US Market Open: US equity futures are mixed & EUR slightly higher ahead of the ECB policy announcement

Published Thu, 06 Jun 2024 10:20:00 GMT

European bourses extend gains; US futures are mixed, RTY underperforms

Dollar is flat and EUR incrementally gains ahead of today’s ECB policy announcement

Bonds are slightly softer, giving back some of this week’s advances

Crude is now around flat after trading higher for much of the morning, XAU/base metals continue recent strength

Looking ahead, US Challenger Layoffs, IJC, ECB Policy Announcement and Press Conference

EUROPEAN TRADE

EQUITIES

European bourses, Stoxx 600 (+0.6%) began the session on a strong footing, taking impetus from a positive APAC session. As the morning progressed, stocks continued to climb higher, and currently reside just off session highs.

European sectors hold a strong positive bias; Tech is the clear outperformer, building on the prior day’s advances, with sentiment also lifted after Nvidia’s market cap surpassed USD 3tln. Optimised Personal Care is found at the foot of the pile.

US Equity Futures (ES U/C, NQ U/C%, RTY -0.4%) are mixed, taking a breather from recent strength in the last trading session; the RTY underperforms.

FX

USD is showing varying performance vs. peers which has left the DXY flat. For now, DXY is capped by the 200 and 100DMAs at 104.40 and 104.42 respectively.

EUR is modestly firmer vs. the USD on ECB day which is set to see the ECB deliver its first rate cut since September 2019. With a cut so widely expected, focus will be on any hints over what comes next. For reference, the next 25bps cut is priced by October with 63bps of cuts seen by year-end. EUR/USD currently within a busy 1.0869-1.0895.

Cable briefly sat on a 1.28 handle overnight, though has since slipped lower and currently holds around 1.2785; UK-specific newsflow has been light today.

JPY is losing marginal ground vs. the USD following cautious comments from officials overnight. USD/JPY is attempting to close the gap on Monday and Tuesday's risk-induced selling which took the pair from circa 157.47 to a weekly low of 154.52.

Antipodeans are both a touch softer vs. the USD with AUD/USD continuing to pivot around the 0.6650 mark having been stuck on a 0.66 handle throughout the week.

PBoC set USD/CNY mid-point at 7.1108 vs exp. 7.2436 (prev. 7.1097)

FIXED INCOME

USTs are consolidating between five and ten ticks from Wednesday's 110-12+ WTD peak. Specifics light thus far with the macro focus firmly on the ECB, with US Challenger Layoffs and Initial Jobless Claims also on the docket.

Bunds are a slightly softer and was unreactive to the miss in German Industrial Orders; Supply from Spain passed with no issue while the chunky French tap sparked some choppiness and an incremental new low for Bunds at 131.15.

Gilt price action is in-fitting with EGBs. However, the BoE DMP sparked a turnaround in fortunes for the UK benchmark lifting it by around 20 ticks to a 97.72 peak, driven by the moderation in wage growth expectations within the survey.

Spain sells EUR 5.865bln vs exp. EUR 5-6bln 2.50% 2027, 0.10% 2031, 4.00% 2054 Bono & EUR 0.51bln vs exp. EUR 0.25-0.75bln 2.05% 2039 I/L.

France sells EUR 12bln vs exp. EUR 10.5-12bln 3.00% 2034, 1.25% 2038, 3.25% 2055 OAT

1/2

US Market Open: US equity futures are mixed & EUR slightly higher ahead of the ECB policy announcement [Cont'd]

COMMODITIES

Crude benchmarks were grinding higher throughout the European morning, though the upside has since dissipated (now flat), despite a lack of clear catalysts. Brent holding around USD 78.50/bbl.

Precious metals are contained after the strength seen in the prior session. Rangebound action which currently sees XAU hold around the lower-end of USD 2354-2374/oz bounds.

Base metals are firmer and continuing the turnaround in fortunes for the likes of copper that occurred yesterday alongside the broader risk-on trade.

OPEC SecGen says demand for oil is still good, fundamentals drove their decisions. Adds, as travel is picking up, demand for oil should be strong.

Qatar has set July Marine crude OSP at Oman/Dubai plus USD +1.10bbl; land crude OSP at Oman/Dubai plus USD +0.35bbl, according to a pricing document.

Goldman Sachs says US retail gasoline prices in October could rise to nearly USD 4/gal if the hurricane season is extreme and positioning normalises.

Canada Energy Regulator said it is updating an order that will allow Nova Gas to temporarily increase operating pressure by 5% in a section of the Grande Prairie mainline.

JP Morgan price outlook calls for Brent to average USD 75/bbl in 2025; sharply down from UD 83/bbl in 2024, with prices exiting the year at USD 64/bbl

CRYPTO

Bitcoin holds around USD 71k in quiet trade, whilst Ethereum holds onto USD 3.8k.

NOTABLE DATA RECAP

German Industrial Orders MM (Apr) -0.2% vs. Exp. 0.5% (Prev. -0.4%, Rev. -0.8%)

Italian Retail Sales NSA YY (Apr) -1.9% (Prev. 2.0%); Retail Sales SA MM (Apr) -0.1% (Prev. 0.0%)

EU Retail Sales YY (Apr) 0.0% vs. Exp. 0.1% (Prev. 0.7%); Retail Sales MM (Apr) -0.5% vs. Exp. -0.3% (Prev. 0.8%, Rev. 0.7%)

German HCOB Construction PMI (May) 38.5 (Prev. 37.5)

Italian HCOB Construction PMI (May) 49.0 (Prev. 48.5)

EU HCOB Construction PMI (May) 42.9 (Prev. 41.9)

French HCOB Construction PMI (May) 43.4 (Prev. 41.5)

UK S&P Global Construction PMI (May) 54.7 vs. Exp. 52.5 (Prev. 53)

NOTABLE EUROPEAN HEADLINES

BoE Monthly Decision Maker Panel: 1-year ahead CPI inflation expectations remained unchanged at 2.9% in May. 3-year ahead CPI inflation expectations remained unchanged at 2.6% in May. Expected year-ahead wage growth fell by 0.3ppts to 4.5% on a three-month moving-average basis in May.

ISTAT lifts Italy's 2024 GDP growth forecast to 1.0% (prev. 0.7%)

NOTABLE US HEADLINES

Chinese battery firms which are linked with the likes of Ford (F) and Volkswagen (VOW3 GY) should be banned from shipping to the US, via WSJ citing a Republican lawmaker group

US FTC has reportedly opened a probe into Microsoft's (MSFT) AI deal with Inflection AI, according to WSJ; probe looks into whether MSFT structured the deal to avoid a government antitrust review of the transaction.

Mexico Health Ministry said a fatal case of bird flu was detected in a man in Mexico state with chronic kidney disease, type 2 diabetes; bird flu detected in humans in Mexico does not represent a risk to the population. So far no evidence of person-to-person transmission, according to Reuters.

GEOPOLITICS

MIDDLE-EAST

Israel's cabinet has cancelled their planned meetings amid reports that Hamas has rejected the truce proposal, according to Israeli media cited by journalist Elster

Heavy Israeli bombardment of South Lebanon was reported, according to Al Monitor Senior Correspondent Karam.

RUSSIA-UKRAINE

Russian President Putin said he has no intention to attack NATO, according to Reuters.

US officials have notified relevant Congressional committees about expected Russian activity, according to a senior US official cited by Reuters. The temporary Russian deployment is likely to include combat vessels but is not seen by the US as a threatening move. The US is expecting Russian naval and air exercises in the Caribbean this summer with port calls likely in Cuba and possibly Venezuela.

CHINA-TAIWAN

US State Department has approved the possible sale of F-16 parts to Taiwan for USD 80mln, according to the Pentagon

Taiwan Defence Ministry said in the past 24 hours, 1 Chinese Air Force plane was detected operating around Taiwan.

https://newsquawk.com/daily/article/?id=3593-us-market-open-us-equity-futures-are-mixed-eur-slightly-higher-ahead-of-the-ecb-policy-announcement

If EU banks don't get their rate cut, there will be hell to pay(and those donors won't be ponying up for the campaigns).

Europe rallies ahead of first ECB rate cut in nearly 5 years

Jun 6th, 06:32:01

By Marc Jones

LONDON (Reuters) - World stocks were on the brink of an all-time high and the euro rose on Thursday ahead of what was widely expected to be the European Central Bank's first interest rate cut in nearly five years.

With the long-awaited moment about to arrive, traders pushed the pan-European STOXX 600 up 0.8% and watched the MSCI 47-country main world index trade within a point of a seemingly inevitable new peak.

Sentiment was almost at frenzy stage again. Wall Street's S&P 500 and Nasdaq had both set records on Wednesday after a now $3-trillion AI juggernaut Nvidia swept past Apple to become the world's second-most valuable company, behind Microsoft.

The euro was on the rise again. It added another 0.1% to its 2% rise over the last month to reach just shy of $1.0880, although most traders were sitting on their hands, waiting to see what the ECB signals later.

All 82 economists polled by Reuters expect the Frankfurt-based central bank to trim its key rate to 3.75% from the record high 4.0% level it has been at since September, but what it does after that remains subject to much debate.

EU elections happen in the coming days but stronger-than-expected data over the last few weeks has raised doubts about how many more cuts will be justified this year.

Euro zone inflation rose more than predicted in May, fueled by price growth in the services sector, which some policymakers single out as especially relevant because it reflects domestic demand.

This was likely to mirror larger-than-expected increases in wages in the first quarter of the year, which boosted consumers' battered disposable income after years of below-inflation pay hikes.

Michael Metcalfe, head of global macro strategy at State Street Global Markets, said for this meeting though, it was hard to remember a central bank move more well flagged in advance.

"Maybe today is going to mark something of a watershed as they (ECB) are not going to be able to be as clear with their forward guidance," Metcalfe said

Considering the recent robust data, "what follows is now a much harder question for markets - and the ECB - to assess," he added. "It could be a classic buy-the-rumour-sell-the-fact and the euro get some support from here."

The Bank of Canada pipped the ECB to being the first G7 country to cut rates in this cycle on Wednesday. The U.S. Federal Reserve meets next week, although is not expected to move until September. By contrast, the debate at the Bank of Japan, which meets the week after, will be on if, and when, to raise rates.

Canada's dollar trimmed some of the losses from its post-cut dip on Thursday to leave it at C$1.3686 per U.S. dollar.

In the bond markets, Germany's 2-year government bond yield, which is sensitive to policy rate expectations, was down 1 bp at 2.987%. It hit 3.125% on Friday last week, its highest since mid-November.

Benchmark 10-year U.S. Treasury yields were sitting near their lowest in two months, after data this week hinted that the U.S. labour market is finally cooling.

That included private U.S. payrolls on Wednesday and a report on Tuesday that showed job openings fell in April to the lowest in more than three years.

Markets are now pricing nearly two quarter-point Fed cuts again this year, with a September move seen as a 68% chance compared to 47.5% last week.

"We're still in the Goldilocks range, so bad economic news has been good for equities, as Fed rate cuts are back on the table," said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.

Investor attention will soon turn to the U.S. nonfarm payroll report for May on Friday, with a Reuters poll of economists expecting it to have risen by 185,000 jobs.

"We need that to be around 100-150k to maintain the Goldilocks narrative," Bennett said. "Much higher than that and yields could move back up, but if we get zero or negative, then we could be talking about a hard landing again."

In commodities, Brent crude futures rose 0.5% to $74.75 a barrel, while U.S. West Texas Intermediate crude futures rose 0.4% to $78.74. [O/R]

Spot gold rose 0.25% to $2,360 per ounce after a 1% rise previously, while silver rose 1% to $30.31 per ounce. [GOL/]

(Additional reporting by Ankur Banerjee in Singapore; Editing by Christina Fincher and Angus MacSwan)

https://PiQSuite.com/reuters/europe-rallies-ahead-of-first-ecb-rate-cut-in-nearly-5-years

NEWSMAX

@NEWSMAX

Voting company Smartmatic bribed foreign official $4 million, DOJ alleges, sanctions sought. MORE: https://www.newsmax.com/newsfront/newsmax-smartmatic-court/2024/06/04/id/1167386/

https://twitter.com/RichardGrenell/status/1798340415260922003

David Sheppard @OilSheppard

The 1812 Project: US news outlets turn to Fleet Street veterans as their troubles mounthttps://ft.com/content/226af97d-aefe-4d1f-80b4-d211375a2845 via

"He joins the ranks of CNN chief Mark Thompson, Wall Street Journal editor Emma Tucker, Associated Press chief executive Daisy Veerasingham, Bloomberg News editor John Micklethwait and New York Post editor Keith Poole — all British-born. This week, The Daily Beast replaced editor Tracy Connor with another British import: Hugh Dougherty.

The trend has puzzled some US media observers.

“I do think that there’s something special about American journalism and democracy because we have this ethos that is formed in part by the First Amendment. The country has a very special relationship with the press,” said Margaret Sullivan, a former Washington Post columnist who runs a journalism ethics centre at Columbia University. “That’s not to say that individual people are not good choices. But the trend is hard to understand.”"

https://twitter.com/OilSheppard/status/1798687851036528986

vegastar

@vegastarr

Are you awake yet or blind? 😎👌

https://twitter.com/vegastarr/status/1798597337386045541

ECB cuts 25 bps. Breaks from Fed and gives banks relief at the pump.

ECB may have"Cut Rates"but it, unexpectedly, sharply restricted the easy money trading at member banks at the end of the month.

First Squawk

@FirstSquawk

ECB SAYS ECB WILL CONTINUE TO REINVEST, IN FULL, PRINCIPAL PAYMENTS FROM MATURING SECURITIES PURCHASED UNDER PEPP UNTIL END OF JUNE 2024 || ECB SAYS OVER SECOND HALF OF YEAR, IT WILL REDUCE PEPP PORTFOLIO BY €7.5 BILLION PER MONTH ON AVERAGE

ECB SAYS ECB INTENDS TO DISCONTINUE REINVESTMENTS UNDER PEPP AT END OF 2024 || ECB SAYS ECB WILL CONTINUE APPLYING FLEXIBILITY IN REINVESTING REDEMPTIONS COMING DUE IN PEPP PORTFOLIO, WITH A VIEW TO COUNTERING RISKS TO MONETARY POLICY TRANSMISSION MECHANISM RELATED TO PANDEMIC

https://twitter.com/FirstSquawk/status/1798691425996914848

Hans Mahncke

@HansMahncke

The invisible chair strikes again.

https://twitter.com/HansMahncke/status/1798692123056947472

>>20976579

No longer an impartial member of jury. Must be removed due to said influence attempt. Should be set up in long standing court rules.

>>20976585

I can grab, but no beneficial edit. Some anon smarter than dis one can provide needed enhancement.

Canada Free Press

@canadafreepress

GROOMER: Gay Lawmaker Says LGBT Kids Belong to Him, Not Parents

https://canadafreepress.com/article/groomer-gay-lawmaker-says-lgbt-kids-belong-to-him-not-parents

https://twitter.com/canadafreepress/status/1798331487844180208

>>20976607

New case, because new crime. Related, but new. Up to prosecution and judge whether it can be "piled on".

>>20976626

Just need Two [moar] Weeks of glaringly corrupt courts for the Military is the only way Overton Window to be in position.

>>20976633

MuhFysiks

>>20976643

The Plan is someone else's design, and another's execution. So my only tools are smack, read everything, and be patient. "Cause someone's gotta be around to splain shit when the dust finally goes up, and then settles.