US stocks gained amid a cyclical bias and encouraging inflation proxies - Newsquawk Asia-Pac Market Open

US stocks finished in the green with the indices led by continued outperformance in the small-cap Russell 2k and amid some promising inflationary signs ahead of Wednesday's CPI data after the Manheim used car priced index tumbled further in June which could be crucial for bringing down core CPI in the months ahead. Furthermore, there was plenty of fanfare around the fall in the New York Fed's 1-year ahead consumer inflation expectations to the lowest since April 2021 and surprisingly little focus on the rise to series peaks for the 5-year head inflation expectations.
USD was pressured alongside a decline in yields which dragged the DXY beneath 102.00 after the Manheim used vehicle price index fell 4.2% M/M in June ahead of the June CPI release on Wednesday, while NY Fed consumer inflation expectations were mixed with a decline in 1yr consumer inflation expectations to 3.8% from 4.1% which was the lowest since April 2021, although the 3yr view was unchanged at 3.0% and the 5yr rose to 3.0% from 2.7%.
Looking ahead, highlights include New Zealand Electronic Card Retail Sales, Japanese Money Supply, Australian Westpac Consumer Sentiment & NAB Business Surveys, Supply from Australia & Japan.

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LOOKING AHEAD

Highlights include New Zealand Electronic Card Retail Sales, Japanese Money Supply, Australian Westpac Consumer Sentiment & NAB Business Surveys, Supply from Australia & Japan.

US TRADE

US stocks finished in the green with the indices led by continued outperformance in the small-cap Russell 2k and amid some promising inflationary signs ahead of Wednesday's CPI data after the Manheim used car priced index tumbled further in June which could be crucial for bringing down core CPI in the months ahead. Furthermore, there was plenty of fanfare around the fall in the New York Fed's 1-year ahead consumer inflation expectations to the lowest since April 2021 and surprisingly little focus on the rise to series peaks for the 5-year ahead inflation expectations.
SPX +0.24% at 4,410, NDX +0.06% at 15,046, DJI +0.62% at 33,944, RUT +1.64% at 1,895
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NOTABLE HEADLINES

Fed's Barr (voter) said the existing capital framework is sound and he plans to build on such requirements, as well as propose several changes to bank capital rules in the coming months and recommends that enhanced capital rules apply to those with USD 100bln or more in assets. Furthermore, Barr said inflation is far too high and he is quite attentive to bringing inflation down to the target, while he added they have made a lot of progress on inflation and it is close but they still have a bit of work to do.
Fed's Bostic (non-voter) reiterated that he does not see rates needing to rise any further from here and said this is a hard judgement call, while he added the path forward is no longer obvious and inflation reduction will take longer than expected.
Fed's Daly (non-voter) said they are likely to need a couple more rate hikes this year and it is appropriate to slow the pace of rate hikes, while she added that US economic momentum continues to surprise and in the context of that momentum, there is more they need to do to raise rates.
Fed's Mester (non-voter) said they will need to tighten somewhat further to lower inflation and Fed policy is less restrictive compared to history, while she added that raising rates again will reduce the risk of more action in the future. Furthermore, she hasn't decided yet on a July rate hike with more data needed and said her outlook for the terminal rate matches or is just above the June Fed median forecast.
NY Fed's June SCE showed median 1yr ahead inflation expectations fell to 3.8% from 4.1% which is the lowest since April 2021 and 3yr inflation expectations were unchanged at 3.0%, while 5yr inflation expectations rose to 3.0% from 2.7% which is the joint highest since the introduction in January 2022.

DATA RECAP

US Consumer Credit (May) 7.24B vs. Exp. 20.25B (Prev. 23.01B)
US Wholesale Sales MM (May) -0.2% vs. Exp. 0.2% (Prev. 0.2%)
Manheim June Used Vehicle Price Index declined 4.2% M/M (prev. -2.7%) and fell 10.3% Y/Y (prev. -7.6%)

FIXED INCOME

US Treasuries were higher and the curve steepened further after the front and belly outperformed following the latest Fed commentary and promising inflation proxies ahead of CPI and duration supply.

FX

USD was pressured alongside a decline in yields which dragged the DXY beneath 102.00 after the Manheim used vehicle price index fell 4.2% M/M in June ahead of the June CPI release on Wednesday, while NY Fed consumer inflation expectations were mixed with a decline in 1yr consumer inflation expectations to 3.8% from 4.1% which was the lowest since April 2021, although the 3yr view was unchanged at 3.0% and the 5yr rose to 3.0% from 2.7%.
EUR benefitted from the weaker dollar and EUR/USD tested the 1.1000 level to the upside, while there was limited reaction to the EU Sentix Index or to comments from ECB's Nagel who reaffirmed that euro-area inflation remains too high and GDP may slow but he is convinced a hard landing can be avoided.
GBP was ultimately firmer on the session but saw two-way price action with initial selling in GBP/USD later reversed after finding support at the 1.2750 level, while there were recent comments from BoE Governor Bailey who noted CPI is unacceptably high and it is crucial that they see the job through and meet the mandate to return inflation to its target.
JPY outperformed and USD/JPY retreated beneath the 142.00 handle amid a fall in US yields.

COMMODITIES

Crude was ultimately lower after rejecting multi-month highs as the Chinese inflation data weighed on prices despite the broader bid in cyclical stocks and a weaker dollar.
IEA's Birol reiterated a warning of oil market tightness in the second half of the year with oil demand from China and developing countries set to be strong.
Iraq set August OSPs for Basrah medium crude to Asia at a premium of USD 0.40/bbl vs Oman/Dubai average and to Europe at a discount of USD 3.15/bbl vs Brent, while it set prices to North and South America at a discount of USD 0.80/bbl vs ASCI, according to Somo.
Russian and Gulf top diplomats agreed to work on the development of energy resources supply chains, according to TASS.
Peru copper production rose 34.7% in May Y/Y, according to the energy ministry.
LME said aluminium stocks of Russian origin in warehouses rose to 80% of the total in June (prev. 68% in May).

GEOPOLITICAL

Chinese President Xi told Russia's upper house speaker Matviyenko that he's willing to continue to work with Russia to develop a comprehensive strategic partnership of cooperation, while Matviyenko said Russia and China will continue cooperation and that Russia can count on China's friendly shoulder, according to state media and TASS.
Russian Foreign Minister Lavrov said there is still no result on the Russian part of the Black Sea grain deal and Russia expects strong growth of its grains exports.
Turkish President Erdogan said he'll remove his veto on Sweden becoming a member of NATO if the EU agrees to resume its long-frozen negotiations for Turkey to join the EU. It was later reported that Turkey agreed to advance Sweden's NATO bid and that Turkey received the assurances it needed, while NATO Secretary Gen Stoltenberg also confirmed Turkish President Erdogan has agreed to send Sweden's NATO bid to the Turkish parliament and that it is a clear commitment which President Erdogan said will happen ASAP.
North Korean leader Kim's sister Kim Yo-Jong said a US spy plane entered North Korea’s economic zone on July 10th and they will respond decisively if the US military enters their economic zone again, according to KCNA.
Office of the Director of National Intelligence said Iran is no longer taking steps towards a testable nuclear device at this time.

ASIA-PAC

NOTABLE APAC HEADLINES

PBoC extended policies on financial support for the stable and healthy development of real estate markets to the end of 2024, while it implemented policies to ensure the safety of creditors' rights and aims to increase financial support for home deliveries.
China's Global Times reported that there are no deflation risks in China for the full year as consumer prices are expected to rise in the third quarter with more policy stimulus to be rolled out to reinvigorate consumption activities, citing experts.
China said it will release 2,300 metric tons of frozen pork from state reserves on July 12th, according to a notice cited by Reuters.
US Treasury Secretary Yellen agreed with Chinese officials to maintain open communication and deepen talks on areas of concern. It was noted that China's technological innovations may be transferable around the world to reduce the cost of fighting climate change, while Yellen sees a desire on the part of both the US and China to stabilise the relationship.

EU/UK