US stocks extended on post-NFP gains, while oil prices were choppy amid geopolitical uncertainty - Newsquawk Asia-Pac Market Open

• US stocks extended on gains amid continued momentum from last week's soft NFP data which increased the chances of the Fed being able to cut this year, while rate-sensitive small-caps outperformed in an indication of the appetite for duration which will be tested at this week's refunding auctions.
• USD was relatively flat on Monday after recovering from a low of 104.86 in the US morning amid mixed Fed speak including from Barkin who stressed the job is not done yet and Williams acknowledged job growth is moderating, while the attention was on the geopolitical front after Hamas announced they accepted the latest ceasefire proposal although Israel sees the deal as unacceptable.
• Looking ahead, highlights include Japanese Services PMI, Philippines CPI, Australian Retail Sales, RBA Rate Decision & Press Conference.

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LOOKING AHEAD

• Highlights include Japanese Services PMI, Philippines CPI, Australian Retail Sales, RBA Rate Decision & Press Conference.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks extended on gains amid continued momentum from last week's soft NFP data which increased the chances of the Fed being able to cut this year, while rate-sensitive small-caps outperformed in an indication of the appetite for duration which will be tested at this week's refunding auctions.
• SPX +1.03% at 5,181, NDX +1.13% at 18,094, DJI +0.46% at 38,852, RUT +1.23% at 2,061.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (voter) said inflation data this year is disappointing and the job is not yet done, while he is confident that the current restrictive level of rates can curb demand enough to bring inflation to target and he doesn't see the economy overheating but added the Fed knows how to respond if it does. Barkin also said it still feels like the weight of risks is towards inflation and that metrics of where the neutral rate is have moved up. Furthermore, he said it feels like current policy is restrictive and at this point, is willing to believe rates are restrictive enough.
• Fed's Williams (voter) is seeing job growth moderate and is looking at the totality of economic data, while he said eventually there will be rate cuts and the balance sheet wind down has gone smoothly and hasn't affected markets.
• Fed SLOOS for Q1 noted that a net 15.6% of large and medium US banks tightened C&I loan standards in Q1 (prev. 14.5% in Q4). Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the first quarter, while banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.

FX

• USD was relatively flat on Monday after recovering from a low of 104.86 in the US morning amid mixed Fed speak including from Barkin who stressed the job is not done yet and Williams acknowledged that job growth is moderating, while the attention was on the geopolitical front after Hamas announced they accepted the latest ceasefire proposal but Israel sees the deal as unacceptable.
• EUR marginally strengthened against the dollar although gains were capped after stalling on approach to 1.0800 and as ECB officials continued to flag multiple cuts this year beginning in June.
• GBP saw two-way price action in holiday trade with most of its early gains reversed after hitting a peak just shy of the 1.2600 handle.
• JPY weakened against the buck although further advances in USD/JPY were capped by resistance at the 154.00 level.

FIXED INCOME

• Treasuries lacked firm direction with price action rangebound amid no major data ahead of refunding auctions.

COMMODITIES

• Oil prices were choppy and finished with mild gains amid the ongoing geopolitical uncertainty.
• UAE's ADNOC set June Murban crude OSP at USD 89.14/bbl (prev. USD 84.52/bbl M/M).

GEOPOLITICAL

MIDDLE EAST

• Israeli air force struck 50 targets in Rafah Monday, according to IDF spokesperson Hagari. Furthermore, Israeli Army Radio said preparations for the military operation in Rafah continue as planned, according to Sky News Arabia.
• Heavy Israeli raids were reported on the city of Rafah in the southern Gaza Strip, according to Sky News Arabia. There were more than 100 raids on sites in eastern Rafah within several hours, while an Israeli raid targeted a humanitarian aid warehouse near the Rafah crossing.
• Israeli PM’s office said the War Cabinet unanimously decided that Israel will continue the operation in Rafah to exert military pressure on Hamas in order to advance the release of hostages and the other goals of the war, according to Axios.
• Israeli political source said Hamas agreed to a “modified” Egyptian proposal which differs from the formula approved by Israel, according to Sky News Arabia. However, an official briefed on the talks said Hamas’s agreement is to the latest proposal Israel made on April 27th, with no changes to major elements, according to Reuters.
• The proposal approved by Hamas is unacceptable to Israel and an Israeli official said the proposal includes 'far-reaching' conclusions that Israel does not agree to, according to Al Arabiya citing Israeli sources.
• Israeli source said they do not take Hamas’ response seriously and that it is a “unilateral response” from it, while the source that added when they receive it, they will study it and respond to it. Israeli Channel 12 also reported that Israel has not yet received confirmation of Hamas’ announcement that it accepts the broad outlines of the ceasefire.
• Hamas said it accepts the ceasefire proposal of Egypt and Qatar, while it was separately reported that an informed source in Hamas told Al-Sharq said they are waiting if Israel will agree to the ceasefire agreement or will disrupt it.
• Hamas source told Al-Arabiya the movement agreed to a 3-stage proposal that begins with a 40-day suspension in which the first phase includes a ceasefire and Israel’s withdrawal from the Gaza Valley, as well as the return of the displaced and the exchange of a number of prisoners. Furthermore, the second and third stages include a truce for 42 days for each stage.
• Hamas delegation will visit Cairo soon to discuss the ceasefire agreement and the next step, according to a Hamas official cited by Reuters. It was earlier reported that Hamas sources said that they have decided to freeze ceasefire negotiations with Israel and postpone the return of their delegation to Cairo, according to Faytuks citing Al-Jadeed.
• White House said Israeli PM Netanyahu agreed to ensure the Kerem Shalom Crossing is open for humanitarian assistance in a call with US President Biden on Monday. It was separately reported that the Biden administration is concerned the Hamas’ deadly rocket attack over the weekend has led Israel to fast-track its timeline for a military operation in Rafah, according to Politico citing a senior administration official.
• US official familiar with talks said the US is committed to stopping an invasion of Rafah and Israel still plans to proceed, while the official added that Israeli PM Netanyahu and the Israeli War Cabinet have not appeared to negotiate with Hamas in a good faith in the latest round, according to Reuters.
• Iranian Supreme Leader Khamenei said the 'enemy' cannot be dealt with using moderation.

OTHER

• EU announced a new Russian sanctions proposal which includes a ban on EU facilities being used to tranship Russian LNG to third countries, as well as a ban on new investment and provisions of goods and services for LNG projects such as Artic LNG and Murmansk LNG. The proposal also includes a ban on using EU ports and locks for vessels that contribute to Russia's ability to wage war against Ukraine, while it seeks further restrictions on the export of chemicals and equipment that boost Russian industry, as well as on import of helium from Russia and adds Voice of Europe, RIA Novosti, Izvestija, and Rossiiskaja Gazeta to the sanctioned media list.
• Russian Foreign Ministry said Russia reserves the right for a tit-for-tat response wherever US short and medium-range missiles appear, while Russia is to consider F-16s in Ukraine as carriers of nuclear weapons.
• Russian Foreign Ministry said it considers the British Foreign Minister’s statement as evidence of a serious escalation and Russia could target British facilities on Ukrainian territory and outside of it in response to Ukrainian strikes with British weapons.
• A US soldier has been detained in Russia, according to an NBC News reporter.

ASIA-PAC

NOTABLE HEADLINES

• Chinese President Xi said in a meeting with French President Macron and European Commission President von der Leyen that whether viewed from the perspective of comparative advantage or global market demand, there is no such thing as "China's overcapacity problem". Furthermore, he stated China and the EU have extensive common interests and broad space for cooperation in green and digital transition.
• EU's von der Leyen said they will defend their companies and economies, while she added the world cannot absorb China's surplus production and she will coordinate with other G7 nations who are also affected by China's policies.
• China will not impose taxes and customs duties on French cognac, according to Reuters citing a French diplomatic source.

EU/UK

NOTABLE HEADLINES

• ECB's Simkus said last week's data on GDP and inflation were as expected, while he hasn't changed thinking that they can afford to reduce restrictions. Simkus added that unless the ECB sees data surprises, rate cuts should not be limited to just June and he said to expect other rate cuts beyond June, as well as reaffirmed the view of three rate cuts in 2024.
• ECB's Vujcic said incoming data is so far consistent with projections and he expects a loosening of the policy stance but will stay in restrictive territory.
• German Finance Minister Lindner said their economic growth is not enough for the spending wishes of some ministries and a handful of ministries have exorbitant spending wishes that are unacceptable.

DATA RECAP

• German HCOB Services PMI (Apr) 53.2 vs. Exp. 53.3 (Prev. 53.3)
• German HCOB Composite PMI (Apr) 50.6 vs. Exp. 50.6 (Prev. 50.5)
• French HCOB Services PMI (Apr) 51.3 vs. Exp. 50.5 (Prev. 50.5)
• French HCOB Composite PMI (Apr) 50.5 (Prev. 49.9)
• EU HCOB Services Final PMI (Apr) 53.3 vs. Exp. 52.9 (Prev. 52.9)
• EU HCOB Composite Final PMI (Apr) 51.7 vs. Exp. 51.4 (Prev. 51.4)
• EU Sentix Index (May) -3.6 vs. Exp. -5.0 (Prev. -5.9)
• EU Producer Prices MM (Mar) -0.4% vs. Exp. -0.4% (Prev. -1.0%, Rev. -1.1%)
• EU Producer Prices YY (Mar) -7.8% vs. Exp. -7.7% (Prev. -8.3%, Rev. -8.5%)