ECB expected to hike – Eyes on US May PPI

General trend and developments -Middle East headlines once again drove market action as risk assets took a further leg down early in the Asia session (following the overnight resumption of heavy bombing on Iranian strategic targets by the US military) as Iran said the Strait of Hormuz was closed for passage of any vessels. Markets started to recover 35 minutes later as Pres Trump said that he had spoken directly with Iranian officials and they asked him to stop bombing (a claim later refuted by Iranian press), but regardless of rhetoric the markets took off to the upside and oil came off its highs on Trump’s additional comment that “bombing will stop shortly”. [At time of writing US equity FUTs had pared back close to half of their NY session losses] . - Silver and Gold touched multi-month lows early on but were similarly rescued by Trump’s comments of stopping bombing and Bitcoin also caught a bid off the week’s lows [and interestingly has not yet revisited last Friday's multi-month lows]. -Asian equities down again, but mildly so. Hang Seng underperforming -1.1%. -ECB rate decision tonight , with market pricing and analyst polls indicating near-unanimous expectation of a 25bp hike to 2.25% in a preemptive reaction to the uptick in Eurozone inflation primarily caused by higher energy prices. -If US May PPI meets expectations of 4.9% y/y tonight it will be the highest reading since January, 2023. -Shares of online retailer JD.com dipped as much as ~6% as China regulators said to be questioning JD and competitors Douyin, Tmall (Alibaba) and PDD (Pinduoduo) over “fraudulent sales advertising”. Comes as Chinese press said to note risks in speculation over ‘hot’ market themes in the A-share market such as ‘Physical AI’, humanoid robots and data centers. -In trade news Pres Trump reportedly warning he was not looking to renew the USMCA , in spite of Mexico and Canada both having already said they want a full 16-year extension. Trump warned “They must treat us better”. -Japan’s Gov Ueda has been hospitalized for about 2 weeks in what should be a relatively benign procedure and recovery to remove a hepatic (liver) cyst. Ueda will thus miss next week’s BOJ rate decision , to instead by chaired by Dep Gov Himino and the press conference to be hosted by co-Dep Gov Uchida. [Ueda is expected to be fully recovered in time to attend the following policy meeting on July 30–31] . Expectations for the June 16th BOJ decision is now almost fully priced in for a 25bps hike. -At just 2.1% Tokyo average office vacancies now back down to their lowest since the Covid-era in June of 2020. -Further attempts by Korean officials to stabilize the Won (KRW) as Bank of Korea (BOK) said it will extend payment of interest on foreign currency deposits by financial firms for a further six months. Note also South Korea's chip exports continue to prop up the economy, up over 200% on a y/y basis for the first 10 days of June. -Chatter intensified around '“golden shares” for US frontier AI models such as OpenAI and Anthropic as Trump reportedly to meet top AI execs to discuss; Trump saying that the public “could become very wealthy”. -In further AI news, OpenAI said to be considering “drastic” price cuts amid growing reports of corporations putting restrictions around AI token usage due to surging token costs - in tech firms sometimes more than the actual salary being received by the employee using the latest AI tools from Claude and ChatGPT. May have implications for both OpenAI and Anthropic IPOs if a token price war breaks out. -Meanwhile the SpaceX IPO scheduled for Friday now said to be 4x oversubscribed (>$250B on the $75B float), with Japan's retail investors estimated to account for ~3% of total fundraising. -Oracle shares down -10% after hours following Q4 earnings in a sign of further market indigestion for AI-related debt, revealing that while the company will not issue additional debt in 2026, in FY27 Oracle expects to raise approximately $40B through a combination of debt and equity financing [including its previously announced $20B at-the-market equity issuance]. -On the same theme of investor doubts related to the equity-debt fueled AI-spending frenzy, Super Micro overall fell ~30% during NY trading, including after hours, following the company’s intent for $7B equity raises after the close yesterday. -UK's RICS house price balance now at joint-lowest level since Nov 2023. -US equity FUTs +0.4% to +0.6% during Asia trading. Looking ahead (Asian-weighted focus, using Asian time zone) -Thu Jun 11th: (Thu night, ECB Rate Decision, US May PPI). -Fri Jun 12th: UK Apr GDP , (Fri night, US Jun Prelim Michigan Consumer Sentiment). Holidays in Asia this week -Mon Jun 8th: Australia. -Fri Jun 12th: Philippines. Headlines/economic data Australia/New Zealand -(AU) ASX 200 opens -1.0% at 8,564. -(AU) Australia Jun Consumer Inflation Expectation: 5.5% v 5.6% prior. China/Hong Kong -(CN) Shanghai Composite opens -0.3% at 3,980; (HK) Hang Seng opens -0.1% at 24,380. -(CN) China cancels high-level meetings with the EU - FT. -(CN) Further effort needed to 'boost' China consumption [follows weak CN May CPI yesterday] - China press. -(CN) China PBOC Gov Pan Gongsheng reiterated the depth and breadth of China’s financial market provide key allocation opportunities for overseas institutional investors; cites comments made on Wed at a Bank for International Settlements (BIS) meeting – Chinese press [update]. -(CN) Chinese press said to note risks in speculation over ‘hot’ market themes in the A-share market, mentions areas including ‘Physical AI’, humanoid robots and data centers – China Securities Daily front-page commentary. -(CN) China has added government savings bonds to the investment menu of private pensions - Chinese press [update]. -(CN) China-based ‘operatives’ used ChatGPT to ‘shape’ AI data centers and tariff debates; OpenAI said China is 'fomenting' dissent over these issues - Nikkei [update]. -(CN) CAAM [auto association]: China's New Energy Vehicle [NEV] exports double in May to 446K units - update. -(CN) China bond ETFs see ‘strong’ inflows during Q2 – Chinese press. -(CN) China Resources New Energy raised $3.6B in Shenzhen IPO which is a record high for the city – SCMP. -(CN) China should build out its strategic bauxite stockpiles - Press. -(CN) China regulators question online retailers JD.com, Douyin, Tmall and PDD over "fraudulent sales advertising" - CCTV. -(CN) China PBOC sets the yuan mid-point at 6.8150 v 6.8130 prior. -(CN) China PBOC Open Market Operation (OMO): Sells CNY189B in 7-day Reverse Repos; Net injects CNY189B v injects CNY159B prior. Japan -(JP) Nikkei 225 opens -1.1% at 63,438. -(JP) BOJ Gov Ueda said to have been hospitalized for ~2 weeks and expected to be absent at next week's meeting; BOJ Gov Himino set to Chair next week's meeting and BOJ Gov Uchida to host press conf after the meeting - press [**Note: BOJ set to hold meeting on June 15-16th]. -(JP) Japan Chief Cab Sec Kihara: Strongly hope latest attacks between US and Iran will not escalate further. -(JP) Japan Q2 BSI Large All Industry Q/Q: -0.5 % v +4.4 prior. -(JP) Japan May Tokyo Avg Office Vacancies: 2.1% v 2.2% prior. -(JP) Japan said to be in talks with US Treasury Dept over extension of sanction exemption for energy from Russia's Sakhalin-2 project - Japanese press. -(JP) Japan releases weekly flows data [period ended Jun 5th]: Foreign buying of Japan equities: -¥701.0B v -¥491.5B prior; Japan buying of foreign bonds: ¥197.5B v -¥184.4B prior. -(JP) BOJ Outright Bond Purchase Operation for 1~3 Years; 3~5 Years; 5~10 Years and 10~25 Years; (Inline with planned amounts for Q2, 2026). -(JP) Bank of Japan (BOJ) Results related to today's outright bond buying operations: Korea -(KR) Kospi opens -2.9% at 7,509. -(KR) 000660.KR *Chairman: To triple wafer capacity by 2034 for AI compute - Nikkei Asia interview [update]. -(KR) North Korea uranium-enrichment capacity reportedly could expand 75% with new Yongbyon facility; This additional output would be enough to make at least 10 more nuclear bombs per year - WSJ. -(KR) South Korea May Unemployment Rate: 2.8% v 2.8%e. -(KR) South Korea Jun 1-10 Exports Y/Y: 85.9% v 43.7% prior; Imports Y/Y: 35.6% v 14.9% prior. -(KR) South Korea May Total Bank Lending to Household (KRW): 1,181.8T v 1,174.9T prior. -(KR) CPNG Follow up: South Korea privacy regulator to fine co. KRW624.7B after 2025 data breach [follows regulatory threats of a KRW1T fine] - Media. -(KR) Bank of Korea (BOK): To pay interest on excess foreign currency deposits by financial firms for six more months [follows prior reports of declining foreign currency deposits in South Korea]. Other Asia -(IN) India PM Modi said to be likely to meet US Pres Trump at G7 Summit in Evian, France (to be held June 15-17th). -(PH) Philippines military chief assures no political intervention amid Senate turmoil – SCMP [update]. -(ID) Indonesia May Retail Sales Estimate M/M: -0.9%; Y/Y: -3.2%. -(TH) Thailand May Consumer Confidence: 49.5 v 50.6 prior. North America -(US) May CPI M/M: 0.5% v 0.5%e; Y/Y: 4.2% v 4.2%e (~3-year high); Core CPI M/M: 0.2% v 0.3%e; Y/Y: 2.9% v 2.9%e [US market close]. -(CA) Bank of Canada (BOC) leaves interest rates unchanged at 2.25%; As expected; Continuing to look through the war's near-term impact on headline inflation, but will not let higher energy prices become persistent inflation [US market close]. -(US) MBA Mortgage Applications w/e Jun 5th: +10.8% v -2.5% prior [US market close]. -(US) May Real Avg Hourly Earning Y/Y: -0.7% v -0.3% prior; Real Avg Weekly Earnings Y/Y: -0.4% v -0.2% prior [US market close]. -(US) DOE Crude: -7.2M v -4Me; Gasoline: +0.2M v -0.5Me; Distillate: -0.2M v -0.5Me [US market close]. -(US) Treasury's $39B 10-year note reopening draws 4.538% v 4.282% prior; Bid-to-cover ratio: 2.57 v 2.43 prior and 2.56 over last 8 reopenings [US market close]. -(US) Pres. Trump: No other President has ever been more committed to both REBUILDING our Great Military... - post on Truth Social. -(US) OPENAI.IPO Reportedly considers price cuts that are "drastic" - WSJ. -(US) Follow Up: Pres Trump said to be planning to meet AI execs to discuss taking stakes; Pres stated the public could become "very wealthy" - Press [update]. -(US) SPCX Defiance ETFs to launch SPCU, the 2x SpaceX ETF, as the SpaceX IPO nears. -(CA) Bank of Canada (BOC) Gov Macklem: Core inflation has ticked down; The base case of USMCA talks is that they continue for a number of months; Our attention would be raised if core inflation begins to drift up - post rate decision conf [US market close]. -(CA) Canada introduces bill to restrict social media use under 16. -(BR) Brazil Senate approves Rural debt renegotiation bill - Globo. -(AR) S&P raises Argentina's sovereign rating to B-. -(PE) Fujimori leads in the "final stretch" of the Peru Presidential runoff election. Europe -(EU) Follow up: European Parliament amends ETS market stability mechanism [as expected]. -(RU) Local Authority: Russia's Southern Krasnodar region under drone attack. -(RU) Local Authorities: Fire at Russia's Afipsky refinery extinguished. -(UK) PM Starmer declines to rule out tax rises to pay for defense - Weekly PMQs [US market close]. -(UK) Govt reportedly draws up plans to modify steel tariff regime - Sky News [US market close]. -(UK) May RICS House Price Balance: -35% v -32%e ("joint-lowest" figure since November, 2023). -(SE) Sweden May PES Unemployment Rate: 3.4% v 3.5% prior. Middle East -(IR) Follow up: U.S. forces complete latest strikes in Iran, cites CENTCOM. -(IR) President Trump: Spoke directly with Iran officials; Iranians asked me to stop bombing; Bombing will stop shortly - Interview on Fox News. -(IR) Iran's Top Joint Military Command: Strait of Hormuz closes for passage of any vessels; Any vessel that attempts passage will be targeted - Statement. -(IR) US Pres Trump: We've the right to resume combat and will be attacking Iran hard citing the downed Apache helicopter as cause; We're going to hit them again hard today; We want a deal that's meaningful and works [US market close]. -(IR) Iran Foreign Ministry: US has struck vital civilian water infrastructure [US market close]. -(IR) Head of Iran Parliament's National Security Commission: This time the war will not be limited to the region [US market close]. -(IR) Iran military spokesperson: In response to Trump's renewed threats against infrastructure, Iran has proven that it will respond to threats appropriately [US market close]. -(IR) Pres. Trump: Iran has taken too long to negotiate a deal that would have been great for them, now they will have to pay the price!!! [US market close]. -(IR) Pres Trump: I am close to ordering new strikes against Iranian power plants and bridges; Iran is taking too long to make the deal - Fox News [US market close]. -(IR) Pres. Trump: Last month, ordered secret military mission to support tankers and ships through the Strait of Hormuz; Resulted in 100M bbl of oil coming to market and 200 ships passing the Strait [US market close]. -(IR) US CENTCOM: Confirmed it started launching additional 'self defense' strikes against Iran; all of the targets are again located in Southern Iran, according to Axios. -(IR) Iran state media: Reports indicate US ships near the Strait of Hormuz have been targeted by Iranian missiles and drones launched by Iran's army - press. -(IR) CENTCOM: Commercial ships are continuing to transit in and out of Strait of Hormuz tonight; - post on X. -(IR) Follow up: Iran's State Media: Senior Official denies that Iranian Officials contacted Trump to 'stop bombing'. -(IR) Explosions reported heard in Iran's region of Karaj - IRNA. -(IR) US equity FUTs improve ‘strongly’ amid comments from US CENTCOM, Nikkei article on Hynix. -(IR) Bahrain's Interior Ministry: Warning siren has been sounded again. -(IR) IRGC: Targeted U.S. aircraft at Al-Azraq air base with 12 ballistic missiles [time frame uncertain] - Tasnim. -(IL) Israel Military: Home Front Command issued after launches from Lebanon into Northern Israel. -(KW) Kuwait Civil Aviation Authority: Kuwait temporarily closes it's airspace following Iranian attacks, flight diverted, starting 04:50am local time. Levels as of 01:20 ET Nikkei 225 +0.1%; ASX 200 flat; Hang Seng -1.0%; Shanghai Composite -0.4%; Kospi -0.2% . Equity S&P500 Futures +0.4%; Nasdaq100 +0.6%; DAX -0.3%; FTSE100 -0.3%. EUR 1.1557-1.1526; JPY 160.57-160.43 ; AUD 0.7013-0.6988; NZD 0.5818-0.5786. Gold +0.2% at $4,079/oz; BTC +2.2% at $62,712; Crude Oil +1.0% at $90.95/bbl ; Copper +0.3% at $6.2195/lbs.