US stocks gained, while the dollar and yields dropped after softer US inflation - Newsquawk Asia-Pac Market Open

US stocks gained while the dollar and yields were pressured after softer-than-expected US inflation spurred risk appetite and hopes of a return to the 2% inflation target, while money markets unwound Fed rate hike pricing beyond July.
USD was pressured and the DXY slid to a YTD low of 100.50 after the cooler-than-expected CPI data which is seen to have little effect on the prospects for a Fed rate hike this month but could alter the view on whether to hike again after.
Looking ahead, highlights include New Zealand BusinessNZ PMI & Electronic Card Retail Sales, Australian MI Inflation Expectations, Chinese Trade Data, BoK Rate Decision, Supply from Japan.

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LOOKING AHEAD

Highlights include New Zealand BusinessNZ PMI & Electronic Card Retail Sales, Australian MI Inflation Expectations, Chinese Trade Data, BoK Rate Decision, Supply from Japan.

US TRADE

US stocks gained while the dollar and yields were pressured after softer-than-expected US inflation spurred risk appetite and hopes of a return to the 2% inflation target, while money markets unwound Fed rate hike pricing beyond July.
SPX +0.74% at 4,472, NDX +1.24% at 15,307, DJIA +0.25% at 34,347, RUT +1.05% at 1,933.
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NOTABLE HEADLINES

Fed's Beige Book for June stated that overall activity increased slightly since late May with expectations for slow growth ahead and many reported labour availability has improved with wage inflation normalising, while price expectations are flat to lower in the months ahead.
Fed's Kashkari (voter) said if high inflation persists the Fed may need to raise rates further and noted the Fed's fight against inflation must succeed, while he added that higher rates could increase pressure on banks and bank supervisors should ensure all banks are prepared to withstand a higher-rate environment.
Fed's Barkin (non-voter) said inflation is still too high and demand remains elevated, while he added that supply is constrained and the process of getting back to balance has been slow.
WSJ's Timiraos suggested the June CPI probably won't alter the Fed's planned July hike but it reduces the prospect of a second hike, while he noted that most officials pencilled in two more increases last month but did so on the assumption that inflation would decline more slowly.
US Senate Committee unanimously approved Biden nominee Jefferson as Fed Vice Chair and also approved Cook to the Fed board which moves to the full Senate for a final vote.
US NEC Director Brainard said the labour market is in much better balance than just six months ago and June CPI was encouraging. Brainard also stated that recent non-housing core services inflation is close to pre-COVID levels and that new evidence today suggests the US is on the path to moderate inflation.

DATA RECAP

US CPI MM, SA* (Jun) 0.2% vs. Exp. 0.3% (Prev. 0.1%)
US CPI YY, NSA* (Jun) 3.0% vs. Exp. 3.1% (Prev. 4.0%)
US Core CPI MM, SA* (Jun) 0.2% vs. Exp. 0.3% (Prev. 0.4%)
US Core CPI YY, NSA* (Jun) 4.8% vs. Exp. 5.0% (Prev. 5.3%)
US Cleveland Fed CPI MM (Jun) +0.1% (Prev. +0.4%)
US Cleveland Fed CPI YY (Jun) 6.2% (Prev. +6.7%)

FIXED INCOME

US Treasuries saw significant bull-steepening after the soft CPI data and a solid 10yr auction.

FX

USD was pressured and the DXY slid to a YTD low of 100.50 after the cooler-than-expected CPI data which is seen to have little effect on the prospects for a Fed rate hike this month but could alter the view on whether to hike again after.
EUR was boosted after the US inflation data which propelled EUR/USD to the 1.1100 handle.
GBP benefitted from the weaker buck but with further upside capped by resistance at 1.3000.
JPY continued with its recent recovery alongside narrowing US-Japan yield differentials.
Bank of Canada hiked rates by 25bps as expected to 5.00% and removed language that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the 2% target.
BoC Governor Macklem said further rate decisions will be guided by the assessment of incoming data and the outlook for inflation, while he added that policy is working but underlying inflationary pressures are proving more stubborn and they are prepared to raise rates further. Macklem also stated that the Governing Council discussed the possibility of keeping rates unchanged although the cost of delaying action was larger than the benefit of waiting.

COMMODITIES

Crude gained with notable tailwinds in the wake of the cooler-than-expected US CPI report and a softer dollar.
US EIA Weekly Crude Stocks 5.946M vs. Exp. 1.35M (Prev. -1.508M)
Peru extended the state of emergency on main roadways as protests are expected to reignite next week, while the 30-day state of emergency extension includes the key mining corridor, according to Reuters.

GEOPOLITICAL

US President Biden said Ukraine being in NATO is "going to happen" but later stated that Ukraine will not be in NATO for a while, while he is confident that the US will be able to sell F-16s to Turkey.
US President Biden said the US is considering sending long-range missiles to Ukraine, according to FT.
White House National Security Adviser Sullivan said Ukraine's admission into NATO now would mean war with Russia.
Turkey President Erdogan said he could act as a mediator between Russia and Ukraine if both parties propose, while he will forward the ratification of Sweden's NATO membership to the Turkish parliament when it begins. It was separately reported that Russian President Putin has no plans to speak to Turkish President Erdogan yet, according to TASS citing a Kremlin spokesman.
Russian Kremlin said a visit to China by President Putin in September is on the agenda and when dates are agreed, the media will be informed.
Russian Foreign Minister said the NATO summit in Vilnius showed that the alliance has finally returned to Cold War schemes and Russia will carefully analyse NATO summit results taking into account challenges and threats to Russian security and interests. Furthermore, they will continue to strengthen military and defence, while Russia will respond to threats in a timely and appropriate manner using all means and methods at its disposal, according to TASS.
Russia scrambled a MiG-31 jet due to a Norwegian warplane approaching the border, according to RIA citing the Russian Defence Ministry.
US defence official Ratner spoke with China’s Ambassador to US Xie Feng on Wednesday and underscored the commitment to maintaining open lines of military-to-military communication.

ASIA-PAC

NOTABLE APAC HEADLINES

Chinese Premier Li met with several companies including Meituan (3690 HK), JD.com (9618 HK), Alibaba (9988 HK) and Douyin to discuss the platform economy, while he stated the platform economy is good for a demand boost and vowed more support for the sector.
China's state fund is reportedly moving to cut exposure to weak LGFVs and builders, according to Bloomberg.