US stocks edged higher as US-China trade talks remained in focus ahead of US CPI data - Newsquawk Asia-Pac Market Open

• US stocks finished higher as focus remained on US-China trade talks with comments from US Commerce Secretary Lutnick providing some optimism as he reiterated that trade talks are going well which underpinned stocks to fresh session highs, although gains were capped amid a lack of concrete details and with talks yet to conclude. In terms of sectors, they predominantly closed in the green with gains led by strength in Energy and Consumer Discretionary, while Industrials lagged and was the only industry in the red.
• USD was little changed with newsflow light and amid a quiet US calendar ahead of CPI on Wednesday, while talks between the US and China on trade continued into the London evening with details sparse so far, although Commerce Secretary Lutnick noted discussions are "going really well" and may spill over into tomorrow.
• Looking ahead, highlights include South Korean Unemployment, Japanese PPI, Comments from ECB's Lagarde, Supply from Australia.

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LOOKING AHEAD

• Highlights include South Korean Unemployment, Japanese PPI, Comments from ECB's Lagarde, Supply from Australia.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks finished higher as focus remained on US-China trade talks with comments from US Commerce Secretary Lutnick providing some optimism as he reiterated that trade talks are going well which underpinned stocks to fresh session highs, although gains were capped amid a lack of concrete details and with talks yet to conclude. In terms of sectors, they predominantly closed in the green with gains led by strength in Energy and Consumer Discretionary, while Industrials lagged and was the only industry in the red.
• SPX +0.55% at 6,039, NDX +0.66% at 21,942, DJI +0.25% at 42,867, RUT +0.56% at 2,156.
• Click here for a detailed summary.

TARIFFS/TRADE

• US Commerce Secretary Lutnick said they will try to finish things and talks are going really well, while he hopes they end this evening but added that China talks could go into Wednesday if need be. Furthermore, a US official earlier said US-China talks were ongoing and they were working out technical details.
• US Treasury Secretary Bessent said they have had two days of productive talks and talks are ongoing, while talks will be continuing as needed. Furthermore, Bessent said he is returning to the US but USTR Greer and Commerce Secretary Lutnick are to continue talks in London.
• US and Mexico are near a deal to cut steel duties and cap imports, while President Trump would need to sign off on a US-Mexico agreement, according to Bloomberg
• India and the US reportedly advance toward interim trade deal after four-day talks, according to Reuters citing sources. It was separately reported that an official said India and the US have held discussions on market access and digital trade with talks progressing well.
• World Bank lowered its 2025 global growth forecast by 0.4ppts vs. January forecast, citing trade tensions, while the 2025 forecast indicates the lowest level of global growth since 2008, outside of recessions.

NOTABLE HEADLINES

• US Treasury Secretary Bessent was reportedly seen as a contender to be the next Fed Chair, although formal interviews for the next Fed Chair haven't yet begun and Kevin Warsh is also seen as a possible contender, according to Bloomberg. However, the White House later stated the Bloomberg report is false.
• US Senate Republicans are reportedly to send House counterparts a list of fatal flaws in US President Trump's tax/budget bill, according to Politico.

FX

• USD was little changed with newsflow light and amid a quiet US calendar ahead of CPI on Wednesday, while talks between the US and China on trade continued into the London evening with details sparse so far, although Commerce Secretary Lutnick noted discussions are "going really well" and may spill over into tomorrow.
• EUR ultimately returned to flat territory after recouping early losses and as the latest ECB rhetoric provided very little incrementally including ECB's Rehn who said they will take decisions on a meeting-by-meeting basis.
• GBP underperformed with pressure seen in the aftermath of the UK jobs report which showed HMRC Payrolls Change dropped by the most since May 2020, while Earnings growth slowed and the Unemployment Rate ticked higher, albeit as expected.
• JPY softened amid the positive risk appetite although USD/JPY is off today's best levels after pulling back from a brief foray into the 145.00 territory.

FIXED INCOME

• T-notes pared earlier gains as risk tone improved and as participants looked ahead to US CPI and upcoming supply.

COMMODITIES

• Oil prices retreated throughout the day despite comments from OPEC Secretary General Ghais who sees no peak in oil demand on the horizon.
• US Private Inventory Data (bbls): Crude -0.4mln (exp. -2mln), Distillates +3.7mln (exp. +0.8mln), Gasoline +3.0mln (exp. +0.9mln), Cushing -0.7mln.
• OPEC Secretary General Ghais said there is no peak in oil demand on the horizon and OPEC is very concerned by the IEA's "flip-flopping" on oil investment. Furthermore, he sees a 24% increase in world energy needs between now and 2050 and said oil demand will surpass 120M barrels per day by 2050.
• EIA STEO stated 2025 world oil demand is seen at 103.5mln BPD (prev. 103.7mln BPD in prior forecast) and 2026 world oil demand is seen at 104.6mln BPD (prev. 104.6mln BPD).
• Russian President Putin extended the oil sale ban for buyers observing the price cap, according to Interfax.
• EU Foreign Policy Chief Kallas said the Commission has proposed cutting the Russian oil price cap to USD 45/bbl and Commission President von der Leyen said the price cap will be discussed at the G7, while they propose listing more shadow fleet vessels and oil firms on the restricted list.
• Chile's Codelco Copper Production rose 20.5% Y/Y in April to 114,600 tonnes, while Collahuasi copper production fell 13.5% Y/Y in April to 36.6k tonnes and Escondida copper production rose 31% Y/Y in April to 128.4k tonnes.

GEOPOLITICAL

MIDDLE EAST

• US President Trump said to Israeli PM Netanyahu that he still wants to defuse the Iran crisis with talks, not bombs, according to Axios.
• US Special Envoy Steve Witkoff told Israeli officials that he believes understandings are now forming with Hamas over a hostage-ceasefire deal, a source familiar with the matter told CNN Tuesday.
• A senior US official and an Israeli official said efforts to persuade Hamas to soften its stance on the US hostage deal are showing signs of progress recently and we are closer to an agreement than thought, according to Axios's Ravid on X.
• UK is set to sanction Israel Ministers Ben-Gvir and Smotrich, according to the Times.
• US Secretary of State Rubio said the US condemns sanctions imposed by the governments of the UK, Canada, Norway, New Zealand, and Australia on two sitting members of the Israeli cabinet. Rubio also stated that Israel sanctions do not advance US-led efforts to achieve a ceasefire, bring all hostages home, and end the war, while he added that the US urges a reversal of the sanctions.
• Iranian Deputy Foreign Minister said any Israeli action against Iran will not go unanswered and Israel must think carefully before taking any action, while it added that Israel's threat to Iran's nuclear facilities if negotiations fail, is an attempt to influence the talks.
• Iran's lawmakers said the US is not serious in nuclear talks with Tehran and aims to impose its demands, while they urged for nuclear negotiators to be vigilant in talks with the US and said the talks are a strategic trap. Furthermore, they said Tehran's uranium enrichment is non-negotiable and any such US demand should be rejected, while all sanctions should be lifted in a verifiable and permanent way under any new deal with the US.
• US President Trump told Fox News that Iran is becoming much more aggressive in nuclear talks.
• US Central Command Commander told a hearing before a US House committee that he presented Defense Secretary Hegseth and US President Trump with a "broad range of options" for military action against Iran if negotiations on the nuclear deal fail.
• US senior administration officials told Fox News that Iran appears to be dragging negotiations on without concrete progress while pushing forward with its nuclear efforts.

RUSSIA-UKRAINE

• US State Department spokesperson said Russia's strikes against Ukraine's cities need to stop immediately.

ASIA-PAC

NOTABLE HEADLINES

• China's Commerce Minister said China and the UK should resolve differences via consultations and expand cooperation in digital and financial areas.
• White House AI and Crypto Czar Sacks said China is only 3-6 months behind the US in AI.

EU/UK

NOTABLE HEADLINES

• ECB's Rehn said will take decisions on a meeting-by-meeting basis and must avoid complacency over the inflation outlook.
• ECB's Villeroy said the ECB has successfully normalised policy and that policy and inflation are now in a favourable zone, while he added that being in a favourable zone does not mean the Bank is static and that the ECB is to be as agile as needed.
• ECB's Vujcic said cannot say if US tariffs are disinflationary or inflationary and he is hopeful they will have more tariff clarity by September, while he added the ECB can wait for new projections and data before the next move, according to Bloomberg.

DATA RECAP

• UK Employment Change (Apr) 59k vs. Exp. 50k (Prev. 112k)
• UK HMRC Payrolls Change (May) -109k (Prev. -33k, Rev. -55k)
• UK ILO Unemployment Rate (Apr) 4.6% vs. Exp. 4.6% (Prev. 4.5%)
• UK Avg Earnings (Ex-Bonus) (Apr) 5.2% vs. Exp. 5.3% (Prev. 5.6%, Rev. 5.5%)
• UK Avg Wk Earnings 3M YY (Apr) 5.3% vs. Exp. 5.5% (Prev. 5.5%, Rev. 5.6%)
• EU Sentix Index (Jun) 0.2 vs. Exp. -6.0 (Prev. -8.1)