US stocks were cautious amid mixed data and after hardliners voiced opposition to the debt ceiling deal - Newsquawk Asia-Pac Market Open

US stocks were mixed on return from the Memorial Day holiday amid some cautiousness after mixed data releases and as some hardliners voiced opposition to the debt ceiling agreement. Nonetheless, the major indices were relatively little changed at the close with mild outperformance in the NDX owing to the strength in tech names after Nvidia's slew of AI updates over the weekend which helped it momentarily breach the USD 1tln market cap milestone for the first time.
USD softened and DXY briefly dipped below the 104.00 level with yields notably lower after the debt ceiling agreement was made over the weekend and with the latest data releases mixed, although the dollar pared some of the losses as stocks were pressured.
Looking ahead, highlights include South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Retail Sales, New Zealand ANZ Business Confidence, Australian CPI, Construction Work & Private Sector Credit, Chinese Official PMIs, Speech from RBA Governor Lowe, Supply from Australia.

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LOOKING AHEAD

Highlights include South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Retail Sales, New Zealand ANZ Business Confidence, Australian CPI, Construction Work & Private Sector Credit, Chinese Official PMIs, Speech from RBA Governor Lowe, Supply from Australia.

US TRADE

US stocks were mixed on return from the Memorial Day holiday amid some cautiousness after mixed data releases and as some hardliners voiced opposition to the debt ceiling agreement. Nonetheless, the major indices were relatively little changed at the close with mild outperformance in the NDX owing to the strength in tech names after Nvidia's slew of AI updates over the weekend which helped it momentarily breach the USD 1tln market cap milestone for the first time.
SPX +0.00% at 4,205, NDX +0.40% at 14,354, DJIA -0.15% at 33,042, RUT -0.32% at 1,767.
Click here for a detailed summary.

NOTABLE HEADLINES

Fed Discount Rate Minutes stated Richmond, Atlanta, Chicago, Kansas City, Dallas, Boston, New York, Philadelphia, Cleveland, and San Francisco voted to leave the Discount Rate unchanged at 5%, while St. Louis and Minneapolis voted for a 25bps hike to 5.25%. Furthermore, Federal Reserve Bank Directors reported stable to solid economic activity across sectors and districts but expressed some caution about the outlook going forward.
Fed's Barkin (non-voter) said policy is in restrictive territory but there is uncertainty around where rates need to go and it is hard to count on rate hikes to do all the work on inflation. Barkin also stated there is more willingness among businesses to try to raise prices which will continue until demand falls and said inflation is going to be more stubborn than many people would hope.
US Deputy Treasury Secretary Adeyemo said the debt ceiling deal is a good faith compromise that takes debt default off the table and that Congress must act by June 5th to raise the Federal Debt ceiling, according to Reuters and MSNBC.
US House Speaker McCarthy said the debt ceiling bill is easy for Republicans to vote for and he is not worried about a possible House Freedom Caucus motion to oust him.
US House Speaker McCarthy’s team believes they can avoid a disaster at the House Rules Committee today and there is chatter that Rep. Massie may still back the rule which makes him the key figure in today’s drama, according to Punchbowl.
US Senate Majority Leader Schumer said he supports the debt limit deal and will vote on it as soon as possible.
US Democrat Senator Manchin responded that he absolutely thinks so when asked whether he believes the debt limit deal will pass, according to Fox's Elkind.
US House Democratic Leader Jeffries said House Democrats will do their part to win passage of the debt limit bill and he does not see a problem winning the House Rules Committee advancement of the bill, while he expects Republicans to keep a promise of at least 150 GOP votes for a debt limit bill.
US House Freedom Caucus Chair Scott Perry said the debt limit-government spending fails to deliver and HFC members are completely opposed to the debt limit/government spending agreement and will do everything in their power to stop it, according to State Newsroom.
US GOP Rep. Bishop said a motion to oust House Speaker McCarthy over the debt deal has to happen, while others framed it as the House Freedom Caucus has left open the possibility of filing a motion to vacate the chair if Speaker McCarthy pushes through the debt deal.
US GOP Rep. Chip Roy said there is going to be a "reckoning" over the debt limit deal, while GOP Rep. Norman said he will vote against the debt ceiling bill in committee if it is not amended.
US Republican debt negotiator McHenry said over half of House Republicans will support the debt ceiling bill and the bill will pass, according to Punchbowl.
A senior GOP source responded "not that great right now" when asked how the debt ceiling vote count was looking in the House, while a Democratic source said "I don't know where we are now.. there are a lot of disappointed democrats", according to Fox. Furthermore, Democrats are said to be incensed over work requirements, while Republicans don’t believe the PAYGO provisions go far enough and wanted a more significant clawback of IRS money.
The most likely event, at least for now, is that the Treasury would provide advance notice if coupons or principal payments need to be delayed, according to two sources who have spoken with Treasury and Fed officials cited by Politico.
Goldman Sachs (GS) is reportedly preparing another round of layoffs amid the deal drought, according to WSJ citing sources, who suggested it could be fewer than 250 jobs.

DATA RECAP

US Consumer Confidence (May) 102.3 vs. Exp. 99.1 (Prev. 101.3, Rev. 103.7)
US Dallas Fed Manufacturing Business Index (May) -29.1 (Prev. -23.4)
US CaseShiller 20 YY NSA (Mar) -1.1% vs. Exp. -1.6% (Prev. 0.4%)

FIXED INCOME

US Treasuries rallied with advances led by the belly following the softer Spanish CPI and as debt default risk unwound, while mixed US data and large month-end buying were also at play.

FX

USD softened and DXY briefly dipped below the 104.00 level with yields notably lower after the debt ceiling agreement was made over the weekend and with the latest data releases mixed, although the dollar pared some of the losses as stocks were pressured.
EUR benefitted from the dollar's retreat and recouped all the initial losses from an earlier slip beneath the 1.0700 handle.
GBP was firmer after the recent BRC shop price data hit a series high and underpinned BoE hike expectations.
JPY strengthened and USD/JPY reverted to a sub 140.00 level as US-Japan yield differentials narrowed.
CBRT was reported to meet with Turkish Bank executives and discuss FX-protected accounts alongside other topics, according to bankers cited by Reuters.

COMMODITIES

Crude weakened amid concerns about the debt ceiling bill and mixed OPEC+ supply messages with Saudi Arabia and Russia said to be experiencing tensions as Russia continues to flood the market with cheap oil, undermining Saudi Arabia's efforts to stabilise prices.
Iraqi cabinet approved USD 417mln for the construction of a third offshore export pipeline.

GEOPOLITICAL

Russian President Putin said the HQ of Ukraine's military intelligence unit was hit, while he noted attempts to provoke Russia and said that Russian air defence worked well.
Russia's Defence Ministry said Kyiv attacked Moscow with drones, according to RIA. Furthermore, Russia’s Defence Minister said supplies of equipment and weapons to Ukraine are being stepped up, while Moscow is monitoring the volumes and routes of these supplies and will strike if detected.
Russian Foreign Ministry said they have the right to take the harshest measures in response to the Moscow drone attack, according to RIA.
Ukrainian presidential aide said Ukraine is watching the drone attack on Moscow and predicts attacks will increase but denied Kyiv's involvement.
White House commented on drone attacks in Russia and stated that it does not support attacks inside Russia and is focused on helping Ukraine retake its sovereign territory.
US Secretary of State Blinken said they will announce new export controls on tech used in Iranian drones to target Ukraine on Wednesday.
Ukraine is said to be seeking to extend the Black Sea grain deal by one year from July, according to reports.
Russia's UN Envoy held a meeting with the IAEA Chief, according to TASS citing a source.
US military said a Chinese fighter pilot performed an unnecessary aggressive manoeuvre during an intercept of a US jet over the South China Sea on May 26th, in which it flew directly in front of the nose of a US air force jet, according to a statement.

ASIA-PAC

NOTABLE APAC HEADLINES

Chinese President Xi said it is necessary to speed up the modernisation of the national security system and capabilities, while he added that China should maintain political security and improve the level of network data AI security governance.
Chinese Foreign Minister said a healthy, stable and constructive China-US relationship is beneficial for China, the US and the world.
China is to extend tariff waivers on some US goods until December 31st.
Japanese top currency diplomat Kanda said it is important for currencies to move stably reflecting economic fundamentals, while they are closely watching forex moves and will respond appropriately if necessary but added they are not focusing on forex levels. Kanda also said the meeting between the BoJ, MOF, and FSA was held partly due to various risks including the US debt ceiling and he responded there was "no such intention" when asked whether the meeting was meant to serve as a verbal intervention against Yen weakening.
US, Japanese, Australian and Philippine defence ministers are planning to hold their first-ever quadrilateral talks in Singapore next month, according to Kyodo citing a diplomatic source.

EU/UK