US stocks gained after a rise in initial jobless claims triggered a dovish reaction across asset classes - Newsquawk Asia-Pac Market Open

• US stocks were firmer after a rise in initial jobless claims to the highest level since August 2023 led to a dovish reaction across assets, while the attention was also on the BoE meeting where there were a couple of dovish dissenters and Governor Bailey opened up the door to cuts at coming meetings.
• USD weakened owing to a jump in Initial Jobless Claims which printed its highest since August last year and pressured yields.
• Looking ahead, highlights include New Zealand BusinessNZ PMI, Japanese Household Spending, Current Account & Eco Watchers Survey, Malaysian Industrial Production, Supply from Japan.

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LOOKING AHEAD

• Highlights include New Zealand BusinessNZ PMI, Japanese Household Spending, Current Account & Eco Watchers Survey, Malaysian Industrial Production, Supply from Japan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks were firmer after a rise in initial jobless claims to the highest level since August 2023 led to a dovish reaction across assets, while the attention was also on the BoE meeting where there were a couple of dovish dissenters and Governor Bailey opened up the door to cuts at coming meetings.
• SPX +0.51% at 5,214, NDX +0.16% at 18,113, DJI +0.85% at 39,388, RUT +0.90% at 2,074.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Daly (2024 voter) said the last three months have left considerable uncertainty about the next few months of inflation and the Fed is facing a range of scenarios right now. Daly said she is getting different signals from firms who say consumers seem to be getting choosy but input prices are not yet declining, while she added the balance sheet offers no signal about monetary policy.

DATA RECAP

• US Initial Jobless Claims w/e 231.0k vs. Exp. 215.0k (Prev. 208.0k, Rev. 209k), highest since August 2023.
• US Continued Jobless Claims w/e 1.785M vs. Exp. 1.785M (Prev. 1.774M, Rev. 1.768M)

FX

• USD weakened owing to a jump in Initial Jobless Claims which printed its highest since August last year and pressured yields.
• EUR benefitted from the softer greenback in the absence of any notable data or catalysts from the eurozone today.
• GBP traded choppy in the aftermath of the BoE where there was dovish dissent and ensuing commentary from BoE Governor Bailey who opened up the door to cuts at coming meetings although he stated they are not yet at the point they can cut rates and suggested a rate change in June has not been ruled out nor decided.
• JPY was ultimately flat against a weaker dollar after the early upside in USD/JPY stalled just shy of the 156.00 handle, before reversing on the initial jobless claims data.
• Banxico left rates on hold at 11.00% as widely expected with the decision unanimous, while it stated that headline and core inflation forecasts were raised for Q224 to Q325 with inflation seen returning to the 3.0% target in Q425.
• Polish NBP Base Rate (May) 5.75% vs. Exp. 5.75% (Prev. 5.75%).
• BoC Financial Stability Report stated that debt serviceability and asset valuations are key risks to stability, while some indicators of financial stress have risen and the valuations of some financial assets appear to have become stretched.

FIXED INCOME

• Treasuries rallied after rising jobless claims and a solid 30-year auction.

COMMODITIES

• Oil prices were modestly firmer after gains out of APAC trade faded through the US session, while the softer dollar provided some support.
• OPEC is to stop publishing a calculation of the world's demand for its own crude in its monthly oil report and instead focus on forecasts for demand for oil from the wider OPEC+ group, according to Reuters sources.
• Iraq set the June 2024 Basrah medium crude OSP to Asia at USD +1.00/bbl vs Oman/Dubai and set the OSP to Europe at -3.35/bbl vs dated Brent, while it set the OSP to North and South America at -0.65/bbl vs ASCO, according to SOMO.

GEOPOLITICAL

MIDDLE EAST

• Israeli officials said the delegation presented to mediators its reservations regarding the Hamas proposal and this round of Gaza truce and hostage-release talks in Cairo has ended, while Israel will press ahead with its operation in Rafah and elsewhere in the Gaza strip as planned.
• Hamas delegation left Cairo without a breakthrough and insisted on the truce proposal that was rejected by Israel, according to Walla's Elster.
• Israel PM Netanyahu said "If Israel is forced to stay alone - Israel will stand alone", in response to comments from US President Biden, according to Kann's Stein.
• Israeli military chief spokesperson said the Israeli military has the munitions it needs for Rafah and other planned operations.
• US State Department said the US continues to engage with Israel about other options in Rafah instead of a major military operation and continues to engage with Israel on amendments to the proposal Hamas submitted. Furthermore, the US continues to work to try to finalise the ceasefire deal text although the effort is "incredibly difficult".
• White House's Kirby said conversations with Israel on Rafah are ongoing and the US is not walking away from Israel, while it was also reported that CIA Director Burns is leaving the region but talks are ongoing in Cairo.
• US source familiar with the talks said it was decided to temporarily stop the talks due to the current situation in Rafah, according to Al Jazeera.
• There were said to be non-stop alerts in northern Israel and several interceptions were reported, according to Walla's Elster.
• Yemen's Houthis said they will target any ship of any company related to supplying/transporting goods to Israel and to any destination they are heading to.
• Iraqi factions announced the targeting of a "vital target" in the Israeli city of Eilat with two drones, according to Sky News Arabia.
• Islamic Resistance in Iraq said it targeted the Leviathan gas platform in occupied Palestine with marches, according to Al Jazeera.

OTHER

• Russian President Putin said Russian and Belarus forces have commenced preparation for nuclear tactical weapons drills, according to Ifx.
• Russian Deputy Foreign Minister said they warn adversaries of the consequences of escalatory policy, which forces them to strengthen nuclear deterrence measures, according to Al Jazeera.

ASIA-PAC

NOTABLE HEADLINES

• China is said to be considering a proposal to exempt individual investors from paying dividend taxes on Hong Kong stocks bought via the Stock Connect, according to Bloomberg sources.
• China and Hungary elevate ties to an all-weather comprehensive strategic partnership in the new era, according to Chinese state media.
• US added Chinese entities to its sanctions list over national security with China Electronics Technology Group units among the entities added.
• South Korean President Yoon ordered measures to minimise the adverse impact from restructuring of real estate projects and ordered to swiftly prepare tax incentive measures for the value-up programme.

EU/UK

NOTABLE HEADLINES

• BoE kept the Bank Rate at 5.25%, as expected, in a 7-2 vote (exp. 8-1) as Ramsden joined Dhingra in calling for a 25bps cut, while the BoE repeated guidance that monetary policy needs to remain restrictive for sufficiently long.
• BoE DMP showed one-year ahead CPI inflation expectations declined further to 2.9% in April, down from 3.2% in March, while the three-month average fell by 0.2 percentage points to 3.1% in April.
• BoE Governor Bailey said they have had encouraging news on inflation and need more evidence it will stay low before cutting rates, while he is optimistic that things are moving in the right direction for a rate cut.
• BoE Governor Bailey said in the post-meeting statement that it is likely that BoE will need to cut rates in the coming quarters and may need to cut rates by more than is currently priced into markets with cuts to be data dependent. However, he said they are not yet at the point where they can cut rates and a change in Bank Rate in June is neither ruled out nor a fait accompli. Furthermore, he said during the Q&A that one small cut in the Bank Rate would still leave them with restrictive monetary policy.
• BoE Deputy Governor Ramsden said he sees no contradiction between his voting for a rate cut and continuing with QT in the background, while he added that QT is not designed to be an active part of monetary policy.
• BoE's Pill said the Bank is more confident it can start to cut policy restrictions but it is not there yet and needs more confidence in data before moving. Pill said they don't have confidence inflation is subdued but noted "encouraging signs" on inflation and growth, as well as some signs UK economic activity is recovering. Furthermore, Pill said in the absence of big disturbances to the economy, they will be thinking about cutting rates over the next few meetings, as well as noted that rate decisions will be data dependent and the process of getting inflation down is not yet complete.
• UK Chancellor Hunt said he would prefer the BoE take their time, rather than having to reverse their course. It was separately reported that Hunt said the economy has likely escaped recession and the UK is far stronger than what critics say, according to WSJ.
• ECB's de Guindos sees Europe's economic growth gaining momentum and said inflation is to converge to the ECB's goal by mid-2025, while he added the ECB does not want to commit to any path beyond June. De Guindos said the ECB is not dependent on the Fed, but its policies are relevant at a global level and the evolution of the USD is very important. Furthermore, he said US fiscal policy is much more expansive than in the Eurozone but their unemployment rate is much lower, while he added that the number of future rate cuts will depend on multiple factors including salaries and possible adjustment in financial markets.