• European equities trade with little in the way of firm direction, with US equity futures also hovering around the unchanged mark.
• RBA delivered a surprise 25bps rate hike and kept the door open for further policy tightening.
• China has reportedly asked the largest banks to cut deposit rates to boost the economy.
• Ukraine's State Atomic Agency said the destruction of the Kakhova dam poses a risk to the Zaporizhzhia nuclear power plant, but does not consider the situation to be critical right now.
• In FX, DXY is back above 104.00, AUD outperforms, JPY is resilient on yield differentials, and EUR/USD lost 1.07 status.
• Looking ahead, highlights include Canadian Ivey PMI and ECB's Centeno

6th June 2023

• Highlights include, Canadian Ivey PMI and ECB's Centeno
• Click here for the Newsquawk Week Ahead preview.

EUROPEAN TRADE

EQUITIES

• European equities trade with little in the way of firm direction as incremental catalysts for the region remain light.
• Equity sectors in Europe are mixed with Health Care top of the leaderboard whilst Energy lags to the downside with WTI and Brent both below Friday’s closing levels despite efforts by OPEC+.
• US equity futures are hugging the unchanged mark with the ES around 20 points shy of the 4300 mark after venturing as high as 4305.75 yesterday.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• DXY edged higher throughout the European morning and currently resides near session highs above 104.00.
• JPY is continues to claw back losses at the expense of its US counterpart as yields softened.
• Aussie remains the clear G10 outperformer in wake of another largely unexpected 25 bp rate rise from the RBA overnight.
• Euro eased back from circa 1.0732 against the Dollar to sub-1.0700 and the base of 1bln option expiries between the round number and 1.0695.
• PBoC set USD/CNY mid-point at 7.1075 vs exp. 7.1080 (prev. 7.0904)
• Click here for notable OpEx for the NY Cut.
• Click here for more detail.

FIXED INCOME

• Debt futures have racked up bigger and longer-lasting gains on a combination of bullish or supportive factors ranging from geopolitical developments, disinflationary vibes and a deeper reversal in oil that should have dovish implications for price pressures ahead.
• Bunds have been up to 135.57 for a 100+ tick flip from Eurex trough to peak.
• Gilts probed 97.00 within a 97.06-96.35 range in wake of a well received 2053 DMO tap
• US Treasuries are above 114-00 between 114-06+/113-24 overnight parameters.
• UK sells GBP 2.5bln 3.75% 2053 Gilt: b/c 2.58x (Prev. 2.50x), average yield 4.478% (Prev. 4.083%) & tail 0.5bps (Prev. 0.2bps)
• Click here for more detail.

COMMODITIES

• WTI and Brent futures continue trundling lower as the post-OPEC pop faded, with prices now back at levels seen in the run-up to last weekend's confab.
• Asian refiners are likely to take less oil from Saudi Arabia for July and buy more spot cargoes such as those from the UAE after the surprise price hike and output cut, according to Reuters citing traders.
• Kazakhstan Energy Minister said the country will go ahead with the USD 16.5bln claim against international oil giants over costs, no plans for out-of-court settlement, according to Reuters.
• Spot gold is relatively steady around the USD 1,950/oz mark and within recent ranges, with some potential haven support underpinning prices.
• Base are mostly softer with LME copper still hovering above USD 8,250/t following the recent gains as China looks to bolster its property sector. On that note, iron ore continued to benefit from these tailwinds and printed higher levels in around seven weeks.
• Shanghai futures exchange says trading of alumina futures will begin on June 9th.
• Click here for more detail.

CRYPTO

• Bitcoin trades flat under the USD 26,000 mark following yesterday's losses.
• Kraken said it is investigating an issue with several crypto funding gateways including major ones such at BTC, ETH, and ERC20; deposits and withdrawals are currently delayed.

NOTABLE EUROPEAN HEADLINES

• ECB's Knot said inflation is still way too high but the worst is behind us; underlying pressures will prove more difficult to bring down. He said they are seeing first signs that monetary policy tightening is being transmitted to the real economy, and will keep tightening policy until we see inflation return to 2% target, but this will be done step by step.
• ECB Consumer Expectations Survey (Apr): Inflation Expectations: 4.1% 12-months ahead (Mar 5.0%), 3yr ahead 2.5% (Mar 2.9%). Nominal Income: 1.1% over the next 12-months (Mar 1.3%). Nominal Spending: 3.8% over the next 12-months (Mar 4.1%)
• Barclaycard said UK May consumer spending rose 3.6% Y/Y and noted that higher food prices limited discretionary spending, according to Reuters.

DATA RECAP

• UK BRC Retail Sales Like-For-Like YY (May) 3.7% (Prev. 5.2%)
• UK BRC Total Sales YY (May) 3.9% (Prev. 5.1%)
• German Industrial Orders MM* (Apr) -0.4% vs. Exp. 3.0% (Prev. -10.7%)
• EU Retail Sales YY (Apr) -2.6% vs. Exp. -3.0% (Prev. -3.8%, Rev. -3.3%)
• EU Retail Sales MM (Apr) 0.0% vs. Exp. 0.2% (Prev. -1.2%, Rev. -0.4%)

GEOPOLITICS

RUSSIA-UKRAINE

• Russia's Federal Security Service (FSB) says Ukraine planning a "dirty bomb" attack in Russia, via RIA.
• Twitter sources reported that the Nova Kakhovka Dam was blown up in southern Ukraine, while Ukraine's south military command later confirmed that the dam was blown up by Russian forces. Furthermore, a Moscow-backed official said there was no critical danger to the Zaporizhzhia nuclear plant yet from the destruction of the dam, according to Reuters.
• Russia's Defence Ministry said they destroyed 8 leopard tanks in the Donetsk region and that Ukraine continues with its offensive in Donetsk, while it also noted huge losses were inflicted on Ukrainian forces in Donetsk and that Ukrainian forces are deploying fresh troops in the eastern combat zone, according to Reuters.
• Ukraine's State Atomic Agency said the destruction of the Kakhova dam poses a risk to the Zaporizhzhia nuclear power plant, but the situation is under control, according to Reuters.
• Ukraine's Foreign Minister said Ukraine will "probably" only be able to join NATO after the end of the war and said Ukraine has enough weapons to begin its counter-offensive, according to Reuters.

OTHER

• White House said the US is seeing an increasing level of aggressiveness by China's military and the US is prepared to address growing aggressiveness. White House stated the US wants to see Beijing justify what it is doing with increased military and said both recent Chinese intercepts occurred in international space, while it added that it won't be long before someone gets hurt and that unsafe intercepts can lead to miscalculations.
• South Korea has scrambled air force jets after Russian and Chinese military planes entered its air defence zone, according to joint chiefs; did not violate South Korean air space.

APAC TRADE

• APAC stocks traded mixed with price action mostly rangebound following on from the subdued performance stateside where participants 'sold the news' following Apple's headset announcement and with sentiment clouded by weak data releases.
• ASX 200 was led lower by underperformance in the consumer-related sectors and top-weighted financial industry, with losses later exacerbated after the RBA delivered a surprise 25bps rate hike to lift the Cash Rate Target to 4.10% and it also kept the door open for further policy tightening.
• Nikkei 225 was initially pressured after disappointing Household Spending and Labour Earnings data which briefly dragged the index beneath the psychological 32,000 level where it then found support and staged a recovery amid dip buying.
• Hang Seng and Shanghai Comp. were somewhat varied with the former boosted by strength in property names, although the mainland was less decisive and lagged amid mixed US-China rhetoric.

NOTABLE ASIA-PAC HEADLINES

• RBA surprisingly raised the Cash Rate Target by 25bps to 4.10% (exp. 3.85%), while it reiterated that the Board remains resolute in its determination to return inflation to the target and some further tightening of monetary policy may be required. It also repeated that inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range. RBA stated that this further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe, as well as noted that recent data indicates that the upside risks to the inflation outlook have increased and the Board has responded to this.
• China has reportedly asked the largest banks to cut deposit rates to boost the economy, according to Bloomberg sources. State-owned lenders including Bank of China, ICBC, and Bank of Communications were advised to cut rates on a range of products, including demand deposits by 5bps and 3yr and 5yr time deposits by at least 10bps.
• Former ByteDance executive claimed the Chinese Communist Party accessed TikTok's Hong Kong user data, according to WSJ. It was separately reported that Vietnam's ministry found TikTok violations during its inspection.
• BoJ Governor Ueda said BoJ is to continue QQE until the inflation target is achieved, and added inflation and inflation expectations are heightening, according to Reuters.

DATA RECAP

• Japanese All Household Spending MM (Apr) -1.3% vs. Exp. 0.6% (Prev. -0.8%)
• Japanese All Household Spending YY (Apr) -4.4% vs. Exp. -2.3% (Prev. -1.9%)
• Japanese Labour Cash Earnings YY (Apr) 1.0% vs Exp. 1.8% (Prev. 0.8%, Rev. 1.3%)
• Australian Current Account Balance (AUD)(Q1) 12.3B vs. Exp. 15.0B (Prev. 14.1B)
• Australian Net Exports Contribution (Q1) -0.2% vs. Exp. -0.6% (Prev. 1.1%)

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.