US stocks gained alongside a short squeeze in regional banks - Newsquawk Asia-Pac Market Open

• US stocks gained as a short squeeze in US regional banks led the advances despite a lack of fresh catalysts for the sector, while the upside in stocks supported broader risk assets such as oil and activity currencies. However, the gains in the major indices were limited by a disappointing NY Fed Manufacturing survey and debt ceiling concerns.
• USD weakened after a dismal NY Fed Manufacturing survey and amid the improved risk environment throughout the afternoon, while debt limit talks remain in limbo with House Speaker McCarthy dissatisfied with progress ahead of tomorrow's meeting and despite optimism from the White House over the weekend.
• Looking ahead, highlights include Australian Westpac Consumer Sentiment, Chinese Industrial Production & Retail Sales, RBA Minutes from the May Meeting.

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LOOKING AHEAD

• Highlights include Australian Westpac Consumer Sentiment, Chinese Industrial Production & Retail Sales, RBA Minutes from the May Meeting.

US TRADE

EQUITIES

• US stocks gained as a short squeeze in US regional banks led the advances despite a lack of fresh catalysts for the sector, while the upside in stocks supported broader risk assets such as oil and activity currencies. However, the gains in the major indices were limited by a disappointing NY Fed Manufacturing survey and debt ceiling concerns.
• SPX +0.30% at 4136, NDX +0.55% at 13,414, DJIA +0.14% at 33,349, RUT +1.19% at 1,762.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Goolsbee (voter) said need to monitor more than normal data sets and need to be attuned to credit, while he added that a lot of the impact of rate hikes is still in the pipeline and it does not feel like a 2008-type of crisis but feels like there is stress in some parts of the financial sector.
• Fed's Kashkari (voter) said inflation is much too high although is starting to come down, while he added that the Fed has more work to do and should not be fooled by a few months of good data.
• Fed's Bostic (non-voter) said he does not see inflation coming down quickly and the Fed won't be looking at cuts until well into 2024, while they may have to go up on rates. Fed's Bostic said he doesn't rule out anything as far as rate hikes and they have got to keep a possible rate hike on the table for sure, while he added that if he were voting now for June it would be a vote to hold and said there is still a lot of data before June.
• Fed Vice-Chair of Supervision Barr said the bank stress shows the need for vigilance but noted that the US banking system remains sound and resilient, and depositors should be confident all deposits in the banking system are safe.
• US President Biden has scheduled a debt limit meeting with US House Speaker McCarthy for Tuesday and will be meeting with congressional leaders on Tuesday.
• US Treasury Secretary Yellen reiterated that the US could default as early as June 1st without a debt ceiling hike, while she added that the actual date for default could be a number of days or weeks later than estimated and they have already seen Treasury's borrowing costs increase substantially for securities maturing in early June.
• US House Speaker McCarthy suggested it doesn't seem that the White House wants a debt ceiling deal and it just seems like they want to look like they are in a meeting but they aren't talking anything serious. McCarthy said the two sides are still far apart and it seems like the White House wants a default more than a deal, while he added that a deal is needed before this weekend to have a timeline to be able to pass it in both houses. Furthermore, McCarthy said he is not confident of getting a deal this week based upon what they are offering right now.
• FDIC Chair Gruenberg said the banking industry was quite resilient during recent stress and early reports show aggregate bank net income is roughly unchanged in Q1 2023, ex. recent acquisitions.
• US SEC Chair Gensler said the SEC isn't currently weighing a stock short-selling ban.
• EU antitrust regulators cleared Microsoft's (MSFT) acquisition of Activision Blizzard (ATVI) and said remedies fully address competition concerns in the cloud gaming market.

DATA RECAP

• US NY Fed Manufacturing (May) -31.8 vs. Exp. -3.75 (Prev. 10.8)

FIXED INCOME

• Treasuries bear-steepened amid heavy corporate supply and stagflationary economic data.

FX

• USD weakened after a dismal NY Fed Manufacturing survey and amid the improved risk environment throughout the afternoon, while debt limit talks remain in limbo with House Speaker McCarthy dissatisfied with progress ahead of tomorrow's meeting and despite optimism from the White House over the weekend.
• EUR gained against the dollar but failed to reclaim 1.0900 in the aftermath of weak Industrial Production.
• GBP strengthened as cyclical currencies outperformed alongside the broad heightened risk appetite.
• JPY remained subdued amid the lack of haven demand and recent dovish BoJ reiterations.

COMMODITIES

• Oil prices were on the front foot with broader risk appetite, dollar weakness and Iraq-related supply tailwinds.
• US reportedly plans to buy 3mln barrels of oil for the Strategic Petroleum Reserve, according to Bloomberg.
• EIA sees shale regions oil output for June up about 42k BPD at 9.332mln BPD (prev. 53k BPD rise in May).
• Iraq invited international companies to develop 13 oil and gas fields in a licensing round.
• Flows of Northern Iraqi crude oil to Turkey's Ceyhan port have not resumed following Iraq's request and operators at Ceyhan have not received instructions to prepare for the restart of oil, according to Reuters sources.

GEOPOLITICAL

• White House said the US continues to see indications Russia and Iran are expanding their unprecedented defence partnership and Iran is providing Russia with one-way attack drones including more than 400 since August, while Russia has been offering Iran unprecedented defence cooperation including on missiles, electronics, and air defence. White House said Iran and Russia are working on the selling of advanced weapons, especially more advanced drones and said the military partnership poses a threat to Iran's neighbours and Ukraine.
• Russia's Defence Ministry said it scrambled Russian fighter jets as German and French aircraft approached the Russian border in the Baltic region, according to Interfax.
• Ukrainian official said a Chinese envoy will visit Kyiv from Tuesday, according to Sky News Arabia.
• French President Macron said France is open to training Ukrainian fighter jet pilots in France and training can start right away, while he has not discussed delivering warplanes but has discussed missiles and training, according to a TF1 Television interview.

GLOBAL

• Turkey's third presidential candidate Ogan said he could only support the opposition candidate Kilicdaroglu in the runoff if no concessions are made to the Pro-Kurdish party.

ASIA-PAC

• PBoC Monetary Policy Implementation Report said inflation may rebound gradually in H2 2023 and that prudent monetary policy will be precise and forceful. PBoC also said it will keep policy reasonably ample and keep interest rates reasonable and appropriate, as well as prevent the transmission of risks from abroad to China.
• PBoC said should not exaggerate a temporary fall in CPI and said the GDP growth-inflation gap is due to delays in demand.

UK/EU

• BoE Chief Economist Pill said trying to keep spending power risks inflation persistence and said the labour-profit share of UK national income has not shifted much, while he added the BoE is concerned the UK economy has too much momentum and he would like to think the BoE has done enough but need to monitor risks.
• EU Commission increased 2023/24 EZ Inflation and GDP forecasts with the GDP growth forecast raised to 1.1% (prev. 0.9%) for 2023 and raised to 1.6% (prev. 1.5%) for 2024, while the inflation forecast was raised to 5.8% (prev. 5.6%) for 2023 and raised to 2.8% (prev. 2.5%) for 2024.
• EU's Gentiloni said tightening financial conditions is not killing growth and that tightening conditions are expected to last a few months.
• ECB sanctioned Goldman Sachs Bank Europe for misreporting capital needs and breaching credit risk reporting rules with a EUR 6.63mln penalty imposed.

DATA RECAP

• EU Industrial Production MM (Mar) -4.1% vs. Exp. -2.5% (Prev. 1.5%)
• EU Industrial Production YY (Mar) -1.4% vs. Exp. 0.9% (Prev. 2.0%)