US EARLY MORNING: US equity futures are rallying; CPI data on Friday is the highlight for the week

MARKETS:

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  MARKETS NOW: NQ +1.4%, RTY +1.2%, ES +1.1%, YM +0.9%, paring back losses after Friday’s NFP data stoked the dollar and yields higher, pressuring equities. US Treasury yields around neutral, with yields rising to flat levels amid a constructive risk tone as European traders entered for the day. Europe has started the week on the front foot, although UK PM Johnson faces a confidence vote later today (18:00BST-20:00BST), leaving after hours event risk on the table for European traders. APAC shares were mixed, but luxury names have been supported in European trade as Beijing eases COVID requirements for restaurants and schools.


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  Day Ahead: Employment trends data for May at 15:00BST/10:00EDT is the only notable release on a very quiet docket (Day Ahead calendar is here). The Fed is in its blackout ahead of its June 15th meeting, where a 50bps rate hike is expected. This week, US CPI, China CPI, and central bank meetings at the ECB and RBA are the highlights; our week ahead preview can be accessed here.

US ECONOMY:

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  Fed - Fed's Mester Friday told CNBC that she did not want to declare victory on inflation before she saw compelling evidence that the Fed's actions were beginning to make progress in bringing down demand in better balance with aggregate supply. She added that if she did not see this evidence that inflation was cooling, she could easily endorse a 50bps rate hike at the September FOMC meeting. Separately, Fed Chair Powell is to deliver his semi-annual Monetary Policy Report at the Senate on June 22nd and it was also reported that the Senate Banking Committee will vote on Fed nominee Barr on June 8th.


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  Inflation – The US Treasury secretary on Saturday issued a statement which refuted suggestions that Treasury Secretary Yellen urged President Biden to scale back the size of his USD 1.9trln COVID stimulus package last year over fears it could stoke inflation. The statement was a rebuttal of claims made in an upcoming book by Washington journalist Owen Ullmann, who claimed that “privately, Yellen agreed with [Larry] Summers that too much government money was flowing into the economy too quickly.”


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  Inflation – US Commerce Secretary Raimondo said she does not believe the American rescue plan package caused high inflation and said the economic recovery is robust despite inflation, while she said President Biden asked his team to look at China tariff and she agrees that the semiconductor shortage will likely persist into 2024, according to a CNN interview.


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  Defense Budget – House and Senate to begin work this month on President Biden’s USD 813bln national defense budget, and Politico reports that the bid for a larger Pentagon budget is gaining steam, as top lawmakers and the defense industry push to enlarge President Joe Biden’s already historically high $813 billion military spending proposal. Top Republicans say inflation will devour Biden’s proposed 4% defense budget hike, and envision an even larger cash infusion.

CHINA:

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  Covid - Beijing to ease Covid-19 requirements for restaurants and schools as local infections wane, SCMP reported. Limits will remain in areas that have had cases in the last week.

GEOPOLITICS:

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  Russia - A close ally of Russia President Putin warned that Moscow could target western cities if Ukraine uses rocket systems supplied by the US to carry out strikes on Russian territory, The Times reported.


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  US Tour - US President Biden’s visits to Israel and Saudi Arabia were postponed until July, according to Reuters.


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  UK - Confidence vote in UK PM Johnson to occur between 18:00-20:00BST today, results to be immediately counted, announcement time TBC. Johnson needs a majority of Conservative Party members (180 MPs) to vote in his favour in order to remain as MP; if he secures a favourable majority, then he is exempt from such proceedings for a one-year period.

TECH:

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  Apple Inc. (AAPL) - Apple Worldwide Developers Conference 2022 kicks off on Monday June 6th, running through June 10th. Ahead of the event, FT reports that the iPhone maker is looking to its first headset for the next product breakthrough, adding that AAPL was battling technical challenges ahead of expected launch of Apple's augmented reality headset device is shaping up to be its most significant new product since the iPhone, and this year's WWDC could be its last big event before the headset is unveiled in autumn.


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  Alphabet Inc. (GOOG) - An Australian court ordered Google to pay a former lawmaker AUD 715k over refusal to remove a YouTuber's "relentless, racist, vilificatory, abusive and defamatory" videos drove him out of politics, Reuters reported. The Court found Google intentionally made money by hosting videos on YouTube.


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  DiDi Global Inc. (DIDI) - China is set to conclude its cybersecurity probe into DiDi and lift its Ban on new users, WSJ reports, adding that authorities were also preparing to allow Didi's app back on domestic Chinese app stores, perhaps as soon as this week.

CONSUMER STAPLES:

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  Walmart Inc. (WMT) - Walmart said it needed another two quarters to work through its inventory backlog that prompted markdowns and contributed to last month’s steep stock decline, Bloomberg reports. Separately, Walmart executives said some suppliers have been responding to its efforts to lower prices despite their own struggles with high inflation, material and labour costs, Reuters reported.


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  Kohl's Corporation (KSS) - CNBC said that the drawn-out bidding process for Kohl’s could take several more weeks, if not longer; talks have dragged on over difficulties in securing financing in uncertain market conditions, sources told CNBC.


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  Kroger Co. (KR), McDonald's Corporation (MCD) - Activist investor Carl Icahn is dropping his proxy fight over the treatment of pigs by Kroger, WSJ reported; Icahn said in a letter that he was likely to lose the campaign, as he did with McDonald's.


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  Altria Group, Inc. (MO), AB InBev (BUD) - WSJ commentary says pressure is building on Altria to improve its smoke-free brands; if Philip Morris' USD 16bln offer for Swedish Match is accepted, US cigarette makers will have a new competitor. WSJ said MO could sell its stake in AB Inbev and use the money to purchase the rest of Juul.

CONSUMER CYCLICAL:

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  Just Eat Takeaway.com NV (JTKWY) - The founder of Grubhub teamed up with US private equity giant General Atlantic in an attempt to buy back the company he sold to Just Eat Takeaway for USD 7.3bln last year, The Times reported. The group ultimately decided against making a bid, but Just Eat shares have plunged since then, raising the prospect of a return, The Times added.

INDUSTRIALS:

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  CRH (CRH) - Acquires Barrette Outdoor Living for an enterprise value of USD 1.9bln.


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  Solar - President Biden to use executive action to bridge the solar panel supply gap, will invoke the Defense Production Act to spur US manufacturing of solar panels and clean energy technologies for the future. Biden will allow solar panels to be imported from Thailand, Malaysia, Cambodia and Vietnam without the risk of tariffs for 24 months, Reuters reports.


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  Tesla, Inc. (TSLA) - CEO Musk, when asked about how Tesla's staffing would rise over the next year, said total headcount will increase, but salaried workers will be "fairly flat." His remarks follow news last week that Tesla planned to make job cuts amid concerns about the economy.


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  Mercedes Benz AG (MBG), Daimler Truck Holding AG (DTRUY), BMW (BMWYY) - Automakers are starting to see the global chip shortage ease, Bloomberg reported. Mercedes Benz, Daimler Trucks, BMW are now getting enough of the high-tech components to produce at full capacity after experiencing crippling outages for months, the report said.


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  Mercedes-Benz Group (MBG) - Mercedes-Benz to recall nearly 1mln vehicles amid brake issues, CityAM reported.


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  Rivian Automotive, Inc. (RIVN) - Rivian is struggling to master the nuts and bolts of production, WSJ said.


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  Stellantis (STLA) - US unit pleaded guilty with regards to the emissions probe, to pay USD 300mln in penalties.


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  Boeing Company (BA) - Production and delivery problems are hindering Boeing's ability to satisfy airlines' demand for new aircraft, WSJ reports.


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  Eaton Corporation plc (ETN) - Positive mention in Barron's; said the stock could jump 30%.


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  Melrose Industries (MLSYY) - To sell its Ergotron unit for USD 650mln to funds managed by Sterling Group, Reuters reports; will complete by Q3.

ENERGY:

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  ENI SPA (E), Repsol SA (REPYY) - Eni and Repsol could begin shipping Venezuelan crude to Europe next month to make up for Russian crude, according to Reuters, resuming the oil-for-debt swaps halted two years ago after Washington stepped up sanctions on Venezuela. Volumes not expected to be large, any impact on global oil prices will be modest.


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  Russia Crude, Chevron Corporation (CVX) - CEO sees Russian crude output declining. Said Russia still had buyers for its oil, but would face difficulty overcoming loss of western technology and capital, according to the WSJ. Separately, French Finance Minister said France was in talks with the UAE regarding the supply of oil and diesel, as it seeks alternatives to Russian energy.


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  Saudi OSPs - Saudi Aramco increased its prices to Asia for July with the light crude premium raised to USD 6.50/bbl from USD 4.40/bbl vs Oman/Dubai, while it raised the premium to North West Europe to USD 4.30/bbl from USD 2.10/bbl vs ICE Brent but maintained premiums to the US unchanged from the prior month.


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  Iran - Oil trader Vitol claims that the US might allow more sanctioned Iranian oil onto global markets, even without a revival of the 2015 nuclear accord, Bloomberg reported.


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  Libya - Libya's El Sharara oil field resumed production at around 180k bpd after having been shut by protests for more than six weeks, according to Argus.


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  Oman - Announced new oil discoveries that will increase output by 50k-100k bpd in the next 2-3 years, while it noted that its crude reserves stand at 5.2bln bbls and gas reserves are at around 24tln cubic feet, according to the state news agency citing the energy and minerals minister.

HEALTH CARE:

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  Abbott Laboratories (ABT) - The US baby formula shortage is expected to persist in the weeks ahead, WSJ suggested, stating that Abbott plant’s reopening was unlikely to replenish shelves until July, adding that the Biden administration expected more shipments from abroad in June.


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  GSK (GSK) - FDA approves Priorix for the prevention of measles, mumps and rubella in individuals 12 months of age and older.


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  AstraZeneca (AZN) - Enhertu reduced the risk of disease progression or death by 50% vs chemotherapy in patients with HER2-low metastatic breast cancer with HR-positive and HR-negative disease.

FINANCIALS:

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  Crypto - A bipartisan bill may soon be introduced in the Senate that would dramatically overhaul regulation of the crypto industry, Barron's reports. Bill would split oversight of the industry between CFTC and SEC, would broaden the definition of tokens, would allow courts to make exceptions to the presumption that a token counts as a commodity.

06 Jun 2022 - 09:29- Research Sheet- Source: Newsquawk