US EARLY MORNING: US index futures are up; debt ceiling talks postponed until next week; Fedspeak, Michigan sentiment data ahead

OVERNIGHT: US were mixed on Thursday, with outperformance in Nasdaq led by Communication names, with Google (GOOGL) continuing its recent rally. But gains were not broad, and the Russell, Dow, and S&P closed lower, while sectors were predominantly red (only upside in Communication, Discretionary, and Staples). The Regional banking ETF finished lower on fresh deposit concerns. Our US wrap is here. APAC stocks were mostly lower; Aussie shares were constrained by weakness in the energy and mining sectors after the recent pressure in underlying commodity prices. Japanese shares outperformed, driven by earnings results. China shares were indecisive as talks between US National Security Adviser Sullivan and China's top diplomat Wang Yi provided some encouragement towards a potential Biden-Xi call, though participants also digested weaker-than-expected Chinese loans and financing data. APAC wrap here. European indices are starting the last trading day of the week higher, although the broad Stoxx 600 index of shares as well as the narrow Euro Stoxx 50 index of blue chips are both currently on a course to post small weekly losses. GDP data out this morning from the UK disappointed expectations (see our review, below) although IP was more constructive. Final French HICP data for April was unrevised. Our European cash open note is here.

US PRE-MARKETS: US equity futures are trading higher, and the ES is on course to post a small weekly gain after data this week showed headline CPI continues to cool and traders bet that the Fed will pivot towards rate cuts this year, but the price action ultimately is a continuation of the horizontal range we have seen since April, with investors still anxious over the outcome of fiscal talks in Washington, the health of regional banks, and while Fed officials have this week been impressing that they are still prepare to raise rates (see below). Treasury yields are drifting slightly higher as we eye the weekend, but that follows a decent rally seen over the last couple of sessions. The Dollar Index is a little better than flat. Crude futures are continuing lower, with demand concerns (China, US banks, US debt ceiling) and supply (possible return of Kurdish flows) factors weighing. Today’s focus was going to be on further debt ceiling talks, but a meeting between US President Biden and Congressional leaders has been pushed into next week (see below). Instead, the focus will be on Fedspeak (Jefferson, Bullard, Daly) and data (prelim University of Michigan sentiment), while any commentary on the debt ceiling (Treasury Secretary Yellen has been reiterating her warnings today) and regional banks will continue to influence price action.

DEBT CEILING TALKS DELAYED: Fiscal talks between US President Biden and Congressional leaders that was scheduled for Friday has been postponed, the White House said, though added that staff will continue working and all the principals agreed to meet early next week. House Speaker McCarthy said postponing the debt ceiling meeting did not mean that debt talks have fallen apart, adding that leaders decided it was in the best interest to let staff meet again; McCarthy does not think there was enough progress for the leaders to get back together, but expects them to meet next week. Separately, Treasury Secretary Yellen will meet with top Wall Street bankers in Washington next week as the Biden administration and Republican leaders scramble to reach a deal to avoid a debt default, Politico reports; Yellen will speak with board members of the Bank Policy Institute, a lobbying group whose board is led by JPMorgan Chase CEO Jamie Dimon and includes Citigroup CEO Jane Fraser, to discuss the impasse over raising the government’s borrowing limit.

HAWKISH FEDSPEAK: Fed Governor Bowman (voter) gave hawkish remarks and said additional rate hikes may be likely if inflation stays high and the labour market remains tight; her comments cast some doubt on the notion that the Fed is ‘on pause’, and follows similar remarks from other influential Fed officials, like NY Fed President Williams earlier in the week, as well as others.











12 May 2023 - 09:00- Research Sheet- Source: Newswires

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