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Newsquawk Asia-Pac Market Open - European stocks and US equity futures gained but with volumes light on Memorial Day

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Monday, May 30, 2022 - 09:25 PM
  • Major European indices kicked off the week in positive territory but with volumes light on US Memorial Day, while US equity futures were also firmer across the board.
  • DXY softened amid gains in its major peers and holiday-thinned conditions, while EUR/USD rose to its highest in more than a month after record-high German inflation.
  • EU officials have failed to reach an agreement so far on the sixth package of sanctions on Russian including the Russian oil embargo.
  • Looking ahead, highlights include Australian Building Approvals & Private Sector Credit, New Zealand Building Permits & Business Confidence, South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Retail Sales, Chinese Official PMIs, 2yr JGB Auction.

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LOOKING AHEAD

  • Australian Building Approvals & Private Sector Credit, New Zealand Building Permits & Business Confidence, South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Retail Sales, Chinese Official PMIs, 2yr JGB Auction.
  • Click here for the Week Ahead preview

US TRADE

EQUITIES

  • US stocks were closed for Memorial Day.

NOTABLE HEADLINES

  • Fed’s Waller (voter, hawk) said he supports 50bps hikes for "several meetings" and is not taking 50bps off the table until inflation comes down "closer" to the 2% target. Waller said the policy rate should be above neutral by year-end to reduce demand and if inflation is stubbornly high, he is prepared to do more. Furthermore, Waller said the Fed needs to raise rates while the economy is strong and needs to front-load rate rises, according to Reuters.

FX

  • DXY weakened amid strength in its major counterparts and holiday-thinned conditions.
  • Euro climbed to its highest in more than a month after record-high German inflation.
  • GBP was marginally firmer but with gains capped by resistance near last week's peak.
  • JPY continued its depreciating trend with USD/JPY above 127.50.

COMMODITIES

  • Oil futures extended on recent gains with the WTI July contract back above the USD 117/bbl level on tightening supply.
  • China's NDRC announced to increase retail prices of gasoline and diesel by CNY 400/tonne and CNY 300/tonne respectively as of May 31st.
  • French Finance Minister Le Maire said France will freeze gas prices in 2022 and that power prices remain capped, while he added that France will need an additional EUR 2bln in the budget to support energy price cuts, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

MILITARY/DEFENSIVE/NATO

  • Ukrainian Defence Ministry said Russia is regrouping to resume attack in the direction of Sloviansk and noted that Ukraine is having some success in the Southern coastal areas, according to Reuters.
  • US President Biden said the US will not send rocket systems that can reach Russia, according to Reuters.

ENERGY/SANCTIONS/ECONOMIC

  • Russian President Putin told Turkish President Erdogan that Russia may export significant volumes of fertilisers and food in the case sanctions are lifted and is ready to facilitate unhindered sea transit of cargoes, including grains from Ukrainian ports, according to TASS.
  • Turkish President Erdogan told Russian President Putin that steps must be taken to implement peace as soon as possible. Erdogan said that a 30km safe zone has not been established in Northern Syria even though it was agreed by Turkey and Russia in October 2019, while he added that YPG/PKK had been attacking civilians and it is imperative to neutralise this territory.
  • EU Commission President von der Leyen said they are not there yet on a new sanctions package and that there are low expectations that sanctions will be resolved before the end of May, while she added that the issue is around sanctions on crude oil via pipelines, according to Reuters.
  • EU's Borrell said he has been pushing envoys to reach a sanctions deal on Monday and is very confident an agreement will be found, according to Reuters.
  • EU's Michel said sanctions progress has been possible in the last hours, while an EU Commission official said without an agreement on a Russian oil embargo, the EU would have difficulties with other elements of the latest sanctions package.
  • Hungarian PM Orban said things are not looking good with respect to the EU oil embargo on Russian crude and that an exemption of oil pipeline shipments would be a good solution, according to Reuters. PM Orban stated that guarantees are also needed for a potential halt in Russian oil shipments by pipeline and that there is no compromise at this moment at all, while he suggested the next talks on pipeline oil from Russia should happen at the leaders' level.
  • EU Summit draft conclusions said the 6th EU package of sanctions against Russia is to cover crude oil and petroleum products, with a temporary exemption of pipeline deliveries and is to address the issue of temporary exemption of crude oil as soon as possible, according to Reuters.
  • Germany is to pledge to end oil imports this year, according to a note within the Coreper minutes, cited by WSJ's Norman. Furthermore, WSJ’s Norman tweeted that the situation on the sixth package is complex but there is light at the end of the tunnel.
  • Netherlands and Denmark have become the latest countries to reject Russian demands to pay for gas in roubles, according to FT. Netherland's Gasterra said Gazprom has decided to halt gas deliveries over the refusal to pay in roubles, while there were also comments from the Dutch Economy Minister that the Netherlands is not activating a gas crisis plan in the wake of the Gazprom delivery halt and is not expecting a delivery cut to lead to physical gas storage.
  • European leaders will intensify efforts to get food out of Ukraine by land as Russia blockades the country’s ports, according to FT. EU will pledge to improve attempts to find alternative routes to bring out millions of tonnes of grain over the next three months and free Ukraine’s warehouses for the coming harvest, according to a draft.

OTHER

  • Georgian breakaway region of South Ossetia suspended a previously announced referendum on whether to join Russia which had been set for July 17th, according to Reuters.
  • Tunisia’s President called for the suspension of the country’s membership in the Venice Commission and expel its representatives in the country following a report that criticised conducting a referendum on a new constitution, according to Reuters.
  • UN nuclear watchdog said Iran’s stockpile of enriched uranium is more than 18 times larger than the agreed limit in the 2015 nuclear deal, according to AFP News.
  • Greece warned oil tankers and other vessels to avoid sea waters close to Iran following the seizure of two Greek-flagged oil tankers by Iranian forces last week, according to FT.
  • Twitter sources reported a missile attack on the Ain al Asad Airbase in Iraq which hosts US and other international forces.

ASIA

NOTABLE HEADLINES

  • China's Vice-Premier Liu He said they should strengthen research efforts in several aspects including viruses, vaccines, industrial and supply chains, food security, energy security, network information technology, and city management, according to Reuters.
  • PBoC research piece suggested that China should implement various policies and measures to deal with the impact of the epidemic and promote orderly recovery and development of consumption, according to Weixin.
  • Beijing city official said they will no longer require working from home in the Chaoyang district.
  • Shanghai City said it is necessary to hasten work resumption without relaxing efforts to normalise epidemic prevention measures and will fully implement economic policies, while it will make efforts to accelerate the recovery and said it should not increase layer upon layer of COVID curbs.
  • Shanghai City is to remove restrictions on private cars and free passage into housing communities as of midnight from June 1st, while bus and rail transport are to resume basic operations from June 1st.
  • Tesla’s (TSLA) Shanghai plant restored weekly production to 70% of the pre-lockdown level, according to Reuters.
  • German Foreign Ministry said the China trip by UN rights chief Bachelet fell short of expectations and that China ruled out an independent assessment of the situation on-site by the UN rights chief.
  • China’s Global Times tweeted that Chinese authorities should be alert regarding the potential interference of hostile forces outside China that aimed to poison the aesthetics and thinking of China’s next-generation through ”toxic textbooks.
  • China and the US are working to finalise the first face-to-face meetings between their defence ministers at a June conference as Defense Secretary Austin will be travelling to the Shangri-La Dialogue annual defence conference on June 10-12, according to WSJ.
  • Taiwan's Defence Ministry said 30 Chinese air force planes entered Taiwan's ADIZ on Monday, according to Reuters.
  • RBNZ Deputy Governor Hawkesby said the central banks needs to keep decreasing stimulus and tighten conditions beyond the neutral of 2.0%.

EUROPEAN TRADE

  • European stock markets traded higher and the STOXX Europe 600 finished up by 0.6%.

NOTABLE HEADLINES

  • Senior Tory MPs said UK PM Johnson is likely to face a no-confidence vote as leader of the Conservative Party if they lose two parliamentary by-elections next month, according to FT.
  • UK PM Johnson’s spokesperson said they do not expect to see energy rationing or cuts in the UK over the winter but are planning for a range of scenarios and that the UK may need to keep coal power plants, according to Reuters.

DATA RECAP

  • EU Economic Sentiment (May) 105.0 vs. Exp. 104.9 (Prev. 105.0, Rev. 104.9)
  • EU Industrial Sentiment (May) 6.3 vs. Exp. 7.5 (Prev. 7.9, Rev. 7.7)
  • EU Consumer Confidence Final (May) -21.1 vs. Exp. -21.1 (Prev. -21.1, Rev. -22.0)
  • EU Services Sentiment (May) 14.0 vs. Exp. 14.3 (Prev. 13.5, Rev. 13.6)
  • German CPI Prelim MM (May) 0.9% vs. Exp. 0.5% (Prev. 0.8%)
  • German CPI Prelim YY (May) 7.9% vs. Exp. 7.6% (Prev. 7.4%)
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