US stocks were choppy after weak data spurred a drop in yields - Newsquawk Asia-Pac Market Open

• US stocks finished mixed following a choppy performance throughout the session as participants digested weak data releases including the significantly lower-than-expected ADP job numbers and with ISM Services PMI slipping into contraction territory. The disappointing data spurred a drop in yields and constrained the major indices although there was slight outperformance in the Nasdaq amid firm gains in Meta (META) and as Alphabet (GOOGL) recouped some of the prior day's losses.
• USD was pressured following soft US data, and a subsequent drop in yields, as the ADP employment report missed expectations significantly ahead of the key NFP report due on Friday, albeit analysts remain sceptical about the correlation between the two data sets, while the ISM Services PMI report was also weak.
• Looking ahead, highlights include South Korean GDP, Japanese Labour Cash Earnings, New Zealand ANZ Commodity Price Index, Australian Trade Data, Chinese Caixin Services & Composite PMIs, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include South Korean GDP, Japanese Labour Cash Earnings, New Zealand ANZ Commodity Price Index, Australian Trade Data, Chinese Caixin Services & Composite PMIs, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks finished mixed following a choppy performance throughout the session as participants digested weak data releases including the significantly lower-than-expected ADP job numbers and with ISM Services PMI slipping into contraction territory. The disappointing data spurred a drop in yields and constrained the major indices although there was slight outperformance in the Nasdaq amid firm gains in Meta (META) and as Alphabet (GOOGL) recouped some of the prior day's losses.
• SPX +0.01% at 5,970, NDQ +0.27% at 21,722, DJI -0.22% at 42,427, RUT -0.21% at 2,098.
• Click here for a detailed summary.

TARIFFS/TRADE

• USTR Greer said there is constructive engagement with the EU on trade and he is pleased that talks are advancing quickly with the EU, while he stated the meeting indicates a willingness by the EU to work with the US to find a concrete way forward to achieve reciprocal trade.
• EU Trade Commissioner Sefcovic said he had constructive talks with USTR Greer and they are advancing in the correct direction at "pace".
• EU Economy Commissioner Dombrovskis, when asked about countermeasures to US tariffs, said the EU has measures in place which have been suspended during talks.
• Canadian PM Carney said Ottawa is preparing reprisals against the US if talks to remove tariffs do not succeed.
• Canada’s Industry Minister said they are looking at different scenarios on how to react to the latest US tariffs and need a bit more time, while they have not removed from the table the idea of more counter-tariffs.
• Alberta Premier Smith said Canada is optimistic about a near-term trade deal with the US.
• China introduced a national rare earths magnet tracking system and requires exporters to list clients and sales volumes, according to Reuters sources.
• Chinese Commerce Minister met with France's Trade Minister, according to a Chinese statement.

NOTABLE HEADLINES

• Fed Beige Book noted reports across the twelve Federal Reserve Districts indicate that economic activity has declined slightly since the previous report, while half of the Districts reported slight to moderate declines in activity, three Districts reported no change, and three Districts reported slight growth.
• NY Fed Survey showed most firms passed through to customers at least some of the tariffs as one-third of factory firms and about 45% of service firms passed on all tariff increases, while three-quarters of factory firms and service firms passed on some amount of tariffs. Furthermore, firms were very uncertain about the tariff outlook.
• US President Trump commented "The Debt Limit should be entirely scrapped to prevent an Economic catastrophe", while he added "It is too devastating to be put in the hands of political people that may want to use it despite the horrendous effect it could have on our Country and, indirectly, even the World".
• Some economists are beginning to question the accuracy of recent US inflation data after the federal government said staffing shortages hampered its ability to conduct a massive monthly survey, according to WSJ.

DATA RECAP

• US S&P Global Services PMI Final (May) 53.7 (Prev. 52.3)
• US S&P Global Composite PMI Final (May) 53.0 (Prev. 52.1)
• US ISM N-Mfg PMI (May) 49.9 vs. Exp. 52.0 (Prev. 51.6)
• US ISM N-Mfg New Orders Idx (May) 46.4 (Prev. 52.3)
• US ISM N-Mfg Price Paid Idx (May) 68.7 (Prev. 65.1)
• US ISM N-Mfg Bus Act (May) 50.0 (Prev. 53.7)
• US ISM N-Mfg Employment Idx (May) 50.7 (Prev. 49.0)
• US ADP National Employment (May) 37.0k vs. Exp. 110.0k (Prev. 62.0k)

FX

• USD was pressured following soft US data, and a subsequent drop in yields, as the ADP employment report missed expectations significantly ahead of the key NFP report due on Friday, albeit analysts remain sceptical about the correlation between the two data sets, while the ISM Services PMI report was also weak.
• EUR benefitted from the dollar selling and better-than-expected EU PMI data, while the focus for the single currency shifts to Thursday's ECB.
• GBP gained amid the weaker buck and after UK Services PMI topped forecasts, although further upside is capped amid light UK-specific newsflow although Chancellor Reeves reportedly ruled out increasing income tax, NI and VAT for 'working people' in the autumn Budget.
• JPY strengthened with USD/JPY slipping to sub-143.00 territory as US-Japanese yield differentials narrowed following the soft US data.
• BoC maintained its policy rate at 2.75% as expected and said uncertainty about US tariffs is still high, while BoC Governor Macklem said there was a clear consensus to hold policy unchanged as they gain more information and on balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued US tariffs and uncertainty.
• NBP maintained its main interest rate at 5.25%, as expected.

FIXED INCOME

• T-notes were lifted following soft economic releases including weaker-than-expected ISM Services and dismal ADP jobs data.

COMMODITIES

• Oil prices faded the initial geopolitically-induced upside following a source report that Saudi Arabia wants more super-sized OPEC+ hikes.
• US EIA Weekly Crude Stocks w/e -4.304M vs. Exp. -1.035M (Prev. -2.795M)
• Saudi Arabia reportedly wants more super-size OPEC+ hikes in a push for market share, according to Bloomberg.
• Saudi set July Arab super light crude oil OSP to Asia plus USD 1.75/bbl (prev. USD 1.55/bbl) vs. the Oman/Dubai average.
• Qatar set July Marine Crude OSP at Oman/Dubai +USD 0.7/bbl and land crude at +USD 0.2/bbl, according to Reuters.
• An alternative Trans-Balkan gas import route for Ukraine has been developed that allows for cheaper imports to Ukraine that avoid Russian-origin gas, according to a Ukraine source cited by Reuters.

GEOPOLITICAL

RUSSIA-UKRAINE

• Ukrainian President Zelensky said Ukraine did not receive a memorandum from Russia and called the Russian document an ultimatum, while he proposed a ceasefire until the leaders' meeting takes place.
• US President Trump said he spoke with Russian President Putin in which the conversation lasted 15 minutes and they discussed Ukraine’s attack on Russia’s docked aeroplanes, as well as various other attacks that have been taking place by both sides. Trump added it was a good conversation, but not a conversation that will lead to immediate peace, while Trump noted that Putin said very strongly, that he will have to respond to the recent attack on the airfields.
• Russian President Putin said he doubts that a summit or ceasefire with Ukraine is possible given the most recent attacks.
• Russian Foreign Minister Lavrov said the process of direct talks is working, while both rounds produced concrete results and there is a real move forward.
• Russia's Kremlin said regarding the Russia-Ukraine peace talks, that as soon as the parties are ready, the dates of the next round will be agreed.

ASIA-PAC

NOTABLE HEADLINES

• BoJ is reportedly mulling slowing the pace of bond tapering next year, according to Reuters sources, with the central bank likely to roughly maintain the bond taper plan through March and the new programme beyond April 2026 may see a slowdown.
• Apple (AAPL) and Alibaba's (BABA) AI rollout in China has been delayed by US President Trump's trade war, according to FT.
• US SEC called for public comment on potential rules requiring more US-listed Chinese and other foreign firms to provide more regular investor disclosures.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Reeves said she has no intention of raising taxes again on the scale of the 2024 budget, while she reportedly ruled out increasing income tax, NI and VAT for 'working people' in the autumn Budget and said she will stick to her manifesto pledges despite tight public finances.
• ECB said Bulgaria has met the EUR accession criteria which paves the way for EUR adoption on January 1st 2026, while the EU Commission has increased disciplinary action against Romania regarding its excessive deficit.

DATA RECAP

• UK S&P Global Services PMI (May) 50.9 vs. Exp. 50.2 (Prev. 50.2)
• UK S&P Global Composite PMI (May) 50.3 vs. Exp. 49.4 (Prev. 49.4)
• EU HCOB Services Final PMI (May) 49.7 vs. Exp. 48.9 (Prev. 48.9)
• EU HCOB Composite Final PMI (May) 50.2 vs. Exp. 49.5 (Prev. 49.5)
• German HCOB Services PMI (May) 47.1 vs. Exp. 47.2 (Prev. 47.2)
• German HCOB Composite Final PMI (May) 48.5 vs. Exp. 48.6 (Prev. 48.6)
• French HCOB Services PMI (May) 48.9 vs. Exp. 47.4 (Prev. 47.4)
• French HCOB Composite PMI (May) 49.3 vs. Exp. 48.0 (Prev. 48.0)
• Italian HCOB Services PMI (May) 53.2 vs. Exp. 52.0 (Prev. 52.9)
• Italian HCOB Composite PMI (May) 52.5 (Prev. 52.1)