US stocks finished mostly rangebound with price action choppy after mixed data and latest Fed speak - Newsquawk Asia-Pac Market Open

• US stocks and bonds were choppy as participants digested mixed data releases and the latest Fed commentary with the dollar pressured after the softer-than-expected ISM services PMI. Stocks began the session on the front foot in the wake of the ISM data and T-notes pared the earlier weakness that was triggered by a strong ADP report, while Fed Chair Powell largely stuck to the script which only pushed stocks and bonds higher and the DXY lower as he remained seemingly unfazed by the recent hot data releases. However, the major indices later pulled back from their best levels as traders unwound their positions in the last hour of trade.
• USD was pressured in the aftermath of the ISM Services PMI data which missed expectations and showed prices eased from February but remained in expansionary territory, while there were comments from Fed Chair Powell who repeated his recent commentary noting that risks are becoming more balanced.
• Looking ahead, highlights include Australian Services PMI Retail Sales & Building Approvals, New Zealand Building Permits & ANZ Commodity Price Index, Comments from RBA Assistant Governor Jones, Supply from Japan, Holiday Closures in Mainland China, Hong Kong and Taiwan.

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LOOKING AHEAD

• Highlights include Australian Services PMI Retail Sales & Building Approvals, New Zealand Building Permits & ANZ Commodity Price Index, Comments from RBA Assistant Governor Jones, Supply from Japan, Holiday Closures in Mainland China, Hong Kong and Taiwan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks and bonds were choppy as participants digested mixed data releases and the latest Fed commentary with the dollar pressured after the softer-than-expected ISM services PMI. Stocks began the session on the front foot in the wake of the ISM data and T-notes pared the earlier weakness that was triggered by a strong ADP report, while Fed Chair Powell largely stuck to the script which only pushed stocks and bonds higher and the DXY lower as the Fed Chair remained seemingly unfazed by the recent hot data releases. However, the major indices then pulled back from their best levels as traders unwound their positions in the last hour of trade.
• SPX +0.11% at 5,211, NDX +0.21% at 18,160, DJIA -0.11% at 39,127, RUT +0.54% at 2,076.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Chair Powell said if the economy evolves as the Fed expects, most on the FOMC expect to cut rates later this year and it is too soon to say if the recent inflation readings are more than just a bump. Powell said inflation expectations are consistent with 2% inflation and the Fed is committed to returning inflation to the 2% target over time. Furthermore, he said policy is restrictive and is doing its job, while he repeated that there are risks of cutting rates too soon as well as waiting too long.
• Fed's Bostic (voter) said the economy is maintaining the strong momentum it had and if there is any weakening, it is at a very incremental level. Bostic thinks they can still get growth and get inflation to continue to come down, but inflation would come down much slower than expected which is partly why he changed his forecast as the Fed would have to be more patient than expected. Furthermore, said he *still sees one rate cut in 2024 and thinks it is appropriate to cut rates in Q4 this year if the economy evolves as he expects. *

DATA RECAP

• US S&P Global Services PMI Final (Mar) 51.7 (Prev. 51.7)
• US S&P Global Composite Final PMI (Mar) 52.1 (Prev. 52.2)
• US ISM Non-Manufacturing PMI (Mar) 51.4 vs. Exp. 52.7 (Prev. 52.6)
• US ISM Non-Manufacturing Prices Paid Index (Mar) 53.4 (Prev. 58.6)
• US ISM Non-Manufacturing Employment Index (Mar) 48.5 (Prev. 48.0)
• US ISM Non-Manufacturing New Orders Index (Mar) 54.4 (Prev. 56.1)
• US ADP National Employment (Mar) 184k vs. Exp. 148k (Prev. 140k, Rev. 155k)

FX

• USD was pressured in the aftermath of the ISM Services PMI data which missed expectations and showed prices eased from February but remained in expansionary territory, while there were comments from Fed Chair Powell who repeated his recent commentary noting that risks are becoming more balanced.
• EUR rose on the weaker dollar and reclaimed the 1.0800 status with the single currency shrugging off dovish commentary from ECB's Holzmann, while softer-than-expected EU inflation had little impact.
• GBP notched firm gains and reclaimed the 1.2600 status alongside broad strength in cyclical peers.
• JPY was ultimately flat against the dollar after USD/JPY pulled back from resistance near 152.00.

FIXED INCOME

• Treasuries were ultimately little changed after strong selling post-ADP was unwound on soft ISM Services and typically dovish Powell comments.

COMMODITIES

• Oil prices were firmer but settled off best levels amid geopolitical headlines and alongside OPEC JMMC, as well as the weekly EIA data.
• US EIA Weekly Crude Stocks 3.21M vs. Exp. -1.75M (Prev. 3.17M)
• OPEC+ JMMC didn't recommend any change in oil policy and OPEC+ renewed its request for an improvement in output cut compliance, while the JMMC will meet next on June 1st, according to Reuters sources.
• OPEC+ JMMC welcomed Iraq and Kazakhstan's pledge to achieve full conformity as well as compensate for overproduction, while it also welcomed an announcement by Russia that its voluntary adjustments in Q2 2024 will be based on production instead of exports, according to Energy Intel.
• Kuwaiti Oil Minister said they emphasise the need for OPEC+ members to adhere to their quotas in crude production with OPEC+ decisions proactive and precautionary to protect oil markets.
• Russian Deputy PM Novak said the situation of the domestic fuel market is stable and there is enough fuel in the domestic market, while he added OPEC+ oil production quota will stand at 9mln BPD in June and has the potential to increase fuel production due to available refining capacity, according to TASS.
• All Russian refineries that have been damaged will be back to normal condition by the start of June, according to Interfax citing a minister.
• US Treasury officials are to say in India that enforcement of the price cap on Russian oil is working and kept the discount of Russian oil to the international Brent benchmark wide in February, while actions by Indian refiners to not take Russian oil on Sovcomflot tankers help bolster enforcement of Russian sanctions.
• Chile Central Bank raised its 2024 average copper price to USD 3.85/lb (vs prev. forecast 3.80/lb).

GEOPOLITICAL

• US President Biden is to speak with Israeli PM Netanyahu on Thursday, according to Axios. It was separately reported that White House National Security Adviser Sullivan cancelled his visit to Saudi Arabia scheduled for Monday and is recovering from cracked ribs.
• Israeli Defence Minister said they are expanding their operation against Hezbollah and other entities that threaten them, according to Al Jazeera.
• IDF decided to call up Air Defence Force reservists as part of an assessment of the security situation.
• Qatar’s PM said the main point of dispute in Gaza ceasefire negotiations today is over the return of displaced people to different parts of Gaza, while obstacles today to a Gaza ceasefire are the same obstacles negotiators faced in February.
• IRGC spokesman said we will soon witness more lethal strikes against Israel and the resistance front will do its duty, according to Al Jazeera.
• US and Iran reportedly agreed not to escalate after the targeting of the Iranian consulate in Damascus, while the previous US warning to Iran about non-escalation still stands and the Biden administration assured Iran that any targeting of US interests will bear its responsibility, according to Al Arabiya sources.
• US President Biden’s administration decided to strengthen measures to protect embassies and consulates in Lebanon, Iraq and Jordan, according to a Pentagon official cited by Sky News Arabia.
• US envoy to Yemen said peace negotiations are now impossible due to Houthi attacks and Houthi attacks in the Red Sea undermine progress in the Yemen peace process.
• UKMTO received a report of a vessel experiencing disruption to electronic navigation systems between April 2nd-3rd 95nm east of Saudi Arabia's Ras Al-Zour.
• Ukrainian President Zelenskiy said Russia is preparing to mobilise an additional 300k troops by June, according to Interfax.
• Russian Foreign Ministry spokesperson Zakharova said Foreign Minister Lavrov's meeting with Chinese Foreign Minister Wang is being prepared.
• Chinese Foreign Ministry said Assistant Foreign Minister Miao Deyu held consultations on UN Security Council affairs with Russia’s Deputy Foreign Minister in Beijing.
• US Deputy Secretary of State Campbell said the trilateral summit next week between the US, Japan and the Philippines will bring closer coordination in the South China Sea and elsewhere.

ASIA-PAC

NOTABLE HEADLINES

• PBoC monetary policy committee held a meeting and stated that expectations for economic growth are relatively weak and China's economic operation continues an upward trend but faces challenges of insufficient demand and weak social expectations. PBoC said it will meet reasonable financing demand of real estate enterprises, regardless of different ownership and will resolutely correct pro-cyclical behaviour and firmly prevent the risk of exchange rate overshooting. Furthermore, it will step up the implementation strength of monetary policy, accurately and effectively implement a prudent monetary policy, pay more attention to counter-cyclical adjustments and give better play to dual functions of monetary policy tools.
• PBoC released a statement on car loan adjustments in which it relaxed loan policy for NEV purchases and financial institutions can independently determine the lowest down payment on car loans. Furthermore, the lowest down payment was set at 30% for commercial gasoline car loans and at 25% for NEVs with the loan ratio for vehicle purchases relaxed to boost consumption.

EU/UK

NOTABLE HEADLINES

• ECB's de Cos said EZ inflation data is positive news and the recent decline in general inflation and core inflation show monetary policy is being transmitted forcefully, while he added the central scenario points to the first rate cut in June. De Cos also stated that he is not explicitly giving a forecast on future policy, but added that recent data is compatible with the ECB mandate on the inflation goal.

DATA RECAP

• EU HICP Flash YY (Mar) 2.4% vs. Exp. 2.6% (Prev. 2.6%)
• EU HICP-X F&E Flash YY (Mar) 3.1% vs. Exp. 3.2% (Prev. 3.3%)
• EU Unemployment Rate (Feb) 6.5% vs. Exp. 6.4% (Prev. 6.4%, Rev. 6.5%)