• APAC stocks were mostly positive and followed suit to the gains on Wall Street post-FOMC; SPX +1.46%
• The Fed hiked rates by 75bps and lifted its FFR projections, Fed Chair Powell said he does not expect 75bps moves to be common
• European equity futures are indicative of a positive open with Eurostoxx 50 +0.3% after the cash market closed higher by 1.6% yesterday
• DXY has rebounded from the post-FOMC declines, JPY lags G10 FX, GBP eyes the BoE announcement
• Looking ahead, highlights include US IJC, BoE Policy Announcement, SNB Policy Announcement & Press Conference, Speeches from ECB's de Guindos & Panetta, Supply from Spain & France.

US TRADE

• US stocks gained alongside a rally in bonds and precious metals, while the Dollar tumbled post-FOMC despite the 75bps rate hike by the Fed, as Fed Chair Powell indicated that 75bps hikes are not going to be common and suggested the July meeting could be 50bps or 75bps. The S&P 500 reclaimed 3,800 although remained in a technical bear market.
• SPX +1.46% at 3,789, NDX +2.49% at 11,593, DJIA +1.00% at 30,668, RUT +1.35% at 1,731.
• Click here for a detailed summary.

FOMC

• Fed hiked rates by 75bps to 1.50-1.75% via 10-1 vote (George favoured a 50bp move) and anticipates ongoing increases in the target range will be appropriate. FOMC is strongly committed to returning inflation to its 2% objective (prev. statement stated with appropriate policy Fed expects inflation to return to 2% target and the labour market to remain strong), while the Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
• Dot plot projections for FFR: 2022 at 3.4% (prev. 1.9%), 2023 at 3.8% (prev. 2.8%), 2024 at 3.4% (prev. 2.8%) and Longer Run at 2.5% (prev. 2.4%).
• Fed Chair Powell said they are moving expeditiously on rates and have resolve on price stability, while he added the economy has been through a lot and is resilient and that it is essential they bring inflation down. Powell added that policy has been adapting and will continue to do so with the Fed highly attentive to risks of high inflation and is strongly committed to bringing it down.
• Fed Chair Powell stated that since the Fed's May meeting, inflation has surprised to the upside and indicators of inflation expectations have risen, so it decided the larger 75bps move was warranted in response. Furthermore, Powell said he does not expect moves of 75bps to be common but either 50bps or 75bps in July seem most likely and they will be data-dependent, while he added that further surprises in inflation could be in store.

GEOPOLITICS

• German Chancellor Scholz, French President Macron and Italian PM Draghi plan a joint visit to Kyiv on Thursday, according to Reuters.
• Turkish Foreign Minister commented regarding Sweden and Finland's NATO membership that documents received by Ankara 'do not meet expectations', according to Reuters.
• Russian Kremlin spokesman said Russia and US must discuss an extension of the nuclear arms reduction treaty, according to RIA.
• US has asked Israel to refrain from any actions in the West Bank and Jerusalem that could create tensions ahead of President Biden’s visit next month, according to Axios citing sources.
• North Korea appears to be expanding restoration work at its nuclear test site to include a second tunnel, according to a report by a US-based think tank cited by several Twitter sources.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive and followed suit to the gains on Wall Street in the aftermath of the FOMC meeting where the Fed hiked rates by 75bps and lifted its Fed funds rate projections, while markets found relief from Fed Chair Powell’s press conference as he does not expect 75bp moves to be common and kept the door open for either a 50bps or 75bps hike in July.
• ASX 200 traded higher but with gains capped as participants reflected on the latest data releases including a mixed jobs report and a further rise in consumer inflation expectations.
• Nikkei 225 shrugged off mixed trade data as Japan seeks to raise the minimum hourly wage above JPY 1000 and is also looking to implement steps to increase tourist demand next month.
• Hang Seng and Shanghai Comp. were choppy with COVID-related concerns stoked by an increase in cases in Hong Kong and with Shanghai to conduct weekly community COVID testing across all districts until end-July, while property names lagged after Chinese house prices contracted Y/Y.
• US equity futures initially mildly extended on gains from the post-FOMC relief rally before upside waned ahead of the European open; ES -0.1%
• European equity futures are indicative of a positive open with Eurostoxx 50 +0.3% after the cash market closed higher by 1.6% yesterday.

FX

• DXY composed itself overnight after the post-FOMC drop and rebounded to around the 105.00 level.
• EUR/USD lacked direction after the recent price swings caused by the FOMC and ECB announcements; maintains 1.04 status.
• GBP/USD continued to pull back from resistance at 1.2200 as focus turns to the BoE meeting later today with the MPC expected to raise rates by 25bps.
• USD/JPY rebounded owing to the dollar recovery and after mostly softer than expected trade data.
• Antipodeans held on to recent gains but with price action contained by mixed Australia jobs data and disappointing New Zealand GDP.
• Brazilian Central Bank raised the Selic rate by 50bps to 13.25%, as expected, through a unanimous decision and it left the door open for further monetary tightening, while it sees another rate increase of equal or lesser magnitude at the next meeting.
• Russian First Deputy PM said Rouble is overvalued and industry would be more comfortable if it fell between 70-80 against the Dollar, while Russian Y/Y inflation will be around 15% in December 2022, according to TASS.

FIXED INCOME

• 10yr UST futures partially faded the post-FOMC relief rally after stalling just shy of the 116.00 level with the curve flatter overnight.
• Bunds pulled back overnight but with downside stemmed after the ECB’s recent announcement to apply flexibility in PEPP reinvestments.
• 10yr JGBs were kept afloat as the BoJ kick starts its 2-day policy meeting and after prices recovered from yesterday’s turmoil with the rebound helped by the central bank’s additional fixed-rate buying operations.

COMMODITIES

• Crude futures are higher but with gains capped by demand uncertainty, as well as the recent bearish IEA report and mixed inventories,
• White House said President Biden is willing to use the Defense Production Act if it could help oil refining capacity, according to Reuters.
• US Department of Energy requested to meet with refiners regarding prices no later than June 21st, according to Reuters sources.
• US reportedly fears the EU and UK ban on insuring Russian oil tankers could result in surging crude prices and urges European capitals to seek ways to ease the impact of their ban on insuring Russian oil cargoes, according to FT.
• Ukraine's energy minister said gas production could fall to 16-17 BCM in 2022 from around 20 BCM in 2021, according to Reuters.
• Spot gold traded flat with price action contained as the greenback nursed losses overnight.
• Copper was firmer after prices were boosted by the post-FOMC relief rally.
• China will set up a centralised iron ore buyer to counter the dominance of Australia as it hopes bulk buying will secure lower prices, according to FT.

CRYPTO

• Bitcoin remained pressured and languished around the 22,000 level.

NOTABLE APAC HEADLINES

• HKMA raised its base rate by 75bps to 2.00%, as expected, following the earlier Fed rate hike.
• China's NDRC said it will ensure reasonable economic growth in Q2 to provide a firm foundation for H2 and will expand the scope of use of funds raised by local government special bonds to include high-tech infrastructure for the first time, according to Reuters.
• White House official said US President Biden will keep his mind open regarding relaxing tariffs on Chinese goods, according to Reuters.

DATA RECAP

• Chinese House Prices YY* (May) -0.1% (Prev. 0.7%)
• Japanese Trade Balance Total Yen (May) -2384.7B vs. Exp. -2022.6B (Prev. -839.2B, Rev. -842.8B)
• Japanese Exports YY (May) 15.8% vs. Exp. 16.4% (Prev. 12.5%)
• Japanese Imports YY (May) 48.9% vs. Exp. 43.6% (Prev. 28.2%, Rev. 28.3%)
• Australian Employment (May) 60.6k vs. Exp. 25.0k (Prev. 4.0k)
• Australian Unemployment Rate (May) 3.9% vs. Exp. 3.8% (Prev. 3.9%)
• Australian Participation Rate (May) 66.7% vs. Exp. 66.4% (Prev. 66.3%)
• Australian Consumer Inflation Expectations (June) 6.7% (Prev. 5.0%)
• New Zealand GDP QQ (Q1) -0.2% vs. Exp. 0.6% (Prev. 3.0%)
• New Zealand GDP YY (Q1) 1.2% vs Exp. 2.4% (Prev. 3.1%)

EU/UK

NOTABLE HEADLINES

• Senior EU diplomat told Sky's Parsons that relations between EU and UK "have now hit a new rock bottom".
• UK food inflation is likely to peak at up to 15% during the summer and high levels will persist into next year, according to Reuters citing industry researcher IGD.
• French Finance Minister Le Maire said the inflation peak will last at least until the end of 2022 and they will continue to have high inflation until the end of 2023, according to Reuters.
• ECB President Lagarde said they cannot just be bold and must be consistent too, while she added that crises are never the same twice and they must have the courage to act when facts are not clear.
• ECB’s bond scheme is to come with loose conditions such as compliance with the commission's recommendations and it is to stress scheme aims to bring the spread between bond yields in line with fundamentals, according to Reuters sources. Furthermore, conditions will likely be achieved through quantitative benchmarks, such as historical spreads which may then be turned into a "traffic light" system to instruct staff on which country's bonds to buy and at which frequency.