• European bourses & US futures are softer after a weak APAC handover on PMIs and despite softer inflation data 
• DXY lifted to a new WTD best as EUR succumbs on CPI, Yuan drifts on data and Mester remains hawkish
• EGBs bid on softer-than-expected inflation metrics from German states and France, though upside briefly capped by the latest Italian figures
• Crude continues to crumble while base metals are dented by soft Chinese data, conversely Gold remains relatively resilient
• US House Committee voted to advance the debt ceiling bill, will now go to the full House for approval
• Looking ahead, highlights include US JOLTS & Chicago PMI, German Preliminary CPI. Speeches from ECB's Lagarde, BoE's Mann, Fed's Bowman, Jefferson, Harker & Collins

US DEBT CEILING

• US House Committee voted 7-6 to advance the debt ceiling bill which sends it to the full House for approval, according to Reuters.
• US CBO estimated that if the debt ceiling bill is enacted, the agency's projections of the budget deficit would be reduced by about USD 1.5tln over 2023-2033 relative to May projections, according to Reuters.

MAY 31ST SCHEDULE

• 14:00ET/19:00BST - House to meet for legislative.
• 15:30ET/20:30BST - First votes expected.
• 20:30ET/01:30BST - Last votes expected.
• via Punchbowl.

EUROPEAN TRADE

EQUITIES

• European bourses are mostly in the red, Euro Stoxx 50 -0.4%, following the soft APAC handover and despite the generally softer inflation data from European nations thus far.
• Sectors are lower across the board, with Luxury names lagging after the weak Chinese PMI figures.
• Stateside, futures are all in the red though only modestly so, ES -0.1%, with the NQ in-line with broader action today and NVIDIA pulling back a touch from its recent upside, -1.5% in the pre-market.
• Foxconn AGM recap, available here.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• Yuan's post-PMI pain revives Greenback fortunes with hawkish Fed's Mester also boosting the Buck; USD/CNY and USD/CNH top 7.1100 and 7.1300 respectively, while DXY sets new w-t-d peak at 104.630.
• Aussie retreats through 0.6500 irrespective of stronger than forecast CPI, but AUD/NZD remains elevated on RBA rate hike expectations.
• Euro undermined by mostly weaker than expected EZ inflation data, as EUR/USD eyes Fib support just above 1.0650.
• Franc hit by feeble Swiss retail sales and Pound weighed down by decline in Lloyds UK business barometer; USD/CNF above 0.9100 and Cable probing 1.2350
• Yen treading water near 140.00 amidst softer Treasury yields and debt ceiling deal jitters.
• PBoC set USD/CNY mid-point at 7.0821 vs exp. 7.0764 (prev. 7.0818)
• Click here for notable OpEx for the NY Cut.
• Click here for more detail.

FIXED INCOME

• Debt elevated approaching month end with added impetus via weak Chinese PMIs and mostly cooler than forecast EZ inflation data.
• Bunds, Gilts and T-note all hovering just below best levels between 136.39-135.31, 96.97-37 and 114-14+/00 bounds.
• 2029 German supply reasonably well sponsored with collapse in crude and other commodities supporting the disinflation narrative.
• Germany sells EUR 2.504bln vs exp. EUR 3.00bln 2.10% 2029 Bund: b/c 2.30x (prev. 2.50x), average yield 2.23% (prev. 2.22%) & retention 16.53% (prev. 15.00%).
• Click here for more detail.

COMMODITIES

• Crude benchmarks continue to slip following Tuesday's marked pressure and subdued settlement. Renewed pressure comes after soft Chinese data, broader risk-aversion and ahead of the June 4th OPEC+.
• Currently, WTI Jul and Brent Aug are towards the lower end of respective USD 68.60-69.69/bbl and USD 72.68-73.95/bbl parameters.
• Base metals are dented following the mentioned Chinese data while spot gold is proving relatively resilient to the firmer USD and is only incrementally softer, given the broader underlying tone and its haven status.
• Iraqi cabinet approved USD 417mln for the construction of a third offshore export pipeline.
• Norway Police are responding to report of a gas leak at Equinor's (EQNR NO) Melkoeya LNG facility.
• Hungary asked the EU to extend import restrictions on grains from Ukraine for five eastern-European states until at least end-2023.
• EU Executive VP Dombrovskis says the EU-US steel and raw material deals are both making progress.
• Click here for more detail.

NOTABLE HEADLINES

• Netherlands Senate approved a wide-ranging reform of the Dutch pension system, according to Reuters.
• ECB's Muller says core inflation shows no signs of slowing yet, very likely that the ECB will hike by 25bp more than once; probably too optimistic to see ECB rate cut in early 2024.
• ECB's de Guindos says we have to adjust liquidity requirements to modern world; inflation data today and yesterday was positive; victory over inflation is not there but the trajectory is correct; markets are absorbing QT smoothly and positively.
• ECB's Visco says longer-term inflation expectations remain in line with the definition of price stability; now that rates are in restrictive territory, must proceed with the correct degree of graduality.
• ECB Financial Stability Review: says financial stability outlook remains fragile.
• Spain's People's Party (PP) leader says they will reduce public debt if they win the snap election and will reduce electric bill for small consumers and certain companies.

DATA RECAP

• German North Rhine-Westphalia State CPI YY (May) 5.7% (Prev. 6.8%); Core (ex-food/energy) 5.0% (prev. 5.5%); MM (May) -0.2% (Prev. 0.5%)
• French CPI Prelim YY NSA (May) 5.1% vs. Exp. 5.5% (Prev. 5.9%); MM NSA (May) -0.1% vs. Exp. 0.3% (Prev. 0.6%)
• Italian Consumer Price Prelim YY (May) 7.6% vs. Exp. 7.4% (Prev. 8.2%); Core (ex-food/energy) 6.1% (prev. 6.2%); MM (May) +0.3% vs. Exp. -0.1% (Prev. 0.4%)
• German Import Prices YY (Apr) -7.0% vs. Exp. -5.9% (Prev. -3.8%); MM (Apr) -1.7% vs. Exp. -0.5% (Prev. -1.1%)
• UK Lloyds Business Barometer (May) 28 (Prev. 33)

NOTABLE US HEADLINES

• Fed's Mester (2024 Voter, Hawk) said she sees no compelling reason to wait for a fresh rate increase and that the debt-ceiling deal removes a large piece of uncertainty over the US economy, according to FT.
• US FHA is expected, on Wednesday, to propose a plan where borrowers could get back on track with bills while maintaining super-low rates, via WSJ.
• Click here for the US Early Morning Note.

GEOPOLITICS

• A fire broke out at an oil refinery in Russia which was likely due to a falling drone, according to RIA citing the local Governor; subsequently, drone crashed on Ilsky oil refinery in Russia's south, no damages to infrastructure and no casualties, according to RIA citing local taskforce
• South Korean military said North Korea fired a space satellite, while Japan's Defence Ministry said North Korea fired what could be a ballistic missile and Japan's government issued a shelter-in-place order for residents in Okinawa, according to Reuters. Japan's government later stated that the missile did not fly into Japanese territory and it lifted the evacuation warning, while South Korea said a previous warning by Seoul city was an error. Furthermore, North Korea said an accident occurred during its satellite launch and that it will verify grave defects, as well as conduct a second launch soon, while South Korea's military said the North Korean projectile was more likely to be a space vehicle rather than a missile.
• US, Japan and South Korea strongly condemned North Korea's launch, while South Korea said the launch was a serious provocation and a grave violation of UN resolutions, according to Reuters.
• US military said a Chinese fighter pilot performed an unnecessary aggressive manoeuvre during an intercept of a US jet over the South China Sea on May 26th, in which it flew directly in front of the nose of a US air force jet, according to a statement.
• US President Biden's senior Middle East adviser discussed with Oman a possible outreach to Iran on the nuclear program earlier this month, according to sources cited by Axios.

CRYPTO

• Bitcoin is hindered by the firmer USD and earlier slipped incrementally below the USD 27k mark and remains at the lower-end of USD 26.99-27.85k bounds.

APAC TRADE

• APAC stocks were mostly lower following the mixed handover from Wall St where sentiment was clouded as hardliners voiced opposition to the debt ceiling bill, while risk appetite was subdued overnight as participants digested a slew of data releases heading into month-end including disappointing Chinese official PMIs.
• ASX 200 was led lower by underperformance in the commodity-related sectors with energy the worst hit after oil prices slumped by more than 4% yesterday and with the mood not helped by firmer-than-expected monthly CPI.
• Nikkei 225 was pressured by data releases in which Industrial Production printed a surprise contraction and Retail Sales missed forecasts, with early jitters also from North Korea’s failed satellite launch.
• Hang Seng and Shanghai Comp. declined with Hong Kong dragged lower by notable weakness in the local blue-chip tech stocks and following disappointing Manufacturing and Non-Manufacturing PMI data in which the former printed at a second consecutive month in contraction territory and its weakest reading YTD.

NOTABLE ASIA-PAC HEADLINES

• US imposed sanctions on Chinese and Mexican entities to combat the opioid crisis, according to FT.
• China's NBS said the economic activity level in China declined slightly in May which indicates the need to strengthen the foundation for recovery and development, according to Reuters.
• Japan's METI said the decline in semiconductors and flat panel manufacturing equipment were the main contributors pushing down Japan's industrial output in April and noted that official business sentiment remains bearish as overseas economies continue to weaken.
• RBA Governor Lowe said they are in data-dependent mode and there is not a single variable that drives their decisions, while he added that monetary policy is in a restrictive environment and that they are on a narrow path with success not guaranteed.

DATA RECAP

• Chinese NBS Manufacturing PMI (May) 48.8 vs. Exp. 49.4 (Prev. 49.2); Non-Manufacturing PMI (May) 54.5 vs. Exp. 55.3 (Prev. 56.4)
• Chinese Composite PMI (May) 52.9 (Prev. 54.4)
• Japanese Industrial Production MM (Apr P) -0.4% vs. Exp. 1.5% (Prev. 1.1%); Retail Sales YY (Apr) 5.0% vs. Exp. 7.0% (Prev. 7.2%, Rev. 6.9%)
• Australian Weighted CPI YY (Apr) 6.8% vs. Exp. 6.4% (Prev. 6.3%)
• Australian Construction Work Done (Q1) 1.8% vs. Exp. 0.5% (Prev. -0.4%)