US stocks gained on debt ceiling optimism and a downward revision to Labor Costs - Newsquawk Asia-Pac Market Open

US stocks gained amid debt ceiling optimism after the US House passed the debt ceiling bill and with the Senate also largely expected to follow suit, while participants digested a slew of data releases including strong ADP Employment, a sharp revision lower in Q1 Unit Labor Costs and the mostly softer-than-expected ISM Manufacturing PMI report which showed a plunge in the Prices Paid component.
USD was pressured amid the positive risk environment and as yields softened following a slew of data releases including a downgrade in Q1 Unit Labor Costs and a mostly softer ISM Manufacturing report. There were also comments from Fed's Harker that the Fed is close to the point where it can hold interest rates in place, while he also stated that they don't have to keep moving rates up and thinks they should at least skip raising rates in June.
Looking ahead, highlights include New Zealand Terms of Trade Index, Australian Home Loans, South Korean GDP & CPI, Supply from Australia, Holiday Closures in Singapore & Indonesia.

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LOOKING AHEAD

Highlights include New Zealand Terms of Trade Index, Australian Home Loans, South Korean GDP & CPI, Supply from Australia, Holiday Closures in Singapore & Indonesia.

US TRADE

US stocks gained amid debt ceiling optimism after the US House passed the debt ceiling bill and with the Senate also largely expected to follow suit, while participants digested a slew of data releases including strong ADP Employment, a sharp revision lower in Q1 Unit Labor Costs and the mostly softer-than-expected ISM Manufacturing PMI report which showed a plunge in the Prices Paid component.
SPX +0.99% at 4,221, NDX +1.31% at 14,441, DJIA +0.47% at 33,061, RUT +1.05% at 1,767.
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NOTABLE HEADLINES

Fed's Harker (voter) said the Fed is close to the point where it can hold interest rates in place and is closely monitoring data to assess whether additional policy tightening will be needed. Harker also commented that they don't have to keep moving rates up and thinks they should at least skip raising rates in June.
Fed's Bullard (non-voter, hawk) reiterated that policy is now at the low end of what is arguably 'sufficiently restrictive' given current macroeconomic conditions and said the prospect for more disinflation is good but not guaranteed.
US Republican Senator Thune said the Senate is "a ways away" from a time agreement "at the moment" and a final vote is "trending more towards tomorrow", according to Punchbowl's Sherman.
US Republican Senator Scott said after a closed-door Senate GOP lunch that a time agreement seems close and the Senate intends to finish the debt limit bill and amendment votes today, according to Punchbowl's Sherman.
Bank of America (BAC) CEO Moynihan said US consumer spending is slowing with restaurant spending growth down to 3% Y/Y from 17% and spending growth slowed to 3% this month from 9% growth.

DATA RECAP

US Unit Labor Costs Revised (Q1) 4.2% vs. Exp. 6.1% (Prev. 6.3%)
US ISM Manufacturing PMI (May) 46.9 vs exp. 47.0 (Prev. 47.1)
US ISM Manufacturing New Orders Index (May) 42.6 (Prev. 45.7)
US ISM Manufacturing Prices Paid (May) 44.2 (Prev. 53.2)
US ISM Manufacturing Employment Index (May) 51.4 (Prev. 50.2)
US S&P Global Manufacturing PMI Final (May) 48.4 (Prev. 48.5)
US Initial Jobless Claims w/e 232k (Prev. 229.0k, Rev. 230k)
US Continued Jobless Claims w/e 1.795M (Prev. 1.794M, Rev. 1.789M)
US ADP National Employment (May) 278k vs. Exp. 170.0k (Prev. 296.0k, Rev. 291k)
US Challenger Layoffs (May) 80.089k (Prev. 66.995k)
US Productivity Revised (Q1) -2.1% vs. Exp. -2.6% (Prev. -2.7%)

FIXED INCOME

US Treasuries bull-steepened after lower Q1 Unit Labor Costs, mixed ISM data and dovish comments from Fed's Harker.

FX

USD was pressured amid the positive risk environment and as yields softened following a slew of data releases including a downgrade in Q1 Unit Labor Costs and a mostly softer ISM Manufacturing report. There were also comments from Fed's Harker that the Fed is close to the point where it can hold interest rates in place, while he also stated that they don't have to keep moving rates up and thinks they should at least skip raising rates in June.
EUR strengthened and reclaimed the 1.0700 handle against the dollar despite softer-than-expected EU inflation data which remained at elevated levels, while ECB President Lagarde repeated that inflation is too high and is set to remain so for too long, while she added that they will keep moving forward, determined and undeterred, until they see it returning to the 2% medium-term target in a timely manner.
GBP benefitted from the upbeat risk mood and alongside outperformance in cyclical currencies.
JPY gained as USD/JPY retreated from resistance near the 140.00 handle to a sub-139.00 level.

COMMODITIES

Crude gained as the heightened risk appetite and weaker dollar offset OPEC sources and a surprise crude build.
US EIA Weekly Crude Stocks w/e 4.488M (Prev. -12.456M)
OPEC+ is unlikely to deepen output cuts at the June 4th meeting, according to Reuters sources.
Russia's Kremlin said the relationship with Saudi in OPEC+ is constructive and based on trust.
London Metal Exchange reportedly lost its benchmark status in part of the nickel market, according to Bloomberg.

GEOPOLITICAL

Russia's FSB head said the West is actively pushing Moldova to partake in the Ukraine conflict, according to Tass.
German Chancellor Scholz said he is ready to talk to Russian President Putin at an appropriate time.

ASIA-PAC

NOTABLE APAC HEADLINES

US President Biden said the US does not seek conflict in competition with China and the countries should work together where they can.
China’s Foreign Affairs Chief Yi spoke with German Chancellor Scholz's top aide and said the upcoming Chinese-German inter-cabinet meeting serves to send a positive signal to Europe and globally, according to Politico's Lau.
China’s Foreign Ministry said the US should stop any form of exchanges with Taiwan under the guise of trade and said that China has made several solemn representations to the US.
Japan is to review fiscal reforms in FY24, according to Asahi citing the government’s mid-year fiscal policy draft.

EU/UK