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US stocks finished lower with price action choppy on return from the holiday weekend - Newsquawk Asia-Pac Market Open

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Tuesday, Jun 20, 2023 - 09:32 PM
  • US stocks finished lower on what was a choppy session on return from the extended weekend with initial spurts of weakness framed as preliminary month and quarter-end selling in the absence of any major data releases until Friday's ISMs, although the downside was stemmed amid a softening in yields and as participants digested strong Housing Starts data.
  • USD was slightly firmer as US participants returned from the long weekend with the DXY hitting a peak of 102.79 in the aftermath of the jump in US Housing Starts. However, the dollar then failed to sustain its highs as Treasury yields extended their descent on technicals and positioning.
  • Looking ahead, highlights include Australian Westpac Leading Index, BoJ April Meeting Minutes, Speech from BoJ's Adachi, Supply from Australia.

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LOOKING AHEAD

  • Highlights include Australian Westpac Leading Index, BoJ April Meeting Minutes, Speech from BoJ's Adachi, Supply from Australia.

US TRADE

  • US stocks finished lower on what was a choppy session on return from the extended weekend with initial spurts of weakness framed as preliminary month and quarter-end selling in the absence of any major data releases until Friday's ISMs, although the downside was stemmed amid a softening in yields and as participants digested strong Housing Starts data.
  • SPX -0.47% at 4,389, NDX -0.09% at 15,070, DJIA -0.72% at 34,054, RUT -0.47% at 1,867
  • Click here for a detailed summary.

NOTABLE HEADLINES

  • Fed Vice Chair nominee Jefferson (voter) said in prepared remarks for the Senate confirmation hearing that he remains focused on returning inflation to 2% and that they must remain attentive to all of inflation, banking-sector stress, and geopolitical uncertainty. Jefferson added that the US banking system is sound and resilient but he remains attuned to any threats to its stability, while he also noted that inflation has started to abate, according to Reuters.
  • Fed Board nominee Cook (voter) said in prepared remarks for the Senate hearing that she is focused on inflation until the job is done, while she added that the US economy is at a critical juncture and she has consistently supported the Fed's work to lower inflation.
  • Fed Board nominee Kugler said in prepared remarks for the Senate confirmation hearing that she is deeply committed to setting monetary policy to reduce inflation and promote maximum employment. Kugler also stated that high inflation hurts workers and businesses alike, while she added it is important to bring inflation down to the Fed's 2% target.
  • Fed's Barr (voter) said the banking system is quite strong but there are concerns and observers should not over-generalise from Spring banking woes.
  • US Treasury raised its 4-week and 8-week bill sizes to USD 70bln and USD 60bln from USD 65bln and USD 55bln, respectively, with both to be sold on June 22nd and it left its 17-week bill auction (June 21st) unchanged at USD 46bln with all three to settle on June 27th.

DATA RECAP

  • US Building Permits (May) 1.491M vs. Exp. 1.42M (Prev. 1.417M)
  • US Housing Starts (May) 1.631M vs. Exp. 1.4M (Prev. 1.401M)

FIXED INCOME

  • US Treasuries bull-flattened after the long weekend and futures staged a big recovery from Monday's lows as anxiety grew around month- and quarter-end flows.

FX

  • USD was slightly firmer as US participants returned from the long weekend with the DXY hitting a peak of 102.79 in the aftermath of the jump in US Housing Starts. However, the dollar then failed to sustain its highs as Treasury yields extended their descent on technicals and positioning.
  • EUR marginally softened against the buck and EUR/USD briefly dipped below 1.0900 before clawing back most of its earlier losses.
  • GBP traded marginally lower alongside the general weakness observed in cyclical currencies.
  • JPY saw some reprieve from recent losses as USD/JPY continued its pullback from the 142.00 handle.
  • NBH cut its key one-day rate to 16% from 17% (as expected by several analysts). NBH said it is to continue gradual convergence of the interest rate conditions of one-day tenders to the base rate if improvement in risk perceptions persist, while it noted that a cautious and gradual approach is warranted.

COMMODITIES

  • Crude prices were lower as Chinese growth concerns weighed while dollar strength post-blowout Housing Starts data dragged WTI to below USD 70/bbl before paring for the rest of the session.
  • Iraqi Kurdish PM Barzani arrived in Turkey for talks with President Erdogan regarding halted oil exports, according to Reuters citing sources.
  • China 2023 crude oil demand is seen rising 3.5% Y/Y to 740mln metric tons, according to CNPC Research.
  • Indian Oil Minister noted the possibility of cutting petrol and diesel prices next quarter if the global situation remains stable.

GEOPOLITICAL

  • EU is to offer EUR 50bln in aid to Ukraine for the next four years and is asking 27 members to fund EUR 66bln to deliver on priorities, according to Commission President von der Leyen.
  • Russia's Kremlin said it is hardly worth talking about any stable grounds to conduct negotiations with Ukraine but added that President Putin remains open to dialogue.
  • Russian Defence Minister said Ukraine plans to hit Crimea with HIMARS and Storm Shadows, while the use of these weapons would mean full-scale involvement of the US and the UK in the Russia-Ukraine conflict, according to TASS.
  • Russia believes July 18th will be the time to end the Black Sea grain deal, according to Sputnik citing Deputy Foreign Minister Vershinin.

ASIA-PAC

NOTABLE APAC HEADLINES

  • Chinese Premier Li said China is capable and confident in advancing continuous and healthy economic development. Premier Li also said that China is willing to work with Germany to take Sino-German relations to new levels.
  • EU Summit draft conclusions call on China to engage in global challenges including climate change, biodiversity and debt relief, according to an EU official.
  • Nasdaq executives plan to visit China this year to restart data partnership talks with companies there about access to economic data desperately sought by Western investors, according to Semafor.

EU/UK

NOTABLE HEADLINES

  • UK Chancellor Hunt said capping supermarket prices is not the right long-term solution and he will meet with regulators next week to discuss what needs to be done. Hunt also said they will have sympathy with people whose mortgage costs are going up but will not do anything that might increase inflation and will stick to the plan of halving inflation this year.
  • UK Chancellor Hunt said he will meet main mortgage lenders later this week to discuss flexibility for families in arrears and other steps.
  • BoE's Hall (FPC) said recent moves in UK government bond yields have tested the resilience of liability-driven investment funds.
  • ECB's Villeroy said inflation is past the peak in France and the Euro area, while he added ECB decisions are to depend on inflation data and most of the ECB rate hike path is complete.
  • ECB's Vujcic said sometimes a soft landing is not possible and they have to consider the risks of doing too much vs too little, while he added that core inflation pressures remain in the EZ.

DATA RECAP

  • German Producer Prices MM* (May) -1.4% vs. Exp. -0.7% (Prev. 0.3%)
  • German Producer Prices YY* (May) 1.0% vs. Exp. 1.7% (Prev. 4.1%)
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