GLOBAL CAPITAL MARKETS OVERVIEW:  

European shares rose Monday, with the pan-European Stoxx 600 and DAX 40 up to around 1% each, dragged down by bargain hunting. However, fears of a sharp slowdown in the global economy continued to rattle market sentiment, with major central banks tightening monetary policy aggressively to rein in record inflation. Meanwhile, in France, Emmanuel Macron lost an outright majority in the National Assembly of France's lower house of Representatives, with French parliamentary elections ending on Sunday, two after last week's first-round and April's presidential election. Fourth Election Day of the month. Regarding economic data, German producer prices rose 33.6% year-on-year in May, hitting a new high for the sixth month in a row, mainly due to higher energy prices. The FTSE MIB rose 1% to close at 22,000 on Monday, rebounding from a 16-month low last week on strong support from the financial sector. At the same time, recession fears and uncertainty over European energy demand continued to weigh on the market. Milan heavyweight banks rose the most, boosted by strong BTP bonds after the European Central Bank announced plans to issue new tools to avoid a split in the currency zone. UniCredit and Banco BPM each rose more than 4%, while Intesa Sanpaolo gained 3.8%. On the other hand, expectations that utility providers will have to pay more gas prices after Russia cut gas supplies to Italy sent both Hera and A2A down more than 5%. Italian energy giant Eni has been particularly active in securing LNG resources outside Russia, winning a $29 billion stake in a gas project in Qatar. The CAC 40 rose 0.64% to 5,920.09, rebounding slightly from two sessions of losses, led by gains in auto stocks. French stocks, however, lagged their peers after the president's party failed to secure an outright majority in the country's parliamentary elections, compounded by the uncertainty already existing around war, monetary tightening, and a recession. Among individual stocks, Renault topped the index (9.74%), followed by Safran (5.69%) and Airbus Group (3.04%) after Jeferries' recommendation. Conversely, the Saint-Gobain index fell 4.01%, leading to the decline, with rival Kingspan falling on deteriorating order volumes. The MOEX Russia Index rose more than 2% to close at 2,404 on Monday, supported by banks, as investors focused on Russia's energy supplies to Europe. Sberbank and VTB rose 6% and 4.7%, respectively, while Rosbank rose 10% after owner Interros Capital announced a share buyback. Meanwhile, Gazprom shares fell after the company further cut supplies to Europe. Traffic through the Nord Stream 1 pipeline has fallen below 40% capacity levels since last week, while Italy has reported less than half of its planned supply. European authorities have accused Moscow of weaponizing energy to trigger a crisis, fueling fears that Russia's economic isolation could deepen. Russia's energy exports to Asia have surged, with India's Urals crude oil imports increasing by more than 800% from pre-invasion levels. In contrast, exports to China hit a record high, leading to a sharp drop in Russian energy exports to Asia. In turn, higher natural gas prices supported Novatek shares by soaring 11.7%. The FTSE 100 rose 1.5 percent to close at 7,121.8, snapping a two-session losing streak, boosted by financial and energy gains. Euromoney institutional investor ERM shares rose 26.1% after the company said it might receive a cash offer valued at about $1.96 billion. British recruitment firm Stree Plc rose 5.2%, forecasting an annual profit that topped market forecasts on strong demand for contract roles. Conversely, building insulation specialist, Kingspan fell 11.4% amid falling orders.Canada's main stock index was on track to break a two-day losing streak on Monday, with the S&P/TSX rebounding from its lowest level in more than a year to above 19,000, with tech and consumer discretionary stocks gaining. Volume is expected to be the focus during the U.S. holiday. Quebec Communications and Shaw Communications were the index's biggest gainers, rising 8.5 percent and 8.3 percent, respectively. Hong Kong stocks rose for a second straight session on Monday, with the benchmark Hang Seng Index closing above 21,160, boosted by gains in property and consumer goods stocks. Investors continued to assess the outlook for inflation and economic growth while digesting China's decision to keep lending rates unchanged, with signs of a global economic recovery and tightening monetary policy clouding prospects for more stimulus. Country Garden Services Holdings Co. and China Overseas Land & Investment were the two biggest gainers on the index, rising 15% and 9%, respectively. On the other hand, NetEase tumbled about 7% after announcing that it would delay the release of the highly anticipated video game Diablo in China. New Zealand S&P/NYSE closed flat on Monday, having closed the previous session at its lowest close since April 26, 2020, as traders struggled to find clues about market movements due to the U.S. holiday. Locally, New Zealand's services sector activity grew by the most in 11 months in May, while it rose for the fourth time in a row as the economy reopened further. On the corporate side, Air New Zealand expects to reach 75% of its pre-COVID-19 international capacity and more than 100% of its pre-pandemic domestic capacity by the end of 2022 as travel demand recovers. Earlier this month, the national carrier said its losses would be smaller than the previous forecast for the 12 months to June 30 as passenger demand rebounded and restrictions eased. Gainers were Good Wine Hotels (10.1%), Savor Ltd (6.4%), and NZME Ltd (4.4%), while decliners were Plexure Group (12.3%), Blis Technologies (8.8%) and Smartpay Holdings (5.2%). The Shanghai Composite fell 0.04% to end at 3,315 on Monday. In comparison, the Shenzhen Composite rose 1.27% to 12,487 in volatile trading as investors focused on the market after China's central bank paused its easing policy and kept key lending rates unchanged reaction. As widely expected, the PBOC kept the one-year loan prime rate at 3.7% and the five-year loan prime rate at 4.45%. Meanwhile, mainland Chinese stocks continued to outperform their global peers when other major economies were tightening monetary policy to combat inflation in hopes of more stimulus to help the country's economy recover from a devastating lockdown. High-growth new energy stocks rose, with Contemporary Abe (4.2%), BYD (1.2%), and Jiangxi Special (1.7%) gaining. Elsewhere, commodity-related and financial stocks weighed on the benchmark, while technology shares were mixed. Japan Nikkei 225 lost 0.74% to end at 25,771. In comparison, the broader Topix index fell 0.92% to close at 1,819 on Monday, its lowest level in three months, as investors worried that aggressive monetary tightening could lead to global The economy is in recession. On Saturday, Federal Reserve President Christopher Waller became the latest U.S. central banker to pledge to curb inflation across the board, backing another 75 basis point rate hike in July. Meanwhile, Cleveland Commonwealth Bank President Loretta Mester said Sunday that the risk of a U.S. recession is growing and that it will take years for inflation to fall to the central bank’s 2 percent target. Commodity-related stocks led to losses in Japanese stocks as Inpex Corp (-9.4%), Osaka Titanium (-4%) and Nippon Steel (-3.9%) fell sharply. Chip-related companies also fell further, including Tokyo Electron (down 5.2%), Sumco (down 4.2%) and Mitsui High-tech (down 3.3%). Australia S&P/ASX 200 index fell 0.64% to 6433 on Monday, closing at its lowest level in 19 months, led by energy and mining companies as aggressive monetary tightening weighed on commodity prices and related assets. The risk of a global recession has increased. Energy stocks tracked sharp declines in oil prices late Friday, with Woodside Energy (down 4.9%), Santos Ltd (down 6%), and Beach Energy (down 8.3%). Mining stocks also fell on lower metals prices, including BHP Billiton (down 5.3%), Fortescue Metals (down 8.6%), Rio Tinto (down 5.1%), and South32 (down 2.4%). Gold and clean energy-related names also declined, such as Northern Star Resources (down 6.1 percent), Newcrest Mining (down 4.6 percent), Evolution Mining (down 6.2 percent), Pilbara Mining Corp. (Pilbara Minerals) (down 2.9%) and Lynas Rare Earth Corp (down 3.1%). Meanwhile, financial companies, as well as healthcare and technology stocks, rebounded on Monday.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- EU: In April 2022, construction products in the euro area rose by 3% year-on-year, a slowdown from an upwardly revised 3.4% in the previous month. This was the slowest growth in construction activity since December, with civil engineering contracting by 0.7% (5.3% in March), while construction activity held steady at 4.1%. Monthly construction output fell 1.1%, the first decline in four months, after rising 0.1% in March.

- GE: Germany's annual producer inflation surged to 33.6% in May 2022, the sixth straight month of record highs, up from 33.5% in April and the market forecast of 33.5%. These figures reflect the impact of the war in Ukraine, with energy prices remaining the biggest increase factor (87.1%), namely natural gas (148.1%), electricity (90.4%), and mineral oil products (55.8%). Excluding energy, producer prices rose 16.5% year on year. Other significant increases in prices were for intermediate goods (25.1%), namely metals (38.1%), fertilizers and nitrogen compounds (110.9%), wooden containers (67.4%); non-durable consumer goods (14.7%), ready-to-eat food (19.2%) %); consumer durables (9.4%); and capital goods (7.1%, the largest increase since September 1975). Every month, the producer price index rose 1.6%, the slowest gain in three months, compared with the consensus forecast for a 1.5% rise, after rising 2.8% in April.

- HK: On Monday, the three-month Hong Kong Interbank Offered Rate (Hibor), the benchmark borrowing cost, rose six basis points from 1.29% on Friday, June 17, to its highest level since May 2020, reaching two levels. Liquidity eased as authorities bought local currency, and the Hong Kong Monetary Authority raised interest rates following the Federal Reserve's lead. Meanwhile, the one-month gauge, an essential reference for mortgage lending, rose one basis point to 0.61%, its highest level since June 2020. Given that Hong Kong is pegged to the U.S. dollar, monetary policy in the financial center is in step with the Federal Reserve. Local media reports quoted MAS chief executive Eddie Yue saying that the MAS may accelerate local currency purchases until interest rates in the city approach U.S. levels.

 

LOOKING AHEAD:   

Today, investors will receive:

- USD: Existing Home Sales and FOMC Member Mester Speaks.

- EUR: Current Account.

- GBP: MPC Member Pill Speaks, CBI Industrial Order Expectations, and MPC Member Tenreyro Speaks.

- NZD: Westpac Consumer Sentiment, and GDT Price Index.

- AUD: RBA Gov Lowe Speaks, and Monetary Policy Meeting Minutes.

- CHF: Trade Balance.

- CAD: Core Retail Sales m/m, Retail Sales m/m, and NHPI m/m.

 

KEY EQUITY & BOND MARKET DRIVERS:

- GE: Germany's 10-year bond yield rose above 1.7 percent, its highest level since early 2014, after European Central Bank President Christine Lagarde reiterated plans to raise interest rates this summer. The move followed last week's announcement of new measures by the central bank to ease the market rout, which revived fears of a new debt crisis in the euro zone's southern periphery. Meanwhile, investors digested recent elections in France, in which President Emmanuel Macron lost an outright majority in the House of Representatives National Assembly, although his coalition remained the largest bloc.

- FR: Yields on 10-year oats rose above 2.2%, near the 8-year high of 2.4% last week after President Emmanuel Macron's ensemble! Alliance did not secure a parliamentary majority during its five-year term. The result prompted French bonds to underperform compared with German bonds, reflecting concerns about the political division of the French parliament. Meanwhile, investors continued to assess the possible impact of tighter monetary policy transmission from the ECB's new measures to avoid a split in the eurozone. Like the Federal Reserve, Bank of England, and Swiss National Bank raised borrowing costs last week, new tools announced by the European Central Bank limited significant central banks' tightening measures, rising bond yields. Despite looming recession fears, the Bank of France revised its second-quarter growth forecast to 0.25% quarter-on-quarter, compared with a previous forecast of 0.2%.

- EU: European futures edged higher on Monday as investors took a breather after major stocks fell around 5% last week, as concerns remained that tighter monetary policy could tip the global economy into recession after the Federal Reserve, Bank of England, and Swiss National Bank raised interest rates to curb inflation exists. In terms of economic data, German producer prices rose by 33.6% year-on-year in May, hitting a new high for the sixth consecutive month, mainly due to rising energy prices.

- US: U.S. stock futures rose in Asian trade on Monday as risk appetite returned to the market, but persistent concerns about inflation and a possible recession capped sentiment. Dow futures were up 0.4%, S&P 500 futures were up 0.5% and Nasdaq 100 futures were up 0.8%. It followed a sharp weekly sell-off on Wall Street, with the S&P 500 falling 5.8% and plunging further into a bear market. Meanwhile, the Dow and Nasdaq Composite fell 4.8% each last week. Volatility is expected to continue to plague the market as aggressive monetary tightening policies in major economies to reduce inflation remains a threat to asset prices. In his latest comments, Fed President Christopher Waller said he would support another 75 basis point rate hike at the July central bank meeting, while Cleveland Fed President Loretta Mester said, The risk of a U.S. recession is growing. U.S. markets will be closed on Monday for the June 10 holiday.

 

 

 

STOCK MARKET SECTORS:

- High: Real Estate, Health Care, Consumer Discretionary, Information Technology, Communication Services.

- Low: Energy, Utilities, Consumer Staples.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- CAD: The Canadian dollar edged up to $1.299/USD, while the U.S. dollar edged lower as the Bank of Canada is expected to aggressively tighten monetary policy ahead of the release of domestic CPI data. Markets expect a 75bps rate hike at the July 14 meeting, following a 50bps walk in June. Domestic inflation is at a 31-year high of 6.8%, and stronger-than-expected labor market data in May further Increased bets on massive monetary tightening. On top of that, Bank of China Governor Tiff Macklem said he was committed to raising domestic inflation to his 2.0% target. In addition, policymakers pledged to shrink the central bank's balance sheet if inflation worsens while signaling further rate hikes in the future.

- EUR: The euro rose to $1.05 in the third week of June after French President Emmanuel Macron lost an outright majority in the House of Representatives National Assembly. However, his coalition remained the largest bloc. Macron's coalition won 245 seats, followed by Jean-Luc Melenchin's left-wing coalition with 131. On the monetary policy front, investors continued to doubt the ECB's ability to significantly raise borrowing costs, despite the ECB's announcement of new measures to ease market volatility, reviving fears of a recent debt crisis in the euro zone's southern periphery. At the same time, the Fed raised the federal funds rate by 75 basis points, the most since 1994, and Chairman Powell said similar action is likely at the next meeting, making it clear that the central bank will go all out to combat soaring inflation.

- CNY: The offshore yuan appreciated more than 6.70 yuan against the dollar, offsetting losses this month, as China's central bank kept its benchmark lending rate unchanged to avoid a further divergence in monetary policy with other economies. As widely expected, the PBOC kept the one-year loan prime rate at 3.7% and the five-year loan prime rate at 4.45%. The yuan has also recently found some support from better-than-expected Chinese economic data, which has given hope for a sustained recovery from the massive lockdown. Meanwhile, investors remained wary of U.S. monetary policy as a faster pace of tightening by the Federal Reserve could affect global flows and other major currencies. Analysts also expect the People's Bank of China to resume monetary easing for the rest of the year to support an economy battered by the coronavirus pandemic.

- USD: Holiday trading was thin on Monday, with the dollar index retreating to 104.4, giving back some gains from the previous session but still near a 20-year high reached last week, as expectations that the Federal Reserve will continue to tighten monetary policy underpinned the greenback aggressively. Fed last week raised its benchmark interest rate by 75 basis points, the most significant increase since 1994. In the latest comments, Federal Reserve Governor Christopher Waller said Saturday that he would support another rate hike of a similar size at the central bank's July meeting if economic data turns out as he expects. Meanwhile, Cleveland Commonwealth Bank President Loretta Mester warned Sunday that the risk of a U.S. recession is growing and that it will take several years to return to the central bank's 2 percent inflation target.

 

CHART OF THE DAY:

The Australian dollar held steady at around $0.695 but remained under pressure as aggressive monetary tightening weighed on commodity prices and related assets, raising the risk of a global recession. Meanwhile, higher domestic yields supported the Aussie, with Australia's benchmark 10-year yield hovering near an eight-year high above 4 percent. The Reserve Bank of Australia surprised markets by announcing at its June meeting that it would raise interest rates by 50 basis points to 0.85%, citing rising consumer prices and economic recovery and pledging to "take necessary measures" to curb inflation soaring. Futures markets are pricing in several 50-basis-point rate hikes before the end of the year, taking rates as high as 3.75%, a level not seen in a decade.

-  AUSUSD - D1, Resistance around ~ 0.72680, Support around  ~ 0.68346.

Japanese Nikkei continues to fall, more than one month low - auto stocks rise, shipbuilding miserable

GLOBAL CAPITAL MARKETS OVERVIEW:  

European shares rose Monday, with the pan-European Stoxx 600 and DAX 40 up to around 1% each, dragged down by bargain hunting. However, fears of a sharp slowdown in the global economy continued to rattle market sentiment, with major central banks tightening monetary policy aggressively to rein in record inflation. Meanwhile, in France, Emmanuel Macron lost an outright majority in the National Assembly of France's lower house of Representatives, with French parliamentary elections ending on Sunday, two after last week's first-round and April's presidential election. Fourth Election Day of the month. Regarding economic data, German producer prices rose 33.6% year-on-year in May, hitting a new high for the sixth month in a row, mainly due to higher energy prices. The FTSE MIB rose 1% to close at 22,000 on Monday, rebounding from a 16-month low last week on strong support from the financial sector. At the same time, recession fears and uncertainty over European energy demand continued to weigh on the market. Milan heavyweight banks rose the most, boosted by strong BTP bonds after the European Central Bank announced plans to issue new tools to avoid a split in the currency zone. UniCredit and Banco BPM each rose more than 4%, while Intesa Sanpaolo gained 3.8%. On the other hand, expectations that utility providers will have to pay more gas prices after Russia cut gas supplies to Italy sent both Hera and A2A down more than 5%. Italian energy giant Eni has been particularly active in securing LNG resources outside Russia, winning a $29 billion stake in a gas project in Qatar. The CAC 40 rose 0.64% to 5,920.09, rebounding slightly from two sessions of losses, led by gains in auto stocks. French stocks, however, lagged their peers after the president's party failed to secure an outright majority in the country's parliamentary elections, compounded by the uncertainty already existing around war, monetary tightening, and a recession. Among individual stocks, Renault topped the index (9.74%), followed by Safran (5.69%) and Airbus Group (3.04%) after Jeferries' recommendation. Conversely, the Saint-Gobain index fell 4.01%, leading to the decline, with rival Kingspan falling on deteriorating order volumes. The MOEX Russia Index rose more than 2% to close at 2,404 on Monday, supported by banks, as investors focused on Russia's energy supplies to Europe. Sberbank and VTB rose 6% and 4.7%, respectively, while Rosbank rose 10% after owner Interros Capital announced a share buyback. Meanwhile, Gazprom shares fell after the company further cut supplies to Europe. Traffic through the Nord Stream 1 pipeline has fallen below 40% capacity levels since last week, while Italy has reported less than half of its planned supply. European authorities have accused Moscow of weaponizing energy to trigger a crisis, fueling fears that Russia's economic isolation could deepen. Russia's energy exports to Asia have surged, with India's Urals crude oil imports increasing by more than 800% from pre-invasion levels. In contrast, exports to China hit a record high, leading to a sharp drop in Russian energy exports to Asia. In turn, higher natural gas prices supported Novatek shares by soaring 11.7%. The FTSE 100 rose 1.5 percent to close at 7,121.8, snapping a two-session losing streak, boosted by financial and energy gains. Euromoney institutional investor ERM shares rose 26.1% after the company said it might receive a cash offer valued at about $1.96 billion. British recruitment firm Stree Plc rose 5.2%, forecasting an annual profit that topped market forecasts on strong demand for contract roles. Conversely, building insulation specialist, Kingspan fell 11.4% amid falling orders.Canada's main stock index was on track to break a two-day losing streak on Monday, with the S&P/TSX rebounding from its lowest level in more than a year to above 19,000, with tech and consumer discretionary stocks gaining. Volume is expected to be the focus during the U.S. holiday. Quebec Communications and Shaw Communications were the index's biggest gainers, rising 8.5 percent and 8.3 percent, respectively. Hong Kong stocks rose for a second straight session on Monday, with the benchmark Hang Seng Index closing above 21,160, boosted by gains in property and consumer goods stocks. Investors continued to assess the outlook for inflation and economic growth while digesting China's decision to keep lending rates unchanged, with signs of a global economic recovery and tightening monetary policy clouding prospects for more stimulus. Country Garden Services Holdings Co. and China Overseas Land & Investment were the two biggest gainers on the index, rising 15% and 9%, respectively. On the other hand, NetEase tumbled about 7% after announcing that it would delay the release of the highly anticipated video game Diablo in China. New Zealand S&P/NYSE closed flat on Monday, having closed the previous session at its lowest close since April 26, 2020, as traders struggled to find clues about market movements due to the U.S. holiday. Locally, New Zealand's services sector activity grew by the most in 11 months in May, while it rose for the fourth time in a row as the economy reopened further. On the corporate side, Air New Zealand expects to reach 75% of its pre-COVID-19 international capacity and more than 100% of its pre-pandemic domestic capacity by the end of 2022 as travel demand recovers. Earlier this month, the national carrier said its losses would be smaller than the previous forecast for the 12 months to June 30 as passenger demand rebounded and restrictions eased. Gainers were Good Wine Hotels (10.1%), Savor Ltd (6.4%), and NZME Ltd (4.4%), while decliners were Plexure Group (12.3%), Blis Technologies (8.8%) and Smartpay Holdings (5.2%). The Shanghai Composite fell 0.04% to end at 3,315 on Monday. In comparison, the Shenzhen Composite rose 1.27% to 12,487 in volatile trading as investors focused on the market after China's central bank paused its easing policy and kept key lending rates unchanged reaction. As widely expected, the PBOC kept the one-year loan prime rate at 3.7% and the five-year loan prime rate at 4.45%. Meanwhile, mainland Chinese stocks continued to outperform their global peers when other major economies were tightening monetary policy to combat inflation in hopes of more stimulus to help the country's economy recover from a devastating lockdown. High-growth new energy stocks rose, with Contemporary Abe (4.2%), BYD (1.2%), and Jiangxi Special (1.7%) gaining. Elsewhere, commodity-related and financial stocks weighed on the benchmark, while technology shares were mixed. Japan Nikkei 225 lost 0.74% to end at 25,771. In comparison, the broader Topix index fell 0.92% to close at 1,819 on Monday, its lowest level in three months, as investors worried that aggressive monetary tightening could lead to global The economy is in recession. On Saturday, Federal Reserve President Christopher Waller became the latest U.S. central banker to pledge to curb inflation across the board, backing another 75 basis point rate hike in July. Meanwhile, Cleveland Commonwealth Bank President Loretta Mester said Sunday that the risk of a U.S. recession is growing and that it will take years for inflation to fall to the central bank’s 2 percent target. Commodity-related stocks led to losses in Japanese stocks as Inpex Corp (-9.4%), Osaka Titanium (-4%) and Nippon Steel (-3.9%) fell sharply. Chip-related companies also fell further, including Tokyo Electron (down 5.2%), Sumco (down 4.2%) and Mitsui High-tech (down 3.3%). Australia S&P/ASX 200 index fell 0.64% to 6433 on Monday, closing at its lowest level in 19 months, led by energy and mining companies as aggressive monetary tightening weighed on commodity prices and related assets. The risk of a global recession has increased. Energy stocks tracked sharp declines in oil prices late Friday, with Woodside Energy (down 4.9%), Santos Ltd (down 6%), and Beach Energy (down 8.3%). Mining stocks also fell on lower metals prices, including BHP Billiton (down 5.3%), Fortescue Metals (down 8.6%), Rio Tinto (down 5.1%), and South32 (down 2.4%). Gold and clean energy-related names also declined, such as Northern Star Resources (down 6.1 percent), Newcrest Mining (down 4.6 percent), Evolution Mining (down 6.2 percent), Pilbara Mining Corp. (Pilbara Minerals) (down 2.9%) and Lynas Rare Earth Corp (down 3.1%). Meanwhile, financial companies, as well as healthcare and technology stocks, rebounded on Monday.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- EU: In April 2022, construction products in the euro area rose by 3% year-on-year, a slowdown from an upwardly revised 3.4% in the previous month. This was the slowest growth in construction activity since December, with civil engineering contracting by 0.7% (5.3% in March), while construction activity held steady at 4.1%. Monthly construction output fell 1.1%, the first decline in four months, after rising 0.1% in March.

- GE: Germany's annual producer inflation surged to 33.6% in May 2022, the sixth straight month of record highs, up from 33.5% in April and the market forecast of 33.5%. These figures reflect the impact of the war in Ukraine, with energy prices remaining the biggest increase factor (87.1%), namely natural gas (148.1%), electricity (90.4%), and mineral oil products (55.8%). Excluding energy, producer prices rose 16.5% year on year. Other significant increases in prices were for intermediate goods (25.1%), namely metals (38.1%), fertilizers and nitrogen compounds (110.9%), wooden containers (67.4%); non-durable consumer goods (14.7%), ready-to-eat food (19.2%) %); consumer durables (9.4%); and capital goods (7.1%, the largest increase since September 1975). Every month, the producer price index rose 1.6%, the slowest gain in three months, compared with the consensus forecast for a 1.5% rise, after rising 2.8% in April.

- HK: On Monday, the three-month Hong Kong Interbank Offered Rate (Hibor), the benchmark borrowing cost, rose six basis points from 1.29% on Friday, June 17, to its highest level since May 2020, reaching two levels. Liquidity eased as authorities bought local currency, and the Hong Kong Monetary Authority raised interest rates following the Federal Reserve's lead. Meanwhile, the one-month gauge, an essential reference for mortgage lending, rose one basis point to 0.61%, its highest level since June 2020. Given that Hong Kong is pegged to the U.S. dollar, monetary policy in the financial center is in step with the Federal Reserve. Local media reports quoted MAS chief executive Eddie Yue saying that the MAS may accelerate local currency purchases until interest rates in the city approach U.S. levels.

 

LOOKING AHEAD:   

Today, investors will receive:

- USD: Existing Home Sales and FOMC Member Mester Speaks.

- EUR: Current Account.

- GBP: MPC Member Pill Speaks, CBI Industrial Order Expectations, and MPC Member Tenreyro Speaks.

- NZD: Westpac Consumer Sentiment, and GDT Price Index.

- AUD: RBA Gov Lowe Speaks, and Monetary Policy Meeting Minutes.

- CHF: Trade Balance.

- CAD: Core Retail Sales m/m, Retail Sales m/m, and NHPI m/m.

 

KEY EQUITY & BOND MARKET DRIVERS:

- GE: Germany's 10-year bond yield rose above 1.7 percent, its highest level since early 2014, after European Central Bank President Christine Lagarde reiterated plans to raise interest rates this summer. The move followed last week's announcement of new measures by the central bank to ease the market rout, which revived fears of a new debt crisis in the euro zone's southern periphery. Meanwhile, investors digested recent elections in France, in which President Emmanuel Macron lost an outright majority in the House of Representatives National Assembly, although his coalition remained the largest bloc.

- FR: Yields on 10-year oats rose above 2.2%, near the 8-year high of 2.4% last week after President Emmanuel Macron's ensemble! Alliance did not secure a parliamentary majority during its five-year term. The result prompted French bonds to underperform compared with German bonds, reflecting concerns about the political division of the French parliament. Meanwhile, investors continued to assess the possible impact of tighter monetary policy transmission from the ECB's new measures to avoid a split in the eurozone. Like the Federal Reserve, Bank of England, and Swiss National Bank raised borrowing costs last week, new tools announced by the European Central Bank limited significant central banks' tightening measures, rising bond yields. Despite looming recession fears, the Bank of France revised its second-quarter growth forecast to 0.25% quarter-on-quarter, compared with a previous forecast of 0.2%.

- EU: European futures edged higher on Monday as investors took a breather after major stocks fell around 5% last week, as concerns remained that tighter monetary policy could tip the global economy into recession after the Federal Reserve, Bank of England, and Swiss National Bank raised interest rates to curb inflation exists. In terms of economic data, German producer prices rose by 33.6% year-on-year in May, hitting a new high for the sixth consecutive month, mainly due to rising energy prices.

- US: U.S. stock futures rose in Asian trade on Monday as risk appetite returned to the market, but persistent concerns about inflation and a possible recession capped sentiment. Dow futures were up 0.4%, S&P 500 futures were up 0.5% and Nasdaq 100 futures were up 0.8%. It followed a sharp weekly sell-off on Wall Street, with the S&P 500 falling 5.8% and plunging further into a bear market. Meanwhile, the Dow and Nasdaq Composite fell 4.8% each last week. Volatility is expected to continue to plague the market as aggressive monetary tightening policies in major economies to reduce inflation remains a threat to asset prices. In his latest comments, Fed President Christopher Waller said he would support another 75 basis point rate hike at the July central bank meeting, while Cleveland Fed President Loretta Mester said, The risk of a U.S. recession is growing. U.S. markets will be closed on Monday for the June 10 holiday.

 

 

 

STOCK MARKET SECTORS:

- High: Real Estate, Health Care, Consumer Discretionary, Information Technology, Communication Services.

- Low: Energy, Utilities, Consumer Staples.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- CAD: The Canadian dollar edged up to $1.299/USD, while the U.S. dollar edged lower as the Bank of Canada is expected to aggressively tighten monetary policy ahead of the release of domestic CPI data. Markets expect a 75bps rate hike at the July 14 meeting, following a 50bps walk in June. Domestic inflation is at a 31-year high of 6.8%, and stronger-than-expected labor market data in May further Increased bets on massive monetary tightening. On top of that, Bank of China Governor Tiff Macklem said he was committed to raising domestic inflation to his 2.0% target. In addition, policymakers pledged to shrink the central bank's balance sheet if inflation worsens while signaling further rate hikes in the future.

- EUR: The euro rose to $1.05 in the third week of June after French President Emmanuel Macron lost an outright majority in the House of Representatives National Assembly. However, his coalition remained the largest bloc. Macron's coalition won 245 seats, followed by Jean-Luc Melenchin's left-wing coalition with 131. On the monetary policy front, investors continued to doubt the ECB's ability to significantly raise borrowing costs, despite the ECB's announcement of new measures to ease market volatility, reviving fears of a recent debt crisis in the euro zone's southern periphery. At the same time, the Fed raised the federal funds rate by 75 basis points, the most since 1994, and Chairman Powell said similar action is likely at the next meeting, making it clear that the central bank will go all out to combat soaring inflation.

- CNY: The offshore yuan appreciated more than 6.70 yuan against the dollar, offsetting losses this month, as China's central bank kept its benchmark lending rate unchanged to avoid a further divergence in monetary policy with other economies. As widely expected, the PBOC kept the one-year loan prime rate at 3.7% and the five-year loan prime rate at 4.45%. The yuan has also recently found some support from better-than-expected Chinese economic data, which has given hope for a sustained recovery from the massive lockdown. Meanwhile, investors remained wary of U.S. monetary policy as a faster pace of tightening by the Federal Reserve could affect global flows and other major currencies. Analysts also expect the People's Bank of China to resume monetary easing for the rest of the year to support an economy battered by the coronavirus pandemic.

- USD: Holiday trading was thin on Monday, with the dollar index retreating to 104.4, giving back some gains from the previous session but still near a 20-year high reached last week, as expectations that the Federal Reserve will continue to tighten monetary policy underpinned the greenback aggressively. Fed last week raised its benchmark interest rate by 75 basis points, the most significant increase since 1994. In the latest comments, Federal Reserve Governor Christopher Waller said Saturday that he would support another rate hike of a similar size at the central bank's July meeting if economic data turns out as he expects. Meanwhile, Cleveland Commonwealth Bank President Loretta Mester warned Sunday that the risk of a U.S. recession is growing and that it will take several years to return to the central bank's 2 percent inflation target.

 

CHART OF THE DAY:

The Australian dollar held steady at around $0.695 but remained under pressure as aggressive monetary tightening weighed on commodity prices and related assets, raising the risk of a global recession. Meanwhile, higher domestic yields supported the Aussie, with Australia's benchmark 10-year yield hovering near an eight-year high above 4 percent. The Reserve Bank of Australia surprised markets by announcing at its June meeting that it would raise interest rates by 50 basis points to 0.85%, citing rising consumer prices and economic recovery and pledging to "take necessary measures" to curb inflation soaring. Futures markets are pricing in several 50-basis-point rate hikes before the end of the year, taking rates as high as 3.75%, a level not seen in a decade.

-  AUSUSD - D1, Resistance around ~ 0.72680, Support around  ~ 0.68346.

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