US stocks were lower after weak Chinese and Chicago PMIs, although JOLTS data jumped - Newsquawk Asia-Pac Market Open

• US stocks declined but finished off worse levels amid month-end flows and after mixed US data releases, while there was particular weakness in real economy levered names and the Russell 2000 underperformed after disappointing Chinese and Chicago PMI figures, although JOLTS data spiked higher.
• USD was firmer with the greenback underpinned in early trade following a surprise spike in JOLTS jobs openings and as key counterparts such as CNY and EUR weakened from recent data releases, although the DXY has pulled back from intraday highs amid dovish Fed commentary in which voters Jefferson and Harker were both in the skip camp for the June FOMC meeting.
• Looking ahead, highlights include Australian Manufacturing PMI, Private Capex & Retail Sales, South Korean Trade Data, Japanese Capital Spending, Regional PMIs, Chinese Caixin Manufacturing PMI, Supply from Japan.

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LOOKING AHEAD

• Highlights include Australian Manufacturing PMI, Private Capex & Retail Sales, South Korean Trade Data, Japanese Capital Spending, Regional PMIs, Chinese Caixin Manufacturing PMI, Supply from Japan.

US TRADE

• US stocks declined but finished off worse levels amid month-end flows and after mixed US data releases, while there was particular weakness in real economy levered names and the Russell 2000 underperformed after disappointing Chinese and Chicago PMI figures, although JOLTS data spiked higher.
• SPX -0.61% at 4,180, NDX -0.70% at 14,254, DJIA -0.41% at 32,908, RUT -1.00% at 1,750.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Beige Book stated financial conditions were stable or somewhat tighter in most Districts and employment increased in most Districts, though at a slower pace than before, while prices rose moderately and inflation slowed in many Districts.
• Fed's Bowman (voter) said residential real estate "appears to be rebounding" with implications for the Fed's inflation battle, while she noted that lowered rents will eventually be reflected in inflation data and said home prices are levelling out.
• Fed's Harker (voter) is in the camp that they can 'skip' a meeting which would be a skip not a pause, while he added a pause says you may hold there for a while and he doesn’t think they are ready for that.
• Fed's Jefferson (voter) said holding the policy rate constant at a coming meeting should not be taken to mean rates have peaked for this tightening cycle and skipping would allow time to assess data.
• Fed's Collins (non-voter) said the Fed is intent on reducing inflation which is simply too high.
• US President Biden said that they are going to deal with the debt ceiling and things are going as planned. It was also reported that the White House said it believes the debt ceiling bill is going to happen and President Biden will have a statement on Wednesday evening on the debt ceiling, while the bill is expected at Biden's desk by June 5th.
• US House Speaker McCarthy said the debt ceiling bill will become law. It was separately reported that GOP Rep. McHenry said he has the votes to pass debt limit bill today, according to CNBC.
• US House Democratic Leader Jeffries said he will support the debt ceiling bill.
• US Senate Majority Leader Schumer said once the debt ceiling bill reaches the Senate, it will be brought to the floor as soon as possible. Schumer also said that he hopes the debt ceiling bill will reach the Senate later on Wednesday and that the Senate will move quickly to pass the debt limit bill, while he added that they can't risk amending the debt bill and sending it back to the House.
• US Senate Republican Leader McConnell said they anticipate the debt ceiling bill will pass the House and come to the Senate as soon as Thursday.
• US GOP Senator Rand Paul said he will not employ parliamentary procedures to delay a Senate vote on the debt ceiling bill, according to CBS.
• CSPAN's Caplan said an hour-long House debate on the debt limit will start earlier at 19:15ET with the final vote to follow at 20:15ET.
• Wells Fargo (WFC) said credit quality continues to be strong and things are still stronger than expected for this point in the cycle. Co. has taken some steps to reduce origination on some loans on consumer and commercial loans, while it has seen no major changes in deposits.

DATA RECAP

• US Chicago PMI (May) 40.4 vs. Exp. 47.0 (Prev. 48.6)
• US JOLTS Job Openings (Apr) 10.103M vs. Exp. 9.35M (Prev. 9.59M, Rev. 9.745M)

FIXED INCOME

• US Treasuries bull-steepened with soft Chinese PMIs and European inflation data accentuated by a dive in Chicago PMI and despite the spike in JOLTS.

FX

• USD was firmer with the greenback underpinned in early trade following a surprise spike in JOLTS jobs openings and as key counterparts such as CNY and EUR weakened from recent data releases, although the DXY has pulled back from intraday highs amid dovish Fed commentary in which voters Jefferson and Harker were both in the skip camp for the June FOMC meeting.
• EUR weakened and extended beneath 1.0700 which pressure from softer Eurozone inflation prints.
• GBP ultimately gained against the dollar following hawkish comments from BoE's Mann who noted the gap between headline and core inflation is more persistent than seen in the US and EZ.
• JPY strengthened and USD/JPY failed to sustain a brief foray above 140.00 amid narrowing US-Japan yield differentials.

COMMODITIES

• Crude prices declined amid headwinds from soft Chinese PMI data and a stronger dollar.
• US Private Inventory (bbls): Crude +5.2mln (exp. -1.4mln), Cushing +1.8mln, Gasoline +1.9mln (exp. -0.5mln), Distillate +1.8mln (exp. +0.9mln).
• Russian plans to halve subsidies for oil refiners may be postponed until September, according to Interfax citing sources. However, the Russian Finance Ministry said no final decision on oil and gas sector subsidies has been taken yet.
• Codelco Chairman said the price of metal appears solid going forward and is optimistic about long-term trends in the global copper market but added some price volatility is to be expected in the current market uncertainty.

GEOPOLITICAL

• Russia claimed it destroyed Ukraine's 'last warship', according to AFP.
• UN proposed that Ukraine, Russia, and Turkey begin preparatory work for Russian ammonia to transit through Ukraine, according to Reuters sources which added that parallel talks should be held on broadening the Black Sea grain deal to include further ports and cargoes. Furthermore, Ukraine and Turkey have accepted the UN proposals, while Russia is yet to respond.
• French President Macron has for the first time called for Ukraine to be granted a NATO membership "path" when asked at a security conference in Bratislava, Slovakia, according to FT.
• North Korea may need several weeks at least to fix the rocket's problem, according to a South Korean Lawmaker citing the intelligence agency.

ASIA-PAC

NOTABLE APAC HEADLINES

• China's Global Times reported that experts expect China’s full-year GDP growth to exceed 6% and the PBoC may cut RRR by 25bps if the Chinese economy maintains a stable recovery in the second half of 2023 and requires more liquidity.
• US Secretary of State Blinken confirmed that a Chinese pilot took dangerous action in approaching a US plane within the South China Sea and said it is regrettable that the meeting between the US and Chinese Defense Secretaries did not occur. Blinken also said they have competition with China and want to ensure this does not veer into a conflict, while he added the most dangerous thing would be not to communicate with China and that the incident underscores why a direct communication line with the Chinese is required.

DATA RECAP

• Indian GDP Quarterly YY (Q4) 6.1% vs. Exp. 5.0% (Prev. 4.4%)
• Indian Infrastructure Output YY (Apr) 3.5% (Prev. 3.6%)

EU/UK

NOTABLE HEADLINES

• BoE's Mann (Hawk) said the gap between headline and core inflation is more persistent than seen in the US and EZ, while she added that if firms have high pricing powers, they will use it.
• ECB Financial Stability Review stated the financial stability outlook remains fragile and that Euro area home prices could see a disorderly fall.
• ECB's de Guindos said they have to adjust liquidity requirements to the modern world, while he noted that inflation data today and yesterday was positive. Furthermore, he said victory over inflation is not there but the trajectory is correct and that markets are absorbing QT smoothly and positively.
• ECB's Muller said core inflation shows no signs of slowing yet and it is very likely that the ECB will hike by 25bps more than once, while he suggested it is too optimistic to see an ECB rate cut in early 2024.
• ECB's Visco said longer-term inflation expectations remain in line with the definition of price stability and the risk of inflation remaining above target for too long has gone down considerably from the peak of mid-2022.
• ECB's Villeroy said it is quite likely that France may have passed its peak in inflation.
• European Commission is to propose increasing transparency in credit default swaps for eight globally systemic banks in the EU and noted that information asymmetries in single-name credit default swaps on top banks can harm financial stability.

DATA RECAP

• German Unemployment Change (May) 9.0k vs. Exp. 15.0k (Prev. 24.0k)
• German Unemployment Rate SA (May) 5.6% vs. Exp. 5.6% (Prev. 5.6%)
• German CPI Prelim YY (May) 6.1% vs. Exp. 6.5% (Prev. 7.2%)
• German HICP Prelim YY (May) 6.3% vs. Exp. 6.8% (Prev. 7.6%)
• French CPI Prelim YY (May) 5.1% vs. Exp. 5.5% (Prev. 5.9%)
• Italian CPI Prelim YY (May) 7.6% vs. Exp. 7.4% (Prev. 8.2%)