• European bourses trade on the front foot as the region plays catch up to the afternoon gains on Wall Street.
• DXY defies gravity given negative rebalancing signals on spot month, Q1 and H1-end, as the index continued to pivot 102.50.
• Debt futures overcame several wobbles before establishing a more solid base to mount a firmer recovery from sub-par lows.
• WTI and Brent whipsawed between gains and losses this morning despite a lack of newsflow, but in the grander scheme, prices are choppy within tight ranges.
• US considers new curbs on AI chip exports to China amid some concerns China could use AI chips from Nvidia (-4% pre-market) and others for weapon development and hacking, according to WSJ.
• Looking ahead highlights include US Mortgage Applications, Speeches from ECB's Lagarde, Lane & Enria, BoE's Pill, Panel Participation by BoE's Bailey, ECB's Lagarde, Fed's Powell & BoJ's Ueda, Supply from the US.

28th June 2023

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EUROPEAN TRADE

EQUITIES

• European bourses trade on the front-foot as the region plays catch up to the afternoon gains on Wall Street.
• US equity futures are flat/lower after the upside seen Tuesday, which was underpinned by solid economic data that pushed back against recession narratives, showing an economy that is resilient in the face of Fed rate hikes.
• Equity sectors in Europe are firmer with the exception of Basic Resource names which are being hampered by softness in underlying metals prices. To the upside, Tech is among the top of the leaderboard following yesterday’s solid showing on Wall Street with other gainers including Construction, Industrial Goods and Autos.
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• Click here and here for a recap of the main European updates.

FX

• DXY defies gravity given negative rebalancing signals on spot month, Q1 and H1-end, as the index continued to pivot 102.500.
• Yen largely ignored commentary from Japanese Finance Minister Suzuki with USD/JPY bulls encouraged by the ongoing lack of actual action to stem the currency weakness.
• NZD underperforms for no obvious reason other than consolidation, retracement and corrective price action having fared better of late, whilst AUD is hit by softer-than-expected monthly CPI.
• EUR remains underpinned amidst more hawkish-sounding ECB vibes from Sintra and beyond, plus mega option expiry interest at 1.0900-10 (3.2 bn) on top of RHS demand in EUR/GBP.
• CNH is on the backfoot following more downbeat Chinese data overnight, with USD/CNH topping 7.2500 during the European morning.
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FIXED INCOME

• Debt futures overcame several wobbles before establishing a more solid base to mount a firmer recovery from sub-par lows, and soft Italian inflation data gave them another push.
• Bunds, Gilts and US Treasuries extend gains on positional grounds approaching the end of the month, quarter and half one of the year.
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COMMODITIES

• WTI and Brent whipsawed between gains and losses this morning despite a lack of newsflow, but in the grander scheme, prices are choppy within tight ranges
• Spot gold looks heavy as DXY recovers some of its recent losses while participants look ahead to more central bank commentary from the ECB Sintra Forum.
• Base metals are mostly lower – in part due to the dollar, but also as Chinese markets lagged overnight after reports suggested the US is to impose more chip restrictions on China.
• US Private Inventory Report: Crude -2.4mln (exp. -1.8mln), Distillates +0.8mln (exp. +0.8mln), Gasoline -2.9mln (exp. -0.1mln), Cushing +1.5mln.
• Russian Energy Ministry said Russia's gasoline exports fell 30% in June from May and Russian refineries' gasoline production was up 3.1% Y/Y as of the last week of June, while diesel production rose 2% Y/Y with reserves at a historical high, according to Reuters.
• Chile's Codelco said it is still evaluating the impact on operations from stoppages caused by rains in the central-south region, while it also noted that some operations were still halted at the El Teniente mine after rains, according to Reuters.
• Probability of Russia's withdrawal from Black Sea Grain Deal in July remains higher, according to Ria citing sources.
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NOTABLE US HEADLINES

• Apple (AAPL) has no plan to transfer its supply chain out of China, according to Foxconn (2317 TT) CEO - the largest iPhone manufacturer - cited by Global Times.
• Google (GOOG) is having “productive conversations” with EU regulators about bringing in regulations for artificial intelligence, the company’s head of cloud Thomas Kurian told CNBC.

NOTABLE EUROPEAN HEADLINES

• Two-fifths of UK sellers are accepting discounts of more than 5% on property asking prices as rising mortgage costs spook buyers, according to property website Zoopla cited by FT.
• Some ECB officials are reportedly mulling a faster reduction of bond portfolio, according to Bloomberg sources.
• ECB's de Guindos said there is still more ground to be covered on rates; the September move will depend on data and the July rate hike is set, according to Bloomberg.
• ECB's Centeno said rates will remain in restrictive territory, not seeing clear second round effects, according to CNBC.
• ECB's Muller said must get inflation down to much lower levels; too early to say where rates will end up; need to look at data for rate hikes beyond July, according to CNBC.
• ECB's Vujcic said there is no reason to say now what we are going to do in September, though there is a good chance of a hike in September, according to CNBC.
• ECB's Scicluna said we will see on rates after July meeting; must be mindful of impact of rate hikes, according to Bloomberg.
• ECB's Vasle said he needs convincing that rate hike beyond July is not needed, not that it is needed, according to Reuters.

EUROPEAN DATA RECAP

• EU Money-M3 Annual Growth* (May) 1.4% vs. Exp. 1.5% (Prev. 1.9%)
• EU Loans to Non-Fin* (May) 4.0% (Prev. 4.6%)
• EU Loans to Households* (May) 2.1% (Prev. 2.5%)
• Swiss Investor Sentiment (Jun) -30.8 (Prev. -32.2)
• Italian Consumer Price Prelim YY (Jun) 6.4% vs. Exp. 6.8% (Prev. 7.6%)
• Italian Consumer Price Prelim MM (Jun) 0.0% vs. Exp. 0.1% (Prev. 0.3%)
• Italian CPI (EU Norm) Prelim YY (Jun) 6.7% vs. Exp. 6.8% (Prev. 8.0%)
• Italian CPI (EU Norm) Prelim MM (Jun) 0.1% vs. Exp. 0.1% (Prev. 0.3%)

CRYPTO

• Bitcoin is on a slightly softer footing intraday but holds onto the USD 30k handle.
• Speculation is mounting that the BlackRock Bitcoin ETF will get the green light, according to FT.
• FTX is moving ahead with efforts to revive its flagship international cryptocurrency exchange, according to WSJ.

GEOPOLITICS

RUSSIA/UKRAINE

• Ukraine said the main event in its counteroffensive is still to come and its main troop reserves have yet to be used in the operation, while Defence Minister Reznikov said their forces made gains that were not made public to avoid exposing troops, according to FT.
• NATO Secretary General Stoltenberg said NATO is ready to defend itself against Russia or Belarus, according to Sky News Arabia.
• US officials said a senior Russian general had advanced knowledge of the Wagner Group chief's plans to rebel against Russia’s military leadership and they are trying to learn if former top Russian commander in Ukraine General Surovikin helped plan Prigozhin's actions. Furthermore, there are signs that other Russian generals may also have supported Prigozhin’s attempt to change the leadership of the Defense Ministry by force, according to the New York Times.
• South Korea designated new sanctions on 2 individuals and 2 entities over North Korea's weapons programme.

APAC TRADE

• APAC stocks traded mixed and only partially sustained the momentum from Wall St where risk appetite was lifted and the NDX outperformed amid strong data and a tech rebound.
• ASX 200 was positive with nearly all sectors in the green after softer-than-expected monthly CPI data from Australia added to the bets for the RBA to keep rates unchanged at next week’s meeting.
• Nikkei 225 gained amid tailwinds from recent currency weakness and with Japan leaning towards extending support measures for gas and electricity bills set to expire at the end of September as it seeks to underpin the economy.
• Hang Seng and Shanghai Comp were subdued after Chinese Industrial Profits remained at a steep contraction and with the US considering new curbs on AI chip exports to China amid some concerns China could use AI chips from Nvidia and others for weapons development and hacking.

NOTABLE APAC HEADLINES

• US considers new curbs on AI chip exports to China amid some concerns China could use AI chips from Nvidia (NVDA) and others for weapon development and hacking, according to WSJ.
• Japanese Finance Minister Suzuki said they will respond appropriately to excessive FX moves if necessary. He offered no comment on FX levels but says FX should move stably, and said one-sided moves seen in current FX market., according to Reuters.

DATA RECAP

• Chinese Industrial Profit YY (May) -12.6% (-18.2%)
• Chinese Industrial Profit YTD (May) -18.8% (Prev. -20.6%)
• Australian Weighted CPI YY (May) 5.6% vs. Exp. 6.1% (Prev. 6.8%)