European Morning Briefing 01.06

European Morning Briefing 01.06

• Asian equities saw mixed performance with the Nikkei 225 supported by domestic data while soft Caixin PMI weighed on the Shanghai Comp.

• AUD underperformed due to soft Chinese data despite strong Australian numbers. Polls remain in focus for GBP

• Looking ahead, highlights include Eurozone and UK Mfg. PMI, ADP, ISM Mfg. PMI, DoEs and a slew of central bank speakers

ASIA
Asia equity markets traded mixed following a subdued lead from Wall St. where financials suffered after revenue warnings by BofA and JPMorgan, while the region also digested a miss on Chinese Caixin Manufacturing PMI. A deluge of data was the main driver in Asia with Nikkei 225 (+1.1%) the outperformer following encouraging Japanese Capex, Company Profits and PMI figures, while a softer JPY also underpinned exporter sentiment. Conversely, ASX 200 (+0.1%) traded choppy and was briefly pressured alongside weakness in the Shanghai Comp. (-0.4%) after the disappointing Chinese PMI data which fell into contraction territory for the 1st time in 11 months.

Chinese Caixin Manufacturing PMI (May) 49.6 vs. Exp. 50.1 (Prev. 50.3). (Newswires)

PBoC injected CNY 70bln in 7-day reverse repos and CNY 30bln in 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8090 (Prev. 6.8633)

EUROPE

ECB's Weidmann said recovery and improved balance of risks suggests ECB should start to discuss whether and when to adjust guidance. (Newswires)

ECB's Nowotny said it is possible that inflation rates will remain low in the long-term. (Newswires)

UK

Times/YouGov general election weekly poll showed the UK Conservatives at 42% (-1) vs. Labour 39% (+3). Furthermore, a public expectation poll showed 62% see a Conservative majority, 7% see a hung parliament with Conservatives ahead, 5% see a hung parliament with Labour ahead and 7% see a Labour majority, according to Britain Elects citing YouGov. (Twitter)

SurveyMonkey UK Election Poll for the Sun: Conservatives 44% (Unch) Labour 38% (+2) (The Sun)

FX

AUD/USD underperformed and broke below the 0.7400 handle despite initial support from better than expected Retail Sales and higher Capex estimates through to 2018, as this was overshadowed by disappointing Chinese PMI data. NZD also weakened in sympathy, while GBP/USD remained at the mercy of the polls and pulled back from yesterday’s gains after the latest Times/YouGov poll showed the Conservative Party lead narrowed to just 3 points. Elsewhere, CNH advanced after the PBoC strengthened the reference rate by the most since early January and amid continued increases in money market rates in which the Overnight CNY HIBOR surged to over 42%.

Australian Retail Sales (Apr) M/M 1.0% vs. Exp. 0.3% (Prev. -0.1%, Rev. -0.2%). (Newswires)

Australian Private New Capital Expenditure (Q1) Q/Q 0.3% vs. Exp. 0.5% (Prev. -2.1%, Rev. -1.0%). (Newswires)
- Private Capex Survey 2017-2018 (AUD)(Est. 2) 85.4bln (Prev. 80.6bln)
- Private Capex Survey 2016-2017 (AUD)(Est. 6) 112.6bln (Prev. 112.2bln)

SNB's Jordan repeated that the CHF is significantly overvalued and that the SNB is willing to intervene if necessary. (Newswires)

Brazil Central Bank reduced the Selic rate by 100bps to 10.25% as expected. (Newswires)

COMMODITIES

Copper lost ground following the poor Caixin PMI data out of China and alongside weakness in iron ore with Singapore prices falling to the weakest since October. Elsewhere, gold (+0.1%) was uneventful and held near 5-week highs, while WTI crude futures nursed some of yesterday’s losses after finding support from a larger than expected draw in crude stockpiles of 8.67mln bbls, which was also the biggest decline in inventories since September.

US API Crude Oil Inventory Report (May 31) W/W -8670k (Prev. -1500K). (Newswires)

US EIA said US crude oil production rose 62,000 bpd in March to 9.098mln bpd (Prev. 9.036mln bpd). (Newswires)

US

Fed's Beige Book shows most districts reported their economies continued to expand at modest or moderate pace. Pricing pressures were little changed on balance with most reporting modest increases. (Newswires)

Fed's Williams (Non-Voter, Soft Hawk) stated that unconventional policies will become the norm, while he added that 3 rate hikes this year is reasonable and that US inflation below 2% is a challenge for monetary policy. (Newswires)

US House Intelligence Committee approved subpoenas for former National Security Adviser Michael Flynn and President Trump's personal lawyer Michael Cohen concerning the probe into Russian interference in the US election. (Newswires)

US House is said to investigate another possible meeting between Attorney General Sessions and Russian Ambassador Kislyak. (Newswires)


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