• APAC stocks mostly gained following the positive handover from Wall St where the S&P 500 posted its highest close YTD
• Chinese trade data mostly disappointed including the wider-than-expected contraction in dollar-denominated exports
• European equity futures are indicative of a marginally higher open with the Euro Stoxx 50 +0.2% after the cash market closed flat yesterday
• DXY hovers just above the 104 mark, EUR/USD is capped by 1.07, USD/JPY continues to pull back from 140.
• Looking ahead, highlights include BoC Policy Announcement, remarks from ECB's de Guindos, Knot & Panetta, Supply from UK & Germany.

US TRADE

EQUITIES

• US stocks were higher albeit with gains limited across the three main indices amid light trade and the absence of tier 1 data. Nonetheless, the S&P 500 printed its highest YTD close and the Russell 2000 substantially outperformed with the gains led by regional banks following a bullish outlook on the economy from Goldman Sachs which cut its probability of a recession within the next 12 months to 25% from 35% and forecast US GDP growth of 1.8% for this year to surpass the views from the private sector and the Fed.
• SPX +0.24% at 4,283, NDX +0.01% at 14,558, DJIA +0.03% at 33,573, RUT +2.69% at 1,855.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed, OCC and FDIC issued guidance on third-party risk management and told lenders to watch risks from vendors.
• US Republican vote to protect gas stoves stalled in the House due to Conservative revolt over House Speaker McCarthy's deal with President Biden on raising the debt limit.

APAC TRADE

EQUITIES

• APAC stocks mostly gained following the positive handover from Wall St where the S&P 500 posted its highest close YTD and the Russell 2000 rallied amid strength in regional banks, although advances were capped as the attention in Asia turned to softer-than-expected Chinese trade data.
• ASX 200 was just about kept afloat but with the upside limited by the weaker-than-expected Australian GDP and hawkish adjustments to peak rate forecasts.
• Nikkei 225 wiped out its initial gains in an early 700-point swing and briefly dipped beneath the 32,000 level where it found some support.
• Hang Seng and Shanghai Comp. were positive after reports that China asked the largest banks to cut deposit rates to boost the economy and with Hong Kong led by tech strength, while price action was less decisive in the mainland after the latest Chinese trade data mostly disappointed including the wider-than-expected contraction in dollar-denominated exports.
• US equity futures traded flat overnight in the absence of any major catalysts from the US.
• European equity futures are indicative of a marginally higher open with the Euro Stoxx 50 +0.2% after the cash market closed flat yesterday.

FX

• DXY hovered above the 104.00 level following the prior day’s mild gains but with price action in the dollar muted owing to the absence of any tier-1 data releases or macro events stateside.
• EUR/USD remained lacklustre with the single currency restrained by resistance at the 1.0700 level and after the recent softer data releases and inflation expectations from the bloc.
• GBP/USD was indecisive with trade confined to within a tight range on the 1.2400 handle.
• USD/JPY continued to pull back from resistance at 140.00 amid narrowing yield differentials.
• Antipodeans were somewhat choppy as the hawkish impulse in AUD/USD following the RBA's surprise hike was partially offset by disappointing Australian GDP and Chinese trade data.
• PBoC set USD/CNY mid-point at 7.1196 vs exp. 7.1194 (prev. 7.1075)

FIXED INCOME

• 10yr UST futures recovered most of the losses from yesterday’s bear flattening which had been triggered by supply and the bullish outlook on the US economy from Goldman Sachs.
• Bund futures were positive after softer data releases and whipsawing around the 135.00 level.
• 10yr JGB futures held on to recent spoils but with further advances limited overnight.

COMMODITIES

• Crude futures were subdued as participants digested the latest Chinese trade data but with losses stemmed after mixed inventory data including a surprise crude draw.
• US Energy Inventory Data (bbls): Crude -1.7mln (exp. +1.0mln), Gasoline +2.4mln (exp. +0.9mln), Distillate +4.5mln (exp. +1.3mln), Cushing +1.5mln.
• EIA STEO (June) 2023 world oil demand growth forecast was raised by 30k BPD to a 1.59mln BPD Y/Y increase, while the 2024 forecast was cut by 20k BPD to a 1.70mln BPD Y/Y increase.
• Russia said its crude oil production remained stable in May.
• Spot gold traded sideways amid a rangebound dollar and sparse US data calendar.
• Copper futures were contained amid the indecisive mood in its largest purchaser after mostly disappointing Chinese trade data continued to suggest weakening global demand.

CRYPTO

• Bitcoin reversed some of the prior day's advances and trickled back beneath the USD 27,000 level.
• Binance commented on the US SEC filing a motion to freeze assets in which it stated that user assets remain safe and its platform continues normal deposit and withdrawal operations, while it added that the filing of the preliminary injunction is unwarranted and it looks forward to defending against it in court, according to Reuters.

NOTABLE ASIA-PAC HEADLINES

• EU is considering a mandatory ban on using Huawei to build 5G and the UK is to remove Chinese surveillance cameras from sensitive government sites, according to FT. Hangzhou Hikvision (002415 CH) later stated that it believes the possible action by the UK government is a further step up of mounting geopolitical tensions being expressed through technology bans, while it added that dismantling its products shall never contribute to heightened security of sites in the UK and is counterproductive.
• RBA Governor Lowe said it is too early to declare victory in the battle against inflation and this month's rate hike followed information which suggested greater upside risks to the bank's inflation outlook. Lowe said some further tightening of monetary policy may be required, but that will depend upon how the economy and inflation evolve, while he noted they are going to feel a lot of pain if inflation stays high.

DATA RECAP

• Chinese Trade Balance (USD)(May) 65.81B vs. Exp. 92.00B (Prev. 90.21B)
• Chinese Exports (USD)(May) -7.5% vs. Exp. -0.4% (Prev. 8.5%)
• Chinese Imports (USD)(May) -4.5% vs. Exp. -8.0% (Prev. -7.9%)
• Chinese Trade Balance (CNY)(May) 452.3B vs. Exp. 643.3B (Prev. 618.4B)
• Chinese Exports YY (CNY)(May) -0.8% vs. Exp. 9.9% (Prev. 16.8%)
• Chinese Imports YY (CNY)(May) 2.3% vs. Exp. 4.2% (Prev. -0.8%)
• Australian Real GDP QQ SA (Q1) 0.2% vs. Exp. 0.3% (Prev. 0.5%)
• Australian Real GDP YY SA (Q1) 2.3% vs. Exp. 2.4% (Prev. 2.7%)

GEOPOLITICS

• IAEA said the bursting of the Kakhovka dam is making an already very difficult and unpredictable nuclear safety and security situation at Zaporizhzhia even more so, while it added the Zaporizhzhia plant implemented measures to limit water consumption, according to Reuters.
• US intelligence points to Russia being behind the Ukraine dam attack, according to NBC News.
• US Secretary of State Blinken and Saudi Crown Prince MBS had an open and candid discussion covering a full range of bilateral issues, while there was a good degree of convergence in the meeting but also differences. Furthermore, they discussed the potential for normalisation of relations between Saudi Arabia and Israel, as well as agreed to continue dialogue on normalisation, while Blinken raised human rights issues with MBS both generally and related to specific cases, according to a US official.
• US Secretary of State Blinken is set to travel to China for talks in the coming weeks in a visit intended to be a major step in thawing relations between the two countries, according to Reuters citing a US official.
• US Indo-Pacific coordinator Campbell said the potential for a miscalculation with China is real and growing.
• EU nations are approaching a deal on the 11th sanctions package against Russia. Representatives in Brussels are aiming to get the package over the line at their meeting today. EU diplomats suggest that several questions are still open, according to Politico.

EU/UK

• UK PM Sunak seeks to forge an economic alliance with US President Biden and aims to extract concessions from the US on green technologies, according to FT.