Stocks slip with commodities clipped after Chinese trade; Fed/debt updates ahead

NS

Tuesday, May 9, 2023 – 10:36 AM

European bourses and US futures are weaker as the region struggles to gain a foothold following mixed APAC trade, and ahead of Fed/debt limit events

USD gains against its peers except JPY, as yields fall from their highest levels. AUD falls after Chinese imports decline unexpectedly

Yellen says the Treasury may run out of money as early as June 1, with the Bipartisan Centre expecting the x date between early-June and August

Bunds are gaining strength on the back of strong supply, while USTs are near their highest levels.

Commodities are generally under pressure as the USD rises and after Chinese trade data

Highlights for the future include ECB Lane & Schnabel and Fed Williams & Jefferson. Biden also met with Congressional Leaders. US supply, Airbnb & Occidental Petroleum earnings.

Click to view the full-size image

Premarket movers

News report

Why not try Newsquawk?

Squawk Box

Free for 7 Days?

EUROPEAN TRADE

EQUITIES

The European stock markets are softening across the board.

Euro Stoxx 50

After a mixed APAC transfer, the region is struggling to establish itself in a relatively quiet market.

The sectors are also softer.

Real Estate

Individual movers are influenced by Fresenius's earnings update, Daimler Trucks's and more.

ES

The region is again without a clear direction, ahead of Fed talks and Biden’s meeting on the debt ceiling;

NQ

You can also find out more about the following:

RTY

Fitted roughly

Click Here to Learn More

Here is a link to the article

for more detail.

FX

The buck is gaining ground against most major currencies, except the yen. Treasury yields have eased off their Monday peaks. BoJ Governor Ueda also notes that Japanese inflation expectations are higher.

DXY

Forms a stronger base around 101.500 USD/

JPY

The NY cut is rolled off when the 1bln option expires.

Aussie

The AUD/USD is looking for support at 0.6750, after Monday's high of just over 0.6800.

Euro

Loses of 1.1000+ status against Dollar and Fib Support

Pound

Cable maintains its bid largely above 1.2600.

The PBoC has set the mid-point for USD/CNY at 6.9255 vs. 6.9251 (prev. 6.9158)

According to Turkish President Erdogan, Turkey has raised the salaries of certain civil servants by up to 45%.

Click Here to Learn More

Here is a link to the article

for more detail.

Click Here to Learn More

Here is a link to the article

For today's NY Cut, here are the important FX expiries.

Fixed Income

Bonds are trading at a choppy pace, but

Bundles

Piggy-back bounce is a great way to get your kids moving.

Bobls

After super-strong 5-year German auction, both are holding near intraday peaks within the ranges of 118.34.06 and 135.90.33.

Gilts

lag in catch-up trade after long UK weekend between 100.85-43 parameters.

US Treasuries

Regroup after Monday's crash amidst a drop in NFIB optimism for business and waiting on Fed comments ahead of the latest debt ceiling discussions, T-note is near 115-15+ high peak vs. 115-06+ low trough.

Click Here to Learn More

Here is a link to the article

for more detail.

COMMODITIES

WTI

You can also find out more about the following:

Brent

After recent positive sessions, and the Alberta-driven upswing yesterday, benchmarks are currently around. USD 0.80/bbl lower.

After Chinese trade data showed a mixed bag of results, including an unexpected drop in imports, the news has focused on Aramco and UAE comments. This could be a sign that demand is weakening and Aramco faces a challenge.

Saudi Aramco

Prices of crude oil fell in Q1. Major investments are advancing strategic downstream expansion on key global markets. The global downstream strategy is growing. Supply reliability is 99.7%.

Oil and gas are essential components in the energy mix. This will continue for a long time. The capacity expansion will continue and the long-term outlook is unchanged.

Bakr of Energy Intel cites Al Rajhi Bank as saying that the Saudi Government's budgeted revenue for 2023 is likely to be based on Brent at USD81/bbl.

Spot

gold

The price remains anchored around the USD 2025/oz level and is surrounded by resistance/support lines in close proximity.

Base

Metals are generally weaker, given the Chinese trade data.

Click Here to Learn More

Here is a link to the article

for more detail.

NOTEABLE HEADLINES

Bloomberg reports that ECB Kazaks believes rate hikes may not end in July. Bets on ECB reductions for Spring 2024 are way too early. The greater danger is to do too little. In the Fed's scenario, it is not impossible for the ECB hike/pause.

Kazimir, ECB's Kazimir, says that based on the current data will have to continue raising rates longer than expected

The September projections will allow you to see the impact of your measures, and if they are working.

Norges Bank Governor Bache said that FX interventions for NOK influence are expensive and inefficient.

German Chancellor Schloz said the EU must reduce risk in China relationships without cutting ties, saying that this is not decoupling but smart derisking is the best way to move forward with China.

UK Barclaycard's April consumer spending increased 4.3% YoY, but was affected by the inflation squeeze on incomes as well as higher food prices.

According to Reuters.

DATA RECAP

UK BRC Retail Sales Like-For-Like YY (Apr) 5.2% (Prev. 4.9%); Total Sales YY (Apr) 5.1% (Prev. 5.1%)

French Trade Balance (Mar) EUR, SA -8.023B vs. -9.3B (Prev. -9.904B, Rev. -9.302B)

NOTEABLE US HEADLINES

Fed Semi-Annual Financial Stability Report states that recent turmoil within the banking industry is stabilised, but may weigh on future credit conditions. The banking sector as a whole remains resilient and has substantial capacity to absorb losses.

The report also noted that the bank regulators have taken steps to limit further stress. While funding strains are noticeable for some banks, overall funding risks in the banking system are low.

US Treasury Secretary Yellen reiterated that Treasury would run out of cash by June 1st, and will need to take extraordinary measures to pay off debts. She also warned President Biden to decide what to do with the resources if Congress does not raise the debt ceiling.

According to a CNBC Interview, Yellen also noted that the Republicans' position on the debt ceiling is very different from the President's.

California's Financial Regulator released its report regarding the failure of Silicon Valley Bank (SIVB), and stated that they failed to address management issues quickly enough. They also increased their scrutiny on banks with assets exceeding USD 50bln.

According to Reuters.

Bipartisan policy center estimates that the default date for US debt limits will be somewhere between early June to early August, depending upon revenue strength.

Biden will be meeting with Congressional leaders at 21:00BST/16:00ET

Gourinchas, IMF's Chief Economist, says that recent turmoil in the banking sector has us a little concerned.

Click Here to Learn More

Here is a link to the article

Early Morning Note for US

GEOPOLITICS

Prigozhin, the head of Russian Wagner Group, said they had not received the ammunition promised after claiming that shipments had been sent in advance.

According to Reuters.

The US will provide Ukraine with USD 1.2bln in additional long-term military assistance to strengthen its air defences.

According to US officials cited in AP.

Cleverly, the UK's Foreign Secretary, is in the US to meet with US Secretary Blinken and discuss Ukraine.

Sky News reports.

US State Department reported that the US ambassador to China told Chinese foreign Minister Qin there had been no changes to US one-China Policy.

Blinken, the US Secretary of state, would like to travel to China when conditions permit.

CRYPTO

Bitcoin

The price is basically unchanged and just below the USD 27.500 mark.

APAC TRADE

APAC stocks

Mixed results were reported following Wall St's indecisive performance. The Fed's SLOOS showed that banks tightened their credit terms, and the demand for loans decreased. In the region, the focus shifted from Wall St to earnings and data releases such as mixed Chinese trade statistics.

ASX 200

The financial sector was choppy, with pressures seen in nearly all sectors. Australia's biggest lender CBA reported a slight rise in Q3 cash profits. However, NII fell compared to H1's quarterly average.

Nikkei 225

The index remained unfazed as participants absorbed earnings and the weak data on household spending.

Hang Seng

You can also find out more about the following:

Shanghai Comp.

were varied after the latest Chinese trade figures which showed stronger-than-expected export growth but imports disappointed with a surprise contraction.

Notable Asia-Pacific Headlines

The EU Ambassador in China believes that the comments made by EU's Borrell, suggesting EU navies would patrol the Taiwan Strait have been grossly overstated.

While he

Also commented on China's antispy law and crackdown on consultants

He said that the news is bad

Several experts expressed concerns about the compatibility between this policy and the opening of China's economic system.

Chinese embassy stated that China strongly condemned and opposed Canada's decision

The Canadian government has protested the decision to expel the Chinese ambassador. China claimed that Canada had'sabotaged relations' and promised'resolute measures'. China then announced that it would expel a Canadian diplomatic representative as a response.

BoJ Governor Ueda stated that their scheduled review will not have any predetermined idea on specific monetary policies moves.

Ueda also commented that they will take the necessary policy actions at each meeting, while keeping an eye on price and financial developments. Ueda commented on this as well.

If the price target can be met sustainably, the BoJ will terminate YCC, and then shrink its entire balance sheet. He also added that they see some positive signs, including the inflation expectations, which are at high levels.

Australian Budget

The government forecasts a budget surplus in 2022/23 of AUD 4.2bln. Budget deficits for 2023/24 are AUD 13.9bln (0.5% GDP), and 2024/25 budgets of AUD 35.1bln (1.3% GDP). Click

Here is a link to the article

for more detail.

DATA RECAP

Chinese Trade Balance (USD), April 90.21B, vs. 71.6B (Prev. 88.19B)

Imports (USD) (Apr.) YY (USD), -7.9% in comparison to Exp. 0.0% (Prev. -1.4%)

Chinese Trade Balance (CNY), April 618.4B, compared to Exp. 632.7B (Prev. 601.0B)

Imports (CNY) (Apr.) YY (CNY), -0.8% in comparison to Exp. 4.2% (Prev. 6.1%)

-2.4%); YoY (Mar): -1.9% in comparison to Exp. 0.4% (Prev. 1.6%)

Australian Retail Trade (Q1): -0.6% in comparison to the previous quarter -0.6% (Prev. -0.2%, Rev. -0.3%)

0