US stocks continued to decline despite softer yields post-GDP revisions - Newsquawk Asia-Pac Market Open

US stocks remained pressured and the major indices finished in the red despite the reprieve in treasuries after the second look at US GDP data in Q1 in which the headline was revised lower, as expected, and many of the inflation gauges cooled, while consumer spending also saw a downward revision. The data provided some slight relief for stocks although this was short-lived and the attention now turns to the Fed's preferred inflation gauge due on Friday.
USD weakened with the DXY back beneath the 105.00 level as yields softened after the second estimate of GDP which saw revisions lower to the GDP estimate, in line with forecasts, while Core PCE eased beneath the consensus to 3.6% from 3.7%.
Looking ahead, highlights include South Korean Industrial Production, Japanese Unemployment Rate, Industrial Production & Retail Sales, Australian Private Sector Credit, Chinese Official PMIs, Supply from Australia.

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LOOKING AHEAD

Highlights include South Korean Industrial Production, Japanese Unemployment Rate, Industrial Production & Retail Sales, Australian Private Sector Credit, Chinese Official PMIs, Supply from Australia.
Click here for the Newsquawk Week Ahead.

US TRADE

US stocks remained pressured and the major indices finished in the red despite the reprieve in treasuries after the second look at US GDP data in Q1 in which the headline was revised lower, as expected, and many of the inflation gauges cooled, while consumer spending also saw a downward revision. The data provided some slight relief for stocks although this was short-lived and the attention now turns to the Fed's preferred inflation gauge due on Friday.
SPX -0.60% at 5,235, NDX -1.06% at 18,539, DJI -0.86% at 38,111, RUT +1.00% at 2,056.
Click here for a detailed summary.

NOTABLE HEADLINES

Fed's Williams (voter) said there has been a dearth of progress on lowering inflation and inflation is still too high but should moderate in H2, while he added that policy is well positioned to get inflation back to the target. Williams said during the Q&A that he does not know when the Fed will change monetary policy and that at some point, interest rates will need to come down. Furthermore, he does not feel an urgency to act on monetary policy but noted that the Fed does not need to be at exactly 2% inflation before it cuts rates.
Fed's Bostic (voter) said the outlook is that inflation will come down very slowly, according to Fox.
Fed's Goolsbee (non-voter) said the issue now is whether the US will face a traditional trade-off between inflation and unemployment, while he added it is "extremely important" that the Fed hits the 2% inflation target since it has centred expectations around that number.
Cleveland Fed model suggested inflation may need years to return to 2%.

DATA RECAP

US GDP 2nd Estimate (Q1) 1.3% vs. Exp. 1.3% (Prev. 1.6%)
US Core PCE Prices Prelim (Q1) 3.6% vs. Exp. 3.7% (Prev. 3.7%)
US Pending Sales Change MM (Apr) -7.7% vs. Exp. -0.6% (Prev. 3.4%, Rev. 3.6%)
US Initial Jobless Claims 219.0k vs. Exp. 218.0k (Prev. 215.0k, Rev. 216k)
US Continued Jobless Claims 1.791M vs. Exp. 1.797M (Prev. 1.794M, Rev. 1.787M)

FX

USD weakened with the DXY back beneath the 105.00 level as yields softened after the second estimate of GDP which saw revisions lower to the GDP estimate, in line with forecasts, while Core PCE eased beneath the consensus to 3.6% from 3.7%.
EUR was ultimately firmer and EUR/USD recouped its initial losses after rebounding off its 200DMA.
GBP marginally strengthened to retain the 1.2700 handle alongside mild gains across cyclical peers.
JPY outperformed with USD/JPY back beneath the 157.00 handle owing to the softer US yields.
SARB Repo Rate was kept unchanged at 8.25% (exp. 8.25%). SARB said there is still considerable uncertainty on the longer-run inflation view globally and it now sees CPI stabilising at the 4.5% objective in Q2-2025 which is an improvement vs March's meeting.

FIXED INCOME

Treasuries saw a relief rally with support from the revision lower to the Q1 Core PCE estimate ahead of the April PCE on Friday.

COMMODITIES

Oil prices sold off despite the larger-than-expected draw in headline DoE crude inventories and reports that OPEC+ members are discussing extending voluntary output cuts through to year-end, while gasoline led the declines across the energy complex with prices pressured in the wake of bearish gasoline inventory data.
US EIA Weekly Crude Stocks -4.16M vs. Exp. -1.95M (Prev. 1.83M)
OPEC+ members that are making 2.2mln BPD of voluntary oil output cuts are discussing extending them until the end of the year, according to three OPEC+ sources cited by Reuters. The report added that two OPEC+ sources said another option was to extend the voluntary cuts only for the third quarter of the year, while two other sources said they would not rule out a deeper cut to support the market or releasing oil back into the market if OPEC+ decides demand was rising.
OPEC+ is discussing extending some oil output cuts expiring in 2024 into 2025, according to sources cited by Reuters. OPEC+ extension of some cuts into 2025 will likely come on top of voluntary cuts extension into Q3 to Q4 2024, according to three sources. Furthermore, OPEC+ will make cuts into 2025 conditional on agreeing individual member output capacity figures later in 2024, according to two sources.

GEOPOLITICAL

MIDDLE EAST

Senior Hamas official Izzat a-Rishq said they refuse to return to negotiations before the fighting stops and that mediators received a new Israeli offer, but Hamas informed them that it refused to accept it.
France said Israel is yet to respond to a proposal aimed at bringing about a truce with Lebanon, according to Times of Israel.
Head of Iran's IRCG's aerospace force said Israel sent messages to Tehran via Egypt that it will compromise in Gaza to avoid Iran's response to the attack on its embassy in Syria, according to Tasnim.
Yemeni Houthis leader said military operations will continue in support of Palestinians and will escalate in quality and quantity.

OTHER

US President Biden secretly gave permission to strike inside Russia with US weapons, while a person familiar with the discussions between Washington and Kyiv said a final decision to ease that ban was “very close now”, hinting that the Biden administration will give the green light soon, according to Politico. It was separately reported that President Biden partially lifted the ban on Ukraine using US arms in strikes on Russian territory to defend Kharkiv, according to AP citing US officials.
Russia's Foreign Ministry spokeswoman said US behaviour to act against Russia's "shadow fleet" is artificial meddling into global energy markets and is categorically unacceptable.
US official said the US is getting close to completing negotiations on a bilateral security agreement with Ukraine.
NATO Secretary General Stoltenberg will ask allies to pledge EUR 40bln/year to fund military aid for Ukraine, according to Reuters citing NATO sources.

ASIA-PAC