moving in one direction.
EU/UK
NOTABLE HEADLINES
- ECB Chief Economist Lane said under the baseline view, more cuts can be expected over time and need to act step by step in times of uncertainty.
- ECB's Kazaks said there is no need to rush with monetary easing and they will take rate cuts step by step.
- ECB's Panetta said they should avoid even "casual" forward guidance on the timing of rate moves.
- ECB is reportedly to begin the next strategic review once the summer break concludes and is looking to present findings in H2 2025, according to Bloomberg.
- German Chancellor Scholz said von der Leyen is to be the EU Commission President and Costas is to be the European Council chief.
