European equities trade flat following Friday’s solid session for the region, FTSE 100 narrowly outperforms; US equity futures are flat
Saudi Arabia announced it is to cut an additional 1mln bpd of oil output in July; all other OPEC+ producers agreed to extend earlier cuts through to the end of 2024
Saudi’s Energy Minister said will keep the markets in suspense on whether the additional voluntary cut for July will be extended
DXY maintains a bullish momentum above 104.00, US Treasuries remain underwater, WTI sees post-OPEC gains
Looking ahead, highlights include US ISM Services PMI, Speeches from ECB’s Lagarde, Wunsch & Fed’s Mester, EU syndication announcement
5th June 2023
LOOKING AHEAD
Highlights include, US ISM Services PMI, Speeches from ECB’s Lagarde, Wunsch & Fed’s Mester, and EU Syndication announcement.
European equities trade flat with not much in the way of weekend newsflow to guide prices following Friday’s solid session for the region, whilst the FTSE 100 narrowly outperforms.
Equity sectors are a mixed bag with Telecoms top of the leaderboard, followed closely by Energy and Real Estate, while Tech, Travel & Leisure, and Consumer Products & Services reside at the bottom.
US equity futures are flat following Friday’s session of gains (ES -0.1%, NQ -0.2%, RTY +0.1%)
Click here and here for a recap of the main European updates.
DXY maintains a bullish momentum above 104.00 in the wake of Friday’s strong US payrolls gain which resulted in a hawkish tilt in Fed pricing.
USD/JPY rebounds sharply towards 140.50 from just shy of 140.00 overnight amidst higher Treasury yields and wider spreads to JGBs after slowdowns in Japan’s services and composite PMIs.
Euro extends declines against its US counterparts and against the backdrop of mostly sub-prelim or expected Eurozone services and composite PMIs.
Aussie straddles 0.6600 on the eve of the RBA that could be a very close call.
Yuan weakens irrespective of a firmer than forecast Chinese Caixin services PMI that boosted the composite number along with the manufacturing PMI, as China-US/Canadian/NATO tensions overshadowed the encouraging surveys.
PBoC set USD/CNY mid-point at 7.0904 vs exp. 7.0918 (prev. 7.0939)
Bunds are off worst levels having pared some losses from 134.81 amidst more mixed Eurozone macro releases including soft PMIs, PPI, Sentix readings vs a healthier-than-expected German trade balance.
Gilts have slipped to a new intraday base, albeit marginal at 96.25 in recent trade and probably in recognition of minor upward revisions to the final services and composite PMIs
US Treasuries remain underwater, but the curve is a bit more stable after post-NFP flattening in advance of the final PMIs, services ISM and a speech from Fed’s Mester.
WTI and Brent contracts gapped higher upon the return of futures trading following the weekend OPEC+ deliberations (see below).
Spot gold is subdued under USD 1,950/oz as the Dollar index remains firmer on the session – with the yellow metal finding support at its 100 DMA (1,939/oz) earlier.
Base are mostly subdued but to varying degrees amid the aforementioned APAC growth concerns, although the complex has trimmed losses. Iron ore continued rising overnight.
Saudi Arabia announced it is to cut an additional 1mln bpd of oil output for July in which its output will drop to 9mln bpd and all other OPEC+ producers agreed to extend earlier cuts through to the end of 2024. OPEC+ agreed to a new output target of 40.4mln bpd from 2024 with the output target for 2024 lowered by 1.4mln bpd and said Russia, Angola and Nigeria are to see significant production cuts in 2024, while the next OPEC+ meeting is to take place on November 26th, according to Reuters.
Saudi’s Energy Minister said they are not targeting prices and that the extra voluntary cut is a precautionary measure, while they will keep the markets in suspense on whether the additional voluntary cut for July will be extended and will review the extra voluntary cuts every month.
Saudi’s Energy Minister said Russia is delivering on its oil output commitments, while the UAE’s Energy Minister said there are some discrepancies in Russian production numbers and they don’t want politics involved in how they look at Russian production numbers, according to Reuters.
Russian Deputy PM Novak said OPEC+ agrees total oil output cuts of 3.66mln bpd and that the oil market is more or less balanced, while he added they are seeing oil demand rising and they have the possibility of tweaking decisions. Furthermore, he said they will take decisions so that the oil market is stable and that Russia is fulfilling its obligations in full, according to Reuters.
White House officials said they will continue to work with all fuel producers to ensure energy markets support US economic growth, according to Reuters.
CRYPTO
Bitcoin is on a softer footing back under USD 27k while Ethereum also succumbs to losses in the space, back below USD 1,900.
NOTABLE US HEADLINES
US President Biden signed the bill raising the debt limit into law on Saturday, according to the White House.
Large banks could face a 20% boost to capital requirements as those relying on fees may need larger capital buffers to absorb losses under planned rules, according to WSJ.
United Airlines (UAL) pilot union unanimously voted to authorise a strike vote, according to Reuters citing a letter from the union chair to pilots.
Tesla (TSLA) sold 77,695 Chinese-made cars in May (vs 75,842 in April), according to CPCA.
NOTABLE EUROPEAN HEADLINES
BoE is looking to broaden reform of the deposit guarantee scheme after the collapse of SVB's UK arm highlighted the weakness of the current regime, according to FT.
ECB's Vujcic said Eurozone inflation risks are tilted to the upside; wage pressures are "still very lively", according to Bloomberg.
Fitch affirmed the Bank of England at AA-; Outlook Negative.
S&P said France's "AA/A-1+" ratings affirmed; outlook remains negative; says tighter financial conditions and still-high core inflation will restrain France's economic activity in 2023 and 2024
DATA RECAP
German Exports MM SA* (Apr) +1.2% vs. Exp. -2.5% (Prev. -5.2%, Rev. -6.0%)
German Imports MM SA* (Apr) -1.7% vs. Exp. -1.0% (Prev. -6.4%, Rev. -5.5%)
German Trade Balance, EUR, SA* (Apr) 18.4B vs. Exp. 16.0B (Prev. 16.7B, Rev. 14.9B)
Swiss CPI YY (May) 2.2% vs. Exp. 2.2% (Prev. 2.6%)
Swiss Core CPI YY (May) 1.9% vs. Exp. 2.0%
EU S&P Global Comp Final PMI (May) 52.8 vs. Exp. 53.3 (Prev. 53.3)
EU HCOB Services Final PMI (May) 55.1 vs. Exp. 55.9 (Prev. 55.9)
EU Sentix Index* (Jun) -17.0 vs. Exp. -15.1 (Prev. -13.1)
UK Composite PMI Final (May) 54.0 vs. Exp. 53.9 (Prev. 53.9)
UK S&P GLBL/CIPS SVC PMI FNL (May) 55.2 vs. Exp. 55.1 (Prev. 55.1)
EU Producer Prices YY (Apr) 1.0% vs. Exp. 1.4% (Prev. 5.9%, Rev. 5.5%)
EU Producer Prices MM (Apr) -3.2% vs. Exp. -3.1% (Prev. -1.6%, Rev. -1.3%)
GEOPOLITICS
Russia's Defence Ministry said Ukraine began a large-scale military operation, according to Reuters.
Russia’s Belgorod regional Governor Gladkov said Ukraine shelled a market area in the town of Shebekino although no casualties were reported and he was willing to meet the group holding soldiers captive after the group earlier said it was willing to swap the soldiers for a meeting, while Gladkov said it is most likely that the group killed the captives but he would meet them at the Shebekino checkpoint and guarantee safety if the captive soldiers were alive. It was later reported that the pro-Ukraine group of Russian partisans said they took several Russian soldiers prisoners and will hand them over to Ukraine after the Belgorod Governor failed to turn up at the meeting, according to Reuters.
Russian Defence Ministry says Baltic Fleet started navy drills with the use of over 40 vessels and 3,500 servicemen; drills will last until June 15th, according to Reuters.
US and Canadian warships sailed through the Taiwan Strait on Saturday, while it was separately reported that Chinese Defence Minister Li accused the US of provocation after a near miss between warships in the Taiwan Strait, according to Reuters and ITV News.
Chinese Vice Foreign Minister to hold a meeting with Senior US State Department official on Monday; details are light, according to Reuters.
South Korea’s Defence Minister said that some countries were ignoring North Korea’s unlawful behaviour which creates holes in sanctions against North Korea passed at the UN Security Council, according to Reuters.
Russia's Kremlin said it welcomes the US' "positive statement" last week on regarding nuclear weapons and expects further diplomatic contact, according to Reuters.
APAC TRADE
APAC stocks were mostly positive amid momentum from Friday's post-NFP gains on Wall Street and as participants digested stronger Chinese Caixin Services and Composite PMI data.
ASX 200 was led higher by gains across nearly all sectors with early tailwinds in energy names following Saudi Arabia’s additional 1mln bpd output cut, while the RBA is seen to keep rates unchanged at tomorrow’s meeting.
Nikkei 225 climbed above 32,000 for the first time since 1990 with exporters propelled by a weaker currency.
Hang Seng and Shanghai Comp. were kept afloat following the encouraging Caixin PMIs but with gains capped amid US-China frictions and after China’s Cabinet noted that the foundation for the economic recovery is not solid, while property names were also pressured despite reports that China is mulling a support package for the property sector and bolster the economy.
NOTABLE ASIA-PAC HEADLINES
US Under Secretary of the Treasury for International Affairs Jay Shambaugh met with China’s new ambassador to the US Xie Feng on Friday, while the meeting was said to be candid, constructive and part of ongoing efforts to maintain open lines of communication, according to the Treasury.
China is soon to account for less than half of US low-cost imports from Asia in 2023 for the first time in over a decade, according to an annual reshoring index from Kearney cited by the FT.
Wuhan Commerce Bureau said initial talks have started with Disney (DIS) for the US firm to start a project in the city, according to Reuters.
DATA RECAP
Chinese Caixin Services PMI (May) 57.1 vs. Exp. 55.2 (Prev. 56.4)
Chinese Composite PMI (May) 55.6 (Prev. 52.9)
Australian Gross Company Profits (Q1) 0.5% vs. Exp. 2.0% (Prev. 10.6%)
Australian Business Inventories (Q1) 1.2% vs. Exp. 0.5% (Prev. -0.2%)
GLOBAL NEWS
Turkish President Erdogan named Cevdet Yilmaz as Vice President and Hakan Fidan a Foreign Minister, while he named Yasar Guler as Defence Minister and Mehmet Sismek as the Treasury and Finance Minister, according to Reuters.