Newsquawk

Euro Market Open: APAC supported though China participants out, DXY sub-102.00 with NFP ahead

03 Jun 2022, 06:50 by Newsquawk Desk

US stocks staged a comeback from opening losses; the Nasdaq outperformed and the SPX closed higher by 1.8%
APAC stocks took impetus from the gains in the US; Chinese markets were closed for Dragon Boat Festival
Fed's Mester (2022, 2024 voter) said ongoing rate increases are needed including 50bps rate hikes at the next two Fed meetings
The White House said they do not expect to see blockbuster job numbers every month
DXY remained lacklustre following the prior day’s slump beneath the 102.00 level amid the heightened risk appetite
Looking ahead, highlights include US and EZ Final PMIs, German Trade Balance, EZ Retail Sales, US Labour Market Report, ISM Services PMI, Speech from Fed's Brainard, Holidays in China & UK

US stocks staged a comeback from opening losses with early downside triggered after Microsoft cut its Q2 guidance, although the major indices then trended higher throughout the session led by the Nasdaq amid a broad risk-on mood, with markets unfazed by the disappointing data and hawkish Fed rhetoric.
SPX +1.84% at 4,176, NDX +2.75% at 12,892, DJIA +1.33% at 33,248, RUT +1.84% at 1,897
Click here for a detailed summary.

NOTABLE US HEADLINES

Fed's Mester (2022, 2024 voter) said ongoing rate increases are needed including 50bps rate hikes at the next two Fed meetings, while the Fed will then be well-positioned to consider the appropriate pace for further rate hikes and assess how high rates need to go. Mester added that the policy rate probably needs to go above 2.5% but cannot make that call today as it depends on how much demand moderates and what happens with supply, according to Reuters.
NY Fed's Logan said digital innovations in money and payments could force central banks to overhaul how they conduct monetary policy and depending on how it is constructed, a CBDC could lead to larger balance sheets and greater challenges to control interest rates, according to Reuters.
White House said they do not expect to see blockbuster job numbers every month, according to Reuters.
White House said they have looked at and are considering a congressional proposal to tax oil and gas windfall profits, according to Reuters.

MILITARY/DEFENSIVE/NATO

Ukrainian President Zelensky said the military situation in Donbas had not changed in the past 24 hours and said they had some success in Severodonetsk, according to Reuters.
Russia's Defence Ministry said vessels can leave Ukrainian ports via humanitarian corridors and that Russia will not use the humanitarian situation for its "special military operation", according to RIA and TASS.

ENERGY/SANCTIONS

US Commerce Department added 71 Russian and Belarus entities to the economic blacklist including aircraft plants, shipbuilding and radio technologies, according to Reuters.

APAC stocks took impetus from the gains in the US but with advances capped in holiday-thinned conditions.
ASX 200 was led higher by tech with the sector inspired following the outperformance of the Nasdaq stateside and with mining-related stocks underpinned by the recent gains across commodity prices.
Nikkei 225 benefitted from recent currency weakness and with index heavyweight Fast Retailing among the biggest gainers after a double-digit percentage jump in its same-store sales.
KOSPI is firmer but lagged behind regional counterparts after CPI data climbed to its highest in nearly 14 years and added to the pressure for the BoK to continue with its hiking cycle.
US equity futures sat near the prior day's highs as participants looked ahead to the NFP jobs data.
European equity futures are indicative of a firmer open with Eurostoxx 50 +0.7% after the cash market closed higher by 1.0% yesterday.

DXY remained lacklustre following the prior day’s slump beneath the 102.00 level amid the heightened risk appetite and disappointing ADP data, while the focus turns to the NFP report.
EUR/USD maintained recent gains after further ECB Villeroy reinforced guidance for policy normalisation.
GBP/USD was kept afloat amid the subdued dollar but with gains capped in holiday-thinned conditions.
USD/JPY traded indecisively and JPY-crosses were propped up amid the lack of haven flows.
Antipodeans took a breather from the prior day’s gains which had been helped by the risk appetite and commodity strength.

10yr UST futures were calm heading into the NFP data and following the bull steepening in the aftermath of the disappointing ADP jobs data, higher unit labour costs, and a hawkish Brainard.
Bunds languished at the prior day’s lows after recent gains in EGB yields and hawkish ECB commentary.
10yr JGBs were underpinned amid the BoJ’s presence in the market for JPY 1.15tln of JGBs on top of its daily fixed-rate operations.

Crude futures took a breather from yesterday's rebound which was spurred after OPEC confirmed to bring forward production hikes as Russia was not exempt from the production deal, while approval of the EU partial oil ban on Russia and a bullish inventory report were also recent tailwinds for oil prices.
Kuwait's oil output will rise to 2.768mln BPD in July following the OPEC+ output increase decision.
Kazakhstan's oil output rose by 11% M/M to 6.735mln tons in May but remained beneath the OPEC+ quota, according to Reuters sources.
Gas traders are rushing to secure LNG tankers ahead of winter with ship rates surging as sanctions on Russia reshape global energy flows, according to FT.
Spot gold was flat near the prior day's best levels ahead of the NFP jobs data.
Copper plateaued overnight but held on to most of its recent gains amid the constructive mood.

Bitcoin traded rangebound and took a breather after yesterday's rebound to above the 30,500 level.

NOTABLE APAC HEADLINES

Deputy USTR Bianchi said all options are on the table regarding tariff decisions on Chinese imports and that the USTR is seeking strategic realignment with China and a tariff structure that makes sense, while she added the USTR is to focus the China trade relationship on US concerns about Chinese non-market practices and economic coercion, according to Reuters.
South Korean Finance Ministry said they are taking the inflation situation very seriously, while the BoK noted that demand-side inflation pressure is likely to build and that inflation is to be above 5% in June and July, according to Reuters.

DATA RECAP