• APAC stocks were mostly positive after the US House passed the debt ceiling bill to avert a default which now moves to the Senate
• Chinese Caixin Manufacturing PMI data partially atoned for yesterday’s weak official PMI readings.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.7% after the cash market closed down 1.7% yesterday.
• DXY is a touch firmer on a 104 handle, EUR/USD remains stuck below 1.07, NZD and AUD diverge.
• Looking ahead, highlights include US ISM Manufacturing PMI, Challenger Layoffs, ADP, IJC, EZ Flash CPI & Unemployment Rate, EZ, US & UK Manufacturing PMIs, ECB Minutes, BoE DMP, remarks from Fed's Harker, ECB's Lagarde & Enria, Supply from Spain & France.

US TRADE

EQUITIES

• US stocks declined but finished off worst levels amid month-end flows and after mixed US data releases, while there was particular weakness in real economy levered names and the Russell 2000 underperformed after disappointing Chinese and Chicago PMI figures, although JOLTS data spiked higher.
• SPX -0.61% at 4,180, NDX -0.70% at 14,254, DJIA -0.41% at 32,908, RUT -1.00% at 1,750.
• Click here for a detailed summary.

US DEBT CEILING

• US House voted 314-117 to pass the debt ceiling bill which sends the measure to the Senate.
• US President Biden said that they are going to deal with the debt ceiling and things are going as planned, while President Biden later welcomed the passage by the House of the debt ceiling bill and urged the Senate to pass the bill as quickly as possible, according to Reuters.
• US Senate Majority Leader Schumer said once the debt ceiling bill reaches the Senate, it will be brought to the floor as soon as possible, while he added that they can't risk amending the debt bill and sending it back to the House.
• US Senate Republican Leader McConnell earlier said that they anticipated the debt ceiling bill will pass the House and come to the Senate as soon as Thursday.
• US GOP Senator Rand Paul said he will not employ parliamentary procedures to delay a Senate vote on the debt ceiling bill, according to CBS.

NOTABLE HEADLINES

• Fed's Beige Book stated financial conditions were stable or somewhat tighter in most Districts and employment increased in most Districts, though at a slower pace than before, while prices rose moderately and inflation slowed in many Districts.
• Fed's Harker (voter) is in the camp that they can 'skip' a meeting which would be a skip, not a pause, while he added a pause says you may hold there for a while and he doesn’t think they are ready for that.
• Fed's Jefferson (voter) said holding the policy rate constant at a coming meeting should not be taken to mean rates have peaked for this tightening cycle and skipping would allow time to assess data.
• Fed's Collins (non-voter) said the Fed is intent on reducing inflation which is simply too high.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive after the US House passed the debt ceiling bill to avert a default which now moves to the Senate and with sentiment helped by the surprise expansion in Chinese Caixin Manufacturing PMI.
• ASX 200 was choppy in early trade but ultimately gained after stronger-than-expected capital expenditure and the improvement in Chinese Caixin PMI.
• Nikkei 225 was marginally supported by data releases including business capex which grew at its fastest pace since Q3 2016 and with Japanese firms logging their largest recurring profits for Q1.
• Hang Seng and Shanghai Comp. shrugged off the early indecision and were boosted after the Chinese Caixin Manufacturing PMI data partially atoned for yesterday’s weak official PMI readings.
• US equity futures traded rangebound and largely ignored the positive overnight developments.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.7% after the cash market closed down 1.7% yesterday.

FX

• DXY eked slight gains after the House passed the debt ceiling bill although the upside was capped after the recent mixed data releases stateside and following the latest Fed rhetoric in which voters Jefferson and Harker suggested they were in the skip camp for the June meeting.
• EUR/USD bounced off the prior day’s lows although remained beneath the 1.0700 handle with the rebound limited after recent soft German, Spanish and French CPI figures set the backdrop for today's incoming Eurozone inflation data.
• GBP/USD was rangebound with upward momentum stalled by resistance at the 1.2450 level.
• USD/JPY recouped early losses owing to yield differentials and after support held at 139.00.
• Antipodeans were mixed with slight outperformance in AUD/USD following the stronger-than-expected Australian capex and Chinese Caixin PMI data releases.
• PBoC set USD/CNY mid-point at 7.0965 vs exp. 7.0964 (prev. 7.0821)

FIXED INCOME

• 10yr UST futures were lower after the US House passage of the debt ceiling bill and the surprise expansion in Chinese Caixin Manufacturing PMI unwound some of the prior day’s dovish rate bets.
• Bund futures mildly pulled back after yesterday’s advances as the focus shifts to EZ inflation.
• 10yr JGB futures were rangebound with price action contained amid the 10yr auction results from Japan which didn't deviate much from the previous month.

COMMODITIES

• Crude futures nursed some of the prior day's losses as risk appetite improved following the Chinese Caixin PMI data but with gains capped by a bearish private-sector inventory report.
• US Private Inventory (bbls): Crude +5.2mln (exp. -1.4mln), Cushing +1.8mln, Gasoline +1.9mln (exp. -0.5mln), Distillate +1.8mln (exp. +0.9mln).
• Russian plans to halve subsidies for oil refiners may be postponed until September, according to Interfax citing sources. However, the Russian Finance Ministry said no final decision on oil and gas sector subsidies has been taken yet.
• Spot gold traded sideways after the recent mixed US data and a slightly firmer dollar.
• Copper futures gained after the surprise expansion in Chinese Caixin Manufacturing PMI.
• Codelco Chairman said the price of metal appears solid going forward and is optimistic about long-term trends in the global copper market but added some price volatility is to be expected in the current market uncertainty.

CRYPTO

• Bitcoin retreated with selling pressure exacerbated after a break below the USD 27,000 level.

NOTABLE ASIA-PAC HEADLINES

• US official said fewer US companies are applying to export sensitive tech to China amid growing government scrutiny of the flow of goods to the country, especially those with potential military applications, according to WSJ.
• Taiwan's government said it expects to sign the first deal under the new trade talks framework with the US on Thursday, according to Reuters.

DATA RECAP

• Chinese Caixin Manufacturing PMI Final (May) 50.9 vs. Exp. 49.5 (Prev. 49.5)
• Japanese Company Profits YY (Q1) 4.3% (Prev. -2.8%)
• Japanese Business Capex YY (Q1) 11.0% vs. Exp. 5.5% (Prev. 7.7%)
• Australian Capital Expenditure (Q1) 2.4% vs. Exp. 1.3% (Prev. 2.2%)

GEOPOLITICS

• UN proposed that Ukraine, Russia, and Turkey begin preparatory work for Russian ammonia to transit through Ukraine, according to Reuters sources which added that parallel talks should be held on broadening the Black Sea grain deal to include further ports and cargoes. Furthermore, Ukraine and Turkey have accepted the UN proposals, while Russia is yet to respond.
• French President Macron has for the first time called for Ukraine to be granted a NATO membership "path" when asked at a security conference in Bratislava, Slovakia, according to FT.
• US Defence Secretary Austin told Japanese Defence Minister Hamada that he looks forward to deeper cooperation between the US-Japan alliance and with South Korea and Australia, while he stated that North Korea's launch was dangerous, destabilising and violates international law, according to Reuters.
• North Korean leader Kim's sister said no one can deny their right to launch a satellite and vowed to ramp up military surveillance efforts, while she added that North Korea's spy satellite will soon enter orbit to perform its mission and that North Korea will do everything to enhance its war deterrence. Kim also stated that North Korea should work harder to develop reconnaissance tools and the Foreign Ministry urged the US to halt joint military drills, according to KCNA.

EU/UK

DATA RECAP

• Netherlands CPI EU Harmonised Y/Y (May P) 6.8% vs Exp. 6.1% (Prev. 5.8%)