US stock markets rallied to fresh record highs after soft CPI data boosted Fed rate cut bets - Newsquawk Asia-Pac Market Open

US stocks and bonds rallied after soft CPI data boosted Fed rate cut bets with markets back to fully pricing two rate cuts this year with the first move now fully priced for September. The CPI data was the main driver, while Retail Sales also printed weaker-than-expected which added to the dovish impulse that propelled the major indices to fresh all-time highs.
USD sold off after headline US CPI printed beneath expectations and slightly boosted Fed rate cut bets with Fed rate cut pricing now fully pricing the first rate cut in September, while Retail Sales and NY Fed Manufacturing also missed estimates.
Looking ahead, highlights include Japanese GDP, South Korean Trade Data, Australian Employment Change & Unemployment Rate, Supply from Japan.

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Highlights include Japanese GDP, South Korean Trade Data, Australian Employment Change & Unemployment Rate, Supply from Japan.
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US TRADE

US stocks and bonds rallied after soft CPI data boosted Fed rate cut bets with markets back to fully pricing two rate cuts this year with the first move now fully priced for September. The CPI data was the main driver, while Retail Sales also printed weaker-than-expected which added to the dovish impulse and propelled the major indices to fresh all-time highs.
SPX +1.17% at 5,308, NDX +1.49% at 18,597, DJI +0.88% at 39,908, RUT +1.14% at 2,109.
Click here for a detailed summary.

NOTABLE HEADLINES

Fed's Kashkari (non-voter) said the Fed is focussed on underlying demand in the economy to get inflation down and reiterated that the biggest question now is how restrictive policy levels are, while he added that the Fed probably needs to sit here for a while longer to figure out where inflation is headed.
US President Biden said they have made progress on inflation and have a lot more to do, while he noted that April CPI shows prices are still too high and called on grocery chains to lower prices for consumers. It was also separately reported that President Biden said he accepted a presidential debate invitation from CNN on June 27th.
WSJ’s Timiraos posted on X that "One good print can't offset three unfavorable ones. It may take a couple more for officials to get over the PTSD of the Q1 inflation, and it reduces the risk of any shift to a neutral bias (ie, open the door to hikes)".
WSJ’s Timiraos posted on X that the April core PCE index probably rose between 0.20% and 0.26%, according to the forecasters who map the CPI and PPI into the PCE, although noted it could change with tomorrow's import price data.

DATA RECAP

US CPI MM SA (Apr) 0.3% vs. Exp. 0.4% (Prev. 0.4%)
US Core CPI MM SA (Apr) 0.3% vs. Exp. 0.3% (Prev. 0.4%)
US CPI YY NSA (Apr) 3.4% vs. Exp. 3.4% (Prev. 3.5%)
US Core CPI YY NSA (Apr) 3.6% vs. Exp. 3.6% (Prev. 3.8%)
US Cleveland Fed CPI (Apr) 0.3% (Prev. 0.4%)
US NY Fed Manufacturing (May) -15.6 vs. Exp. -10.0 (Prev. -14.3)
US Retail Sales MM (Apr) 0.0% vs. Exp. 0.4% (Prev. 0.7%, Rev. 0.6%)
US Retail Control (Apr) -0.3% vs. Exp. 0.1% (Prev. 1.1%, Rev. 1.0%)
US NAHB Housing Market Index (May) 45.0 vs. Exp. 51.0 (Prev. 51.0)
US Business Inventories MM (Mar) -0.1% vs. Exp. -0.1% (Prev. 0.4%, Rev. 0.3%)

USD sold off after headline US CPI printed beneath expectations and slightly boosted Fed rate cut bets with Fed rate cut pricing now fully pricing the first rate cut in September, while Retail Sales and NY Fed Manufacturing also missed estimates.
EUR benefitted from the softer buck which saw EUR/USD ascend above 1.0850, while insiders noted that June was virtually a done deal for a cut although the ECB is said to be increasingly cautious about prospects for monetary easing beyond the next meeting.
GBP strengthened alongside the outperformance in cyclical currencies owing to the US CPI data and subsequent heightened risk appetite.
JPY was among the biggest gainers with USD/JPY retreating to sub-155.00 as US yields retreated on the soft data releases.

Oil prices ultimately settled in the green with morning weakness reversed after a larger-than-expected draw in EIA crude inventories and a weaker buck post-soft CPI.
US EIA Weekly Crude Stocks -2.5M vs. Exp. -0.9M (Prev. -1.4M)
OPEC+ is reportedly likely to hold its June 1st policy meeting online, according to Reuters citing sources.
QatarEnergy set the July term price for Al-Shaheen crude at USD 1.82/bbl (prev. 2.54/bbl) above Dubai quotes, according to Reuters citing sources.
IEA OMR cut 2024 oil demand growth forecast by 140k BPD to 1.1mln BPD, while 2025 demand is expected to grow by 1.2mln BPD (vs. prev. forecast of 1.1mln BPD).
A barge hit a bridge in Galveston, Texas, which damaged the structure and caused an oil spill, according to AP.

MIDDLE EAST

Lebanon's Hezbollah said it launched drones at a military base west of Israel's Tiberias in the deepest strike into Israeli territory thus far.
Israeli PM Netanyahu said Hamas's elimination must be pursued without excuses.
Israeli Defense Minister Gallant said relations with the US are strong and stable, while he added cooperation with the US is important despite differences and it is necessary to work on the existence of civilian alternatives in place of Hamas in Gaza.
Israeli security officials visited Cairo for talks today with the purpose of the talks in Cairo to cool down tensions with Egypt and warm relations, according to CNN's Ravid.

OTHER

China's Coast Guard urged the Philippines to immediately cease its "violations", according to Chinese state media.

NOTABLE HEADLINES

China's Industry Minister listed 99 NEV models within the government-backed campaign to promote sales in rural areas, while Zeekr (ZK) 001 and SAIC-Volkswagen's (VOW3 GY) ID.3 were referenced.
US reportedly opened a trade probe of Asian solar imports, according to Bloomberg.

NOTABLE HEADLINES

German Chancellor Scholz said a stable economic rebound is possible, but structural change is required, while he added that they can have domestic confidence that the energy supply is secure and will remain affordable.
ECB's Rehn said if the confidence that inflation is approaching its target in a sustainable manner continues to strengthen, the restrictiveness of monetary policy can be reduced.
ECB insiders noted cautiousness even as a June rate grows more certain with the ECB said to be increasingly cautious about prospects for monetary easing beyond the next meeting, while all insiders made it clear that June was virtually a done deal, according to Econostream citing three Eurosystem insiders.

DATA RECAP

EU GDP Flash Estimate QQ (Q1) 0.3% vs. Exp. 0.3% (Prev. 0.3%)
EU GDP Flash Estimate YY (Q1) 0.4% vs. Exp. 0.4% (Prev. 0.4%)
EU Employment Flash QQ (Q1) 0.3% vs. Exp. 0.3% (Prev. 0.3%)
EU Employment Flash YY (Q1) 1.0% vs. Exp. 1.0% (Prev. 1.2%)
EU Industrial Production MM (Mar) 0.6% vs. Exp. 0.5% (Prev. 0.8%, Rev. 1.0%)
EU Industrial Production YY (Mar) -1.0% vs. Exp. -1.2% (Prev. -6.4%, Rev. -6.3%)