• European bourses trade on the backfoot with sentiment in the region subdued after the Flash PMIs sounded recessionary warnings.
• US equity futures are also lower on the session with the ES briefly dipping under 4,400.
• Havens (ex-CHF) are bid on the back of the risk aversion while industrial commodities take a hit on growth concerns.
• Fed's Barkin (non-voter) said he is comfortable with more hikes if inflation is not heading to the goal but he will not prejudge the July meeting, according to Reuters.
• Looking ahead, highlights include US PMI (Flash), Speeches from Fed's Bostic, Mester & ECB's Panetta, Schnabel and Elderson.

23rd June 2023

• Click here for the Newsquawk Week Ahead preview.

EUROPEAN TRADE

EQUITIES

• European bourses trade on the backfoot with sentiment in the region subdued after the Flash PMIs sounded recessionary warnings.
• US equity futures are also lower on the session with the ES just about managing to maintain 4400 status - the macro narrative in the US hasn’t changed much this week.
• Equity sectors in Europe are mixed with energy names the clear laggard alongside softer energy prices and heavy losses in Siemens Energy (-32%) after the Co. withdrew guidance, while UK homebuilders have been pressured following a raft of broker downgrades at HSBC.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• DXY is on a firmer footing and topped 103.00 earlier in the European session in wake of the downbeat EZ PMIs.
• EUR fell from levels around 1.0950 to lows just under 1.0850 in the wake of the Flash PMIs which overall flagged a recessionary warning.
• GBP is unable to glean any real traction via better-than-expected UK retail sales data or consumer confidence as flash PMIs missed consensus to compound economic concerns hot on the heels of the BoE’s 50bps hike.
• Yen regained some poise amid softer US Treasury yields and risk aversion, while Aussie and Kiwi are once again hit amid their high-beta properties.
• Click here for more detail.

FIXED INCOME

• Bonds looked poised to claw back more losses on pre-weekend short-covering grounds before getting an even bigger boost from largely weaker-than-forecast and worrying PMIs in the face of further Central Bank policy tightening to combat inflation.
• Bunds breezed through Fib resistance and then made light work of clearing 134.00 on the way.
• Gilts came chasing after and touched 97.00 having been down at 95.32 earlier on Liffe.
• T-note rebounded to 113-07 from 112-22 before all the buying dried up.
• Click here for more detail.

COMMODITIES

• WTI and Brent futures are once again on a softer footing and extended on the losses seen overnight To recap, prices were subdued during APAC hours amid the downbeat risk tone, and with Mainland Chinese markets away on a domestic holiday. In European trade, the Flash PMIs from France and Germany painted a bleak picture of the health of the Eurozone economy.
• Spot gold is drifting higher despite the firmer Dollar, possibly on haven flows after the EZ Flash PMIs flagged another GDP contraction for the quarter.
• Base metals are all pressured by the recessionary warnings emanating from the Flash PMIs earlier in the session, with LME copper falling back under USD 8,500/t.
• Newmont (NEM) declared force majeure on some metal products at the Penasquito mine in Mexico, according to Reuters, amid strikes – the mine produces gold, silver, lead and zinc.
• Click here for more detail.

NOTABLE US HEADLINES

• Fed's Barkin (non-voter) said US inflation is too high despite falling from the peak, while he added that demand is still elevated vs pre-COVID trend which is boosting CPI and he is comfortable with more hikes if inflation is not heading to the goal. Barkin said he would support rate cuts when there is conviction inflation is heading down but added that the Fed is still a good way away from the 2% inflation target and said he will not prejudge the July meeting, according to Reuters.
• US Treasury Secretary Yellen said the odds of a recession have eased but it remains a risk as the Fed tightens policy, while she noted that it is not appropriate to debate the 2% target at this time and consumer spending may need to slow to ease CPI, according to Bloomberg.

NOTABLE EUROPEAN HEADLINES

EUROPEAN DATA RECAP

• UK Retail Sales YY (May) -2.1% vs. Exp. -2.6% (Prev. -3.0%)
• UK Retail Sales MM (May) 0.3% vs. Exp. -0.2% (Prev. 0.5%)
• UK Retail Sales Ex-Fuel YY (May) -1.7% vs. Exp. -2.1% (Prev. -2.6%)
• UK Retail Sales Ex-Fuel MM (May) 0.1% vs. Exp. -0.3% (Prev. 0.8%)
• French HCOB Manufacturing Flash PMI (Jun) 45.5 vs. Exp. 45.4 (Prev. 45.7)
• French HCOB Composite Flash PMI (Jun) 47.3 vs. Exp. 51 (Prev. 51.2)
• French HCOB Services Flash PMI (Jun) 48.0 vs. Exp. 52 (Prev. 52.5)
• German HCOB Services Flash PMI (Jun) 54.1 vs. Exp. 56.2 (Prev. 57.2)
• German HCOB Composite Flash PMI (Jun) 50.8 vs. Exp. 53.5 (Prev. 53.9)
• German HCOB Manufacturing Flash PMI (Jun) 41.0 vs. Exp. 43.5 (Prev. 43.2)
• EU HCOB Composite Flash PMI (Jun) 50.3 vs. Exp. 52.5 (Prev. 52.8)
• EU HCOB Services Flash PMI (Jun) 52.4 vs. Exp. 54.5 (Prev. 55.1)
• EU HCOB Manufacturing Flash PMI (Jun) 43.6 vs. Exp. 44.8 (Prev. 44.8)
• UK Flash Services PMI (Jun) 53.7 vs. Exp. 54.8 (Prev. 55.2)
• UK Flash Manufacturing PMI (Jun) 46.2 vs. Exp. 46.8 (Prev. 47.1)
• UK Flash Composite PMI (Jun) 52.8 vs. Exp. 53.6 (Prev. 54)
• BRIEF ANALYSIS: Sentiment in the region remains subdued in the wake of Eurozone flash PMIs. The accompanying report noted "after Eurozone GDP fell for the second time in a row in the first quarter, the probability has increased somewhat that the GDP change will again carry a negative sign in the current quarter". The UK release also underwhelmed with declines in services and manufacturing dragging the composite lower and the accompanying report noting “…the UK economy has lost momentum again after a brief growth spurt in the spring, and looks set to weaken further in the months ahead".

CRYPTO

• Bitcoin is relatively flat intraday and trades on either side of USD 30,000.

GEOPOLITICS

• Air raid alerts were in effect throughout Ukraine, according to official military notices cited by Reuters.
• US and South Korea launched a high-level meeting on cyber security and agree to step up cooperation, according to Reuters.

APAC TRADE

• APAC stocks failed to sustain an early positive bias and faltered following the mixed performance stateside where the S&P 500 and Nasdaq snapped their losing streaks although most sectors finished in the red after a busy day of central bank activity including several rate hikes.
• ASX 200 was lower with the declines led by underperformance in energy after the recent slump in oil prices, with the mood not helped by an inverted yield curve and after Australia’s flash manufacturing PMI remained in contraction territory.
• Nikkei 225 gave back its early gains and then some, as participants digested mixed inflation data from Japan which showed a slowdown in headline and core CPI although the latter and core-core readings were still firmer-than-expected, while Japan’s manufacturing PMI also slipped beneath the 50 benchmark level.
• Hang Seng was pressured on return from the Dragon Boat Festival with the index dragged lower by heavy losses in healthcare, tech and property amid headwinds from rising global yields and as Stock Connect trade remained shut due to the holiday in the mainland.

NOTABLE ASIA-PAC HEADLINES

• Chinese Premier Li said China and Europe should rise above differences and seek common ground and push for more creative solutions, and the Chinese economy has shown upward momentum, according to Reuters.
• China lodged an official protest over US President Biden's dictator remark about Chinese President Xi, according to WSJ.
• US President Biden said his comment on Chinese President Xi being a dictator did not undermine or complicate the relationship with China.
• US and India agreed to terminate six outstanding disputes at the WTO and India agreed to remove retaliatory tariffs on certain US products, according to Reuters.
• Japanese Finance Minister Suzuki says sharp FX moves are undesirable, watching FX moves, will not comment on FX levels, according to Reuters.

DATA RECAP

• Japanese National CPI YY (May) 3.2% vs. Exp. 3.2% (Prev. 3.5%)
• Japanese National CPI Ex. Fresh Food YY (May) 3.2% vs. Exp. 3.1% (Prev. 3.4%)
• Japanese National CPI Ex. Fresh Food & Energy Y/Y (May) 4.3% vs. Exp. 4.2% (Prev. 4.1%)
• Japanese JibunBK Manufacturing PMI Flash (Jun) 49.8 (Prev. 50.6)
• Japanese JibunBK Services PMI Flash (Jun) 54.2 (Prev. 55.9)
• Australian Judo Bank Manufacturing PMI Flash (Jun) 48.6 (Prev. 48.4)
• Australian Judo Bank Services PMI Flash (Jun) 50.7 (Prev. 52.1)