Following a relentless rout that erased nearly $2 trillion in market value from the S&P 500 last week, US equity futures have surged, extending their Monday holiday gains just as predicted on Sunday when we said that a "Nasty Squeeze" was on Deck following last week's "Second Largest Ever" shorting by hedge funds. Nasdaq 100 futures rose as much as 2.2% before trading 1.7% higher as major US tech and internet stocks advanced, poised to extend Friday’s gains; shares of Tesla and Twitter also rose following billionaire Elon Musk’s comments at the Qatar Economic Forum; S&P 500 futures gained 1.8%; the cash market was closed on Monday for a holiday. Asian and European stocks also advanced as did bitcoin which jumped above $21K after sliding below $18K briefly on Saturday. Meanwhile Treasuries and the US Dollar retreated.

US stocks came under renewed pressure last week, with the S&P plunged into bear market territory amid surging inflation and fears that aggressive rate hikes by the Federal Reserve will push the economy into a recession. The S&P 500 is set for an 11% drop in June, poised for the worst month since March 2020, which marked the lows of the pandemic selloff. Sentiment was somewhat boosted by Biden’s Monday comments on the economy in which he said that a recession isn't "inevitable" (what else will he say) but strategists have warned of more volatility ahead.

“Even if the mid-term investing landscape remains blurry to most market operators at the beginning of this summer season, some investors looking for opportunities to buy shares at a discounted price have been reassured,” said Pierre Veyret, a technical analyst at ActivTrades. “The fact central banks are moving quickly towards a super hawkish stance in order to tame inflation is also perceived as good news by some.”

In premarket trading, bank stocks also pushed higher amid a broader rebound in risk assets. In corporate news, HSBC has lost two senior investment bankers in Asia as global banks compete for financial technology talent and dealmaking slows. Meanwhile, the UK’s Payment Systems Regulator will focus a pair of market reviews on the rising card fees charged by Visa and Mastercard. Tech names were also solidly higher; notable movers included Apple +2.4%, Microsoft +2%, Amazon.com +2.6%, Alphabet +2.6%, Meta Platforms +2.1%, Nvidia +3.1% premarket; all six stocks closed higher on Friday, while US markets were closed for a holiday on Monday. Stocks related to cryptocurrencies were also indicating a rally as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Meanwhile, Revlon surged as much as 27% in premarket trading, extending Friday’s rally after the cosmetics firm filed for Chapter 11 bankruptcy. Here are some other notable premarket movers:

Tesla (TSLA US) and Twitter (TWTR US) shares rose in premarket trading on Tuesday after billionaire Elon Musk said the CEO label at the social media firm was less important than driving the product and that Tesla will cut its salaried workforce by about 10% over  the next three months. Tesla rose 3.1% and Twitter was up 1.2% in premarket trading

• Revlon shares surge as much as 27% in US premarket trading, extending Friday’s rally after the cosmetics firm filed for bankruptcy.
• Major US technology and internet stocks advanced in premarket trading on Tuesday, poised to extend Friday’s gains. Apple (AAPL US) +2.4%, Microsoft (MSFT US) +2%, Amazon.com (AMZN US) +2.6%, Alphabet (GOOGL US) +2.6%
• Spirit (SAVE US) shares jump 13% in US premarket trading, to $24, after JetBlue (JBLU US) raised its offer to $33.50 per share from $31.50 on June 6, the latest move in a multi-billion dollar takeover contest with rival Frontier (ULCC US). Arrival shares jump 8.6% in US premarket trading after the electric- vehicle maker announced that its zero-emission van has achieved EU certification and received European Whole Vehicle Type Approval.
• US-listed Chinese stocks are mostly higher in premarket trading, tracking a two-day 2.3% rise in the Hang Seng Tech Index.
• Alibaba (BABA US) +4.6%, Baidu (BIDU US) +3.5%, Pinduoduo (PDD US)+3.3%
• Stocks related to cryptocurrencies rise on Tuesday in US premarket trading as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Riot Blockchain (RIOT US) +5.6%, Coinbase (COIN US) +4.7%, MicroStrategy (MSTR US) +5%
• Citi cuts ratings on International Paper Co. and WestRock to neutral from buy, citing increasing questions about demand as supply additions loom. International Paper falls 1.1% in premarket trading, WestRock -1.5%
• Keep an eye on Maxar shares as Wells Fargo said the stock is its top pick in the burgeoning space sector, initiating it at overweight, Rocket Lab at equal-weight and Virgin Galactic at underweight.
• Adobe (ADBE US) shares may be in focus today as the stock was downgraded to equal-weight and given Street-low $362 target from $591 by Morgan Stanley, on expectation of a slowing structural growth profile for the computer software company.

After unexpectedly accelerating to a fresh 40-year high in May, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year. Yet fears are rampant that Federal Reserve policy makers intent on cooling price pressures will go too far and trigger an economic slowdown. Strategists at Morgan Stanley and Goldman Sachs Group Inc. warned equities may have further to fall to fully price in the risk of recession, reflecting wider skepticism about Tuesday’s rebound.

“We think equities will struggle to rebound sustainably until earnings expectations reset lower and/or central banks turn more dovish, which seems unlikely for now,” said Emmanuel Cau, head of European equity strategy at Barclays Plc.

European stocks also extended their recent recovery, with the region’s benchmark Stoxx 600 Index rising 1%, led by gains in basic resources and chemical companies’ shares. Consumer discretionary, chemicals and autos also trade well. CAC 40 outperforms.

• Leonardo jumps as much as 9.7% in Milan trading after its DRS unit agreed to buy Israeli radar-maker RADA Electronic in an all-stock transaction.
• Valneva rises as much as 23% after CEO Franck Grimaud said the company’s Lyme disease vaccine has the potential of becoming a “blockbuster” with sales of more than 1 billion euros.
• K+S and OCI shares gain after JPMorgan said valuations are “compelling” and fundamentals remain positive. European fertilizer shares had dropped recently because of rising gas prices. OCI rises as much as 4.6%; K+S +6.3%
• Air Liquide climbs as much as 3.9%, after the French industrial gas company signed a long-term power purchase agreement with Vattenfall.
• Mithra rises as much as 21% after the pharmaceutical company said it received subscription commitments for 3.87m new shares at an issue price of EU6.07 apiece, representing a 5% discount to last close.
• Richemont and Swatch advance after Swiss watch exports for the month of May showed strong demand versus the year-earlier period in the US and Japan as well as in European countries such as France and the UK. Luxury peers also trading higher in a wider rebound. Richemont gains as much as 2.8%, Swatch +2.8%, Hermes +3.3%, LVMH +3.7%
• European apparel retail shares drop after JPMorgan downgrades Asos, About You, Boohoo and Primark owner AB Foods to neutral from overweight, citing the cost of living crisis with cracks emerging in discretionary spending. Asos declines as much as 5.1%, Boohoo -4.8%, About You -4.3%, AB Foods -3.2%
• Proximus and Telenet slide after a statement by the Belgian telecom regulator showed that new entrant Citymesh partnered with Romanian carrier Digi Communications and acquired spectrum across various bands. Proximus shares fall as much as 7.8%, Telenet -3.9%

Earlier in the session, MSCI’s Asia-Pacific index snapped an eight-day slide to add more than 1% as Asian equities headed for their biggest gain this month. The MSCI Asia Pacific Index climbed as much as 1.8%, set to snap an eight-day losing streak, with financial and tech stocks among the biggest contributors to its advance. The US president spoke overnight after a conversation with former Treasury Secretary Lawrence Summers, as the White House and congressional Democrats are in talks on legislation that aims to fight inflation. Benchmarks in Taiwan, Japan and Hong Kong led gains in the region. Australia’s index advanced for the first time in days after central bank chief Philip Lowe signaled he will only raise interest rates by 25-to-50 basis points at the July meeting. Chinese shares edged lower after recent gains.  “It’s a respite, not a rebound,” said Charu Chanana, a market strategist at Saxo Capital Markets. “We are still in a bear market that is facing a double whammy of Fed tightening and building recession fears, and the second-quarter earnings season is likely to be particularly painful for the markets” due to cost pressures, she added.  Valuations for the MSCI Asia gauge have continued to slide toward pandemic lows, with the index down 18% this year. Still, it’s outperforming a measure of global shares, supported by a rally in Chinese equities this month as the country emerges from Covid-triggered lockdowns.

Japanese stocks advanced as investors weighed the impact of the yen’s weakness and the extent of the recent selloff. The Topix Index rose 2% to 1,856.20 as of market close Tokyo time, while the Nikkei advanced 1.8% to 26,246.31. Sony Group Corp. contributed the most to the Topix Index gain, increasing 4%. Out of 2,170 shares in the index, 2,023 rose and 108 fell, while 39 were unchanged. “Stocks that are expected to have an upward revision from the weak yen may be firm,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management.

In Australia, the S&P/ASX 200 index rose 1.4% to close at 6,523.80, snapping a seven day losing steak. The benchmark was led by gains in banks and miners, with the financials sub-gauge rising the most since March 10.  In early trade, Australia’s central bank Governor Philip Lowe said he didn’t see a recession on the horizon for the nation.  In New Zealand, the S&P/NZX 50 index rose 1.1% to 10,701.59

India’s benchmark share index posted its biggest two-day advance since May 30, boosted by a recovery in information technology stocks and as investors looked for bargains after a sharp selloff last week.  The S&P BSE Sensex rose 1.8% to close at 52,532.07 in Mumbai, taking its two-day advance to 2.3%. The NSE Nifty 50 Index advanced 1.9%. All of the 19 sectoral indexes compiled by BSE Ltd. gained, led by a measure of oil & gas companies. “Crude prices have corrected by almost 10% from its recent peak, providing some breather to the Indian market,” Motilal Oswal Financial analyst Siddhartha Khemka wrote in a note.   Reliance Industries contributed the most to the Sensex’s gain, increasing 1.6%. All but one of 30 shares in the Sensex index rose. Of the top ten performers on the measure, half were information technology companies, led by Tata Consultancy Services Ltd. that clocked its biggest advance this month. 

In rates, treasuries were cheaper across the curve as trading resumed after Monday’s US holiday; cash USTs bear steepened, but trim losses after cheapening ~5bps at the Asia reopen.  Long-end leads losses with stock futures rising after last week’s rout. US yields are ere cheaper by as much as 6bp at long end, steepening 2s10s by nearly 3bp, 5s30s by nearly 4bp; 10-year, higher by ~5bp at 3.27% lags bund and gilts by 3bp and 4.5bp while Italian bonds outperform Treasuries by 12bp in the sector. Bunds and gilts outperform Treasuries, while Italian bonds extend recent gains after ECB’s Olli Rehn reiterated determination to combat unwarranted spikes in borrowing costs for some of the region’s most vulnerable economies.  That said the ECB has yet to disclose said measures, a move which most agree will lead to selling the news. Gilts bull flatten, 10y yields drop 4bps after stalling near 2.6%. Bunds are comparatively quiet. Shorter-maturity Australian bonds rallied after central bank chief Philip Lowe said interest rates are likely to rise by 50 basis points at most in July. Money markets subsequently scrapped bets he would track the Federal Reserve with a 75 basis-point move. Japanese government bonds were mixed after a five-year note sale that drew the weakest demand in more than two years in the aftermath of wild price swings in futures that have made some traders uneasy about their exposure to cash bonds.

In FX, Bloomberg dollar spot index fell 0.3% as the greenback weakened against all of its Group-of-10 peers apart from the yen. JPY is the weakest in G-10, plunging to a fresh 24 year low of 136. NOK and SEK outperform. The euro advanced and European bonds rallied, led by the front end even as ECB Governing Council Member Peter Kazimir said negative rates must be history by September. Governing Council member Olli Rehn separetely said that “there has been good reason to expedite the normalization of monetary policy”. The pound extended gains amid broad dollar weakness while UK government bonds inched up. BOE Chief Economist Huw Pill said policy makers would sacrifice growth in order to bring down inflation, saying there’s a risk of prices developing a “self-sustaining momentum.

In commodities, WTI drifted 2.3% higher to trade near $112. Most base metals trade in the green; LME zinc rises 2.8%, outperforming peers. LME aluminum lags, dropping 0.3%. Spot gold is little changed at $1,838/oz.

Bitcoin is bid and above the USD 21k mark, after last week's slip to a sub-USD 18k low. Elon Musk says he intends to personally support Dogecoin, via BBG TV. Coinbase (COIN) says connectivity issues across Coinbase and Coinbase Pro could cause failed trades and delayed transactions; issue was subsequently resolved.

To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill.

Market Snapshot

• S&P 500 futures up 1.9% to 3,744.50
• STOXX Europe 600 up 1.0% to 411.06
• MXAP up 1.5% to 158.77
• MXAPJ up 1.5% to 528.18
• Nikkei up 1.8% to 26,246.31
• Topix up 2.0% to 1,856.20
• Hang Seng Index up 1.9% to 21,559.59
• Shanghai Composite down 0.3% to 3,306.72
• Sensex up 2.2% to 52,741.19
• Australia S&P/ASX 200 up 1.4% to 6,523.81
• Kospi up 0.7% to 2,408.93
• German 10Y yield little changed at 1.76%
• Euro up 0.5% to $1.0567
• Brent Futures up 1.2% to $115.53/bbl
• Brent Futures up 1.2% to $115.52/bbl
• Gold spot down 0.2% to $1,835.31
• U.S. Dollar Index down 0.61% to 104.06

Top Overnight News from Bloomberg

• UK rail workers began Britain’s biggest rail strike in three decades after unions rejected a last-minute offer from train companies, bringing services nationwide to a near standstill. Britain’s local authorities say they can’t afford to pay a mandated increase in the legal minimum wage over the next year without a £400 million cash injection from the national government
• A majority of European businesses are worried about their ability to meet employee demands for higher wages amid the current spike in inflation, according to a regional survey by Intrum AB
• Companies in Germany, the UK, France, Spain and Italy are the most distressed since August 2020, according to the Weil European Distress Index. The study aggregates data from more than 3,750 listed European firms

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks gained across amid a broad constructive global risk tone despite a lack of fresh macro drivers and the recent holiday closure in the US, with Bitcoin and Chinese commodity prices also stabilising after the recent tumultuous price action. ASX 200 was led higher by the energy sector and after RBA's Lowe effectively ruled out a 75bps hike next month. Nikkei 225 outperformed and reclaimed the 26,000 level amid a predominantly weaker currency. Hang Seng and Shanghai Comp. were positive with sentiment in Hong Kong underpinned by news the SAR is to propose a quarantine-free business travel corridor with mainland China, while mainland bourses lagged with the US ban on imports from Xinjiang taking effect from today. Japan's PM Kishida says rapid JPY weakening is a source of concern, must closely watch FX moves and consider monetary policy and FX measures separately.

Top Asian News

• Chinese Developer Accepts Wheat, Garlic as Payment to Woo Buyers
• China Junk Bond Selloff in New Phase With Record Fosun Rout
• Gold Steady as Traders Weigh Central Bank Plans to Hike Rates
• Australian Tesla-Supplier Eyes First Lithium Exports
• Over- Optimism Among China Steel-Makers Behind Iron Ore’s Plunge

European bourses are firmer and building on Monday's upside, Euro Stoxx 50 +1.1%; thus far, newsflow has largely focused on familiar themes. Additionally, participants are awaiting the return of the US after Monday's market holiday. Currently, ES +1.7% with the region incrementally outperforming European peers. Elon Musk says there a still a few unresolved matters with Twitter (TWTR) including the number of spam users, via BBG TV; still awaiting a resolution, very significant. Adds, they are reducing the salaried workforce of Tesla (TSLA) by circa. 10% over the next three-months.

Top European News

• French President Macron will invite all parties able to form a group in the new parliament for talks on Tuesday and Wednesday, according to Reuters.
• BDI revises down 2022 German GDP forecasts: 1.5% (prev. 3.5%); return to pre-COVID level expected at end-2022 at the earliest

Central Banks

• ECB’s Lane said very high inflation means there is a risk inflation psychology could take hold and said the larger increment for rate increase in September does not represent a red alert assessment of inflation. Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision and there is no preview beyond September of what will be the appropriate pace of tightening, according to Reuters.
• ECB’s Villeroy said the new instrument should be available as much as necessary to make the no-limit commitment to protect the Euro very clear and the more credible such an instrument is, the less it may have to be used in practice. Villeroy added the new instrument will have rules but there will be elements of judgement also and said they would not necessarily need to hold purchases of government or private sector securities to maturity, according to Reuters.
• ECB's Rehn says EZ inflation pressured are broader and stronger; very likely the September move is more than 25bp in magnitude.
• BoE's Pill says if there is evidence of persistent price pressures, the MPC is certainly prepared to act, expects further tightening in the coming months, need to consider the exchange rate when assessing inflationary pressures. Worries that using monetary policy to stabilise the FX rate in the short-term would be a distraction from the BoE's goals.
• HKMA purchases HKD 9.6bln from the market, as the HKD hits the weak-end of the trading range.

FX

• Euro firm as risk revival continues and ECB’s Rehn says 50bp hike in September is highly probable, EUR/USD eyeing 1.0600 after breaching 1.0550, but could be capped by 1bln option expiry interest between 1.0575-85.
• Sterling rebounds ahead of CBI industrial trends and after BoE chief economist Pill underlines willingness to act if price pressures prove persistent; Pound probes 1.2300 vs Dollar as DXY slips further from recent peaks through 104.000.
• Loonie and Nokkie boosted by firmer crude prices, as former awaits Canadian retail sales data; USD/CAD close to 1.2900 vs circa 1.3078 double top, EUR/NOK sub-10.4000 within 104.4200+/10.3400 range.
• Kiwi and Aussie underpinned by improvement in risk appetite, but hampered as NZ consumer sentiment slides to record low and RBA Governor Lowe pushes back on the amount of 2022 tightening priced in at present; NZD/USD hovers above 0.6350 and AUD/USD shy of 0.7000.
• Franc and Yen remain divergent with SNB and BoJ policy paths, latter largely ignoring latest verbal intervention; USD/CHF pivots 0.9650 and USD/JPY back above 135.00.
• Israel PM Bennett and Foreign Minister Lapid agreed on dissolving the Knesset and going for an early election, while the vote will take place next week and Lapid will become PM once the vote passes, according to Walla News.

Fixed Income

• Debt divergent and erratic awaiting the return of US cash markets from long holiday weekend.
• Bunds hold within 143.05-144.01 range and Gilts between 111.11-68 parameters.
• Treasury futures retreat and curve flits from marginal flattening to steepening ahead of US existing home sales and more Fed speak via Mester and Barkin

Commodities

• WTI and Brent are bid amid broader risk sentiment with newsflow focusing on familiar themes primarily around the reduction in Russia's gas supply to Europe.
• Thus far, Brent has tested but failed to connivingly breach the USD 116.00/bbl mark ahead of touted USD 116.37/bbl resistance.
• US Treasury Secretary Yellen said she does not see resuming the Keystone XL oil pipeline as a short-term measure that can address high oil prices, while she added it would take years to have an impact. Yellen also commented that evidence is mixed on the level of pass-through from a gasoline tax holiday to lower prices and said that an exception or ban on insurance for certain Russian oil shipments would effectively provide a price cap on oil, according to Reuters.
• Brazilian Economy Minister Guedes said Brazil is part of the western energy security, particularly for Europe, while he added that privatising and moving Petrobras to Novo Mercado would increase its market cap from BRL 450bln to BRL 750bln. Guedes added that they will conduct new measures again if the war in Ukraine is escalating, according to Reuters.
• PetroEcuador may have to stop exports if protests continue and it declared a force majeure to avoid contract penalties, according to Reuters.
• Vitol CEO says markets are faced with underinvestment and falling production capacity for crude and there is a relatively tight refining situation, via Reuters; if China exports some more products, the tightness felt today won't be felt.
• Denmark's energy agency declared an 'early warning' stage of gas supply preparedness, according to Reuters.
• German regulator says they are not in a hurry to declare the highest gas emergency level yet, via Reuters citing BR; however, Sweden declares an "early warning" stage of gas supply preparedness for Western and Southern parts of the nation.
• Codelco's union presidents ratified the start of a national strike beginning on Wednesday, according to Reuters; an update which, alongside broader risk, is supporting LME Copper.

US Event Calendar

• 08:30: May Chicago Fed Nat Activity Index, est. 0.47, prior 0.47
• 10:00: May Existing Home Sales MoM, est. -3.7%, prior -2.4%
• 10:00: May Home Resales with Condos, est. 5.4m, prior 5.61m

Central Banks

• 11:00: Fed’s Barkin Interviewed During NABE Event
• 12:00: Fed’s Mester Speaks at Women in Leadership Event
• 15:30: Fed’s Barkin Speaks in Richmond

DB's Jim Reid concludes the overnight wrap

I’ll be publishing my latest monthly chartbook later today so keep an eye out for it. It will include the slides for last week’s webinar on the default study “The end of the ultra-low default world”. See here for the webinar replay and here for the original default study.

Welcome to the longest day of the year although most in markets will already say we've had numerous of those already so far this year. Actually if you're outside of London, trying to get in it could be a very, very long day as the UK is today gripped by the first of three alternate day rail strikes. There is a tube strike today thrown in for good measure. It does seem industrial relations with the government are on a knife edge across the UK as at least 3 million workers across different professions are considering industrial action at the moment over pay and working conditions. So this could become a much bigger story if tensions are not eased. With inflation this high it's not easy to see how they can be without big pay rises being offered.

However on this day of wall to wall sun (sorry to the Southern Hemisphere readers), there has been a little more light than dark in markets over the last 24 hours after what was the worst week for global equities since March 2020. The next major event(s) to look forward to are Fed Chair Powell’s congressional testimonies from tomorrow. To be honest though, its been a fairly quiet start to the week given the US holiday yesterday, with the biggest news instead being a fresh rise in European sovereign bond yields after President Lagarde reiterated the ECB’s intentions to start hiking next month, and also shone a bit more light on their plans to deal with any potential fragmentation.

We’ll start with those remarks from Lagarde, who appeared in a hearing at the European Parliament yesterday and spoke strongly against any potential fragmentation in the Euro Area. Indeed, she said that “we need to be absolutely certain” that monetary policy was being transmitted to the different Euro Area countries and went as far to say that it was “right at the core of the mandate”, whilst adding “anybody who doubts that determination will be making a big mistake”. So not quite “whatever it takes” but along the same lines.

Given the ECB has promised to deal with any fragmentation, that should make life easier for them when it comes to raising rates, and European sovereign bond yields responded accordingly yesterday. Looking at the specific moves, yields on 10yr bunds (+9.0bps), OATs (+11.8bps) and BTPs (+12.3bps) all moved noticeably higher, although by the standards of last week that seemed quite modest given that 10yr bund yields had seen absolute moves of 11bps in either direction on 3 out of 5 days last week.

When it came to bonds though, it was UK gilts who were one of the biggest underperformers yesterday after we heard from one of the more hawkish members of the Bank of England’s MPC. Catherine Mann (who was in the minority that favoured of a 50bps move last week) said in a speech that “the incoming data on inflation show increasingly domestic embeddedness, persistence, and momentum”. Furthermore, she also warned about the risk of embedded domestic inflation being “further boosted by inflation imported via a Sterling depreciation”. Against that backdrop, 10yr gilt yields rose by +10.6bps to close above 2.6% for the first time since 2014, whilst overnight index swaps are continuing to price in a more aggressive response from the BoE after the next meeting, with 50bp moves priced in for each of the next 3 meetings, which would be the fastest pace of hikes since they gained operational independence in 1997.

In spite of the sovereign bond selloff, equities put in a much better performance yesterday, with the STOXX 600 (+0.91%) seeing a broad-based advance that was supported by all the main sector groups. Other indices on the continent also moved higher, including the FTSE 100 (+1.50%), the DAX (+1.06%) and the FTSE MIB (+0.99%). The worst performer on a relative basis was France’s CAC 40 (+0.64%), which struggled following the news that President Macron had lost his parliamentary majority, which will make passing his agenda much more difficult in the coming years. See our economists’ piece on the topic here.

With the US holiday we only had futures to look at, but those on the S&P 500 had moved around +1% higher by the time of the European close. They are +1.62% higher this morning with the NASDAQ 100 futures (+1.71%) also meaningfully higher. Meanwhile, Fed funds futures were again moving in the direction of pricing in a more aggressive path of rate hikes, with the implied rate by the December meeting up +7.18bps to 3.625%, albeit still beneath their closing peak of 3.72% just before the Fed meeting, which meant that Treasury futures were also pointing to fresh declines yesterday as well.

Asian equity markets are relatively buoyant this morning with the Nikkei (+1.76%) leading the pack followed by the Hang Seng (+1.42%). In mainland China, the Shanghai Composite (+0.18%) and CSI (+0.12%) are also trading in positive territory whilst the Kospi (+1.03%) is sharply higher in early trade.

Elsewhere, the meeting minutes from the Reserve Bank of Australia (RBA) released this morning indicated that the central bank is leaning towards more monetary policy tightening over the coming months. The minutes also revealed that inflation was expected to increase to 7% by the end of the year due to pandemic-related supply chain disruptions, before coming back towards the 2-3% inflation range in 2023. Meanwhile, the RBA Governor Philip highlighted that interest rates were still "very low" but watered-down expectations of 75bps rate hikes thus signaling a 25 or 50bps move at the July meeting.

On the FX side, the Aussie Dollar did witness a sharp dip during the RBA Governor’s Q&A session but is reversing losses, trading +0.35% at 0.697 per US dollar, as I type. Elsewhere the Japanese yen has remained under pressure at 135.03 per dollar, not far off a 24-year low of 135.58 hit early last week. Separately, oil prices are higher this morning with Brent futures (+1.04%) at $115.32/bbl and WTI futures increasing +1.79% to $111.52/bbl.

To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill.