• European bourses are mixed and US futures are entirely in the red, though with price action contained ahead of US PCE
• Dollar is flat, EUR gains following the hotter-than-expected EZ-HICP metrics
• Bonds are pressured and EGBs more-so after hotter EZ HICP metrics, downside which has been pared slightly
• Crude is modestly softer following disappointing Chinese PMI data, XAU is flat and base metals are mixed
• Looking ahead, US PCE (Apr), Canadian GDP, France Credit Rating Review & Comments from Fed’s Bostic

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx 600 (+0.1%) are mixed, and generally trading near the unchanged mark as focus turn to the upcoming US PCE report. Equities saw very modest pressure on the back of the hotter-than-expected EZ HICP figures.
• European sectors are mixed and with the breadth of the market fairly narrow; Telecoms takes the top spot, continuing to build on the prior day’s outperformance. Tech is among the worst performers, joined by Travel & Leisure.
• US Equity Futures (ES -0.2%, NQ -0.4%, RTY -0.3%) are entirely but modestly in the red, continuing the negative sentiment seen in the prior session; however, the price action is relatively contained given the focus around the upcoming US PCE at 13:30 BST / 08:30 EDT.
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FX

• USD is flat and trading within the middle of its weekly 104.33-105.18 range; PCE will likely determine the fate of the USD today with analysts at ING suggesting that a 0.2% M/M print could trigger a run of bond bullishness (USD weakness).
• EUR is a touch firmer vs. the USD in wake of firmer-than-expected headline and core inflation metrics from the Eurozone. Next upside target would come via the high from Wednesday at 1.0861.
• GBP is slightly softer vs. the USD in quiet trade with tier 2 data releases from the UK unable to have much sway on the pair. For now, Cable is caged within yesterday's 1.2688-1.2747 range.
• JPY is giving back some of yesterday's gains which saw USD/JPY dragged lower from 157.61 to 156.36. The pair has since moved back onto a 157 handle following mixed data overnight.
• Antipodeans are both a touch firmer vs. the USD. AUD/USD has made further progress on a 0.66 handle but is yet to test yesterday's 0.6647 as the pair remains in close proximity to its 10DMA.
• South Africa's ANC vote share drops below 42% based on results from 55.63% of polling stations; FT writes that South African President Ramaphosa’s future is in doubt after disappointing South African election, figure within the ANC notes that if the vote remains close to 40% "people will suggest he leaves".
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FIXED INCOME

• USTs are slightly softer as Thursday's bounce runs out of steam and hot Tokyo headline CPI, but with price action fairly contained ahead of the key US PCE figure later today. USTs are at lows of 108-12 having dipped from Thursday's 108-19+ peak but currently remain comfortably above the WTD base at 107-31.
• Bunds were pressured alongside USTs into Final EZ HICP, prior to this some modest two-way action was seen on German Retail Sales & Import Prices. Thereafter, hotter-than-expected prints on the three headline Y/Y metrics sent Bunds down from circa. 128.90 to a 128.74 base (matching Wednesday's low); EGBs now back towards pre-release levels.
• Gilts are essentially unchanged with specifics light into EZ HICP, which resulted in some very modest pressure for Gilts to an incremental new session low; Gilts in a narrow 95.62-95.94 bound which itself is entirely within Thursday's 95.54-95.99 range.
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COMMODITIES

• Crude is softer and towards session lows, continuing the overnight pressure seen following the disappointing Chinese PMI data, which saw the Manufacturing component dip into contractionary territory.
• Precious metals are flat/mixed in the run-up to US PCE and unreactive to the hotter-than-expected EZ Flash CPI figures; XAU trades in a USD 2,337-2,347.81/oz range.
• Base metals are mixed and consolidating after yesterday's slump despite the lack of a clear driver, but amid cautiousness as yields remain elevated and US PCE nears.
• OPEC+ could extend production cuts at the June meeting, via CNBC citing sources; "demand concerns persisted until only recently". Delegate cited notes that the US SPR release is unlikely to have an impact beyond price relief during the summer period. Three delegates cited said the 2.2mln BPD supply reduction will likely be extended, which is regarded as anticipated by the market; one noted there will probably be market tightness in H2 but added that demand concerns persisted until only recently. Gaza Strip situation is adding a little pressure to prices, but the market has absorbed the majority of this.
• Russia's Lukoil reportedly plans to restart CDU-6 and catalytic cracker units at Norsi oil refinery (340k BPD) in June, according to Reuters sources
• Chevron (CVX) Australia has confirmed full LNG production has resumed at Gorgon gas facility, according to a spokesperson.
• Ukrainian Navy hit an oil depot in the Krasnodar region of Russia with Neptune missiles.
• Oman Crude OSP calculated at USD 83.89/bbl for July (prev. USD 89.3/bbl M/M, - USD 5.41)
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CRYPTO

• Bitcoin is incrementally softer and holds just shy of USD 68k, whilst Ethereum holds around USD 3.7k, with focus on US PCE later today.

NOTABLE DATA RECAP

• EU HICP Flash YY (May) 2.6% vs. Exp. 2.5% (Prev. 2.4%); HICP-X F,E,A&T Flash YY (May) 2.9% vs. Exp. 2.7% (Prev. 2.7%); HICP-X F&E Flash YY (May) 2.9% vs. Exp. 2.8% (Prev. 2.8%); HICP-X F, E, A, T Flash MM (May) 0.40% (Prev. 0.70%)
• French CPI Prelim YY NSA (May) 2.2% vs. Exp. 2.4% (Prev. 2.2%); CPI (EU Norm) Prelim YY (May) 2.7% vs. Exp. 2.5% (Prev. 2.4%)
• Italian CPI (EU Norm) Prelim MM (May) 0.2% vs. Exp. 0.2% (Prev. 0.5%); Consumer Price Prelim YY (May) 0.8% vs. Exp. 0.8% (Prev. 0.8%); CPI (EU Norm) Prelim YY (May) 0.8% vs. Exp. 0.7% (Prev. 0.9%); Consumer Price Prelim MM (May) 0.2% (Prev. 0.1%)
• German Retail Sales MM Real (Apr) -1.2% vs. Exp. -0.1% (Prev. 1.8%); YY Real (Apr) -0.6% (Prev. 0.3%)
• UK Mortgage Approvals (Apr) 61.14k vs. Exp. 61.5k (Prev. 61.325k, Rev. 61.263k); Mortgage Lending (Apr) 2.412B GB vs. Exp. 0.45B GB (Prev. 0.26B GB, Rev. 0.462B GB); M4 Money Supply (Apr) 0.1% (Prev. 0.7%); BOE Consumer Credit (Apr) 0.73B GB vs. Exp. 1.5B GB (Prev. 1.577B GB, Rev. 1.422B GB)
• German Import Prices MM (Apr) 0.7% vs. Exp. 0.5% (Prev. 0.4%); YY (Apr) -1.7% vs. Exp. -1.8% (Prev. -3.6%)
• UK Nationwide House Price MM (May) 0.4% vs. Exp. 0.1% (Prev. -0.4%); YY (May) 1.3% vs. Exp. 0.8% (Prev. 0.6%)
• Swiss Retail Sales YY (Apr) 2.7% (Prev. -0.1%, Rev. -0.2%)

NOTABLE EUROPEAN HEADLINES

• ECB's Panetta says policy will remain restrictive even after several rate cuts; Monetary easing will be expected over the coming months if our forecasts are confirmed by data. Must avoid monetary policy becoming too restrictive, which could push inflation below the ECB's symmetrical target. Euro zone inflation is expected to continue to ease in the next few quarters. Salary rises can also be expected to slow as workers recover purchasing power, firms can be expected to absorb recent salary hikes without raising prices. ECB will take account Federal Reserve's moves, but not be bound by them. ECB's balance sheet reduction mustn't interfere with the monetary policy stance or create a lack of liquidity in the financial system. Larger Italian banks lag behind European peers in IT investments, must step up spending. Says the latest EZ inflation rate of 2.6% is in line with forecasts and as such is "neither good or bad"

NOTABLE US HEADLINES

• Fed's Logan (non-voter) said there are good reasons to think we are still on the path to 2% inflation but it is bumpy, while she added it is too soon to think about rate cuts and policy may not be as restrictive as we might think. Furthermore, she said there are good reasons to believe the neutral rate is higher now than before the pandemic and if the neutral rate is higher than before, it suggests rates won't go back down to pre-pandemic levels.
• Former US President Trump was found guilty by a jury verdict on all 34 counts he faced at the hush money trial and will be sentenced on July 11th. Following the verdict, Trump said this was a disgrace and the real verdict will be on November 5th (US election), while he added that he is innocent and this was a rigged decision. There were also comments from House Speaker Johnson who said this was a shameful day in American history and that "President Trump will rightfully appeal this absurd verdict—and he will win".
• Tesla (TSLA) is recalling 125,227 US vehicles as a seat belt warning system fails to alert occupants of an unbelted seat belt.
• Bill Ackman reportedly eyes an IPO of Pershing Square, according to WSJ; funding round expected to value the first around USD 10.5bln

GEOPOLITICS

MIDDLE EAST

• Senior Israeli Security Official says there will be no truce or any halt in fighting in Gaza which is not part-and-parcel of a hostage release deal
• US military said American and British forces conducted strikes against 13 Houthi targets in Yemen, while Houthi Al Masirah TV said one person was killed in the US-British strikes on Yemen's Hodeidah.

OTHER

• Deputy Chairman of Russia's Security Council says the use of long-range weapons against Russia could become a reason to go to war with NATO.
• "Ukrainian media: The first attacks on the territory of the Russian Federation using US weapons may begin within hours or days", according to Sky News Arabia
• China has told other governments it will not join the Swiss peace conference on Ukraine and said the peace conference does not meet its conditions since Russia is not attending, according to Reuters sources.
• North Korean leader Kim guided a demonstration of large-scale multiple rocket launchers, according to KCNA.

APAC TRADE

• APAC stocks traded mostly in the green and shrugged off the weak lead from the US but with gains capped amid a deluge of data releases at month-end including disappointing official Chinese PMIs.
• ASX 200 traded higher with outperformance seen in gold mining stocks and the defensive sectors.
• Nikkei 225 advanced with the index ultimately unfazed by the mixed data mixed data from Japan including mostly in-line Tokyo CPI, a surprise contraction in Industrial Production and better-than-expected Retail Sales.
• Hang Seng and Shanghai Comp conformed to the positive tone albeit with gains capped in the mainland after disappointing Chinese PMI data in which Manufacturing PMI unexpectedly slipped into contraction territory.

NOTABLE ASIA-PAC HEADLINES

• Japan's MOF says it spent JPY 9.788tln on currency intervention between 26th April and 29th May
• Chinese state media said China has richer and more powerful countermeasures if the US continues to violate and endanger China's sovereignty and security interests on core issues, or squeeze the development space of Chinese firms and individuals. Furthermore, it warned that in the future, whether the US will suffer greater backlash and losses depends on its sincerity and actual actions.
• Japan is to shift USD 640bln in public pension money into active investment, according to Nikkei.
• US Defence Secretary Austin says the meeting with his Chinese counterpart went well, via CNN/Pentagon Spokesperson.
• Tencent Holdings (0700 HK) has reportedly been asked by Chinese regulators to recude the mobile payment market shae of WeChat, via Nikkei citing sources; aimed at the market share of in-person payments rather than online shopping.
• Japan Business Lobby Keidanren Deputy Head Takashima says stable currency is important no matter what levels they may be at.
• Japan Business Lobby Keidanren Deputy Head Yoshida says economic strength and interest-rate differentials are among factors behind the weak Yen, so much boost investment to address this issue.
• Japan Business Lobby Keidanren Deputy Head Nagasawa says current DX levels at the mid-150 Yen range are excessively weak.

DATA RECAP

• Chinese NBS Manufacturing PMI (May) 49.5 vs. Exp. 50.4 (Prev. 50.4); Non-Manufacturing PMI (May) 51.1 vs. Exp. 51.5 (Prev. 51.2)
• Chinese Composite PMI (May) 51.0 (Prev. 51.7)
• Japanese Industrial Production MM (Apr P) -0.1% vs. Exp. 0.9% (Prev. 4.4%)
• Japanese Retail Sales YY (Apr) 2.4% vs. Exp. 1.9% (Prev. 1.2%, Rev. 1.1%)
• Tokyo CPI YY (May) 2.2% vs. Exp. 2.1% (Prev. 1.8%)
• Tokyo CPI Ex. Fresh Food YY (May) 1.9% vs. Exp. 1.9% (Prev. 1.6%)
• Tokyo CPI Ex. Fresh Food & Energy YY (May) 1.7% vs. Exp. 1.7% (Prev. 1.8%)