US stocks eked slight gains but with upside capped amid higher oil prices and geopolitical uncertainty - Newsquawk Daily Asia-Pac Market Open

• US stocks eked mild gains with the S&P 500 and NDX printing fresh record highs with gains led by further strength in semiconductor names, while energy outperformed alongside higher crude prices, and Materials benefited from strength in metal prices. Nonetheless, the upside for the broader market was limited, and oil prices rose after US President Trump rejected Iran’s response to the latest US proposal to end the war, calling it “totally unacceptable”. Furthermore, Trump said the ceasefire is unbelievably weak and is on life support, while he was set to meet with his national security team to discuss next steps regarding Iran, including the potential resumption of military operations.
• USD traded mixed against G10 peers to start the week, as Middle East rhetoric largely dominated trade dynamics. Over the weekend, Trump labelled Iran's peace plan as totally unacceptable, and the major update on Monday, via Axios citing US officials, is that Trump is meeting with his national security team today to discuss the way forward in the Iran war, including possibly resuming military action, after negotiations with the country deadlocked on Sunday.
• Looking ahead, highlights include Japanese Household Spending & Leading Index, Australian Westpac Consumer Sentiment & NAB Business Confidence, BoJ Summary of Opinions from the April Meeting, Supply from Japan.

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LOOKING AHEAD

• Highlights include Japanese Household Spending & Leading Index, Australian Westpac Consumer Sentiment & NAB Business Confidence, BoJ Summary of Opinions from the April Meeting, Supply from Japan.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump said he has a plan on Iran and repeated that their proposal is unacceptable, while he added that the Iran blockade was part of military genius. Trump noted regarding nuclear dust that Iran said the US or China are able to take it out, and Iran doesn't have the equipment to take out nuclear dust. Furthermore, he said the ceasefire is unbelievably weak and is on life support, but added that a diplomatic solution with Iran is still possible.
• US President Trump is meeting with his national security team on Monday to discuss the way forward in the Iran war, including possibly resuming military action, after negotiations with the country deadlocked on Sunday, according to three US officials cited by Axios. US officials said Trump wants a deal to end the war, but Iran's rejection of many of his demands and refusal to make meaningful concessions on its nuclear program puts the military option back on the table. Furthermore, two US officials said that Trump is leaning toward taking some form of military action against Iran to increase pressure on the regime and force concessions on its nuclear program, while one official said "He will tune them up a bit", and another said "I think we all know where this is going". However, Trump is expected to leave for China on Wednesday and return Friday, while two officials said they don't think Trump would order military action against Iran before he returns from China.
• US President Trump said he is considering renewing Project Freedom, but added that the US Navy guiding ships through the Strait of Hormuz would "only be a piece of it", according to Fox. Trump also said regarding Iran's hardline leaders, that they are going to fold", and when questioned on regime change, he said "I will deal with them until they make a deal".
• US President Trump said he had a positive call with Russian President Putin, while he added that the US has massive oil and the Iran war will be over soon. Trump also said he will hit Iran like they have not seen if a deal is not reached, and is to meet a large group of generals about Iran.
• White House Deputy Press Secretary Kelly said US President Trump is not in a rush with Iran and that Trump has all options on the table for Iran.
• US officials cited by Iran International said Iran's response to the US proposal has blocked the path to a diplomatic solution with Tehran and that "The next steps by Trump after receiving Iran's negative response are still unclear".
• US issued fresh Iran-related sanctions in which targets include entities in Hong Kong. US Treasury said it is imposing sanctions on 12 individuals and entities for aiding Iran's oil shipments to China, while the companies hit with sanctions include 4 based in Hong Kong and 4 in the UAE.
• Israeli broadcaster reported discussions are underway with America regarding resuming the fight against Iran, according to Al Arabiya.
• Israel's Channel 12 cited a military source that stated "We are preparing operationally to expand the ground operation in Lebanon amid Hezbollah's ongoing violations of the ceasefire agreement", according to Al Jazeera.
• Enriched nuclear materials will not be transferred outside Iran, according to Tasnim. A source close to the negotiating team said contrary to claims by some Western media outlets, there is no such thing in Iran's text as accepting the withdrawal of enriched nuclear material from the country, while a source also stated that Iran has set a specific deadline in its proposal for receiving its blocked funds.
• Iranian official Ghalibaf said "Our armed forces are ready to respond in a lesson-based manner to any aggression... We are open to all options".
• Iran’s Foreign Ministry spokesperson Baghaei said Iran’s proposal to the US “was not excessive,” and the US continues to have “unreasonable demands”. Baghaei said they are currently focusing discussions on ending the war and the uranium issue, which they will discuss later, while he also commented that they have not yet had the opportunity to settle the score with those who acted against Iran.
• Iranian spokesman for the National Security Committee said there is no clear horizon for a political agreement with the US and "not a single litre of fuel will leave the Strait of Hormuz without Iran’s permission". The spokesman also said that Bahrain and the UAE are still on the wrong path and "We will not allow the formation of the UAE-Israel axis in the region", according to Al Mayadeen. The spokesperson said Iran does not seek to keep the Strait of Hormuz permanently closed, and quoted the head of the Atomic Energy Organisation stating that the issue of nuclear tech is not on the agenda of the negotiations. Furthermore, it was stated that enrichment is not negotiable and Iran's nuclear industry activities are peaceful and will remain peaceful, while the necessary preparations have been foreseen and carried out to protect nuclear centres and assets.
• Iran is ready to dilute highly enriched uranium to levels of 3.7% and 20%, according to Al Jazeera citing a source. It was reported that Washington refused to transfer the highly enriched uranium to Russia and suggested a third country to receive it, while Iran refused to transfer uranium outside its territory and is ready to dilute it under the supervision of the International Atomic Energy Agency. Furthermore, Washington demanded a halt to uranium enrichment for twenty years, but Iran refused, while Washington demanded in its proposal to obtain highly enriched uranium at 60%, and it rejected a proposal to pay Iran reparations for war losses.
• Iran has reportedly deployed deep-roaming submarines in the Strait of Hormuz.
• "Diplomacy and back channel talks and contacts between Iran and US to work out a draft agreement continue to be in the works -- Diplomacy is not dead", according to a post by Journalist Mallick.
• As Pakistan positioned itself as a diplomatic conduit between Tehran and Washington, it quietly allowed Iranian military aircraft to park on its airfields, potentially shielding them from American airstrikes, according to CBS citing sources.
• UAE has carried out military strikes on Iran, according to WSJ citing sources, while the strikes, which the UAE hasn’t publicly acknowledged, have included an attack on a refinery on Iran’s Lavan Island, which took place in early April around the time Trump was announcing a ceasefire.

US TRADE

• US stocks eked mild gains with the S&P 500 and NDX printing fresh record highs with gains led by further strength in semiconductor names, while energy outperformed alongside higher crude prices, and Materials benefited from strength in metal prices. Nonetheless, the upside for the broader market was limited, and oil prices rose after US President Trump rejected Iran’s response to the latest US proposal to end the war, calling it “totally unacceptable”. Furthermore, Trump said the ceasefire is unbelievably weak and is on life support, while he was set to meet with his national security team to discuss next steps regarding Iran, including the potential resumption of military operations.
• SPX +0.18% at 7,412, NDX +0.29% at 29,321, DJI +0.19% at 49,704, RUT +0.39% at 2,872.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said need more tariffs.
• US President Trump said they are doing smart business with China and have a great relationship with Chinese President Xi. Trump said they will bring up prisoners in a meeting with Xi and that Taiwan will also come up in talks with China, while he said Xi is more likely to bring up Taiwan and that they will also talk about energy and Iran with Xi.
• US President Trump is to address Chinese President Xi on selling weapons to Iran, while Beijing has considered shipping air defence systems to Iran via other countries to mask its involvement, something Trump has threatened to punish with 50% tariffs, according to The Telegraph.
• US White House NEC Director Hassett said "we are going into the Trump-Xi meeting very ambitious", while it was separately reported that the US delegation to China will include Tesla's (TSLA) Musk and CEOs from Visa (V), Qualcomm (QCOM), Mastercard (MA), Cisco (CSCO), Apple (AAPL) and more.
• US President Trump’s administration is reportedly to temporarily reduce tariffs on beef imports, according to source reports. It was later reported that US President Trump will sign executive orders on Monday to allow increased beef imports and support the renewal of US cattle herd, according to a White House official.
• US House lawmakers are introducing a bill to ban Chinese vehicles in the US.

NOTABLE HEADLINES

• US White House NEC Director Hassett said inflation is going down at a microeconomic level and core inflation was averaging 2.6% in the past six months. Hassett said he is not going to give advice about Fed rates and guesses an off-ramp for Chair Powell is the inspector general report. Furthermore, Hassett said stocks are doing well because of earnings surprises, while he also said that President Trump is to decide whether a new AI executive order is required, and it is premature to say what the government will do on AI rules.

DATA RECAP

• US Existing Home Sales MoM (Apr) M/M 0.2% (Prev. -3.6%)
• US Existing Home Sales (Apr) 4.02M vs. Exp. 4.05M (Prev. 3.98M)

FX

• USD traded mixed against G10 peers to start the week, as Middle East rhetoric largely dominated trade dynamics. Over the weekend, Trump labelled Iran's peace plan as totally unacceptable, and the major update on Monday, via Axios citing US officials, is that Trump is meeting with his national security team today to discuss the way forward in the Iran war, including possibly resuming military action, after negotiations with the country deadlocked on Sunday.
• EUR was ultimately flat vs the greenback and kept within a relatively tight range at the 1.17 handle, amid sparse newsflow from the bloc.
• GBP edged marginally lower as markets reacted to a lacklustre PM Starmer address. In brief, Starmer’s speech left Labour MPs unsatisfied, which led to Labour backbencher West to form a letter to gather support for a scheduled exit for the PM, and has since gained more support.
• JPY softened with USD/JPY back at the 157.00 territory as the Japanese currency faced headwinds from higher oil prices.

FIXED INCOME

• T-notes were lower across the curve on Monday, with the front-end underperforming as oil prices rallied after President Trump rejected Iran’s response to the US proposal.

COMMODITIES

• Oil prices were firmer to start the week, albeit settled off highs, as Trump called Iran's response to the peace plan "totally unacceptable". Furthermore, Trump is meeting with his national security team today to discuss the way forward in the Iran war, including possibly resuming military action, after negotiations with the country deadlocked on Sunday, three US officials said via Axios. Within these source reports, they added that Trump is leaning toward taking some form of military action against Iran to increase pressure on the regime and force concessions on its nuclear program. Regarding a possible timeline, Trump is expected to leave for China on Wednesday and return Friday, and two officials said they don't think Trump would order military action against Iran before he returns from China.
• Saudi Aramco CEO Nasser said the company can reach its maximum sustainable oil production capacity of 12mln bpd within three weeks if needed, and warned the market could lose around 100mln barrels of oil each week the Strait of Hormuz remains closed if current disruptions persist. Saudi Aramco CEO also said the Yanbu North and South have a 5mln BPD export capacity and are in the process of expanding it, while Saudi Aramco CFO Al-Murshed said the company has a reserves base of about 250bln barrels of oil equivalent, around five times the combined reserves of international oil majors.
• Iran’s Oil Minister said the oil sector has faced issues since the US blockade, but prepared countermeasures are still being implemented, according to state TV.

GEOPOLITICAL

RUSSIA-UKRAINE

• Ukrainian President Zelensky said Russia has no intention of ending this war and they are preparing for new attacks.
• EU’s Foreign Policy Chief Kallas said that in the 21st package of sanctions, they are targeting the military industrial complex of Russia.

OTHER

• US President Trump said "He is seriously considering a move to make Venezuela the 51st state", according to Fox's Roberts.
• Washington-based diplomats reportedly fear China could offer to help reopen the Strait of Hormuz in exchange for US concessions on Taiwan, according to Politico sources, while a person close to the White House said there would be “no consequence” for President Trump in “selling out Taiwan”.

ASIA-PAC

NOTABLE HEADLINES

• PBoC Q1 Monetary Policy Implementation Report stated they will continue to implement appropriately loose monetary policy, as well as utilise a variety of monetary policy tools flexibly to maintain ample liquidity and relatively loose social financing conditions. PBoC is to reform and improve the LPR mechanism, focusing on improving quote quality to better reflect actual lending rates, and will strengthen the coordination of monetary and fiscal policies. Furthermore, it is to enhance the forward-looking, flexible, targeted nature of policies, and will strengthen financial support for expanding domestic demand, scientific and technological innovation, and micro, small and medium-sized enterprises.
• Japan's Council on Economic and Fiscal Policy have reportedly warned the BoJ against higher borrowing costs, as it could impact small- and mid-size firms, amidst the Iran conflict.

EU/UK

NOTABLE HEADLINES

• UK PM Starmer said the local election results were "very tough", while he reiterated he takes responsibility for the election loss and that he will not step down. Starmer said they will do and can do better in months and years ahead, and will prove doubters wrong. He also stated that he will rebuild UK's relationship with Europe at the next EU summit and wants a new arrangement with the EU on the Youth Scheme. Furthermore, he said the upcoming EU summit will be a platform where relationships can be built and that Brexit failed, while he would contest it if a leadership contest was initiated against him.
• UK MP West gave notice to Number 10 that she is collecting the names of Labour MPs to call on the PM to set a timetable for the election of a new leader in September.
• UK MP Angela Rayner allies are pushing her to strike a deal with Andy Burnham to let him back into Parliament – but only if she becomes prime minister first, according to The i Paper. Furthermore, sources close to the former deputy Labour leader said Rayner does not believe that the hugely popular mayor of Greater Manchester has a “realistic chance” of becoming an MP before a leadership contest is triggered.
• UK MP Wes Streeting appears to have moved against UK PM Starmer tonight. "After getting through the day the prime minister now looks in increasing peril", according to Bloomberg's Wickham.
• UK cabinet members are gearing up to tell UK PM Starmer the "game is up", according to Sky News' Rigby.
• UK ministers told The Spectator they are bracing for resignations in their ranks as soon as today, while another senior government source said 'I wouldn't be surprised' if we start seeing members of government join their colleagues very soon, although all is subject to fast-moving developments and changes of course.
• UK Labour Party power brokers want new fiscal rules after Starmer, and MPs from the influential Tribune faction called for longer-term debt targets and bigger wealth taxes in an effective manifesto for the next leader, according to The Times.
• BoE's Greene said it is worth waiting a little while to see what happens with the Middle Eastern war and how it will propagate through the economy, speaking to Bloomberg's Odd Lots podcast.