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Breakfast Bites - Thu Jun 1, 2023

Rise and shine everyone and Happy June!

The big news is that the Debt Ceiling deal got the House votes needed and is now on to the Senate for the final vote before Treasury runs out of money. The US Treasury’s cash balance has now down to just $37.4 billion, the lowest level since 2017.

US Futures are trading higher quite possibly in celebration of the debt deal. Treasuries weaker with the curve bear flattening. Dollar better vs yen while little changed vs euro and sterling. Gold off 0.3%. Bitcoin futures up 0.4%. WTI crude down 0.3% after a nearly 2% pullback in prior session.

The interesting news to come out yesterday is that Bloomberg, Reuters and the Wall Street Journal has not been invited to the OPEC+ meeting to be held on Sunday in Vienna. The Financial Times has received an invite.

Asia and Australia

  • Asian markets mixed overnight with Japan the standout, while Hong Kong, South Korea and Taiwan were all down and China's Shanghai Composite finished little changed.

  • Japan manufacturing activity expands for first time in seven months

  • South Korea S&P Global PMI reflected continued slowdown in country's manufacturing output but hinted at slowing pace of decline.

  • Repricing of the RBA rate path continues with futures now pricing in 100% chance of a rate increase by August (vs zero probability in mid-May).

  • India's GDP growth accelerated to 6.1% in Q4 y/y (ending 31 Mar-23) from 4.5% y/y growth in Q3, boosted by government and private spending, and manufacturing.

Europe, Middle East, Africa

  • European equity markets rebounds after STOXX 600 hit two-month lows in prior session. Media, Autos & Parts, Banks the biggest gainers. Industrial Goods & Services outperforming with Aerospace & Defense in focus.

  • The details of the ECB May meeting showed most members backed decision to raise rates by the more moderate 25-bps, though some members initially expressed preference for larger move.

  • Eurozone inflation cools in May but will not stop the ECB hiking cycle. Flash CPI at 6.1% y/y versus consensus 6.3% and prior 7.0% gain, while core at 5.3% versus 5.5% forecast and prior 5.6%.

  • UK manufacturing activity declines for third straight month in May

  • Eurozone manufacturing downturn deepens in May. Manufacturing PMI falls to a 36-month low of 44.8 vs the preliminary reading of 44.6 and April's outcome of 45.8.

The Americas

  • Fed officials signal support for leaving rates unchanged in June while retaining option to hike again in coming months

  • Amazon employees plan a worldwide walkout to signal lack of trust in leadership

  • Deutsche Bank warns of imminent wave of corporate debt defaults. They forecast peak default rates to reach 9% for U.S. high-yield debt, 11.3% for U.S. loans, 4.4% for European high-yield bonds and 7.3% for European loans.

  • Google investing in Runway at valuation of $1.5B. The investment is part of a $100M funding round for the AI startup, which enables video to be generated from text descriptions.

  • BofA noted that its Global Earnings Revision Ratio improved significantly last week from 0.77 to 0.90 to reach the highest level in over a year. It would seem that Earnings revisions are being improved to cater to the better than expected results delivered in Q1, 2023.


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)


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