– Risk appetite found tailwinds in Asia with Hang Seng outperforming at +2.7%. Sentiment is turning positive due to the easing of covid restrictions in Beijing. The momentum was reflected in the European indices, most of which were up by +0.75 to 1.25%. Notably the UK 10yr gained 3.3% after UK news took center stage. US futures +0.8-1.5%. Gold +0.2%, BTC +5.7%, DXY -0.2%, Brent +0.3%, WTI +0.3%, Wheat +4.5%.
– The United Kingdom in the spotlight this morning. Vote of no confidence for Prime Minister Johnson at 1:00 p.m. ET with several prominent cabinet members expressing their support for the Prime Minister. UK Chancellor Sunak is expected to speak on inflation at 8:45 a.m. ET.
– The Whit Monday holiday has Austria, Denmark, Iceland, Norway, Switzerland and Sweden all closed for the public holiday.
– Macro news and economic data are light, with UK new car registrations accelerating the decline of up to -20.6% as consumer wealth is constrained.
– Policy focused week with inflation continuing to be in the spotlight (US CPI data, RBA, ECB rate decisions).
– Later this week, RBA interest rate decision (expected to rise by 25 bps), RBI interest rate decision (expected to rise by 40 bps), interest rate ECB (expected unchanged), US CPI (expected at 8.3% vs. 8.3% previously) .
– China May Caixin PMI Services recorded its 3rd consecutive contraction (41.4v 46.0e).
– Beijing will further relax COVID-related restrictions, to allow indoor dining on Monday June 6); Indoor dining resumption does not apply to Fengtai and parts of Changping District.
– BOJ Governor Kuroda reiterates his position that he is not in a monetary tightening position; Pursue persistent monetary easing.
– North Korea fired 8 short-range ballistic missiles into the sea on Sunday morning.
– South Korea Pres Yoon said North Korea’s missile and nuclear weapons programs have reached a level where they pose a threat to regional and global peace.
– EU Foreign Policy Chief Borrell: The Possibility of Reaching a Deal and Reverting to the Iran Nuclear Deal (JCPOA) Is Narrowing; But we can always do it with extra effort.
– The ECB said it is stepping up its plans to keep stress in the bond market in the event of a sell-off as it prepares to end QE and hike rates.
– British Prime Minister Johnson should “widely expect” a vote of confidence as early as this week; some MPs expect the 54-letter threshold for the vote of confidence to have already been exceeded.
– U.S. Commerce Secretary Raimondo reiterated that President Biden had asked his team to review China-related tariff options.
– Pres Biden’s trips to Israel and Saudi Arabia have been postponed until July.
clues [Stoxx600 +0.9% at 444, FTSE +1.3% at 7633, DAX +1.0% at 14609, CAC-40 +1.2% at 6559, IBEX-35 +0.9% at 8807, FTSE MIB +1.3% at 2395, SMI -0.2% at 11529, S&P 500 Futures +1.2%].
Market Focal Points/Key Themes: European indices opened higher across the board and drifted higher as the session progressed; all sectors start the day in the green; improved risk appetite attributed to easing of covid restrictions in China; sectors among those leading up are consumer discretionary and industrials; underperforming sectors include telecommunications and real estate; several European countries closed for holidays including Switzerland, Denmark and Sweden; Melrose sells its Ergotron unit; BPEP finalizes the acquisition of Banca Carige; Sacyr sells its stake in Repsol; focus on the next no-confidence vote on British Prime Minister Johnson expected later today; earnings expected in the upcoming US session include SAIC and Alkermes.
– Discretionary consumption: Dr Martens DOCS.UK +8.0% (analyst action), Just Eat Takeaway JET.UK +8.0% (potential interest in Grubhub stake).
– Energy: Repsol REP.ES +1.3% (Sacyr sells its stake) Serica Energy SQZ.UK +8.2% (trading update).
– Health care: Nanobiotix NANO.FR +6.3% (study results).
– Industrial: Airbus AIR.FR +2.5% (deliveries), Melrose MRO.UK +4.1% (disposals).
– Brady, Chairman of the 1922 British Committee confirmed that a vote of no confidence will take place on Monday June 6 against Prime Minister Johnson. (timetable at 5:00 p.m. GMT).
– Czech Central Bank (CNB) Gov Rusnok (outgoing) said everything pointed to another interest rate in June and could be 75 basis points or higher.
– Czech Central Bank Holub (Chief Economist) said inflation peaked at over 15% at the start of the summer.
– The EU session was quiet with the observance of Whit Monday which kept attendance to a minimum. Looking ahead, the focus is on inflation with the upcoming US CPI data and the RBA and ECB key rate decision.
– The USD was mixed among the major pairs. Dealers noted that upcoming US CPI data is critical ahead of next week’s FOMC decision. A strong inflation reading would add to expectations of aggressive Fed tightening and likely end speculation last month that it would pause interest rate hikes at its September meeting. .
– EUR/USD drifting slightly higher to test 1.0740 during the session. Focus on the ECB’s decision this Thursday with the General Council which should pave the way for rate hikes.
– The GBP was firmer as British Prime Minister Johnson was about to face a vote of confidence. GBP/USD up 70 pips during the session to test the 1.2570 zone.
– USD/JPY higher and moving closer to near 131. BOJ Gov Kuroda again underlined the divergence between the BOJ and the Fed on the rate outlook.
– AUD/USD up 0.3% to 0.722.
– NZD/USD up 0.4% to 0.654.
– USD/CAD down 0.25% to 1.256.
– USD/CHF down 0.15% to 0.961.
– (CZ) Czech national April trade balance (CZK): -28.4 B against -14.0 Be.
– (CZ) Czech Apr Industrial Output Y/Y: -6.4%v -1.6%e; Y/Y construction output: 4.0 vs. 8.8% before.
– (United Kingdom) New car registrations in May Y/Y: -20.6% vs. -15.8% before.
Issuance of fixed income securities
– None seen.
– 05:25 (EU) Daily ECB liquidity statistics.
– 05:30 (ZA) South Africa announces details of the upcoming I/L bond sale (held on Friday).
– 06:00 (IL) Israel will sell bonds.
– 06:45 (US) Libor daily fixing.
– 07:00 (MX) Mexico Mar Gross Fixed Investment: 5.6%ev 1.7% before.
– 07:00 (MX) Vehicle production in Mexico in May: no est v 251.5 K before; Vehicle Exports: No is v 241.3K earlier.
– 07:25 (BR) Weekly survey of economists from the Central Bank of Brazil.
– 07:30 (TR) Turkey May Real Effective Exchange Rate (REER): No est v 57.05 before.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:00 (ES) Spanish Debt Agency (Tesoro) on issue size for upcoming actions.
– 09:00 (IN) India announces details of upcoming bond sale (held on Friday).
– 11:30 a.m. (US) The Treasury will sell 13-week and 26-week bills.
– 12:00 (CA) Canada will sell 2-year bonds.
– 4:00 p.m. (US) Weekly crop progress report.
– 5:00 PM (KR) South Korea May Foreign Reserves: No est versus $449.3 billion previously.
– 7:01 p.m. (UK) May BRC LFL Y/Y Sales: No est v -1.7% ahead.
– 7:30 p.m. (JP) April household spending in Japan: -0.5%ev -2.3% before.
– 19:30 (JP) Japan Apr. Labor cash income Y/Y: 1.5% ev 2.0% before (revised from 1.2%) ); Actual cash gains Y/Y: -1.6%ev +0.6% before (revised from -0.2%).
– 7:30 PM (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No east vs 90.7 ahead.
– 9:00 PM (NZ) New Zealand May ANZ Commodity Prices M/M: no est v -1.9% ahead.
– 9:00 p.m. (PH) Philippines April CPI Y/Y: 5.4%ev 4.9% before.
– 23:35 (JP) Japan will sell 30-year JGB bonds.