• APAC stocks were mostly positive amid momentum from Friday's post-NFP gains on Wall Street and strong Chinese Caixin Services and Composite PMIs.
• Saudi Arabia announced it is to cut an additional 1mln bpd of oil output in July; all other OPEC+ producers agreed to extend earlier cuts through to the end of 2024.
• Saudi’s Energy Minister said will keep the markets in suspense on whether the additional voluntary cut for July will be extended.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 -0.2% after the cash market closed up 1.6% on Friday.
• DXY holds above the 104 mark, EUR/USD has oscillated around 1.07, USD/JPY reclaimed 140.
• Looking ahead, highlights include Swiss CPI, EZ Final Services and Composite PMIs, US ISM Services PMI, Speeches from ECB’s Lagarde, Wunsch & Fed’s Mester, Supply from EU Syndication.

US TRADE

EQUITIES

• US stocks traded higher on Friday with a clear bias to cyclicals and value stocks after the solid additions to Non-Farm Payrolls. The Russell 2K, which is levered to the 'real economy', was the outperformer with gains north of 3.5% for its biggest daily advance YTD, while the Nasdaq 100 was also firmer but lagged behind its peers amid some profit-taking in the AI space (NVDA and beyond) and with headwinds from the pronounced Treasury bear-flattening.
• SPX +1.45% at 4,282, NDX +0.73% at 14,546, DJIA +2.12% at 33,762, RUT +3.5% at 1,830.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden signed the bill raising the debt limit into law on Saturday, according to the White House.
• Large banks could face a 20% boost to capital requirements as those relying on fees may need larger capital buffers to absorb losses under planned rules, according to WSJ.
• United Airlines (UAL) pilot union unanimously voted to authorise a strike vote, according to Reuters citing a letter from the union chair to pilots.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive amid momentum from Friday's post-NFP gains on Wall Street and as participants digested stronger Chinese Caixin Services and Composite PMI data.
• ASX 200 was led higher by gains across nearly all sectors with early tailwinds in energy names following Saudi Arabia’s additional 1mln bpd output cut, while the RBA is seen to keep rates unchanged at tomorrow’s meeting.
• Nikkei 225 climbed above 32,000 for the first time since 1990 with exporters propelled by a weaker currency.
• Hang Seng and Shanghai Comp. were kept afloat following the encouraging Caixin PMIs but with gains capped amid US-China frictions and after China’s Cabinet noted that the foundation for the economic recovery is not solid, while property names were also pressured despite reports that China is mulling a support package for the property sector and bolster the economy.
• US equity futures held on to their NFP spoils although Nasdaq 100 futures lagged amid higher yields.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 -0.2% after the cash market closed up 1.6% on Friday.

FX

• DXY traded steadily above the 104.00 level and took a breather following Friday’s advances in which the stronger-than-expected headline reading boosted rate hike expectations beyond June and July, while weekend newsflow for the US was light with the Fed in a blackout period and President Biden signing the debt ceiling bill.
• EUR/USD lacked firm direction and instead oscillated around the 1.0700 level.
• GBP/USD was subdued after last week's failure to sustain the 1.2500 status.
• USD/JPY reclaimed the 140.00 handle owing to widening yield differentials.
• Antipodeans were choppy with early losses stemmed by the encouraging Chinese Caixin PMI data.
• PBoC set USD/CNY mid-point at 7.0904 vs exp. 7.0918 (prev. 7.0939)

FIXED INCOME

• 10yr UST futures were subdued after the post-NFP bear-flattening which had little impact on implied rate pricing for June and July but lifted the view on rates for year-end.
• Bund futures remained pressured and extended on Friday’s declines after the lack of fresh EU macro drivers.
• 10yr JGB futures retreated amid spillover selling from global peers and the absence of additional BoJ purchases.

COMMODITIES

• Crude futures surged at the reopen following news of Saudi Arabia's additional 1mln bpd output cut in July but then spent the rest of the session paring the majority of advances amid recent dollar strength, lingering global demand concerns and with Saudi going it alone on the additional cuts as others instead extended their prior cuts to end-2024.
• Saudi Arabia announced it is to cut an additional 1mln bpd of oil output for July in which its output will drop to 9mln bpd and all other OPEC+ producers agreed to extend earlier cuts through to the end of 2024. OPEC+ agreed to a new output target of 40.4mln bpd from 2024 with the output target for 2024 lowered by 1.4mln bpd and said Russia, Angola and Nigeria are to see significant production cuts in 2024, while the next OPEC+ meeting is to take place on November 26th, according to Reuters.
• Saudi’s Energy Minister said they are not targeting prices and that the extra voluntary cut is a precautionary measure, while they will keep the markets in suspense on whether the additional voluntary cut for July will be extended and will review the extra voluntary cuts every month.
• Saudi’s Energy Minister said Russia is delivering on its oil output commitments, while the UAE’s Energy Minister said there are some discrepancies in Russian production numbers and they don’t want politics involved in how they look at Russian production numbers, according to Reuters.
• Russian Deputy PM Novak said OPEC+ agrees total oil output cuts of 3.66mln bpd and that the oil market is more or less balanced, while he added they are seeing oil demand rising and they have the possibility of tweaking decisions. Furthermore, he said they will take decisions so that the oil market is stable and that Russia is fulfilling its obligations in full, according to Reuters.
• White House officials said they will continue to work with all fuel producers to ensure energy markets support US economic growth, according to Reuters.
• Spot gold was lacklustre in the aftermath of the post-NFP selling pressure and prodded last Friday's lows.
• Copper futures were subdued after recent dollar-related headwinds but with losses stemmed by support at the USD 3.70/lb level and amid the mostly constructive risk tone.

CRYPTO

• Bitcoin slipped back beneath the USD 27,000 level after a choppy weekend for price action.

NOTABLE ASIA-PAC HEADLINES

• US Under Secretary of the Treasury for International Affairs Jay Shambaugh met with China’s new ambassador to the US Xie Feng on Friday, while the meeting was said to be candid, constructive and part of ongoing efforts to maintain open lines of communication, according to the Treasury.
• China is soon to account for less than half of US low-cost imports from Asia in 2023 for the first time in over a decade, according to an annual reshoring index from Kearney cited by the FT.
• Wuhan Commerce Bureau said initial talks have started with Disney (DIS) for the US firm to start a project in the city, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (May) 57.1 vs. Exp. 55.2 (Prev. 56.4)
• Chinese Composite PMI (May) 55.6 (Prev. 52.9)
• Australian Gross Company Profits (Q1) 0.5% vs. Exp. 2.0% (Prev. 10.6%)
• Australian Business Inventories (Q1) 1.2% vs. Exp. 0.5% (Prev. -0.2%)

GEOPOLITICS

• Russia's Defence Ministry said Ukraine began a large-scale military operation, according to Reuters.
• Russia’s Belgorod regional Governor Gladkov said Ukraine shelled a market area in the town of Shebekino although no casualties were reported and he was willing to meet the group holding soldiers captive after the group earlier said it was willing to swap the soldiers for a meeting, while Gladkov said it is most likely that the group killed the captives but he would meet them at the Shebekino checkpoint and guarantee safety if the captive soldiers were alive. It was later reported that the pro-Ukraine group of Russian partisans said they took several Russian soldiers prisoners and will hand them over to Ukraine after the Belgorod Governor failed to turn up at the meeting, according to Reuters.
• Russian Deputy Foreign Minister Ryabkov said Russia will return to full compliance with the New START treaty if the US abandons its hostile stance but noted that the Russian decision on suspending the treaty stands despite any US countermeasures, according to Interfax.
• Kremlin spokesman Peskov said France cannot be a moderator in the Ukrainian conflict due to its active participation in it, while the Kremlin also announced that journalists from unfriendly countries won’t get accreditation for the St Petersburg Economic Forum, according to Reuters and TASS.
• US Defence Secretary Austin said Asia-Pac security cannot be taken for granted and that China continues an alarming number of risky intercepts of US and allied aircraft in international airspace, while he is deeply concerned by China’s unwillingness to engage in military crisis management, with talks key to avoiding conflict. Furthermore, Austin said conflict over Taiwan is neither imminent nor inevitable and the fact that China’s Xi asked the military to be ready for Taiwan conflict doesn’t mean he has decided to do that, while a senior Chinese military official said they strongly oppose Austin’s comments and Beijing reiterated indisputable sovereignty over South China Sea islands and adjacent waters.
• Chinese Defence Minister Li Shangfu said China seeks dialogue over confrontation and mutual respect should prevail over bullying and hegemony, while Li added that it is natural for countries to disagree with each other and that China is committed to upholding peace in handling international crises. Furthermore, Li said Taiwan is an internal affair of China and China will be reunified and noted that all foreign interference in Taiwan will end up in failure, according to Reuters.
• China’s embassy to Norway said China strongly opposes NATO labelling China as a threat and urges NATO to stop stirring up regional conflicts and creating divisions and unrest, according to Reuters.
• US and Canadian warships sailed through the Taiwan Strait on Saturday, while it was separately reported that Chinese Defence Minister Li accused the US of provocation after a near miss between warships in the Taiwan Strait, according to Reuters and ITV News.
• South Korea’s Defence Minister said that some countries were ignoring North Korea’s unlawful behaviour which creates holes in sanctions against North Korea passed at the UN Security Council, according to Reuters.

GLOBAL NEWS

• Turkish President Erdogan named Cevdet Yilmaz as Vice President and Hakan Fidan a Foreign Minister, while he named Yasar Guler as Defence Minister and Mehmet Sismek as the Treasury and Finance Minister, according to Reuters.

EU/UK

• BoE is looking to broaden reform of the deposit guarantee scheme after the collapse of SVB's UK arm highlighted the weakness of the current regime, according to FT.
• British Chambers of Commerce creates a business council to rival the troubled CBI, according to FT
• Fitch affirmed the Bank of England at AA-; Outlook Negative.