US stocks finished mixed with underperformance in tech as Nvidia continues its reversal from last week's peak - Newsquawk Asia-Pac Market Open

• US stocks finished mixed with clear divergence seen among the indices as the DJIA outperformed and the tech-heavy Nasdaq notably lagged amid headwinds from AI-darling Nvidia (NVDA)(-6.5%) which suffered a third consecutive day of losses and was down 13% from its peak last week after a brief stint as the most valuable company.
• USD was pressured heading into month and quarter-end with Citi's preliminary estimate of month-end FX hedge rebalancing needs pointing to a net USD selling against all major currencies. The data calendar was light with the US Dallas Manufacturing Index the only release stateside which improved from May but there was little reaction, while the latest Fed commentary continued to suggest more work was needed on inflation and that data will determine policy.
• Looking ahead, highlights include Japanese Services PPI, Leading Index & BoJ Core CPI, Australian Westpac Consumer Sentiment, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include Japanese Services PPI, Leading Index & BoJ Core CPI, Australian Westpac Consumer Sentiment, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks finished mixed with clear divergence seen among the indices as the DJIA outperformed and the tech-heavy Nasdaq notably lagged amid headwinds from AI-darling Nvidia (NVDA)(-6.5%) which suffered a third consecutive day of losses and was down 13% from its peak last week after a brief stint as the most valuable company.
• SPX -0.31% at 5,448, NDX -1.15% at 19,475, DJI +0.67% at 39,411, RUT +0.43% at 2,031.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Daly (2024 voter) said the Fed has made a lot of progress on inflation but there is still work to do and inflation is not the only risk although they are nearer to a point where a benign outcome on the labour market could be less likely. Daly said at this point the risks to inflation and employment mandate are in better balance and must be thoughtful about not loosening to early, or holding too long. Furthermore, she said pre-emptive cutting is something you do when you see risks, but right now the labour market is good.
• Fed's Mester (voter, retires June) said mortgage bond sales should stay open as part of the Fed’s ongoing efforts to reduce the size of its balance sheet but noted that any such action is not imminent.
• Fed's Goolsbee (non-voter) said Fed policy is restrictive and slowing inflation data would open the door to easing policy, while he is optimistic they will see an improvement in inflation data and is hopeful the Fed will get more confidence in inflation heading back to 2%. Furthermore, he does not like tying the Fed's hands and likes the idea of not surprising people, while he wants people to understand the Fed's reaction function and stated that data will determine policy.
• Fed reportedly floats a weaker version of the bank-capital overhaul, according to Bloomberg citing sources.
• US Treasury Secretary Yellen is to announce new housing efforts as part of the Biden administration’s push to lower housing costs, while the new program administrated by the CDFI Fund will provide an additional USD 100mln over the next 3 years to support the financing of affordable housing.

DATA RECAP

• US Dallas Fed Manufacturing Bus Index (Jun) -15.1 (Prev. -19.4)

FX

• USD was pressured heading into month and quarter-end with Citi's preliminary estimate of month-end FX hedge rebalancing needs pointing to a net USD selling against all major currencies. The data calendar was light with the US Dallas Manufacturing Index the only release stateside which improved from May but there was little reaction, while the latest Fed commentary continued to suggest more work was needed on inflation and that data will determine policy.
• EUR outperformed amongst the G10 currencies and was unfazed by softer-than-expected German Ifo data, while ECB's Villeroy attempted to alleviate some of the fears of the French snap election in which he noted the French Bank's liquidity and capital are very solid and neither have been affected by market moves due to political uncertainty.
• GBP led the charge amongst cyclical peers although GBP/USD is off highs after stalling just shy of the 1.2700 handle.
• JPY was marginally firmer on the day but well off today's best level after USD/JPY reversed an early aggressive drop in which the pair fell from around 159.60 to beneath 158.80 in a few minutes which spurred some speculation of attempted intervention.
• BoC Governor Macklem continues to think they don't need a large climb in the jobless rate to get inflation back to target.

FIXED INCOME

• T-notes settled little changed ahead of supply and PCE data although futures then saw a late mild bid around the New York closing bell with an unconfirmed report circulating in social media that a US drone had been shot down in the Black Sea.

COMMODITIES

• Oil prices started the week on the front foot amid tailwinds from a softer dollar and the ongoing geopolitical backdrop.
• Dubai set the official crude differential for September at parity to DME Oman 10Qc1.

GEOPOLITICAL

MIDDLE EAST

• Israeli PM Netanyahu said Iran is working on multiple fronts to destroy Israel but added they will thwart Iran's intentions to destroy them at any cost and in any way, according to Iran International.
• US State Department said Israel told them that they are getting close to an end to major combat operations in Rafah, while there is no agreement on the future of Gaza and the US continues to oppose reoccupation without end.

OTHER

• Fighterbomber (linked to Russian Air Force) hinted that something of note occurred in the Black Sea and reports are circulating that a US drone has been shot down although there is no confirmation, according to Faytuks News via social media platform X.
• EU Council adopted the 14th sanctions package against Russia in which sanctions prohibit investments for the completion of Russian LNG projects under construction, while the EU is to list 27 vessels in total related to energy, grains and defence in its 14th sanction package against Russia.
• US Deputy Secretary of State Campbell said the US believes there are discussions about what North Korea gets in exchange for weapons supplies to Russia which could be associated with its nuclear long-range missile development plans.
• China's Coast Guard said it took "necessary control measures" against Japanese fishing vessels and patrol boats which entered the "territorial waters" of the Diayou Islands.

ASIA-PAC

NOTABLE HEADLINES

• European Commission said there will be technical talks in Brussels this week on Chinese EVs, while it was separately reported that China floated help for German automakers in a bid to stop EV levies such as lowering its existing tariffs on large-engines cars in return for scrapping planned EV levies on imports, according to Bloomberg.

EU/UK

NOTABLE HEADLINES

• ECB's Villeroy said the French Bank's liquidity and capital are very solid and neither have been affected by market moves due to political uncertainty

DATA RECAP

• German Ifo Current Conditions New (Jun) 88.3 vs. Exp. 88.4 (Prev. 88.3)
• German Ifo Business Climate New (Jun) 88.6 vs. Exp. 89.7 (Prev. 89.3)
• German Ifo Expectations New (Jun) 89.0 vs. Exp. 90.8 (Prev. 90.4)