S&P 500 printed its highest close YTD, while the R2K rallied on regional bank strength - Newsquawk Asia-Pac Market Open

US stocks were higher albeit with gains limited across the 3 main indices amid light trade and the absence of tier 1 data. Nonetheless, the S&P 500 closed at a fresh YTD high 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.
USD was marginally firmer above the 104.00 level as it benefitted from the weakness in the EUR but with price action contained owing to the absence of any relevant data or macro events stateside.
Looking ahead, highlights include Australian Q1 GDP, Chinese Trade Balance, Japanese Leading Index, Speeches from RBA Governor Lowe & Assistant Governor Bullock, Supply from Australia.

More Newsquawk in 2 steps:

1. Subscribe to the free premarket movers reports

2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days

LOOKING AHEAD

Highlights include Australian Q1 GDP, Chinese Trade Balance, Japanese Leading Index, Speeches from RBA Governor Lowe & Assistant Governor Bullock, Supply from Australia.

US TRADE

US stocks were higher albeit with gains limited across the 3 main indices amid light trade and the absence of tier 1 data. Nonetheless, the S&P 500 closed at a fresh YTD high 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, telling lenders to watch risks from vendors.
Goldman Sachs cut the probability of a US recession in the next 12 months to 25% from 35% and said the Fed is most likely to add a 25bps rate hike in July to take the terminal forecast to 5.25%-5.50%, while 2023 GDP is seen at 1.8% which is "well above" both private-sector and the Fed's view.

US Treasuries bear-flattened as IG supply and improved US growth forecasts unwound the initial EGB-led strength.

USD was marginally firmer above the 104.00 level as it benefitted from the weakness in the EUR but with price action contained owing to the absence of any relevant data or macro events stateside.
EUR softened amid headwinds from recent soft data releases including a surprise contraction in German Industrial Orders and the lower future inflation estimates in the ECB Consumer Expectations Survey.
GBP returned to flat territory after rebounding from an early dip beneath the 1.2400 handle.
JPY traded sideways after initial upward momentum in USD/JPY was thwarted by resistance at 140.00

US SEC sues Coinbase (COIN) in NY federal court and claims the Co. is acting as an unregistered broker, while it said that alleged failures deprive investors of critical protection. It was also reported that 10 states issued show cause orders to Coinbase ordering them to show why they should not have to cease and desist from selling unregistered securities in those states.
US SEC Chair Gensler said the Binance case has parallels with the FTX case and that investment advisors must be careful on crypto, while it was later reported that the SEC filed a motion for a restraining order to freeze Binance's US assets, according to a court filing.

Crude futures were slightly lower after having spent most of the US session clawing back earlier losses with the rebound helped by the improved growth outlook.
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.
Asian refiners are likely to take less oil from Saudi Arabia for July and buy more spot cargoes such as those from the UAE after the surprise price hike and output cut, according to Reuters citing traders.
Russia said its crude oil production remained stable in May.

Russia's Kremlin said Ukraine sabotaged Kakhovka Dam as its large-scale counter-offensive is faltering. However, it was separately reported that US intelligence points to Russia being behind the Ukraine dam attack, according to NBC News.
Senior Ukrainian Military Commander said the Kakhovka dam blast will not prevent Ukraine from advancing.
Ukraine's atomic agency chief does not consider the situation at Zaporizhzhia nuclear plant to be critical after the dam collapse and said the decrease in the level of the Kakhovka reservoir will not affect the level of cooling ponds at the nuclear plant.
German Chancellor Scholz said he had not spoken with Russian President Putin for a long time and now is not the right time to talk to him, but he intends to do so again.
US Indo-Pacific coordinator Campbell said the potential for a miscalculation with China is real and growing.

World Bank raised its 2023 global GDP forecast to 2.1% (vs 1.7% in Jan) citing greater-than-expected resilience in major economies but cut its 2024 growth forecast to 2.4% (2.7%) due to the drag from tighter monetary policy, while it sees 2025 GDP growth at 3.0%. Furthermore, it upgraded US 2023 GDP growth forecast to 1.1% (prev. 0.5% in Jan) but cut the 2024 estimate to 0.8% (prev. 1.6%) and raised its China 2023 GDP growth estimate to 5.6% (prev. 4.3% in Jan) but lowered the 2024 forecast to 4.6% (prev. 5.0%).

NOTABLE APAC HEADLINES

China reportedly asked the largest banks to cut deposit rates to boost the economy, according to Bloomberg sources. It was later reported that regulators asked major state-owned banks to lower dollar deposit rates by as much as 100bps to 4.3%.
China's Shanghai reportedly instructed to upgrade plane and EV manufacturing, according to Bloomberg.
China’s Global Times stated the yuan has remained largely stable despite short-term downward pressure, while positive factors including China's economic rebound and a possible end to US interest rate hikes may boost the yuan to about 6.80 per dollar by year-end.
HKMA said it will continue to work with relevant Hong Kong and Mainland regulators and market participants to develop the offshore Yuan market in Hong Kong, while it will continue to enhance offshore RMB liquidity and expand the range of offshore RMB products.

NOTABLE HEADLINES

BoE confirmed it is to conclude its corporate bond sales programme and noted that a small number of very short maturity bonds will continue to be held in the portfolio maturing fully by 5th April 2024.
ECB's Knot said inflation is still too high and that the worst is behind them but noted that underlying pressures will prove more difficult to bring down.
ECB's Nagel (hawk) reiterated that underlying price pressures are far too high.
ECB Consumer Expectations Survey showed inflation expectations for 12 months fell to 4.1% (Mar 5.0%) and for 3 years ahead fell to 2.5% (Mar 2.9%).

DATA RECAP