US stocks meandered and finished flat with focus on Trump's tax bill and PMI data - Newsquawk Asia-Pac Market Open

• US stocks were very choppy with initial pressure seen in both equities and treasuries in response to the House passing Trump's tax bill, although markets pared the earlier losses and more, perhaps on a "sell the rumour, buy the fact" play, but also as the bill still has to be passed by the Senate. The rebound in stocks was led by the Nasdaq as Communication and Tech were among the outperformers in the mixed picture for sectors with Utilities, Health and Energy the laggards, while the major indices mostly wiped out their gains in the last few minutes of trade to finish mostly flat.
• USD strengthened and briefly reclaimed the 100.00 status with the greenback buoyed by a better-than-expected PMI report in which manufacturing and services accelerated further into expansionary territory. Attention was also on the US tax bill which the House passed and now requires Senate Committee approval before heading to the Senate floor, while there were some comments from Fed officials including Waller who stated that markets are monitoring fiscal policy with concerns and if tariffs settle down, the Fed could be in a position to cut in the latter part of the year.
• Looking ahead, highlights include New Zealand Retail Sales, Japanese & Singapore CPI, Supply from Australia.

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LOOKING AHEAD

• Highlights include New Zealand Retail Sales, Japanese & Singapore CPI, Supply from Australia.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks were very choppy with initial pressure seen in both equities and treasuries in response to the House passing Trump's tax bill, although markets pared the earlier losses and more, perhaps on a "sell the rumour, buy the fact" play, but also as the bill still has to be passed by the Senate. The rebound in stocks was led by the Nasdaq as Communication and Tech were among the outperformers in the mixed picture for sectors with Utilities, Health and Energy the laggards, while the major indices mostly wiped out their gains in the last few minutes of trade to finish mostly flat.
• SPX -0.04% at 5,842, NDX +0.15% at 21,112, DJI unch. at 41,859, RUT -0.05% at 2,046
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump and Chinese President Xi have not spoken since the Geneva agreement, according to CNN.
• EU's Dombrovskis said G7 finance leaders had a positive and successful meeting, while they advanced discussion in support of Ukraine and addressing economic imbalances. Dombrovskis added that trade discussions were a difficult topic and focused on the economic implications of tariffs and economic fragmentation.
• German Finance Minister Klingbeil said he has seen an interest to reach a solution on tariffs in the conversations he has been having, while he had a good conversation with the US and commented that an invitation to Washington from Treasury Secretary Bessent is a good signal but added that if there is no agreement on tariffs, then they can expect turbulence on the markets again very quickly.
• French President Macron spoke to Chinese President Xi and said Chinese investments are welcome in France but added that companies must enjoy equitable conditions between the two countries, while they agreed to advance as quickly as possible regarding the Cognac issue.
• Chinese President Xi said China and France should jointly safeguard international trade rules and world economic order and practice true multilateralism. Xi stated China and France should enhance strategic communication and consolidate consensus, while he added the two sides should deepen cooperation in investment, aerospace and nuclear energy, according to Xinhua.
• China and the Netherlands agreed to maintain close communication through existing channels on cooperation in various fields, including semiconductor technology, according to China's Foreign Ministry.
• China's mission to the EU lodged solemn representations with the EU side over sanctions on Chinese firms.
• Japanese Economy Minister Akazawa held unofficial phone talks with US Treasury Secretary Bessent before Wednesday, while Bessent reportedly expressed reluctance to meet Akazawa this week and the two will meet next week instead, according to TV Tokyo. However, it was separately reported that Japanese Economy Minister Akazawa is to visit the US from Friday until Sunday for tariff negotiations and there is no change to Japan's stance of demanding an elimination of US tariffs.

NOTABLE HEADLINES

• Fed's Waller (voter) said markets are monitoring fiscal policy with concerns, and looking for greater fiscal discipline, while he added the Fed won't buy bonds in primary auctions and that hard data shows the economy is doing quite well with scant sign of a tariff impact so far. Waller also stated if tariffs are closer to 10%, then the economy is in good shape for H2 and if tariffs settle down, the Fed could be in a position to cut in the latter part of the year.
• Fed's Williams (Vice Chair) didn’t comment on monetary policy or the economic outlook and stated that central bank lending facilities reduce uncertainty over reserve levels, while he added there is no one best way to supply reserves to financial system.
• NY Fed's Perli encourages eligible firms to use the standing repo facility as needed and reiterated the Fed will soon launch morning standing repo operations.
• US Tax/Spending Reconciliation Bill passed in the House through votes of 215-214, while US President Trump later posted “THE ONE, BIG, BEAUTIFUL BILL” has PASSED the House of Representatives!..... Senate to get to work, and send this Bill to my desk AS SOON AS POSSIBLE! There is no time to waste".

DATA RECAP

• US S&P Global Manufacturing PMI Flash (May) 52.3 vs. Exp. 50.1 (Prev. 50.2)
• US S&P Global Services PMI Flash (May) 52.3 vs. Exp. 50.8 (Prev. 50.8)
• US S&P Global Composite PMI Flash (May) 52.1 (Prev. 50.6)
• US Existing Home Sales (Apr) 4.0M vs. Exp. 4.1M (Prev. 4.02M)
• US KC Fed Manufacturing (May) -10.0 (Prev. -5.0)
• US KC Fed Composite Index (May) -3.0 (Prev. -4.0)
• US Initial Jobless Claims w/e 227.0k vs. Exp. 230.0k (Prev. 229.0k)
• US Continued Jobless Claims w/e 1.903M vs. Exp. 1.885M (Prev. 1.881M, Rev. 1.867M)

FX

• USD strengthened and briefly reclaimed the 100.00 status with the greenback buoyed by a better-than-expected PMI report in which manufacturing and services accelerated further into expansionary territory. Attention was also on the US tax bill which the House passed and now requires Senate Committee approval before heading to the Senate floor, while there were some comments from Fed officials including Waller who stated that markets are monitoring fiscal policy with concerns and if tariffs settle down, the Fed could be in a position to cut in the latter part of the year.
• EUR gave way to the recovery in the greenback and reverted to beneath the 1.1300 handle with the single currency not helped by weak PMI data and following the recent ECB Minutes which revealed a few members would have felt comfortable with a 50bps rate cut at the April meeting
• GBP traded indecisively and just about retained the 1.3400 status amid light catalysts and mixed UK PMI data.
• JPY mildly weakened with USD/JPY returning to 144.00 territory owing to the recovery in the dollar.

FIXED INCOME

• T-notes gained in a reversal of the recent weakness despite the House passing Trump's tax bill which now goes to the Senate.

COMMODITIES

• Oil prices were pressured following a source report that OPEC+ members are reportedly discussing whether to agree to another output hike of 411k BPD in July.
• OPEC+ members are reportedly discussing on whether to agree to another output hike of 411k BPD in July although no agreement has been reached yet, according to Bloomberg citing sources.
• European official said the US was not convinced about lowering the G7 oil price cap during the G7 finance meeting as the US position was that oil prices are going down and already hurting Russia. However, it does not exclude the idea of lowering the price cap level and discussions will continue.
• US Energy Secretary Wright said there is a great opportunity for US cooperation on the development of oil and gas in Iraq's Kurdistan.
• Egypt is said to be in talks to buy between 40-60 LNG cargoes this year amid worsening energy crunch, according to sources cited by Reuters.

GEOPOLITICAL

MIDDLE EAST

• Israel decided to return to Israel the members of the negotiating team who remained in Doha in light of the continued stalemate in the talks over the hostage deal, according to Axios' Ravid citing a senior Israeli official who noted there was no movement in the talks and Hamas continued to demand an end to the war.
• Israeli PM office said PM Netanyahu and US President Trump discussed the war in Gaza, while Trump expressed support to secure the release of all hostages, to bring about the elimination of Hamas, and to advance the Trump plan. Furthermore, Trump agreed to ensure that Iran does not obtain nuclear weapons, while it was also reported that Israeli PM Netanyahu said he is ready for a temporary ceasefire in Gaza to secure the release of hostages.
• White House said US President Trump spoke with Israeli PM Netanyahu in which they discussed a potential deal with Iran and Trump believes things are moving in the right direction.
• US Special Envoy Witkoff and National Security Council official Anton will travel to Rome on Friday for a fifth round of talks with Iran, while discussions are expected to be both direct and indirect, according to i24News.
• Israeli Strategic Affairs Minister Dermer and Mossad Director Barnea will meet Trump aide Witkoff in Rome on Friday on the sidelines of the nuclear talks with Iran to coordinate positions and get briefed after the talks, according to Axios.
• Iran vowed a "devastating" response to any "stupidity" by Israel, according to Bloomberg's Williams.
• Iran’s Foreign Minister stated in a letter to the UN chief that any Israeli attack on Iran's nuclear facilities will be considered as US involvement.
• Iran’s Foreign Minister said they have a better understanding in many areas, but in some, especially enrichment, differences still remain, while he thinks they cannot reach an agreement until this issue is resolved, according to Iran Nuances. It was separately reported that Iran's Foreign Minister said if the US wants to end Iranian uranium enrichment then there will be no nuclear deal and that the idea of a uranium enrichment consortium is not bad, but it will not replace enrichment on Iranian soil.

RUSSIA-UKRAINE

• Russia’s Kremlin handed over a list of 1000 prisoners it wants back from Ukraine to Kyiv, according to IFAX.
• Russian Deputy Foreign Minister said there is no reason to panic over the US Golden Dome project but it is a cause for serious concern, according to TASS.
• G7 Joint Communique underscored the need to address excessive imbalances and strengthen macro fundamentals, given potential global spillovers, while it also stated that if a Russia/Ukraine ceasefire is not agreed, they will continue to explore all possible options, including further ramping up sanctions.

OTHER

• Taiwan’s military plans new drone units in preparation for a potential China invasion, according to WSJ.
• Indian PM Modi said Pakistan will not get water, to which India has a right.

ASIA-PAC

NOTABLE HEADLINES

• PBoC is to sell CNY 500bln of one-year medium-term lending facility loans on Friday.
• PBoC Deputy Governor said they will guide financial institutions to further enhance credit support for enterprises' research & innovation and equipment upgrades.
• Chinese Vice Premier He Lifeng met with JPMorgan's (JPM) CEO Dimon in Beijing, while Dimon said he is willing to continue to cultivate China's capital market, as well as better serve business operations of multinationals in China and the overseas development of Chinese companies.
• US FCC voted to ban Chinese labs posing security risks from testing US electronics.
• RBA's Hauser said regarding a recent trip to China that he found confidence Beijing would do what was needed to sustain growth and Australian exporters upbeat about the resilience of China demand.

EU/UK

NOTABLE HEADLINES

• ECB Minutes stated a few members noted that they could have felt comfortable with a 50 basis point rate cut and that these members, attached more weight to the change in the balance of risks since the Governing Council’s March meeting, pointing out that downside risks to growth had increased and, even in the event of a relatively mild trade conflict, uncertainty was already discouraging consumption and investment. However, it was also argued that cutting interest rates further could no longer be justified by the intention to return to neutral territory since, by various measures, monetary policy was no longer restrictive.
• ECB's Nagel said the current rate level is not restrictive.
• ECB's Vujcic said Euro area growth is positive but low, while inflation is slowly converging to the 2% target and expected to get close to the 2% target at end-2025 with the target expected to be reached in early 2026.

DATA RECAP

• UK Flash Manufacturing PMI (May) 45.1 vs. Exp. 46.0 (Prev. 45.4)
• UK Flash Services PMI (May) 50.2 vs. Exp. 50.0 (Prev. 49.0)
• UK Flash Composite PMI (May) 49.4 vs. Exp. 49.3 (Prev. 48.5)
• German Ifo Expectations New (May) 88.9 vs. Exp. 88.0 (Prev. 87.4)
• German Ifo Business Climate New (May) 87.5 vs. Exp. 87.4 (Prev. 86.9)
• German Ifo Current Conditions New (May) 86.1 vs. Exp. 86.8 (Prev. 86.4)
• German HCOB Manufacturing Flash PMI (May) 48.8 vs. Exp. 48.9 (Prev. 48.4)
• German HCOB Services Flash PMI (May) 47.2 vs. Exp. 49.5 (Prev. 49.0)
• German HCOB Composite Flash PMI (May) 48.6 vs. Exp. 50.4 (Prev. 50.1)
• French HCOB Manufacturing Flash PMI (May) 49.5 vs. Exp. 48.9 (Prev. 48.7)
• French HCOB Services Flash PMI (May) 47.4 vs. Exp. 47.5 (Prev. 47.3)
• French HCOB Composite Flash PMI (May) 48.0 vs. Exp. 48.0 (Prev. 47.8)
• EU HCOB Manufacturing Flash PMI (May) 49.4 vs. Exp. 49.3 (Prev. 49.0)
• EU HCOB Services Flash PMI (May) 48.9 vs. Exp. 50.3 (Prev. 50.1)
• EU HCOB Composite Flash PMI (May) 49.5 vs. Exp. 50.7 (Prev. 50.4)