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Europe Market Open: APAC mixed with focus on debt ceiling talks; UK Retail Sales & US PCE ahead

  • APAC stocks traded mixed following the mild positive bias stateside where the tech sector surged on Nvidia’s blockbuster report
  • Nikkei 225 outperformed, US equity futures were rangebound, and European equity futures are indicative of a flat open
  • US President Biden and House Speaker McCarthy are said to be near a deal that would raise the debt ceiling for two years and cap spending
  • US House Speaker McCarthy said there was no agreement on Thursday and he will stay at the Capitol to continue to work this weekend
  • Looking ahead, highlights include UK Retail Sales, US PCE Price Index, Durable Goods, Speeches from ECB's Lane, Enria & RBNZ's Orr, Supply from the UK



  • US stocks finished somewhat mixed albeit with a positive bias as a debt limit solution appears increasingly likely and with the advances led by a surge in the tech sector after Nvidia (NVDA) ballooned its market cap by around 25% to approach near the USD 1tln club. In addition, the data releases were stronger than expected, which coupled with the increased optimism on the debt ceiling, put the onus back on the Fed and saw money market pricing edge towards a hike at the next FOMC meeting in June.
  • SPX +0.88% at 4,151, NDX +2.46% at 13,938, DJIA -0.11% at 32,764, RUT -0.70% at 1,754.
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  • Fed Discount Window borrowing at USD 4.2bln on May 24th vs USD 9bln W/W, while Other Credit was at USD 192.6bln vs USD 208.5bln WW and BTFP lending was at 91.9bln vs 87bln W/W, according to Reuters.
  • US President Biden said he had several productive conversations on the debt ceiling with House Speaker McCarthy and it is time for Congress to act now, while Biden put forward a proposal to freeze spending for two years and said negotiations are about budget outlines. Biden added that he has a very different view to McCarthy of who should bear the burden of additional efforts to get the fiscal house in order and he will not agree to huge cuts on teachers, police, border patrol agents or increase wait times for social security claims and he believes they'll come to an agreement.
  • US President Biden and House Speaker McCarthy are said to be near a deal that would raise the debt ceiling for two years and cap spending on most items other than military and veterans, while President Biden and Democrats are considering scaling back the boost in IRS funding as part of a budget deal, according to a US official cited by Reuters.
  • White House Communications Director said they are getting closer to a deal on the debt ceiling, while the White House earlier said President Biden's team had productive debt ceiling talks and discussions continue.
  • White House and Republican debt limit proposals differ now by less than USD 70bln on discretionary spending, while the contours of a US debt limit deal are taking shape and the focus is primarily on the top-line number. Furthermore, negotiators are likely to agree on a slimmed-down agreement with just a few key numbers, according to Reuters sources.
  • US House Speaker McCarthy said there was no agreement on Thursday and he will stay at the Capitol to continue to work this weekend, while he added it is not easy and they will continue working until they get it done, according to Reuters.
  • US GOP Rep. Graves said work requirements are a sticking point in talks with the White House, according to Reuters.
  • US GOP Rep. McHenry said there is alignment on what they need to work on with the debt ceiling, while he responded that he doesn’t think so and they are not quite in that zone yet when asked if a deal could have been made yesterday, but noted the work they are doing centres on a shorter and shorter array of issues.
  • US GOP Rep. McHenry, in a letter to Treasury Secretary Yellen, said the Biden admin's outbound investment proposal requires rigorous scrutiny by the Treasury and thorough oversight by Congress, while it is unclear that investment restrictions would be more effective than export controls or sanctions in regulating foreign investment.
  • US Treasury is preparing to change how the US processes federal agencies’ payments if the debt ceiling is breached whereby agencies would submit payments to the Treasury no sooner than the day before they are due and if the Treasury can't make a full day's payments, it would likely delay until it has enough cash, according to WSJ sources.
  • US regulator vowed to take a tough line on problem banks with the Office of the Comptroller of the Currency to consider taking corrective action against persistently weak banks including forcing them to exit certain businesses, according to WSJ.



  • APAC stocks traded mixed following the mild positive bias stateside where the tech sector surged on Nvidia’s blockbuster report and with sentiment underpinned by firm US data and progress in debt ceiling talks.
  • ASX 200 was indecisive with price action rangebound and risk sentiment contained by disappointing Retail Sales data.
  • Nikkei 225 outperformed and reclaimed the 31,000 level with the index lifted by recent currency weakness and mostly softer-than-expected Tokyo CPI, while tech stocks benefitted from the ripple effect which stemmed from the rally in US counterparts.
  • Shanghai Comp. was subdued amid the closure of Hong Kong markets and Stock Connect trade but with the downside cushioned after the meeting between the US and China’s commerce chiefs where concerns were raised about recent actions taken against US companies in China, as well as US chip policy and export curbs.
  • US equity futures were rangebound as participants await further development in the debt ceiling negotiations and ahead of the Fed's preferred inflation measure scheduled for release later today.
  • European equity futures are indicative of a flat open with the Euro Stoxx 50 flat after the cash market closed up by 0.1% yesterday.


  • DXY marginally softened overnight but held on to most of its recent gains after printing a two-and-a-half-month high above 104.00 following a clean sweep of forecast-beating data releases which contributed to a shift in pricing towards a 25bps Fed hike next month.
  • EUR/USD attempted to nurse some of its losses but with the rebound limited after yesterday’s weak German data.
  • GBP/USD was off the prior day’s lows although lacked any meaningful strength and largely ignored comments from BoE's Haskel who noted that further UK rate rises cannot be ruled out.
  • USD/JPY slightly pulled back after its brief incursion above 140.00 which coincided with moves in US yields.
  • Antipodeans were rangebound amid the mixed risk appetite and after flat Australian Retail Sales.
  • China's major state-owned banks were seen selling dollars in the onshore spot FX market.
  • PBoC set USD/CNY mid-point at 7.0760 vs exp. 7.0752 (prev. 7.0529)


  • 10yr UST futures languished near yesterday’s lows after having bear-flattened to their most inverted since mid-March as strong data and debt ceiling progress placed the onus back on the Fed.
  • Bund futures were subdued after the recent sell-off and hawkish comments from ECB’s Knot but with a floor around 133.00.
  • 10yr JGB futures were pressured on spillover selling from global peers and amid the lack of additional BoJ purchases which instead offered to purchase commercial paper from May 31st, although losses were stemmed after mostly softer-than-expected Tokyo CPI data.


  • Crude futures were lacklustre after yesterday's slide owing to the headwinds from a firm dollar and comments from Russia's Novak who initially downplayed prospects of an OPEC+ output cut but has since stated that the group could make a decision at the June meeting.
  • Russian Deputy PM Novak said Russia and OPEC+ partners will decide on what is best for the oil market, while he added that OPEC+ can make a decision at the June meeting if necessary and that Russia will participate in OPEC+ talks.
  • Iraqi Oil Ministry said discussions with Saudi companies including Aramco about gas and oil investments have not reached a final agreement.
  • Spot gold marginally recovered as the greenback took a breather from its recent advances.
  • Copper futures notched mild gains in the aftermath of the firm US data and debt ceiling progress.


  • Bitcoin traded indecisively overnight in which price action oscillated around the USD 26,500 level.


  • US Commerce Secretary Raimondo met with Chinese Commerce Minister Wang in Washington and raised concerns about the recent spate of Chinese actions taken against US companies in China. Furthermore, China's MOFCOM said Wang and Raimondo agreed to keep communication on trade concerns and that China expressed concerns on US chip policy and export curbs, while the meeting was candid and constructive, according to Reuters.
  • US official Ratner said China has not answered the US request for a defence ministers meeting.
  • US State Department said it is aware of recent activity by a Chinese-sponsored cyber actor to develop a presence in networks across US critical infrastructure and such attacks could include against oil and gas pipelines and rail systems.
  • China's top server makers asked suppliers to suspend shipments of modules containing chips made by Micron (MU) following Beijing's partial ban on Micron products, according to SCMP.


  • Tokyo CPI YY (May) 3.2% vs. Exp. 3.9% (Prev. 3.5%)
  • Tokyo CPI Ex. Fresh Food YY (May) 3.2% vs. Exp. 3.3% (Prev. 3.5%)
  • Tokyo CPI Ex. Fresh Food & Energy YY (May) 3.9% vs. Exp. 3.9% (Prev. 3.8%)
  • Australian Retail Sales MM Final * (Apr) 0.0% vs. Exp. 0.2% (Prev. 0.4%)


  • White House said it has seen reports of the Russian-Belarus nuclear weapon arrangement and will continue to monitor.
  • US issued new Russia-related sanctions related to the Russian Wagner Group, according to Treasury's website.
  • Japan is to place additional sanctions against Russia in which it will freeze the assets of 78 groups and 17 individuals in Russia as part of new sanctions, according to a government bulletin. Furthermore, Chief Cabinet Secretary Matsuno said Japan is to ban providing construction and engineering services in Russia, while they condemned Russia's plan to deploy tactical nuclear weapons to Belarus as it intensifies the situation around Ukraine, according to Reuters.
  • Russian Defence Ministry said it deployed a fighter jet to prevent two US Air Force bombers from violating Russian state borders, according to TASS.


  • UK ministers look to reshape the pensions lifeboat fund to provide a boost to business, according to FT.
  • BoE's Haskel prefers to lean against risks of inflation and said further UK rate rises can't be ruled out, while he added that as difficult as current circumstances are, embedded inflation would be worse. Furthermore, Haskel believes it is prudent to reduce the focus placed on medium-term forecasts and put more weight on the near-term data, according to Reuters.
  • ECB's Knot said there is no sign that underlying inflation is abating and ECB will hold rates at their peak for a significant time, while he added they need rate hikes of 25bps in June and July but is open-minded for September.