Newsquawk

Euro Market Open: Wall St. retreat and a subdued APAC handover with NFP ahead amid Fed speak

06 May 2022, 06:50 by Newsquawk Desk

US stocks took a beating and gave back post-FOMC gains in which the DJIA slumped by more than 1000 points
APAC stocks were mostly lower amid spillover selling from the sharp declines on Wall Street
DXY held firm amid recent gains in yields and after the stock rout in the US spurred a flight to safety
EU's Borrell said EU members are almost there on an agreement on a new package of sanctions against Russia
ECB's Holzmann said the ECB is planning to raise rates, which they will discuss and probably do at the June meeting
The Labour Party has secured Wandsworth and are ready to call Westminster in local elections, according to BBC sources
Looking ahead, highlights include US & Canadian Labour Market Reports, Riksbank Minutes, Speeches from Fed's Williams, Waller, Bostic, Bullard, Daly & Kashkari, Earnings from Adidas, Intesa Sanpaolo, ING & IAG.

LOOKING AHEAD

US & Canadian Labour Market Reports, Riksbank Minutes, Speeches from Fed's Williams, Waller, Bostic, Bullard, Daly & Kashkari, Earnings from Adidas, Intesa Sanpaolo, ING & IAG.
Click here for the Week Ahead preview

US TRADE

US stocks took a beating and gave back post-FOMC gains in which the DJIA slumped by more than 1000 points and the Nasdaq had its worst day since June 2020.
SPX -3.56% at 4,147, NDX -5.06% at 12,851, DJIA -3.12% at 32,998, RUT -4.04% at 1,871.
Click here for a detailed summary.

NOTABLE US HEADLINES

US President Biden announced Karine Jean-Pierre as the new White House Press Secretary with Jen Psaki to leave next week, according to Axios.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS TALKS

White House said it is working to finalise a call among G7 leaders regarding Ukraine which is likely in the approaching days, according to Reuters.

DEFENCE/MILITARY/ASSISTANCE

Ukrainian President Zelensky said evacuations of civilians from Mariupol continued on Thursday and said that Russians are continuing to storm and shell the Azovstal plant, while he added that they are doing everything to find a solution to save Ukrainian military defenders in Mariupol, according to Reuters.
US officials said intel shared by the US helped Ukraine sink Russia's flagship Moskva on April 14th, according to NBC News.

ENERGY/SANCTIONS/DIPLOMATIC

EU is reportedly considering sanctions against Russian President Putin's alleged girlfriend Alina Kabaeva, according to Business Insider.
EU's Borrell said EU members are almost there on an agreement on a new package of sanctions against Russia, according to Reuters.
Hungarian PM Orban accused Brussels of threatening EU unity with its plans to impose an embargo on Russian oil imports and Hungary won't support proposals that undermine its energy security, according to Financial Times.
Austria said it could require years to cut Russian gas entirely, according to Bloomberg.

OTHER

White House said US President Biden will meet with counterparts from South Korea and Japan during his Asia trip and will also meet quad nation leaders in Tokyo, while North Korea will be a topic during the trip and they will also discuss holding Russia accountable for actions in Ukraine, according to Reuters.
White House said it is optimistic it can find ways to address any concerns Sweden or Finland may have as they consider NATO membership, according to Reuters.
The recent oil price rise has reportedly left Iran in no rush to revive the 2015 nuclear deal, according to officials familiar with Tehran's thinking cited by Reuters.

APAC TRADE

EQUITIES

APAC stocks were mostly lower amid spillover selling from the sharp declines on Wall Street.
ASX 200 was heavily pressured in which the losses in tech led the broad declines across all sectors.
Nikkei 225 initially declined on return from the Golden Week holidays but then pared all its losses as currency weakness persisted with Japan also planning to introduce tax incentives, as well as ease border measures in June.
Hang Seng and Shanghai Comp conformed to the downbeat mood with tech and property names dragging the Hong Kong benchmark lower, while China also remained steadfast in its "dynamic COVID clearance" policy.
US equity futures traded sideways overnight which provided much-needed respite from the prior day's stock rout.
European equity futures are indicative of a softer open with Eurostoxx 50 -0.3% after the cash market closed lower by -0.8% yesterday.

FX

DXY held firm amid recent gains in yields and after the stock rout in the US spurred a flight to safety into the dollar which briefly lifted the DXY to just shy of the 104.00 level to match YTD highs, before fading some of the gains in US trade.
EUR/USD traded lacklustre after losing ground to the mighty dollar but with the single currency off its lows after support at 1.0500 ultimately held and with ECB’s Holzmann suggesting the potential for a June rate discussion and hike.
GBP/USD was uneventful after yesterday's post-BoE slump and with price action unaffected by the results from the local elections which showed PM Johnson's Tories lost in the flagship council of Wandsworth after four decades of control.
USD/JPY extended on gains after the recent widening of yield differentials and despite the firmer than expected Tokyo CPI figures which showed headline inflation at its highest since 2014, with inflationary pressures seen as temporary.
Antipodeans were lacklustre with price action contained by the risk aversion, while the RBA's SoMP didn't provide much to excite markets in which it noted that further increases in interest rates are needed to restrain inflation.

FIXED INCOME

10yr UST futures were lacklustre following the recent bear steepening amid concerns over whether the Fed is doing enough to stop inflation and with the US 10yr yield sitting north of 3.0%.
Bunds remained subdued after the prior day’s whipsawing and several comments from ECB officials suggesting a preference for a hike within the next couple of months.
10yr JGBs tracked the recent losses in global counterparts and failed to benefit from the improved demand at the enhanced liquidity auction.

COMMODITIES

Crude futures were choppy but ultimately higher on the session with the US planning to replenish the SPR.
Brazilian President Bolsonaro said a fresh hike in fuel prices by Petrobras could bankrupt Brazil and urged Petrobras not to increase fuel prices again, according to Reuters.
Spot gold was lacklustre following its retreat beneath the USD 1900/oz level as the dollar remained firm.
Copper languished at the prior day's lows after the stock rout on Wall Street rolled over into Asia.

CRYPTO

Bitcoin was subdued after having dropped by the most in 2 months yesterday to beneath the 37,000 level.

NOTABLE HEADLINES

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a net neutral daily position.
PBoC set USD/CNY mid-point at 6.6332 vs exp. 6.6402 (prev. 6.5672)
China is instructing government agencies and state firms to replace foreign PCs, while it will order new computers and software within two years, according to Bloomberg.
USTR said the US review of tariffs on Chinese goods is the start of a process that will involve stakeholder comments and assess the impact on the economy, according to Reuters.
RBA Statement on Monetary Policy noted further increases in interest rates are needed to restrain inflation, while it sharply increased inflation forecasts and sees core inflation above the 2%-3% target until 2024.

DATA RECAP

Tokyo CPI YY (Apr) 2.5% vs. Exp. 2.3% (Prev. 1.3%)
Tokyo CPI YY Ex. Fresh Food (Apr) 1.9% vs. Exp. 1.8% (Prev. 0.8%)
Tokyo CPI YY Ex. Fresh Food & Energy (Apr) 0.8% vs. Exp. 0.6% (Prev. -0.4%)

UK/EU

UK LOCAL ELECTIONS

The Labour Party has secured Wandsworth and are ready to call Westminster, according to BBC sources, as a Labour victory; two key Conservative councils which will be regarded as a Labour victory and Tory loss.
More broadly, the performance is disappointing but not as disappointing as some projected for the Conservatives, with early estimates indicating a loss of circa. 1/5 seats they are defending.
For Labour, they have attained other key seats including Southampton and are projected to have an overall lead in vote share, according to BBC analysis; but, they are securing only modest gains overall ex-London.
Reminder, just shy of half of the councils involved did not begin vote counting overnight, due to start Friday morning including much of in-focus N. Ireland where Sinn Fein and the DUP are facing off. Note, historically governing parties don’t perform as well in mid-term local elections.